It is appropriate that the Democratic leadership of the U.S. House of Representatives unveiled their latest attempt at health care reform shortly before Halloween. It has the countenance of a rather sinister looking phantom as it slowly begins to emerge from the mists of back door Congressional deals between special interests, Speaker Pelosi, and the Obama White House.
Even before the fog totally lifts to expose the full form of the legislation, it is obvious that some features that really would work to reign in costs of a new health care system are totally missing. Most obvious—and unsurprising—is the lack of any tort reform measures that would reduce the expensive practice of defensive medicine currently being practiced by medical service providers to reduce their exposure to expensive lawsuits.
The nation’s trial lawyers didn’t even have to work up a sweat to prevent any medical malpractice reform language from entering the House bill. The majority party that relies heavily on contributions from well-heeled plaintiffs attorneys successfully carried out its role as lap dog of the plaintiff’s bar and kept any vestige of tort reform out of the legislation.
Allowing health insurance to be purchased across state lines also failed to be included in the House version of the health care reform legislation. The Pelosi team has continually harped on the need to make sure that there is enough competition in the health insurance marketplace to keep the insurance companies honest.
Unfortunately, they don’t want that competition to be unleashed into the private sector. They prefer to create a public insurance option instead—one that will be directly or indirectly backed by the full faith and credit of the U.S. government and will have undeniable competitive advantages over the private sector.
What is very clear as the beast emerges from the mists is that Congress’s penchant for playing the taxpayers as fools is alive and well on the Potomac.
Pelosi and Company gleefully proclaimed that the cost for their legislation comes in slightly under $900 million and doesn’t add to the deficit. The validity of that claim was questioned immediately by those who pointed out that the House bill removes the $250 billion doctor and hospital “fix” that would prevent them from being exposed to the drastic Medicare cuts in reimbursement that the current law calls for.
In order to prevent an avalanche of opposition from those providers, the House leadership—in a testimony to cynicism—plans to introduce a separate bill to do the “fix.” The official scorer of the fiscal impact of legislation, the Congressional Budget Office, was not authorized to include the cost of the “fix” in the health care reform legislation since it is not in the health care reform bill. But it will happen and when it does it will result in a further expansion of the huge federal deficit.
Perhaps the most serious flaw—and there are many—in the House bill is the relatively small penalty individuals will have to pay if they do not purchase health insurance. If younger individuals only have to pay a relatively small penalty for not having health insurance, they will take the easy way out and simply pay the penalty. If they get seriously ill, they will then opt in. If the final legislation allows this option, higher premiums for the vast majority of the privately insured are inevitable.
The House bill is ill-conceived and scary. It is a witches’ brew of partisan politics and special interest favoritism. It needs to re-enter the mist and come back in a more fair and affordable form.
Wednesday, November 11, 2009
Sunday, November 1, 2009
Lord Action Was Right
The popular 19th century English nobleman, Lord Acton, is perhaps best remembered for the statement: “Power corrupts; absolute power corrupts absolutely.” History is littered with public figures that are appropriately described by those words. Considering some of the shenanigans going on with the health care legislation in Washington, Senate Majority Leader Harry Reid can certainly be added to the list.
There is no doubt that Reid is in a tough spot. President Obama has stacked up a huge pile of political poker chips, betting on a winning hand on health care reform. He will be harmed politically if he loses, and his fellow Democrats in Congress will feel the collateral damage. But it is not easy to muster the votes necessary to make significant changes to one-sixth of the U.S. economy—as Harry Reid has learned. Adding to Reid’s difficulties is the fact that he has to run for re-election next year, and polling data indicate that he is far from being a shoo-in.
The last thing Reid needs is to be a major factor in passing legislation that will push the crumbling budget of the State of Nevada further into the abyss. One of the central features of the proposed legislation could do just that. It would allow millions of individuals whose income levels currently preclude them from qualifying for Medicaid to meet eligibility requirements for the program. But there is a rub: states must put up a five percent match to help cover the additional costs.
Reid has made no bones about what he plans to do to avoid any political fallout back home. He has stated unequivocally that he will not allow a health care bill to come to the floor if it increases Medicaid costs for Nevada. He seems to be getting his way. The Senate Finance Committee bill would exempt four states—Michigan, Oregon, Rhode Island, and (yes) Nevada—from the requirement to pay the five percent funding match. The alleged justification for making the exception is that those states have been the hardest hit by the recession.
The Senate should rebel against Senator Reid feathering his own nest.
Other states shouldn’t have their budgets savaged by another huge unfunded mandate coming down from Washington while watching Reid and a handful of his cronies grin like bandits counting their loot. If states are going to have to be fiscally penalized to make the numbers work for the health care reform legislation, then all states should have to bear the burden.
The health care reform debate is starting to focus attention on what happens when arrogance meets partisanship. It is almost impossible to pass legislation that will cover all of the uninsured, reduce the overall cost of health insurance, and “not add a dime” to the deficit as President Obama promised. There are going to be winners and losers—and some very big losers—if the legislation passes. The likely losers will be young Americans and healthy policy holders who will have to pay much higher costs to insure or subsidize the elderly, the uninsured, and individuals with health problems or unhealthy life styles.
The main science driving the health care debate at this juncture is political science. After watching the political class making hash out of health care legislation, voters might want to ponder another quote from Lord Acton: “It is easier to find people fit to govern themselves than people to govern others. Every man is the best, the most fit judge of his own advantage.”
Senator Reid is living proof of the wisdom in those words.
There is no doubt that Reid is in a tough spot. President Obama has stacked up a huge pile of political poker chips, betting on a winning hand on health care reform. He will be harmed politically if he loses, and his fellow Democrats in Congress will feel the collateral damage. But it is not easy to muster the votes necessary to make significant changes to one-sixth of the U.S. economy—as Harry Reid has learned. Adding to Reid’s difficulties is the fact that he has to run for re-election next year, and polling data indicate that he is far from being a shoo-in.
The last thing Reid needs is to be a major factor in passing legislation that will push the crumbling budget of the State of Nevada further into the abyss. One of the central features of the proposed legislation could do just that. It would allow millions of individuals whose income levels currently preclude them from qualifying for Medicaid to meet eligibility requirements for the program. But there is a rub: states must put up a five percent match to help cover the additional costs.
Reid has made no bones about what he plans to do to avoid any political fallout back home. He has stated unequivocally that he will not allow a health care bill to come to the floor if it increases Medicaid costs for Nevada. He seems to be getting his way. The Senate Finance Committee bill would exempt four states—Michigan, Oregon, Rhode Island, and (yes) Nevada—from the requirement to pay the five percent funding match. The alleged justification for making the exception is that those states have been the hardest hit by the recession.
The Senate should rebel against Senator Reid feathering his own nest.
Other states shouldn’t have their budgets savaged by another huge unfunded mandate coming down from Washington while watching Reid and a handful of his cronies grin like bandits counting their loot. If states are going to have to be fiscally penalized to make the numbers work for the health care reform legislation, then all states should have to bear the burden.
The health care reform debate is starting to focus attention on what happens when arrogance meets partisanship. It is almost impossible to pass legislation that will cover all of the uninsured, reduce the overall cost of health insurance, and “not add a dime” to the deficit as President Obama promised. There are going to be winners and losers—and some very big losers—if the legislation passes. The likely losers will be young Americans and healthy policy holders who will have to pay much higher costs to insure or subsidize the elderly, the uninsured, and individuals with health problems or unhealthy life styles.
The main science driving the health care debate at this juncture is political science. After watching the political class making hash out of health care legislation, voters might want to ponder another quote from Lord Acton: “It is easier to find people fit to govern themselves than people to govern others. Every man is the best, the most fit judge of his own advantage.”
Senator Reid is living proof of the wisdom in those words.
Tuesday, October 13, 2009
Workers Should Have the Right to Vote
There is a bill in the U.S. Senate that would radically alter the process for deciding whether a union will represent you at the bargaining table with your employer. That bill’s sole purpose is to provide unions greater leverage in labor/management relations.
And while the health care issue has understandably dominated the public’s attention, you should keep an eye on this issue, too.
Lately, the debate over health care has pushed virtually everything else in Congress to the back burners. Nevertheless, unions and their allies in Congress want to force a vote on their bill. Last week, Senate Health, Education, Labor and Pensions Committee chairman, Sen. Tom Harkin (D – Iowa), said that he was still hoping to bring the bill up for a vote this fall. However, the unions have to clear a significant hurdle first. They must secure 60 votes from among the country’s 100 senators to avoid a guaranteed filibuster by opponents.
All 40 Republican senators are against this bill, which means that all 60 Democratic senators are needed to invoke cloture to prevent the filibuster. While most of the Democrats would vote to do this, a number of moderate Democratic senators have not signed onto this bill, including Louisiana’s Sen. Mary Landrieu.
Her reluctance is understandable–and commendable. S. 560 was named the Employee Free Choice Act by its authors, but it is more commonly referred to as “card check” because it would essentially eliminate secret ballot elections and replace them with an open card registration procedure known as card check.
Existing law allows workers to hear both sides–as they would in an election campaign–and then to privately decide in a voting booth whether they want union representation. S. 560 seeks to change the rules for union organizing campaigns so that workers only get the union’s side of the story.
Currently, unions wanting to obtain bargaining rights hire organizers to solicit workers’ signatures on cards authorizing a union certification election. If 30 percent of the workers sign the cards, the union can petition the National Labor Relations Board to conduct an election, which it supervises to assure that neither the employer nor the union intimidates the workers.
Many workers are not interested in being represented by a union, but will sign the cards so organizers will leave them alone.
When the election is held, they then vote against unionization. That is why the standard goal of organizing campaigns is to collect signatures from 75 percent of workers. Unions will always choose card check because they already collect more than a majority of signatures anyway. So, S. 560 would effectively eliminate the secret ballot election procedure.
The inability of union leaders to secure outright support for S. 560 from Sen. Landrieu and other moderate Democratic senators like her has prompted Sen. Harkin and a handful of other supportive senators to attempt to develop an alternative approach to overcome their reluctance. Yet, the only alternative that would satisfy union leaders will be one that rigs the game and keeps workers from getting the full story before deciding to allow a union in their workplace.
The existing law is fair and protects workers from being unduly pressured by their employers or union organizers. S. 560 was not brought by a host of workers begging to have the law changed, but by union leaders who see their membership sinking as workers find unions less relevant and beneficial in today’s economy. Senator Landrieu would be wise not to support cloture on this bill or on any variation of it that the union leadership would support.
Jim Patterson, LABI’s Vice President of Governmental Relations and Employee Relations Council Director, contributed to this column.
And while the health care issue has understandably dominated the public’s attention, you should keep an eye on this issue, too.
Lately, the debate over health care has pushed virtually everything else in Congress to the back burners. Nevertheless, unions and their allies in Congress want to force a vote on their bill. Last week, Senate Health, Education, Labor and Pensions Committee chairman, Sen. Tom Harkin (D – Iowa), said that he was still hoping to bring the bill up for a vote this fall. However, the unions have to clear a significant hurdle first. They must secure 60 votes from among the country’s 100 senators to avoid a guaranteed filibuster by opponents.
All 40 Republican senators are against this bill, which means that all 60 Democratic senators are needed to invoke cloture to prevent the filibuster. While most of the Democrats would vote to do this, a number of moderate Democratic senators have not signed onto this bill, including Louisiana’s Sen. Mary Landrieu.
Her reluctance is understandable–and commendable. S. 560 was named the Employee Free Choice Act by its authors, but it is more commonly referred to as “card check” because it would essentially eliminate secret ballot elections and replace them with an open card registration procedure known as card check.
Existing law allows workers to hear both sides–as they would in an election campaign–and then to privately decide in a voting booth whether they want union representation. S. 560 seeks to change the rules for union organizing campaigns so that workers only get the union’s side of the story.
Currently, unions wanting to obtain bargaining rights hire organizers to solicit workers’ signatures on cards authorizing a union certification election. If 30 percent of the workers sign the cards, the union can petition the National Labor Relations Board to conduct an election, which it supervises to assure that neither the employer nor the union intimidates the workers.
