REP. BURNS: Louisiana Fiscal Reform, Act II

Last week, Dr. Jim Richardson, the LSU economics professor, widely acknowledged to be the Dalai Lama of Louisiana fiscal and tax policy and long-standing member of the state’s Revenue Estimating Committee presented a study of Louisiana tax policy. He was assisted in the study by two economics professors from Tulane University, Dr. Steven Sheffrin and Dr. James Alm. The study was commissioned by House Speaker Chuck Kleckley and Senate President John Alario and paid for by the legislature and Tulane University.

This tax study could lead to Dr. Richardson’s second involvement in a comprehensive fiscal reform effort, the first dating back to the late 80’s as oil revenues were waning and Louisiana was struggling to place itself on sound fiscal footing. Back then, it was Governor Buddy Roemer who attempted comprehensive tax reform based on a plan by Dr. Richardson and others, but unfortunately it didn’t go so well.

Roemer had just come off an improbable gubernatorial victory in which he soared from the back of the pack to a first place primary finish in a few weeks. In fact, Roemer’s 1st primary showing was so impressive that the incumbent Governor Edwin Edwards withdrew the night of the primary, a move that would later haunt Roemer since he was denied his electoral mandate. Some credit for Roemer’s surprise showing was due to groups such as the Louisiana Council for Fiscal Reform, that Dr. Richardson also advised, which skillfully framed the election in the context of dramatic fiscal reform, which Roemer embraced as a revolutionary candidate in 1987. Roemer though was not able to duplicate his initial success with the electorate into significant policy reform.

Despite being bright and well intentioned, Governor Roemer had a knack for impaling himself on his preachy rhetoric and know it all persona, which immediately alienated the legislature and eventually alienated voters. By the time that he was able to pass a watered-down fiscal reform package on his second attempt in 1989, the electorate had wearied of Roemer and his attempt to tie the fiscal reform constitutional amendment to himself doomed it to failure and also cratered his administration as well. Seeking re-election in 1991, Governor Roemer finished a surprising third in the governor’s race behind Edwin Edwards and David Duke.

This led to the fabled Edwards/Duke “race from hell” that deeply tarnished Louisiana, even though the guy in white robe didn’t win. Still the race most remembered for the slogan “Vote for the Crook- It’s Important,” was a negative turning point in Louisiana and helped usher in Louisiana’s version of the Dark Ages, when everything was about gambling, gambling and more gambling. There were problems with gambling from the start, including irregularities alleged in riverboat licensing and then the brawl to control the land-based casino. Then, the temporary casino went bankrupt, prominent legislators were indicted for video poker corruption and of course, Governor Edwards was eventually tried and convicted in connection with the gambling scandal.

The timing of Louisiana’s Dark Ages was unfortunate as the ‘90s brought unparalleled prosperity to other parts of the nation since with the advent of the personal computer and the Internet. During this time Louisiana was probably the last place that anyone would want to relocate a business.

Things seemed a bit better in the new millennium. While the 2008-2009 recession hit Louisiana hard, it didn’t seem to be quite as hard as states like Nevada and Florida perhaps because our sputtering economy had less of a distance to fall. Also, there was still a great deal of Katrina money in the system and propping up industries. Actually, many aspects of the state economy seem to be progressing fairly well until the price of oil dropped recently.

Still, the state’s public sector which was flush just a few years ago has been subject to five years of continuing cuts, primarily in the areas of healthcare and higher education. The future does not appear much better due to items such as rising pension obligations that have exacerbated a structural deficit.

So now we face the prospect of the Act II of Louisiana fiscal reform. The goal of Dr. Richardson’s study was to design a system with sufficient, predictable revenues, that was also competitive to businesses as well as fair and simple. Much of the suggested changes involved items that have been in discussion, namely the large number of tax expenditure items which deplete the tax base.

So this legislative session will apparently be the starting gate for Fiscal Reform Act II. With the exception of a few years when stimulus money or disaster money flooded the coffers, the state has really been struggling financially since the failure of Fiscal Reform Act I. Hopefully, we learned something and can have a better result this time.



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