Many workers are not interested in being represented by a union, but will sign the cards so organizers will leave them alone.
When the election is held, they then vote against unionization. That is why the standard goal of organizing campaigns is to collect signatures from 75 percent of workers. Unions will always choose card check because they already collect more than a majority of signatures anyway. So, S. 560 would effectively eliminate the secret ballot election procedure.
The inability of union leaders to secure outright support for S. 560 from Sen. Landrieu and other moderate Democratic senators like her has prompted Sen. Harkin and a handful of other supportive senators to attempt to develop an alternative approach to overcome their reluctance. Yet, the only alternative that would satisfy union leaders will be one that rigs the game and keeps workers from getting the full story before deciding to allow a union in their workplace.
The existing law is fair and protects workers from being unduly pressured by their employers or union organizers. S. 560 was not brought by a host of workers begging to have the law changed, but by union leaders who see their membership sinking as workers find unions less relevant and beneficial in today’s economy. Senator Landrieu would be wise not to support cloture on this bill or on any variation of it that the union leadership would support.
Jim Patterson, LABI’s Vice President of Governmental Relations and Employee Relations Council Director, contributed to this column.
Saturday, October 3, 2009
Yesterday, Today and Tomorrow from a State Budget Standpoint
The biggest issue facing Governor Jindal and the Legislature in 2010 will be the state budget. No other issue will come remotely close to capturing the same amount of attention and scrutiny in the run-up to the legislative session next March. Considering the fact that the governor must submit an executive budget outline in February, the countdown is on.
The budgeting process is going to be anything but fun in 2010. Soaring revenues fueled by incredibly high oil and gas prices and billions of dollars of hurricane recovery money are a thing of the past. Slower revenue growth is likely to meet a huge loss of federal Medicaid money in the budgeting process next year, and the result will not be pleasant.
To better understand the future direction of the state budget, a look at the two most recent budgets helps to put things in perspective.
In 2008 when the governor and the Legislature fashioned the 2008-2009 budget, state government was still rolling in high cotton. Money was pouring into the treasury so fast it was hard to spend it all—but Lord knows we tried. The total state budget increased by $1 billion and the state general fund portion of it (the part funded only by state generated revenue) went up by a whopping $1.24 billion. That budget also contained an increase of 1,000 state job positions. This significant expansion of the state budget came after a similar sizeable increase in the 2007-2008 budget fashioned in the last year of the Blanco administration. But what goes up must come down—and our governor and Legislature began to learn that lesson last spring when they wrote the 2009-2010 budget.
The budget debate last spring and early summer contained a lot of wailing and gnashing of teeth. The House members wanted to bring spending back in line with existing revenues. A majority of the Senate wanted to increase taxes and lessen the amount of cuts.
Governor Jindal did not support tax increases, so the House version of the budget became the basic blueprint. The result was that the total state budget decreased by $1.5 billion from the previous year and the state general fund portion dropped by $1.21 billion.
That budget also called for a reduction of 1,200 authorized (but probably not filled) job positions in state government. In essence, the governor and the Legislature simply reverted back to 2007-2008 spending levels when they crafted the current budget. But remember, those spending levels were a huge increase in and of themselves due to higher oil and gas prices and hurricane recovery money.
Now the road gets bumpier for the governor and the Legislature. Unless the federal government changes the formula for determining the state match for Medicaid funding (or carves out a temporary exemption for Louisiana), there will be $1 billion less revenue to use to come up with the same spending levels as exists in the current budget.
Several cost savings panels are meeting to come up with recommendations for reducing expenditures and identifying efficiencies in state government operations. Unfortunately, most of the potentially low hanging fruit in the cost savings arena has already been harvested.
To come up with a billion dollars of spending reductions, some sacred cows are going to have to be sacrificed—things like the multiplicity of institutions in post-secondary education and the large amount of state funding provided for local government services and construction projects.
How the governor and Legislature handle the budget next spring will impact the fiscal future of Louisiana for years to come. Let’s hope they do better than Congress.
The budgeting process is going to be anything but fun in 2010. Soaring revenues fueled by incredibly high oil and gas prices and billions of dollars of hurricane recovery money are a thing of the past. Slower revenue growth is likely to meet a huge loss of federal Medicaid money in the budgeting process next year, and the result will not be pleasant.
To better understand the future direction of the state budget, a look at the two most recent budgets helps to put things in perspective.
In 2008 when the governor and the Legislature fashioned the 2008-2009 budget, state government was still rolling in high cotton. Money was pouring into the treasury so fast it was hard to spend it all—but Lord knows we tried. The total state budget increased by $1 billion and the state general fund portion of it (the part funded only by state generated revenue) went up by a whopping $1.24 billion. That budget also contained an increase of 1,000 state job positions. This significant expansion of the state budget came after a similar sizeable increase in the 2007-2008 budget fashioned in the last year of the Blanco administration. But what goes up must come down—and our governor and Legislature began to learn that lesson last spring when they wrote the 2009-2010 budget.
The budget debate last spring and early summer contained a lot of wailing and gnashing of teeth. The House members wanted to bring spending back in line with existing revenues. A majority of the Senate wanted to increase taxes and lessen the amount of cuts.
Governor Jindal did not support tax increases, so the House version of the budget became the basic blueprint. The result was that the total state budget decreased by $1.5 billion from the previous year and the state general fund portion dropped by $1.21 billion.
That budget also called for a reduction of 1,200 authorized (but probably not filled) job positions in state government. In essence, the governor and the Legislature simply reverted back to 2007-2008 spending levels when they crafted the current budget. But remember, those spending levels were a huge increase in and of themselves due to higher oil and gas prices and hurricane recovery money.
Now the road gets bumpier for the governor and the Legislature. Unless the federal government changes the formula for determining the state match for Medicaid funding (or carves out a temporary exemption for Louisiana), there will be $1 billion less revenue to use to come up with the same spending levels as exists in the current budget.
Several cost savings panels are meeting to come up with recommendations for reducing expenditures and identifying efficiencies in state government operations. Unfortunately, most of the potentially low hanging fruit in the cost savings arena has already been harvested.
To come up with a billion dollars of spending reductions, some sacred cows are going to have to be sacrificed—things like the multiplicity of institutions in post-secondary education and the large amount of state funding provided for local government services and construction projects.
How the governor and Legislature handle the budget next spring will impact the fiscal future of Louisiana for years to come. Let’s hope they do better than Congress.
Tuesday, August 25, 2009
Keeping Manufacturing Alive
Some of the highest paying jobs in America are created by companies that make things. Manufacturing has been a mainstay in the U.S. economy since the beginning of the industrial revolution. Some say that manufacturing is passé, that technology is the future, and that it doesn’t matter if manufacturing dries up and blows away.
The flaw in those arguments (actually there are numerous flaws) is that one of the biggest users of technology today is manufacturers.
Modern manufacturing operations are the showcase for innovative technology. Gone are the days, for instance, when hundreds of laborers engaged in the back-breaking activity of wrestling with logs in a forest products plant. A typical worker in those facilities today is more of a technician than a log wrestler.
State-of-the-art machinery moves the logs, determines the best possible value that can be extracted from them, and turns them into profitable products. The same is true of many industries, such as steel, durable goods, petroleum refining, and chemical manufacturing. Technology is the driving force that has increased productivity in American manufacturing, which has kept us a global leader in manufacturing output.
As noted above, advancements in technology have led directly to a diminution of manufacturing employment in the U.S. Many Americans believe that most of the manufacturing job losses—and there have been millions in the last few decades—are due to plants closing in the U.S. and moving to less-developed countries.
Certainly there has been some of that phenomenon occurring, particularly with low-technology industries. But, until this point, the majority of manufacturing job losses has been due more to productivity advances through technology than out-sourcing manufacturing jobs to foreign countries.
That may change soon. Government policies can have a major impact on any industry, and manufacturing is no exception.
Several issues pending in Congress could accelerate the departure of manufacturing industries and jobs from the U.S. Enactment of “cap and trade” legislation tops the list.
If energy costs rise exponentially for manufacturers in the U.S., companies will undoubtedly look more favorably at countries that do not artificially raise their cost of doing business by raising their energy costs.
Another federal issue that will impact the future of American manufacturing is the “card check” legislation pending in Congress. Some manufacturers work with a union agreement. Others do not. Manufacturers are not generally concerned about the wages involved with a collective bargaining agreement. They already have some of the highest wage scales in the private sector.
What troubles them are the voluminous work rules that come with a union contract. These contract requirements inhibit the productivity advancements necessary for manufacturing to survive in the modern world.
The current health care debate also has the full attention of U.S. manufacturers. The vast majority of our domestic manufacturers provide quality health insurance coverage for their workers. Proposals in Congress would mandate that coverage and possibly tax manufacturers for providing it.
The manufacturing community is very wary of government-imposed mandates from past experience involving many issues. Limiting their ability to design quality, affordable insurance plans for their workers—and possibly making them pay taxes to provide it—will not make them more likely to keep or expand their operations in the U.S.
If America is to remain a world leader in making things, government officials should step lightly when considering policies that could make more of our best jobs leave our shores.
Improving the quality of education, encouraging more research and development, and maintaining job-friendly tax policies will help keep manufacturing jobs in America. Passing some of the proposals pending in Congress will definitely have the opposite effect.
The flaw in those arguments (actually there are numerous flaws) is that one of the biggest users of technology today is manufacturers.
Modern manufacturing operations are the showcase for innovative technology. Gone are the days, for instance, when hundreds of laborers engaged in the back-breaking activity of wrestling with logs in a forest products plant. A typical worker in those facilities today is more of a technician than a log wrestler.
State-of-the-art machinery moves the logs, determines the best possible value that can be extracted from them, and turns them into profitable products. The same is true of many industries, such as steel, durable goods, petroleum refining, and chemical manufacturing. Technology is the driving force that has increased productivity in American manufacturing, which has kept us a global leader in manufacturing output.
As noted above, advancements in technology have led directly to a diminution of manufacturing employment in the U.S. Many Americans believe that most of the manufacturing job losses—and there have been millions in the last few decades—are due to plants closing in the U.S. and moving to less-developed countries.
Certainly there has been some of that phenomenon occurring, particularly with low-technology industries. But, until this point, the majority of manufacturing job losses has been due more to productivity advances through technology than out-sourcing manufacturing jobs to foreign countries.
That may change soon. Government policies can have a major impact on any industry, and manufacturing is no exception.
Several issues pending in Congress could accelerate the departure of manufacturing industries and jobs from the U.S. Enactment of “cap and trade” legislation tops the list.
If energy costs rise exponentially for manufacturers in the U.S., companies will undoubtedly look more favorably at countries that do not artificially raise their cost of doing business by raising their energy costs.
Another federal issue that will impact the future of American manufacturing is the “card check” legislation pending in Congress. Some manufacturers work with a union agreement. Others do not. Manufacturers are not generally concerned about the wages involved with a collective bargaining agreement. They already have some of the highest wage scales in the private sector.
What troubles them are the voluminous work rules that come with a union contract. These contract requirements inhibit the productivity advancements necessary for manufacturing to survive in the modern world.
The current health care debate also has the full attention of U.S. manufacturers. The vast majority of our domestic manufacturers provide quality health insurance coverage for their workers. Proposals in Congress would mandate that coverage and possibly tax manufacturers for providing it.
The manufacturing community is very wary of government-imposed mandates from past experience involving many issues. Limiting their ability to design quality, affordable insurance plans for their workers—and possibly making them pay taxes to provide it—will not make them more likely to keep or expand their operations in the U.S.
If America is to remain a world leader in making things, government officials should step lightly when considering policies that could make more of our best jobs leave our shores.
Improving the quality of education, encouraging more research and development, and maintaining job-friendly tax policies will help keep manufacturing jobs in America. Passing some of the proposals pending in Congress will definitely have the opposite effect.
Friday, August 7, 2009
Independents Are Taking a Second Look
By Dan Juneau
Presidential campaigns are in some respects like a gruesome war. Large, well-financed armies of partisans slug it out in battles designed to rally their voters into action and to drive down the favorable impressions of the opposing candidate.
But the growing trend in modern elections centers on securing the votes of independent voters not affiliated with either party. This block of voters has increased significantly in the last few decades. They tend to be more conservative than most Democrats on fiscal issues and more liberal than most Republicans on social issues. Recent Democratic successes in both congressional and presidential elections have revolved around securing a majority of these independent voters to back Democrats.
A recent public opinion survey by the Gallup organization contains a clear message that independent voters may be becoming concerned about their decision to place one-party rule in the hands of the Democrats.
The poll, conducted July 17-19, had some interesting findings. Some 59 percent of the respondents said that the Obama administration’s proposals called for too much federal spending. Not surprisingly, 90 percent of Republicans felt that way, compared to only 28 percent of Democrats. But a solid 66 percent of independents expressed strong concern about the high level of federal spending.
In a similar vein, 52 percent of the respondents felt that the Obama agenda was moving toward too great an expansion of the federal government. Again, 83 percent of Republicans held that view while only 17 percent of Democrats concurred. But 60 percent of independent voters expressed a concern that the federal government is growing too large, too fast.
Other recent polling data show that the president’s popularity is falling, support for his handling of key issues is diminished, and the generic ballot question of whether the voters would prefer a Democrat or Republican in Congress is moving more in the direction of the Republicans. Next year is an election year in which every House member and roughly a third of the Senate face elections. That being the case, this recent Gallup poll should be a wake-up call for the president and the congressional members of his party.
Americans have recently seen the enactment of a “stimulus” package totaling almost $800 billion. But they have seen few positive results from that huge amount of government spending.
Voters have also seen the House pass a thousand-page energy/climate change bill that will expand the government’s role in the economy and pit winners against losers in various states and industries. And now Congress is debating perhaps the largest and most expensive expansion of government ever in the form of health care legislation, including a public insurance option backed by the federal treasury.
Many Democrats in Congress are getting uncomfortable with the rush to enact huge new spending programs that will lead to an increase of direct government intervention in the economy. The Gallup poll indicates those Democrats have good reasons to feel that way. The president and the Democratic leaders in Congress are getting concerned that public opinion is shifting away from them on these crucial issues.
They are trying to ram the health care legislation through before members of Congress go home for their August recess. But moderate Democrats are not moving lockstep behind President Obama and the Democratic leadership at this juncture.
One of the major reasons why they are getting cold feet is the fact that they know they must have the votes of those fiscally conservative independent voters if they are going to retain the seats that many of them won from Republicans in the last few elections.
Presidential campaigns are in some respects like a gruesome war. Large, well-financed armies of partisans slug it out in battles designed to rally their voters into action and to drive down the favorable impressions of the opposing candidate.
But the growing trend in modern elections centers on securing the votes of independent voters not affiliated with either party. This block of voters has increased significantly in the last few decades. They tend to be more conservative than most Democrats on fiscal issues and more liberal than most Republicans on social issues. Recent Democratic successes in both congressional and presidential elections have revolved around securing a majority of these independent voters to back Democrats.
A recent public opinion survey by the Gallup organization contains a clear message that independent voters may be becoming concerned about their decision to place one-party rule in the hands of the Democrats.
The poll, conducted July 17-19, had some interesting findings. Some 59 percent of the respondents said that the Obama administration’s proposals called for too much federal spending. Not surprisingly, 90 percent of Republicans felt that way, compared to only 28 percent of Democrats. But a solid 66 percent of independents expressed strong concern about the high level of federal spending.
In a similar vein, 52 percent of the respondents felt that the Obama agenda was moving toward too great an expansion of the federal government. Again, 83 percent of Republicans held that view while only 17 percent of Democrats concurred. But 60 percent of independent voters expressed a concern that the federal government is growing too large, too fast.
Other recent polling data show that the president’s popularity is falling, support for his handling of key issues is diminished, and the generic ballot question of whether the voters would prefer a Democrat or Republican in Congress is moving more in the direction of the Republicans. Next year is an election year in which every House member and roughly a third of the Senate face elections. That being the case, this recent Gallup poll should be a wake-up call for the president and the congressional members of his party.
Americans have recently seen the enactment of a “stimulus” package totaling almost $800 billion. But they have seen few positive results from that huge amount of government spending.
Voters have also seen the House pass a thousand-page energy/climate change bill that will expand the government’s role in the economy and pit winners against losers in various states and industries. And now Congress is debating perhaps the largest and most expensive expansion of government ever in the form of health care legislation, including a public insurance option backed by the federal treasury.
Many Democrats in Congress are getting uncomfortable with the rush to enact huge new spending programs that will lead to an increase of direct government intervention in the economy. The Gallup poll indicates those Democrats have good reasons to feel that way. The president and the Democratic leaders in Congress are getting concerned that public opinion is shifting away from them on these crucial issues.
They are trying to ram the health care legislation through before members of Congress go home for their August recess. But moderate Democrats are not moving lockstep behind President Obama and the Democratic leadership at this juncture.
One of the major reasons why they are getting cold feet is the fact that they know they must have the votes of those fiscally conservative independent voters if they are going to retain the seats that many of them won from Republicans in the last few elections.
Tuesday, July 21, 2009
Where Do We Go From Here?
The Legislature has adjourned, but the dust from this session probably will not settle before next year's session begins. Louisiana, like many other states, is at a critical crossroads. Two governors and two different Legislatures significantly overspent volatile oil and gas revenues in the two years prior to the current one. That was the major cause of the budget crisis state government faced this year. The problem is easy to identify. Simply go back to the decision made under the Blanco administration to fully fund the Rainy Day Trust Fund and allow skyrocketing oil and gas revenues to flow into the state general fund where they could be spent on recurring expenditures. That is exactly what the Legislature did in Governor Blanco's last year and again in Governor Jindal's first year in office. This year, the chickens came home to roost. Unfortunately, even more chickens will be looking for roosting space in the next few years.
Last Thursday, the head of the Congressional Budget Office told Congress that the federal budget is unsustainable going forward with current spending levels-much less the increases being proposed. Some well-credentialed fiscal guru needs to give our governor and Legislature the same message.
In addition to Louisiana's declining revenue problem, the federal government has informed us that, due to a temporary upward blip in personal income, we will be paid $1 billion less in Medicaid money next year. Our state leaders are on their knees begging for mercy from that decision, but there is a strong likelihood that their pleas will go unanswered. Compounding the problem is the fact that in two years, hundreds of millions in "stimulus" dollars will no longer be coming from Washington. The time to plan for that is now, not two years from now.
Another ominous sign on the horizon is the very negative attitude the Obama administration and the majority in Congress is showing toward the oil and gas industry. The industry is facing a drastic increase in taxes and more restrictions on domestic exploration and production. If domestic oil and gas activity is curtailed by new federal laws and regulations, our state revenue picture will become even bleaker.
Governor Jindal is first up at bat in addressing these problems since he must submit an executive budget proposal to the Legislature early next year. What the governor submits in his annual executive budget usually provides the basic blueprint for what comes out of the process. Certainly, the governor can't expect any increase in revenues coming from natural growth in the foreseeable future. That being the case, he will supply the early vision as to how state government must be reconfigured to match appropriate spending levels with real-world revenue projections. His executive budget should also clearly indicate what his spending priorities will be.
The executive and legislative branches should not wait for next year to begin reshaping the delivery of state services to match new revenue realities. Close scrutiny should be given to state funding of local government services, consolidation of functions in post-secondary education, civil service reforms that would enhance state government's ability to consolidate its workforce, and other spending reforms that would reduce the expense side of the state fiscal ledger.
It was fun to be governor or a legislator in the revenue-boom years after the hurricanes when recovery money was flowing and oil and gas prices were setting records. The party is now over. It is time to clean up the excesses and make government work as best as possible with the revenues that are available. That is what families are doing all across Louisiana. Their elected leaders should follow suit.
Last Thursday, the head of the Congressional Budget Office told Congress that the federal budget is unsustainable going forward with current spending levels-much less the increases being proposed. Some well-credentialed fiscal guru needs to give our governor and Legislature the same message.
In addition to Louisiana's declining revenue problem, the federal government has informed us that, due to a temporary upward blip in personal income, we will be paid $1 billion less in Medicaid money next year. Our state leaders are on their knees begging for mercy from that decision, but there is a strong likelihood that their pleas will go unanswered. Compounding the problem is the fact that in two years, hundreds of millions in "stimulus" dollars will no longer be coming from Washington. The time to plan for that is now, not two years from now.
Another ominous sign on the horizon is the very negative attitude the Obama administration and the majority in Congress is showing toward the oil and gas industry. The industry is facing a drastic increase in taxes and more restrictions on domestic exploration and production. If domestic oil and gas activity is curtailed by new federal laws and regulations, our state revenue picture will become even bleaker.
Governor Jindal is first up at bat in addressing these problems since he must submit an executive budget proposal to the Legislature early next year. What the governor submits in his annual executive budget usually provides the basic blueprint for what comes out of the process. Certainly, the governor can't expect any increase in revenues coming from natural growth in the foreseeable future. That being the case, he will supply the early vision as to how state government must be reconfigured to match appropriate spending levels with real-world revenue projections. His executive budget should also clearly indicate what his spending priorities will be.
The executive and legislative branches should not wait for next year to begin reshaping the delivery of state services to match new revenue realities. Close scrutiny should be given to state funding of local government services, consolidation of functions in post-secondary education, civil service reforms that would enhance state government's ability to consolidate its workforce, and other spending reforms that would reduce the expense side of the state fiscal ledger.
It was fun to be governor or a legislator in the revenue-boom years after the hurricanes when recovery money was flowing and oil and gas prices were setting records. The party is now over. It is time to clean up the excesses and make government work as best as possible with the revenues that are available. That is what families are doing all across Louisiana. Their elected leaders should follow suit.
Thursday, July 9, 2009
Action Picks Up In Washington
By Dan Juneau
Major committees in Congress are moving quickly—some would say too quickly—on legislation that will have a great impact on our health and our pocketbooks. The bills that are advancing are quite momentous. If they were being shaped by sound, well-researched analysis, perhaps the proposals wouldn’t be as scary. Unfortunately, much of the health care and energy legislation is being developed more by deal-cutting than by what works in the real world.
The health care legislation is a prime example. The cost estimates for the bills being shaped in various committees range from $1 trillion to $3.5 trillion over a 10-year period. With the budget deficit for next year already slated to be almost $2 trillion, even the spend-happy Congress is under pressure to pay for whatever is proposed and not simply add the cost to the ever-increasing federal deficit.
One of the major taxes being discussed to pay for the health care bills is a tax on employer-provided health insurance. Such a tax could raise almost $500 billion to offset the cost of covering more of the uninsured and underinsured. The problem is it could blow a hole in the foundation of our health care system that is based on coverage paid for all or in part by employers.
Some of the loudest critics of this tax proposal are the labor unions that have negotiated labor contracts with Cadillac benefits largely paid for by their employers. The staunch opposition of the unions is leaving its mark. One of the major Senate proposals now calls for creating an exemption from this tax for—you guessed it!—labor unions. If such a plan passes, non-union workers could be subject to having their employer-provided health insurance premium payments taxed as ordinary income.
That means that, in addition to the regular income tax rate they are subject to applying to this benefit, they would have to pay Medicare and Medicaid taxes on the amount as well. Their employers would also have to pay their share of the Medicare and Medicaid taxes. Non-union employers and employees would have to pay the tax while their union counterparts would escape the burden.
Substituting politics for sound policy decisions is very much at play with the energy legislation under consideration in Congress as well. Speaker of the House Nancy Pelosi is determined to have “cap and trade” legislation—that would limit carbon dioxide emissions and drive up energy costs—enacted by the end of summer.
But Pelosi and Company ran into a wall of opposition from many members of their own Democratic Caucus who are concerned about the economic impact of the legislation on their constituents. Particularly upset are farm state Democrats who believe the legislation could jeopardize their re-elections. The Waxman-Markey bill cannot pass without those key votes. So what happened? Deals were cut to placate the concerns of some but left the constituents of other congressmen (many in “Red States”) on the hook for paying potentially huge increases in energy costs.
This is no way to run a railroad. If a complete revamp of the nation’s health care system is a necessity, then everyone—union members included—should have to pick up the huge cost of paying for it. If significantly increased energy costs are the price that must be paid for reducing carbon dioxide emissions, then everyone in every region of the nation should have to bear those costs. There are sound reasons for opposing both the “cap and trade” legislation and the health care bills. Playing politics with who gets the bill for them only adds fuel to the fire.
Major committees in Congress are moving quickly—some would say too quickly—on legislation that will have a great impact on our health and our pocketbooks. The bills that are advancing are quite momentous. If they were being shaped by sound, well-researched analysis, perhaps the proposals wouldn’t be as scary. Unfortunately, much of the health care and energy legislation is being developed more by deal-cutting than by what works in the real world.
The health care legislation is a prime example. The cost estimates for the bills being shaped in various committees range from $1 trillion to $3.5 trillion over a 10-year period. With the budget deficit for next year already slated to be almost $2 trillion, even the spend-happy Congress is under pressure to pay for whatever is proposed and not simply add the cost to the ever-increasing federal deficit.
One of the major taxes being discussed to pay for the health care bills is a tax on employer-provided health insurance. Such a tax could raise almost $500 billion to offset the cost of covering more of the uninsured and underinsured. The problem is it could blow a hole in the foundation of our health care system that is based on coverage paid for all or in part by employers.
Some of the loudest critics of this tax proposal are the labor unions that have negotiated labor contracts with Cadillac benefits largely paid for by their employers. The staunch opposition of the unions is leaving its mark. One of the major Senate proposals now calls for creating an exemption from this tax for—you guessed it!—labor unions. If such a plan passes, non-union workers could be subject to having their employer-provided health insurance premium payments taxed as ordinary income.
That means that, in addition to the regular income tax rate they are subject to applying to this benefit, they would have to pay Medicare and Medicaid taxes on the amount as well. Their employers would also have to pay their share of the Medicare and Medicaid taxes. Non-union employers and employees would have to pay the tax while their union counterparts would escape the burden.
Substituting politics for sound policy decisions is very much at play with the energy legislation under consideration in Congress as well. Speaker of the House Nancy Pelosi is determined to have “cap and trade” legislation—that would limit carbon dioxide emissions and drive up energy costs—enacted by the end of summer.
But Pelosi and Company ran into a wall of opposition from many members of their own Democratic Caucus who are concerned about the economic impact of the legislation on their constituents. Particularly upset are farm state Democrats who believe the legislation could jeopardize their re-elections. The Waxman-Markey bill cannot pass without those key votes. So what happened? Deals were cut to placate the concerns of some but left the constituents of other congressmen (many in “Red States”) on the hook for paying potentially huge increases in energy costs.
This is no way to run a railroad. If a complete revamp of the nation’s health care system is a necessity, then everyone—union members included—should have to pick up the huge cost of paying for it. If significantly increased energy costs are the price that must be paid for reducing carbon dioxide emissions, then everyone in every region of the nation should have to bear those costs. There are sound reasons for opposing both the “cap and trade” legislation and the health care bills. Playing politics with who gets the bill for them only adds fuel to the fire.
Wednesday, June 24, 2009
Not One For The Record Books
The 2009 Regular Session of the Legislature is approaching its conclusion, and it probably will not generate fond memories in the minds of most individuals. Gertrude Stein once described Oakland, California by saying: "There is no 'there' there." It is difficult at this juncture to capture the "there" in this convocation of the Legislature.
Granted, the budget shortfall usurped almost every other potential topic during the session. Trying to plug a billion-dollar-plus hole in the operating budget was acts one, two, and three of the three-act play that was this legislative session. And, as with most acting performances, there was a lot of posturing and over-playing of roles.
The current battle of the budget centers around the House that wants to make a significant amount of cuts now (believing that there is more fiscal pain coming in the next two budgets), and the Senate that feels the amount of cuts proposed by the House is too severe. The Senate wants to take a significant amount of money from the Rainy Day Fund and to increase tax revenues to supplement the budget. Many members of the House have concerns about tapping the Rainy Day Fund at this juncture and are dead set against raising taxes. The two chambers are on a collision course with only a week left in the session.
Fiscal disputes such as the current one are somewhat rare. Why? Because the Legislature usually follows the governor's lead on budget matters. Governor Jindal has been a player but not necessarily a dominant one thus far in the budget debate. Yes, he said he would not allow any taxes to become law, but that didn't stop the Senate from (illegally) trying to advance one. Perhaps that was just posturing on the Senate's part so they could appear to be funding unfunded elements of the budget and jamming the House with the issue.
But the House wasn't in the mood for a jam. In an interesting move, the House concurred with the Senate amendments to the budget instead of sending the legislation to a conference committee. The Senate then loudly protested that the House had the audacity to adopt the amended version of the budget that the Senate had sent them. (Talk about audacity!) Now the Senate is amending House bills to send more revenue raising measures back to them in order to put pressure on the House to lessen the amount of cuts in the budget that is now sitting on the governor's desk.
The clock is ticking and the outcome of the battle over the budget is still up in the air. One of two scenarios is going to prevail in some fashion: Either the House's view (serious budget cutting needs to begin now because the news only gets worse in subsequent budgets) or the Senate's plan (raise more money now and hope for better times going forward) will become dominant. The outcome could be resolved fairly quickly if Governor Jindal sold the public on exactly what he thinks the solution to the problem should be-and why. He has stated in the past that he is not for raising taxes or tapping the Rainy Day Fund (except for perhaps $50 million) to address the budget shortfall. If that is where he still is in the deliberations, a forceful statement by him would likely conclude the issue. If he has changed his mind, it is time to let the world know.
Granted, the budget shortfall usurped almost every other potential topic during the session. Trying to plug a billion-dollar-plus hole in the operating budget was acts one, two, and three of the three-act play that was this legislative session. And, as with most acting performances, there was a lot of posturing and over-playing of roles.
The current battle of the budget centers around the House that wants to make a significant amount of cuts now (believing that there is more fiscal pain coming in the next two budgets), and the Senate that feels the amount of cuts proposed by the House is too severe. The Senate wants to take a significant amount of money from the Rainy Day Fund and to increase tax revenues to supplement the budget. Many members of the House have concerns about tapping the Rainy Day Fund at this juncture and are dead set against raising taxes. The two chambers are on a collision course with only a week left in the session.
Fiscal disputes such as the current one are somewhat rare. Why? Because the Legislature usually follows the governor's lead on budget matters. Governor Jindal has been a player but not necessarily a dominant one thus far in the budget debate. Yes, he said he would not allow any taxes to become law, but that didn't stop the Senate from (illegally) trying to advance one. Perhaps that was just posturing on the Senate's part so they could appear to be funding unfunded elements of the budget and jamming the House with the issue.
But the House wasn't in the mood for a jam. In an interesting move, the House concurred with the Senate amendments to the budget instead of sending the legislation to a conference committee. The Senate then loudly protested that the House had the audacity to adopt the amended version of the budget that the Senate had sent them. (Talk about audacity!) Now the Senate is amending House bills to send more revenue raising measures back to them in order to put pressure on the House to lessen the amount of cuts in the budget that is now sitting on the governor's desk.
The clock is ticking and the outcome of the battle over the budget is still up in the air. One of two scenarios is going to prevail in some fashion: Either the House's view (serious budget cutting needs to begin now because the news only gets worse in subsequent budgets) or the Senate's plan (raise more money now and hope for better times going forward) will become dominant. The outcome could be resolved fairly quickly if Governor Jindal sold the public on exactly what he thinks the solution to the problem should be-and why. He has stated in the past that he is not for raising taxes or tapping the Rainy Day Fund (except for perhaps $50 million) to address the budget shortfall. If that is where he still is in the deliberations, a forceful statement by him would likely conclude the issue. If he has changed his mind, it is time to let the world know.
Tuesday, June 9, 2009
The Games People Play
Dan Juneau
A recent ruckus in the state legislature has created a lot of anger and garnered national media attention. The incident involved a sneak attack amendment that Representative Avon Honey managed to get tacked onto one of his bills. The result was a 99-0 vote in the House of Representatives for a bill that, as amended, would enact changes in Louisiana’s unemployment compensation law to be eligible for unemployment compensation stimulus money approved by Congress.
There is more than meets the eye in this maneuver. The bill that was amended was on the “consent calendar” of the House agenda. That part of the agenda is reserved for bills that are totally non-controversial and can be considered quickly in order to speed up the legislative process. The original bill pertained to changes in the workers’ compensation law—not unemployment compensation.
Placing an unemployment compensation amendment on the bill violates the “dual object” provision in the Louisiana Constitution. That provision is designed to maintain order in the legislative process by preventing bills from being hijacked willy-nilly by amending them to have more than one objective.
Essentially, Representative Honey’s last second, unconstitutional amendment to his bill on a calendar reserved for totally non-controversial bills violated the legislative process on several levels, but that was just the opening act. When the bill arrived in the Senate, another game was played when it was referred to committee.
Under the Senate’s rules, the bill should have either not been referred due to its dual object flaw or, if referred, it should have gone to the Senate Labor and Industrial Relations Committee. Instead, the bill was referred to the Senate Finance Committee, presumably under the pretext that it has an impact on state finances.
Senate rules do provide for the dual referral of bills that have a significant fiscal impact. However, the rules clearly state that those bills must first go to the substantive committee (in this case, Labor and Industrial Relations), and only if they advance from that committee should they go to the Finance Committee for the fiscal impact review. The rules of procedure were abused and violated in both the House and the Senate on Rep. Honey’s bill.
Why?
Unfortunately, it has a lot to do with game-playing and message-sending. The unemployment compensation stimulus issue has devolved, to a significant degree, into a Republican versus Democrat and Jindal versus Obama spat. Other bills were filed to do exactly what Rep. Honey’s unconstitutional amendment attempts to do.
However, each time those bills were scheduled for hearing in the House committee, the authors declined to have them considered in a free and open debate on their merits. Instead, the route of subterfuge and abuse of legislative rules was taken.
Governor Jindal’s opposition to taking this portion of the stimulus money has to do with future tax increases on struggling employers to pay for the added benefits once the federal money is gone. His objection is a valid one. Some claim that the stimulus money in question is needed to delay tax increases and benefit cuts that will occur as unemployment claims climb in the future.
That is a bogus argument. Those tax increases and benefit cuts will occur next January regardless of the stimulus money. What the changes in our unemployment compensation law will do is bring us closer to additional employer tax increases and unemployment benefit cuts in the future as the unemployment trust fund has to continue to pay for the new benefits once the stimulus money is used up.
There is room for honest debate about the unemployment compensation stimulus money. There shouldn’t be any tolerance for abuse of the process so that some folks can play games and send messages.
A recent ruckus in the state legislature has created a lot of anger and garnered national media attention. The incident involved a sneak attack amendment that Representative Avon Honey managed to get tacked onto one of his bills. The result was a 99-0 vote in the House of Representatives for a bill that, as amended, would enact changes in Louisiana’s unemployment compensation law to be eligible for unemployment compensation stimulus money approved by Congress.
There is more than meets the eye in this maneuver. The bill that was amended was on the “consent calendar” of the House agenda. That part of the agenda is reserved for bills that are totally non-controversial and can be considered quickly in order to speed up the legislative process. The original bill pertained to changes in the workers’ compensation law—not unemployment compensation.
Placing an unemployment compensation amendment on the bill violates the “dual object” provision in the Louisiana Constitution. That provision is designed to maintain order in the legislative process by preventing bills from being hijacked willy-nilly by amending them to have more than one objective.
Essentially, Representative Honey’s last second, unconstitutional amendment to his bill on a calendar reserved for totally non-controversial bills violated the legislative process on several levels, but that was just the opening act. When the bill arrived in the Senate, another game was played when it was referred to committee.
Under the Senate’s rules, the bill should have either not been referred due to its dual object flaw or, if referred, it should have gone to the Senate Labor and Industrial Relations Committee. Instead, the bill was referred to the Senate Finance Committee, presumably under the pretext that it has an impact on state finances.
Senate rules do provide for the dual referral of bills that have a significant fiscal impact. However, the rules clearly state that those bills must first go to the substantive committee (in this case, Labor and Industrial Relations), and only if they advance from that committee should they go to the Finance Committee for the fiscal impact review. The rules of procedure were abused and violated in both the House and the Senate on Rep. Honey’s bill.
Why?
Unfortunately, it has a lot to do with game-playing and message-sending. The unemployment compensation stimulus issue has devolved, to a significant degree, into a Republican versus Democrat and Jindal versus Obama spat. Other bills were filed to do exactly what Rep. Honey’s unconstitutional amendment attempts to do.
However, each time those bills were scheduled for hearing in the House committee, the authors declined to have them considered in a free and open debate on their merits. Instead, the route of subterfuge and abuse of legislative rules was taken.
Governor Jindal’s opposition to taking this portion of the stimulus money has to do with future tax increases on struggling employers to pay for the added benefits once the federal money is gone. His objection is a valid one. Some claim that the stimulus money in question is needed to delay tax increases and benefit cuts that will occur as unemployment claims climb in the future.
That is a bogus argument. Those tax increases and benefit cuts will occur next January regardless of the stimulus money. What the changes in our unemployment compensation law will do is bring us closer to additional employer tax increases and unemployment benefit cuts in the future as the unemployment trust fund has to continue to pay for the new benefits once the stimulus money is used up.
There is room for honest debate about the unemployment compensation stimulus money. There shouldn’t be any tolerance for abuse of the process so that some folks can play games and send messages.
Sunday, May 24, 2009
Focus on the Millages
Dan Juneau
There is a lot of debate going on at the State Capitol on the issue of property taxation. Some of it centers on raising the homestead exemption, some on freezing or capping tax assessments, and some on carving out special property tax safe harbors for relatively small groups of people. The property tax issue is a complex one and few understand exactly how their property tax bills work.
Individuals with concerns about property taxes should focus on one main aspect: millages. The millage amount is applied to the assessed valuation of taxpayers’ property to determine the amount of taxes owed: the higher the millages, the higher the tax bill.
How do millages go up? Taxpayers can vote to increase the millages in a tax election. If the tax proposition passes, the new millages are added to the next tax bill. Perhaps the most common way millages go up relates to something called roll-forwards. Every four years, residential property is reappraised by the local assessors. If values rise (which is common), the state constitution requires that millages must automatically be rolled back to a level that collects the same amount of tax revenue on the books before the reassessment of property. However, the constitution also gives local governing authorities the option to roll the millages forward to their previous levels—without a vote of the people—in order to collect more revenue. Millages also will rise significantly if the homestead exemption is increased. An increase in the exemption narrows the tax base and millages then automatically roll forward (with no vote required on anyone’s part) to higher levels.
Some of the proponents of raising the homestead exemption say it would result in a reduction of property taxes. That isn’t correct. It would simply result in a transfer of property taxes from some taxpayers to others. It would become a tax increase to many homeowners whose homes are valued higher than the exempted levels, to businesses that already pay almost 80 percent of the property taxes, and to renters whose landlords would pass on their tax increases in the form of higher rents.
According to the Tax Foundation, Louisiana ranks dead last (51st among the 50 states and the District of Columbia) in residential property taxes paid. At the same time, Louisiana has the highest homestead exemption in the nation ($75,000 of home value). The taxpayers who have seen their property tax bills go up a noticeable amount are looking at the wrong element of relief if they think raising the homestead exemption is the answer. Most of the increases are coming from the roll-forward of millages by local governments after reassessments are done.
Everyone benefits from public education, public safety, roads, water, and sewerage infrastructure improvements, libraries, and other public services. The individuals who are pushing for a higher homestead exemption think only a small group of taxpayers—primarily business owners and homeowners who are already paying more than their fair share of property taxes—should be the exclusive source for funding those necessary services. Others in the Legislature are carving out property tax exclusions for small groups of homeowners, not by giving them a direct credit for lower taxes on their tax bills, but by having someone else pay their taxes.
Some members of the Legislature appear hell-bent on making a bad situation worse when it comes to our property tax system. Unfortunately, our Governor is voicing his support for some of the legislation that would be the antithesis of the fiscal reform needed to improve tax fairness and the business climate of Louisiana.
There is a lot of debate going on at the State Capitol on the issue of property taxation. Some of it centers on raising the homestead exemption, some on freezing or capping tax assessments, and some on carving out special property tax safe harbors for relatively small groups of people. The property tax issue is a complex one and few understand exactly how their property tax bills work.
Individuals with concerns about property taxes should focus on one main aspect: millages. The millage amount is applied to the assessed valuation of taxpayers’ property to determine the amount of taxes owed: the higher the millages, the higher the tax bill.
How do millages go up? Taxpayers can vote to increase the millages in a tax election. If the tax proposition passes, the new millages are added to the next tax bill. Perhaps the most common way millages go up relates to something called roll-forwards. Every four years, residential property is reappraised by the local assessors. If values rise (which is common), the state constitution requires that millages must automatically be rolled back to a level that collects the same amount of tax revenue on the books before the reassessment of property. However, the constitution also gives local governing authorities the option to roll the millages forward to their previous levels—without a vote of the people—in order to collect more revenue. Millages also will rise significantly if the homestead exemption is increased. An increase in the exemption narrows the tax base and millages then automatically roll forward (with no vote required on anyone’s part) to higher levels.
Some of the proponents of raising the homestead exemption say it would result in a reduction of property taxes. That isn’t correct. It would simply result in a transfer of property taxes from some taxpayers to others. It would become a tax increase to many homeowners whose homes are valued higher than the exempted levels, to businesses that already pay almost 80 percent of the property taxes, and to renters whose landlords would pass on their tax increases in the form of higher rents.
According to the Tax Foundation, Louisiana ranks dead last (51st among the 50 states and the District of Columbia) in residential property taxes paid. At the same time, Louisiana has the highest homestead exemption in the nation ($75,000 of home value). The taxpayers who have seen their property tax bills go up a noticeable amount are looking at the wrong element of relief if they think raising the homestead exemption is the answer. Most of the increases are coming from the roll-forward of millages by local governments after reassessments are done.
Everyone benefits from public education, public safety, roads, water, and sewerage infrastructure improvements, libraries, and other public services. The individuals who are pushing for a higher homestead exemption think only a small group of taxpayers—primarily business owners and homeowners who are already paying more than their fair share of property taxes—should be the exclusive source for funding those necessary services. Others in the Legislature are carving out property tax exclusions for small groups of homeowners, not by giving them a direct credit for lower taxes on their tax bills, but by having someone else pay their taxes.
Some members of the Legislature appear hell-bent on making a bad situation worse when it comes to our property tax system. Unfortunately, our Governor is voicing his support for some of the legislation that would be the antithesis of the fiscal reform needed to improve tax fairness and the business climate of Louisiana.
Tuesday, May 19, 2009
The Champagne of the Hydrocarbons
05/15/2009
Some 30 years ago, I was coordinating a group of independent oil and gas operators from the Lafayette area lobbying members of Congress on energy legislation. During that time, we pushed successfully for some of the critical production incentives that are now being threatened by the Obama administration and their supporters on Capitol Hill. On one of my visits, I met with the chief legislative aide of then-Senator Lowell Weicker of Connecticut. She was the most intelligent person I met on the Hill-elected or non-elected. The first time I mentioned the words "natural gas," she replied: "Ah yes, the champagne of the hydrocarbons." As Congress and the Obama team thrash about in search of an energy policy, they would be well served to start with a tall glass of that champagne.
A sound energy policy for America should focus on what we have, what we need, and what reduces dependence on foreign energy sources. We need reliable sources for electricity and transportation. We have abundant energy sources in place. We need a rational energy policy to maximize domestic sources with national energy needs. We may get the opposite.
A few years ago, the conventional wisdom was that natural gas supplies had peaked and were entering a period of decline. That "conventional wisdom" was wrong. During the last two years, natural gas production increased by a total of 10 percent and new discoveries expanded proven reserves by 12.6 percent to 6.73 trillion cubic meters. The outlook for natural gas reserves is now improving, not declining, due to the huge amounts of gas located in shale deposits such as the Haynesville Shale field in northwest Louisiana (estimated to be the fourth largest natural gas field in the world). A sound energy policy should maximize the use of compressed natural gas (CNG) in vehicles, lessening dependence on foreign oil to meet those needs.
An increase in nuclear-generated electrical power is also a no-brainer. France gets most of its electricity from these plants, and 30 years ago the U.S. was moving in the same direction. America's electrical generation mix should see an increase in nuclear generation to bring more stability and reliability to the effort of meeting ever-increasing electricity demands.
The powers that be in Washington talk about spending trillions of dollars to increase "alternative" energy sources. Wind and solar power seem to be their favored candidates for huge amounts of federal funding. Science and economics indicate that these alternatives can be minor players in diversifying our energy mix, but cannot become major replacements for the fossil fuels that light our homes and power our cars.
Investments in clean coal technology, incentives for the natural gas vehicle marketplace, and a more streamlined permitting process for nuclear power plants should be the foundation of an energy policy that better protects the environment and has a decent chance of meeting future energy needs. It currently takes about 10 years to permit a nuclear reactor, seven years to permit a coal-fired power plant, and five years for a natural gas-powered facility. Bringing nuclear plant permitting more in line with other generation facilities would be a significant step forward.
Oil and natural gas are not going to disappear from our energy mix any time soon. Current efforts to subsidize solar and wind technologies by removing incentives for exploration and production of domestic oil and natural gas supplies are counterintuitive. We should maximize our domestic energy stocks, particularly those that wean us away from foreign sources of energy. If we don't, we are tilting at windmills in our quest for energy independence and reliability.
Some 30 years ago, I was coordinating a group of independent oil and gas operators from the Lafayette area lobbying members of Congress on energy legislation. During that time, we pushed successfully for some of the critical production incentives that are now being threatened by the Obama administration and their supporters on Capitol Hill. On one of my visits, I met with the chief legislative aide of then-Senator Lowell Weicker of Connecticut. She was the most intelligent person I met on the Hill-elected or non-elected. The first time I mentioned the words "natural gas," she replied: "Ah yes, the champagne of the hydrocarbons." As Congress and the Obama team thrash about in search of an energy policy, they would be well served to start with a tall glass of that champagne.
A sound energy policy for America should focus on what we have, what we need, and what reduces dependence on foreign energy sources. We need reliable sources for electricity and transportation. We have abundant energy sources in place. We need a rational energy policy to maximize domestic sources with national energy needs. We may get the opposite.
A few years ago, the conventional wisdom was that natural gas supplies had peaked and were entering a period of decline. That "conventional wisdom" was wrong. During the last two years, natural gas production increased by a total of 10 percent and new discoveries expanded proven reserves by 12.6 percent to 6.73 trillion cubic meters. The outlook for natural gas reserves is now improving, not declining, due to the huge amounts of gas located in shale deposits such as the Haynesville Shale field in northwest Louisiana (estimated to be the fourth largest natural gas field in the world). A sound energy policy should maximize the use of compressed natural gas (CNG) in vehicles, lessening dependence on foreign oil to meet those needs.
An increase in nuclear-generated electrical power is also a no-brainer. France gets most of its electricity from these plants, and 30 years ago the U.S. was moving in the same direction. America's electrical generation mix should see an increase in nuclear generation to bring more stability and reliability to the effort of meeting ever-increasing electricity demands.
The powers that be in Washington talk about spending trillions of dollars to increase "alternative" energy sources. Wind and solar power seem to be their favored candidates for huge amounts of federal funding. Science and economics indicate that these alternatives can be minor players in diversifying our energy mix, but cannot become major replacements for the fossil fuels that light our homes and power our cars.
Investments in clean coal technology, incentives for the natural gas vehicle marketplace, and a more streamlined permitting process for nuclear power plants should be the foundation of an energy policy that better protects the environment and has a decent chance of meeting future energy needs. It currently takes about 10 years to permit a nuclear reactor, seven years to permit a coal-fired power plant, and five years for a natural gas-powered facility. Bringing nuclear plant permitting more in line with other generation facilities would be a significant step forward.
Oil and natural gas are not going to disappear from our energy mix any time soon. Current efforts to subsidize solar and wind technologies by removing incentives for exploration and production of domestic oil and natural gas supplies are counterintuitive. We should maximize our domestic energy stocks, particularly those that wean us away from foreign sources of energy. If we don't, we are tilting at windmills in our quest for energy independence and reliability.
Wednesday, May 13, 2009
The “Louisiana Way”
Dan Juneau
Louisiana has suffered over the years from a reputation of
having politics unduly and negatively influence the business
climate of the state. Louisiana’s nearly unique system for
collecting and administering sales tax revenues is a
particular problem when the Bayou State is compared to others.
These two factors converged recently in a way that sends
another negative message regarding how Louisiana businesses
are treated in matters of taxation.
The issue centers on Louisiana’s system of sales tax
collection, in particular the lack of centralized collection
of sales taxes. In almost every other state, there is only one
collector of the sales tax: the state. The money is collected
centrally and disbursed back to the local governments in
proportion to their local rate of taxation.
Local jurisdictions pay the state a small fee to collect their
taxes; however, they save money by not having to maintain an
expensive and duplicative local bureaucracy to do the
collections. In the other states, the central collector also
conducts audits of taxpayers. If taxes have not been paid
properly, the state collects the principal, interest, and
penalties for both the state and the local taxing entities.
Businesses have to fill out only one form—not a multiplicity
of them—when they submit their sales taxes. And they are
subject to only one auditing entity—not scores of them.
Our antiquated system of sales tax administration results in
Louisiana ranking at the bottom of “tax fairness” indicators
among the 50 states. Our laws in this regard are bad enough.
Unfortunately, a recent opinion written by our Attorney
General, Buddy Caldwell, makes a bad situation worse.
Louisiana law prohibits entities that collect local sales
taxes from contracting with private auditors on a contingency
fee basis to audit sales tax returns. The logic for this is
simple: auditing entities should not be tempted to treat
taxpayers unfairly in order to increase their compensation
from the local governments. These auditors have contracts that
give them a percentage of the amount of money collected
instead of being paid a flat fee or billing on an hourly basis
to do the audits.
Some local governments have defied the law and continue to use
contingency fee contracts. They have hidden behind the fig
leaf of a flawed Attorney General’s opinion from years ago
that found the contingency contracts not in conflict with the
law. An Attorney General’s opinion is just that—one lawyer’s
opinion, not something that changes a statute.
Senator Jack Donahue requested that Attorney General
Caldwell’s office revisit the opinion written by one of his
predecessors. Caldwell’s office did that and issued two new
opinions that clearly cited legal reasons why the previous
opinion was flawed. Then politics entered the equation. The
contract auditors and the local collectors they work for
leaned heavily on Caldwell to withdraw his new opinions.
Their arguments centered upon their desire not to pay auditors out
of their own funds rather than on any sound legal doctrine
proving that the current law somehow allows contingency fee
contracts. Attorney General Caldwell succumbed to the
“pressure” put on him by a few sales tax collectors and
reinstated the opinion written years ago.
In doing so, he confirmed to the national business community that anti-
business political chicanery is alive and well in Louisiana.
In the Bayou State, it often seems like for every step we take
forward in improving our business climate, we tend to take two
steps backward. Attorney General Caldwell’s recent sales tax
opinion is a prime example of that syndrome. Some call it the
“Louisiana Way.” It is the path to fewer jobs and less outside
investment, things that are sorely needed in these trying
times.
Louisiana has suffered over the years from a reputation of
having politics unduly and negatively influence the business
climate of the state. Louisiana’s nearly unique system for
collecting and administering sales tax revenues is a
particular problem when the Bayou State is compared to others.
These two factors converged recently in a way that sends
another negative message regarding how Louisiana businesses
are treated in matters of taxation.
The issue centers on Louisiana’s system of sales tax
collection, in particular the lack of centralized collection
of sales taxes. In almost every other state, there is only one
collector of the sales tax: the state. The money is collected
centrally and disbursed back to the local governments in
proportion to their local rate of taxation.
Local jurisdictions pay the state a small fee to collect their
taxes; however, they save money by not having to maintain an
expensive and duplicative local bureaucracy to do the
collections. In the other states, the central collector also
conducts audits of taxpayers. If taxes have not been paid
properly, the state collects the principal, interest, and
penalties for both the state and the local taxing entities.
Businesses have to fill out only one form—not a multiplicity
of them—when they submit their sales taxes. And they are
subject to only one auditing entity—not scores of them.
Our antiquated system of sales tax administration results in
Louisiana ranking at the bottom of “tax fairness” indicators
among the 50 states. Our laws in this regard are bad enough.
Unfortunately, a recent opinion written by our Attorney
General, Buddy Caldwell, makes a bad situation worse.
Louisiana law prohibits entities that collect local sales
taxes from contracting with private auditors on a contingency
fee basis to audit sales tax returns. The logic for this is
simple: auditing entities should not be tempted to treat
taxpayers unfairly in order to increase their compensation
from the local governments. These auditors have contracts that
give them a percentage of the amount of money collected
instead of being paid a flat fee or billing on an hourly basis
to do the audits.
Some local governments have defied the law and continue to use
contingency fee contracts. They have hidden behind the fig
leaf of a flawed Attorney General’s opinion from years ago
that found the contingency contracts not in conflict with the
law. An Attorney General’s opinion is just that—one lawyer’s
opinion, not something that changes a statute.
Senator Jack Donahue requested that Attorney General
Caldwell’s office revisit the opinion written by one of his
predecessors. Caldwell’s office did that and issued two new
opinions that clearly cited legal reasons why the previous
opinion was flawed. Then politics entered the equation. The
contract auditors and the local collectors they work for
leaned heavily on Caldwell to withdraw his new opinions.
Their arguments centered upon their desire not to pay auditors out
of their own funds rather than on any sound legal doctrine
proving that the current law somehow allows contingency fee
contracts. Attorney General Caldwell succumbed to the
“pressure” put on him by a few sales tax collectors and
reinstated the opinion written years ago.
In doing so, he confirmed to the national business community that anti-
business political chicanery is alive and well in Louisiana.
In the Bayou State, it often seems like for every step we take
forward in improving our business climate, we tend to take two
steps backward. Attorney General Caldwell’s recent sales tax
opinion is a prime example of that syndrome. Some call it the
“Louisiana Way.” It is the path to fewer jobs and less outside
investment, things that are sorely needed in these trying
times.
Tuesday, April 14, 2009
Guaranteeing The Guarantees
04/03/2009
Occasionally you hear things that you find hard to believe. That happened recently when I heard the 44th President of the United States giving a government guarantee for the warranties of cars purchased from General Motors and Chrysler. It was the perfect metaphor for the unparalleled intrusion of government into the marketplace that accelerated with the 43rd President's bailout of financial institutions deemed "too big to fail." It is now at warp speed with the policies of the current administration. Our federal government is now favoring certain companies over others-both in the financial sector and the automobile industry. These policies are ripe for conflict of interest, cronyism, and more manifestations of the cruel law of unintended consequences.
Guaranteeing the automotive warranties is perhaps a symbol for the new approach to governance in America. The federal government is lining up a bevy of "guarantees" that, if enacted, would significantly change our social compact.
One of the "guarantees" is in health care. President Obama and many of his allies in Congress want to move to a universal health care system in which every American is guaranteed health care coverage. While the plan is not designed to be a "single payer" system with the federal government making all of the payments for (and many of the decisions regarding) health care procedures, it could eventually default into such a system. The cost for the health care plan the president advocates would be enormous. Greatly expanding health care coverage will place escalating demands on the providers within the system. When costs rise (and they will), the government no doubt will employ the same "cost saving" measure it uses for Medicare and Medicaid: reducing the amount of compensation paid to providers. That would likely drive more providers out of the system and could result in rationed care.
President Obama plans to raise the money for his health care initiative from a huge "hidden" tax on carbon emissions. His "cap and trade" approach would have the federal government "guarantee" success in the fight against "manmade" global warming by limiting the amount of carbon dioxide emissions permitted and taxing those that exceed the limits. The president and his congressional supporters, disregard the fact that the amount of atmospheric warming has only risen 0.4 of a degree centigrade in the last 100 years and none in the last 11. They are on a jihad that could cost the U.S. economy as much as $1.9 trillion if this plan is implemented. The effect on jobs and economic growth would be so damaging that even many members of the "tax and spend" crowd in Congress are starting to put the brakes on this idea.
President Obama and many in Congress are pursuing a goal of "guaranteeing" a comfortable life for every citizen of the U.S. In their scenario, the government would see to it that every American will have a good job, a good education, high quality health care and a sound retirement. That is a noble goal that is easier to promote than to accomplish. Historically, those ends are achieved by hard work, a diligent approach to studies and saving for the future. Our leaders in Washington should perhaps eschew the temptation to promise so many guarantees and instead concentrate on making the massive behemoth of the federal government do less and do it much better for the folks who pay dearly to finance it. Promises quickly turn empty fast when the models that deliver them don't work and the cost for providing them brings with it the specter of fiscal insolvency.
Occasionally you hear things that you find hard to believe. That happened recently when I heard the 44th President of the United States giving a government guarantee for the warranties of cars purchased from General Motors and Chrysler. It was the perfect metaphor for the unparalleled intrusion of government into the marketplace that accelerated with the 43rd President's bailout of financial institutions deemed "too big to fail." It is now at warp speed with the policies of the current administration. Our federal government is now favoring certain companies over others-both in the financial sector and the automobile industry. These policies are ripe for conflict of interest, cronyism, and more manifestations of the cruel law of unintended consequences.
Guaranteeing the automotive warranties is perhaps a symbol for the new approach to governance in America. The federal government is lining up a bevy of "guarantees" that, if enacted, would significantly change our social compact.
One of the "guarantees" is in health care. President Obama and many of his allies in Congress want to move to a universal health care system in which every American is guaranteed health care coverage. While the plan is not designed to be a "single payer" system with the federal government making all of the payments for (and many of the decisions regarding) health care procedures, it could eventually default into such a system. The cost for the health care plan the president advocates would be enormous. Greatly expanding health care coverage will place escalating demands on the providers within the system. When costs rise (and they will), the government no doubt will employ the same "cost saving" measure it uses for Medicare and Medicaid: reducing the amount of compensation paid to providers. That would likely drive more providers out of the system and could result in rationed care.
President Obama plans to raise the money for his health care initiative from a huge "hidden" tax on carbon emissions. His "cap and trade" approach would have the federal government "guarantee" success in the fight against "manmade" global warming by limiting the amount of carbon dioxide emissions permitted and taxing those that exceed the limits. The president and his congressional supporters, disregard the fact that the amount of atmospheric warming has only risen 0.4 of a degree centigrade in the last 100 years and none in the last 11. They are on a jihad that could cost the U.S. economy as much as $1.9 trillion if this plan is implemented. The effect on jobs and economic growth would be so damaging that even many members of the "tax and spend" crowd in Congress are starting to put the brakes on this idea.
President Obama and many in Congress are pursuing a goal of "guaranteeing" a comfortable life for every citizen of the U.S. In their scenario, the government would see to it that every American will have a good job, a good education, high quality health care and a sound retirement. That is a noble goal that is easier to promote than to accomplish. Historically, those ends are achieved by hard work, a diligent approach to studies and saving for the future. Our leaders in Washington should perhaps eschew the temptation to promise so many guarantees and instead concentrate on making the massive behemoth of the federal government do less and do it much better for the folks who pay dearly to finance it. Promises quickly turn empty fast when the models that deliver them don't work and the cost for providing them brings with it the specter of fiscal insolvency.
Wednesday, April 1, 2009
Why We Need Local School Board Reform
03/27/2009
Louisiana has about 700 local school board members across the state. Local school boards are charged with establishing policy that results in quality education for students and they are the stewards of hundreds of millions of tax dollars collected for schools. In January, the national education journal Education Week published its annual "Quality Counts" issue, wherein states are ranked according to the journal's assessment of various educational quality indicators. Louisiana's nationally recognized accountability program ranked high, coming in at number two in the nation. Also as expected, our student achievement ranking was one of the lowest in the U.S., coming in at number 47. Soon, almost one-third (500) of Louisiana's public schools will be considered academically failing.
Quality public education is the key to economic development. There is a huge disconnect between state law and policy and implementation at the local level, where education reform really must occur to be effective. Implementation falls directly into the hands of local school boards. Though some boards operate efficiently and are student-focused, many are bogged down in the micromanagement of their district's day-to-day operations, leaving student achievement behind as a priority issue.
Last year, Rep. Steve Carter approached LABI and other groups to discuss a local school board reform legislative package he was considering introducing during the next legislative session. This coalition began to work with Rep. Carter and the result is four bills that attempt to re-focus school boards on the mission of improving student academic achievement. The bills would:
This legislation will in no way affect board members who do not try to influence hiring and firing. Currently, accountability exists at every level of public education except the school board level. Students are accountable every time they take a LEAP or GEE test. Teachers are being held to ever higher standards, from their university training to their performance in the classroom. Schools receive report cards and districts receive scores.
These bills do not strip elected members from important governance functions, including setting standards and policy, and engaging in procurement. They have taxing authority and spend the local, state and federal tax dollars entrusted to them. These bills are not about blame but, rather, about trying to be the best we can be. It's about being thorough at every level. Nothing in these bills stops "good" school boards from continuing their good work. It's an important step to Louisiana's economic development efforts and providing better educational opportunities for students.
Brigitte Nieland, Vice President and Council Director for LABI's Education and Workforce Development Council, contributed to this column.production and consumption of hydrocarbons
in Louisiana.
Ginger Sawyer, Vice President and Director of LABI’s Energy Council, contributed to this column.
Louisiana has about 700 local school board members across the state. Local school boards are charged with establishing policy that results in quality education for students and they are the stewards of hundreds of millions of tax dollars collected for schools. In January, the national education journal Education Week published its annual "Quality Counts" issue, wherein states are ranked according to the journal's assessment of various educational quality indicators. Louisiana's nationally recognized accountability program ranked high, coming in at number two in the nation. Also as expected, our student achievement ranking was one of the lowest in the U.S., coming in at number 47. Soon, almost one-third (500) of Louisiana's public schools will be considered academically failing.
Quality public education is the key to economic development. There is a huge disconnect between state law and policy and implementation at the local level, where education reform really must occur to be effective. Implementation falls directly into the hands of local school boards. Though some boards operate efficiently and are student-focused, many are bogged down in the micromanagement of their district's day-to-day operations, leaving student achievement behind as a priority issue.
Last year, Rep. Steve Carter approached LABI and other groups to discuss a local school board reform legislative package he was considering introducing during the next legislative session. This coalition began to work with Rep. Carter and the result is four bills that attempt to re-focus school boards on the mission of improving student academic achievement. The bills would:
- Take the profit out of local school board service - local school board members would be prohibited from being able to participate in local district health insurance plans (in 1996 they were prohibited from participating in retirement plans). Further, members may currently receive up to $800 per month in compensation. This bill would limit pay to $200 per month, plus expenses.
- Institute Term Limits - local school board members would be subject to the same term limits as BESE, the State Legislature, and many other boards–three four year terms. The goal of this legislation is to shake up the entrenched status quo that exists in some districts and encourage new citizens to get involved in education reform.
- Define the roles of the board and the superintendent - this bill seeks to get members out of hiring, firing and transferring school employees and creates penalties for those who violate this law. The bill also would require a two-thirds majority of school board members to hire and fire a superintendent.
- Tighten the Nepotism Law - tightens the law regarding the employment of superintendents' immediate family members.
This legislation will in no way affect board members who do not try to influence hiring and firing. Currently, accountability exists at every level of public education except the school board level. Students are accountable every time they take a LEAP or GEE test. Teachers are being held to ever higher standards, from their university training to their performance in the classroom. Schools receive report cards and districts receive scores.
These bills do not strip elected members from important governance functions, including setting standards and policy, and engaging in procurement. They have taxing authority and spend the local, state and federal tax dollars entrusted to them. These bills are not about blame but, rather, about trying to be the best we can be. It's about being thorough at every level. Nothing in these bills stops "good" school boards from continuing their good work. It's an important step to Louisiana's economic development efforts and providing better educational opportunities for students.
Brigitte Nieland, Vice President and Council Director for LABI's Education and Workforce Development Council, contributed to this column.production and consumption of hydrocarbons
in Louisiana.
Ginger Sawyer, Vice President and Director of LABI’s Energy Council, contributed to this column.
Louisiana: The Energy-Less State
President Obama’s recently-released budget details two things: where the Administration wishes to go and how it will pay for it.
In Louisiana and other energy-producing and consuming states, alarms are sounding, because the proposed budget could well be the end of economic vitality as we know it. Louisiana has long been called “The Energy State,” with the oil and gas industry providing state and local governments billions of dollars and creating thousands upon thousands of jobs.
But, in an attempt to chart a totally new energy course for the nation, the FY 2010 federal budget, called “A New Era of Responsibility Renewing America’s Promise,” is simply a plan to destroy the nation’s domestic oil and gas industry. While calling on the country to reduce its dependence on foreign oil to assure national security, the Obama Administration proposes to eliminate the tools that have been given to our domestic industry to seek and find oil and gas here at home.
The new budget proposes at least $31.5 billion in taxes and fees from the oil and gas companies over the next decade to pay for its “transition to a clean economy.” No longer will intangible drilling costs be expensed—that means there will be no more available capital investment for high-risk drilling.
No longer will wells be depreciated. No longer will credit be given for wells that produce only small amounts of oil and gas or for enhanced oil recovery projects. Gone is the manufacturing tax deduction. What the industry will get is a new 13 percent excise tax on production in the Gulf of Mexico.
Proponents of the plan point to industry profits in recent years; however, they totally ignore current realities. Take a look at Louisiana’s current budget and budget proposals for next year to see those realities. When oil topped $100 a barrel, the state of Louisiana amassed hundreds of millions of dollars in surpluses. When the price dropped, what happened? Budgets got slashed.
The oil and gas industry responded similarly—when the price for oil and gas dropped, it stopped investing. What was thought to be a great boon to the economy of north Louisiana and the state as a whole, when Haynesville Shale leasing was at its peak last year, has now slowed to a trickle.
This downturn in oil exploration and production has occurred despite the fact that the industry currently receives the federal incentives and more favorable tax treatment. What will be the effect of eliminating those incentives plus adding even more tax burdens on the industry under the new federal taxing plan? For Louisiana, investment in oil and gas would likely drop by $6 billion a year, the State General Fund would drop by another $2.3 billion a year, and unemployment would probably exceed 10 percent.
At the other end of the “double whammy” are Louisiana’s individuals, businesses, and industries. These are the folks that consume the oil and gas and electricity. The proposed budget hits them too, with what’s called “cap and trade” with an estimated national impact of $150 billion in increased energy costs.
So, where are we going and how will we pay for it? We’re headed toward what the U. S. Department of Energy calls “a low-carbon economy” paid for by taxes on our oil and gas consumers and producers. Though “a low-carbon economy” may be a long-term Administration goal, it will be a short-term reality in Louisiana. The combined effect of the taxes on Louisiana’s producers and consumers will assure that there will be much less production and consumption of hydrocarbons in Louisiana.
Ginger Sawyer, Vice President and Director of LABI’s Energy Council, contributed to this column.
In Louisiana and other energy-producing and consuming states, alarms are sounding, because the proposed budget could well be the end of economic vitality as we know it. Louisiana has long been called “The Energy State,” with the oil and gas industry providing state and local governments billions of dollars and creating thousands upon thousands of jobs.
But, in an attempt to chart a totally new energy course for the nation, the FY 2010 federal budget, called “A New Era of Responsibility Renewing America’s Promise,” is simply a plan to destroy the nation’s domestic oil and gas industry. While calling on the country to reduce its dependence on foreign oil to assure national security, the Obama Administration proposes to eliminate the tools that have been given to our domestic industry to seek and find oil and gas here at home.
The new budget proposes at least $31.5 billion in taxes and fees from the oil and gas companies over the next decade to pay for its “transition to a clean economy.” No longer will intangible drilling costs be expensed—that means there will be no more available capital investment for high-risk drilling.
No longer will wells be depreciated. No longer will credit be given for wells that produce only small amounts of oil and gas or for enhanced oil recovery projects. Gone is the manufacturing tax deduction. What the industry will get is a new 13 percent excise tax on production in the Gulf of Mexico.
Proponents of the plan point to industry profits in recent years; however, they totally ignore current realities. Take a look at Louisiana’s current budget and budget proposals for next year to see those realities. When oil topped $100 a barrel, the state of Louisiana amassed hundreds of millions of dollars in surpluses. When the price dropped, what happened? Budgets got slashed.
The oil and gas industry responded similarly—when the price for oil and gas dropped, it stopped investing. What was thought to be a great boon to the economy of north Louisiana and the state as a whole, when Haynesville Shale leasing was at its peak last year, has now slowed to a trickle.
This downturn in oil exploration and production has occurred despite the fact that the industry currently receives the federal incentives and more favorable tax treatment. What will be the effect of eliminating those incentives plus adding even more tax burdens on the industry under the new federal taxing plan? For Louisiana, investment in oil and gas would likely drop by $6 billion a year, the State General Fund would drop by another $2.3 billion a year, and unemployment would probably exceed 10 percent.
At the other end of the “double whammy” are Louisiana’s individuals, businesses, and industries. These are the folks that consume the oil and gas and electricity. The proposed budget hits them too, with what’s called “cap and trade” with an estimated national impact of $150 billion in increased energy costs.
So, where are we going and how will we pay for it? We’re headed toward what the U. S. Department of Energy calls “a low-carbon economy” paid for by taxes on our oil and gas consumers and producers. Though “a low-carbon economy” may be a long-term Administration goal, it will be a short-term reality in Louisiana. The combined effect of the taxes on Louisiana’s producers and consumers will assure that there will be much less production and consumption of hydrocarbons in Louisiana.
Ginger Sawyer, Vice President and Director of LABI’s Energy Council, contributed to this column.
Saturday, March 21, 2009
A Two-Trillion Dollar Mistake?
03/20/2009
One of the crucial elements of President Obama's legislative agenda is his "cap and trade" initiative that would limit carbon emissions and impose a huge indirect tax on them. In the president's budget outline submitted a few weeks ago, he estimated that some $680 billion in federal revenue would be raised by the proposal over the next eight years. Apparently, his advisors are now admitting that cost estimate is woefully low. In a briefing to U.S. Senate staffers recently, an Obama administration representative put the figure at a whopping $1.9 trillion.
This huge new revenue stream doesn't simply drop from the blue into the treasury. It will come from the pocket of businesses and consumers who use carbon-based energy-and that includes almost everyone.
The Tax Foundation, a Washington, D.C. tax policy think tank, recently completed an analysis of the potential impact of "cap and trade" legislation. Its findings are eye-opening:
"In total, households would face an annual burden of roughly $144.8 billion per year with costs disproportionately borne by low-income households, those under 25 and over 75 years, those in southern states, and single parents with dependent children…. Depending on how the system is structured, cap and trade could reduce U.S. employment by 965,000 jobs, household earnings by $37.8 billion, and economic output by $136 billion per year or roughly $1,145 per household. Lawmakers weighing the costs and benefits of climate policy should be aware that cap and trade would impose a significant and regressive annual burden on U.S. households, and would not represent a 'tax free' way to reduce green house gas emissions."
Revenue from cap and trade legislation figures prominently into the president's future spending plans. It is the principal source of funding for his "middle class" tax cut proposal and increased spending on renewable energy sources. Some skeptics would argue that the Obama administration knew all along that its estimates on cap and trade revenue were grossly understated and they were relying on a much larger revenue amount from it to pay for additional trillions of dollars in new spending proposals.
What Team Obama may not be factoring in is the impact that a not-so-hidden tax will have in a weak economy. If the cap and trade price tag is closer to the $1.9 trillion estimate, consumers are going to riot when those higher costs are passed on to them at a time when wages are stagnant and job security is ebbing.
From a business standpoint, the results could be devastating. Congress can impose carbon emission taxes, fees, and assessments on U.S. companies, but it can't impose them on their foreign competitors. That means American industries and their workers could be at a competitive disadvantage with similar companies located in China, India, Mexico and other less developed nations. Quite simply, that means that the cost of doing business will be higher here, profitability will be lower, and economic growth will be hindered. If cap and trade legislation results in higher unemployment and lower profitability and stock prices for American businesses, no one's economic best interest will be served.
It is interesting that the justification for imposing such an onerous proposal is the claim by some in the scientific community that climate change, particularly in the form of global warming, is threatening the planet. Interestingly, the planetary temperature increase in the last century has been 0.4 degrees Centigrade and the earth has actually cooled since 2001. Congress should think long and hard before inflicting economic misery on families and businesses under the guise of rectifying a problem that may not exist to any threatening degree.
One of the crucial elements of President Obama's legislative agenda is his "cap and trade" initiative that would limit carbon emissions and impose a huge indirect tax on them. In the president's budget outline submitted a few weeks ago, he estimated that some $680 billion in federal revenue would be raised by the proposal over the next eight years. Apparently, his advisors are now admitting that cost estimate is woefully low. In a briefing to U.S. Senate staffers recently, an Obama administration representative put the figure at a whopping $1.9 trillion.
This huge new revenue stream doesn't simply drop from the blue into the treasury. It will come from the pocket of businesses and consumers who use carbon-based energy-and that includes almost everyone.
The Tax Foundation, a Washington, D.C. tax policy think tank, recently completed an analysis of the potential impact of "cap and trade" legislation. Its findings are eye-opening:
"In total, households would face an annual burden of roughly $144.8 billion per year with costs disproportionately borne by low-income households, those under 25 and over 75 years, those in southern states, and single parents with dependent children…. Depending on how the system is structured, cap and trade could reduce U.S. employment by 965,000 jobs, household earnings by $37.8 billion, and economic output by $136 billion per year or roughly $1,145 per household. Lawmakers weighing the costs and benefits of climate policy should be aware that cap and trade would impose a significant and regressive annual burden on U.S. households, and would not represent a 'tax free' way to reduce green house gas emissions."
Revenue from cap and trade legislation figures prominently into the president's future spending plans. It is the principal source of funding for his "middle class" tax cut proposal and increased spending on renewable energy sources. Some skeptics would argue that the Obama administration knew all along that its estimates on cap and trade revenue were grossly understated and they were relying on a much larger revenue amount from it to pay for additional trillions of dollars in new spending proposals.
What Team Obama may not be factoring in is the impact that a not-so-hidden tax will have in a weak economy. If the cap and trade price tag is closer to the $1.9 trillion estimate, consumers are going to riot when those higher costs are passed on to them at a time when wages are stagnant and job security is ebbing.
From a business standpoint, the results could be devastating. Congress can impose carbon emission taxes, fees, and assessments on U.S. companies, but it can't impose them on their foreign competitors. That means American industries and their workers could be at a competitive disadvantage with similar companies located in China, India, Mexico and other less developed nations. Quite simply, that means that the cost of doing business will be higher here, profitability will be lower, and economic growth will be hindered. If cap and trade legislation results in higher unemployment and lower profitability and stock prices for American businesses, no one's economic best interest will be served.
It is interesting that the justification for imposing such an onerous proposal is the claim by some in the scientific community that climate change, particularly in the form of global warming, is threatening the planet. Interestingly, the planetary temperature increase in the last century has been 0.4 degrees Centigrade and the earth has actually cooled since 2001. Congress should think long and hard before inflicting economic misery on families and businesses under the guise of rectifying a problem that may not exist to any threatening degree.
Thursday, March 5, 2009
UC and the Stimulus Package
On February 17th, President Obama signed what is commonly referred to as the "stimulus package." It contains three provisions designed to increase unemployment compensation (UC) payments and provide incentives for states to expand the number of individuals eligible for these benefits. There has been a lot of discussion in the media about these provisions, and it is important to understand how they impact Louisiana.
The first provision allows claimants to continue to receive Emergency UC (EUC) benefits in addition to the six months of benefits already provided under our law. The funding comes from federal general revenues. Some 6,000 Louisiana claimants are receiving EUC benefits, which will expire at the end of this year.
A second provision creates a $25 weekly benefit that every Louisiana claimant will get through June 30, 2010. This additional benefit is also appropriated from federal general revenues. Louisiana is among a handful of states that has a minimum weekly benefit amount of $25 or less. The extra $25 per week will result in some low-wage workers receiving more in UC than they earned prior to becoming unemployed, which could discourage some individuals from actively seeking work.
The final provision, and the one that is generating most of the controversy, would transfer pro-rata shares of $7 billion to states from federal UC taxes paid exclusively by employers. States will receive this money in exchange for enacting or maintaining certain UC laws on their books.
To obtain its portion of this $7 billion, Louisiana must enact a more costly "alternative base period" calculation of benefits, which only 18 states-none in the south-have chosen to voluntarily put in their laws. Louisiana must also adopt at least two of the following provisions:
1.
Individuals shall not be denied benefits because they refuse to accept or actively search for full-time work.
2.
Individuals shall not be disqualified from benefits if they quit work for a "compelling family reason" over which the employer has no control.
3.
Individuals will receive an additional six months of benefits if they enroll in state-approved or federal Workforce Investment Act training.
4.
Individuals will receive dependents allowances of at least $15 per dependent.
It is important to note that, as the stimulus package was moving through Congress, an amendment was proposed to give states this money without the strings attached. However, the amendment was rejected because the leadership in Congress insisted that these permanent benefit expansions had to be part of any additional distribution to the states.
The purpose of our federal/state UC system has always been to provide assistance to workers who lose their jobs because of what happens at the workplace and not at home, and who genuinely desire to rejoin the workforce. Adoption of the expensive expansions in the stimulus package would constitute a significant departure from this.
One should also consider the impact of such changes on Louisiana's unemployment trust fund. The business community has fought for decades to protect the fund's solvency in order to provide benefits for deserving claimants. Enactment of the benefit expansions would jeopardize it's future solvency. If the fund declines, lower benefits for all of Louisiana's unemployed and higher state UC taxes for its employers will kick in. So, while a new group of individuals would get benefits, the unemployed already eligible might see their benefits reduced.
This is not free money. It comes at a price. Some say Louisiana should take it anyway. The fact is that the cost is too dear-for employers and the unemployed alike.
The first provision allows claimants to continue to receive Emergency UC (EUC) benefits in addition to the six months of benefits already provided under our law. The funding comes from federal general revenues. Some 6,000 Louisiana claimants are receiving EUC benefits, which will expire at the end of this year.
A second provision creates a $25 weekly benefit that every Louisiana claimant will get through June 30, 2010. This additional benefit is also appropriated from federal general revenues. Louisiana is among a handful of states that has a minimum weekly benefit amount of $25 or less. The extra $25 per week will result in some low-wage workers receiving more in UC than they earned prior to becoming unemployed, which could discourage some individuals from actively seeking work.
The final provision, and the one that is generating most of the controversy, would transfer pro-rata shares of $7 billion to states from federal UC taxes paid exclusively by employers. States will receive this money in exchange for enacting or maintaining certain UC laws on their books.
To obtain its portion of this $7 billion, Louisiana must enact a more costly "alternative base period" calculation of benefits, which only 18 states-none in the south-have chosen to voluntarily put in their laws. Louisiana must also adopt at least two of the following provisions:
1.
Individuals shall not be denied benefits because they refuse to accept or actively search for full-time work.
2.
Individuals shall not be disqualified from benefits if they quit work for a "compelling family reason" over which the employer has no control.
3.
Individuals will receive an additional six months of benefits if they enroll in state-approved or federal Workforce Investment Act training.
4.
Individuals will receive dependents allowances of at least $15 per dependent.
It is important to note that, as the stimulus package was moving through Congress, an amendment was proposed to give states this money without the strings attached. However, the amendment was rejected because the leadership in Congress insisted that these permanent benefit expansions had to be part of any additional distribution to the states.
The purpose of our federal/state UC system has always been to provide assistance to workers who lose their jobs because of what happens at the workplace and not at home, and who genuinely desire to rejoin the workforce. Adoption of the expensive expansions in the stimulus package would constitute a significant departure from this.
One should also consider the impact of such changes on Louisiana's unemployment trust fund. The business community has fought for decades to protect the fund's solvency in order to provide benefits for deserving claimants. Enactment of the benefit expansions would jeopardize it's future solvency. If the fund declines, lower benefits for all of Louisiana's unemployed and higher state UC taxes for its employers will kick in. So, while a new group of individuals would get benefits, the unemployed already eligible might see their benefits reduced.
This is not free money. It comes at a price. Some say Louisiana should take it anyway. The fact is that the cost is too dear-for employers and the unemployed alike.
Wednesday, February 18, 2009
RANDOM THOUGHTS
02/13/2009
Some random thoughts on a Friday the thirteenth…
THE FINANCIAL CRISIS: a recent analysis by Bloomberg News caught my eye. It estimated that the total federal response to the financial crisis thus far (the stimulus legislation, bailouts, plus the vast infusion of “liquidity” into the financial system) comes to $9.7 trillion. It is almost impossible to envision how big $9.7 trillion is, but here are some illustrations:
It would pay off 90 percent of all the home mortgages in the United States.
It would take spending $13.2 million a day from the birth of Christ until today to equal $9.7 trillion.
It is 13 times more than what has been spent on the Iraq and Afghanistan wars combined.
It could be used to write a check for $1430 to every man, woman, and child alive on the planet today.
It is more than three times the annual federal budget.
Our leaders had better come up with a plan that will work to solve this crisis. There isn’t another $9.7 trillion available for them to take a mulligan on addressing the problems. It is incredible that Congress has rushed to pass a stimulus bill that will cost taxpayers over $1 trillion once the interest on the borrowing is figured in. It is the biggest single piece of appropriations legislation in history, and it is supposed to help reverse a dire economic crisis—yet few will know exactly what they are voting on when the votes are cast. That is a bad way to do business.
THE STATE BUDGET: the Revenue Estimating Conference (REC) is scheduled to meet next week in Baton Rouge. The REC just met in December and usually meets again in May, so it is somewhat unusual for it to be meeting in February. It is highly unlikely that the economists who develop the revenue forecasts for the REC will have any new data that will significantly change the revenue estimate. If that is the case, there is only one reason for the meeting: to certify money coming from the federal stimulus legislation as recurring revenue. If that is done, it would soften the budget cuts that the Jindal administration must submit in its executive budget that must be presented to the Legislature in March. If those revenues are truly recurring in nature, then the REC meeting would be timely. If the revenues are only going to be around for a year or two with no guarantee of them continuing in the future, it will be tantamount to kicking the can down the road for the governor and Legislature to use the money to fund recurring expenses in the budget.
THE LARGEST BUSINESS TAX INCREASE IN LOUISIANA HISTORY: If some legislators and assessors have their way in the upcoming legislative session, businesses in Louisiana could see the biggest hike in their tax burden in modern history. How? By the enactment of a significant increase the homestead exemption which, at $75,000, is at the top of the list in the nation. Currently, $680 million in property tax is shifted from some homeowners to other homeowners and businesses due to the high homestead exemption level. If the exemption is doubled, it would automatically result in a large roll-up of millages to offset the drop in taxable property. Those who pay property taxes would pay much more, and businesses currently pay 80 percent of all property taxes in Louisiana. If the governor and the Legislature don’t want to stifle jobs and make Louisiana even less attractive for economic development, they should nip this huge tax increase in the bud.
Some random thoughts on a Friday the thirteenth…
THE FINANCIAL CRISIS: a recent analysis by Bloomberg News caught my eye. It estimated that the total federal response to the financial crisis thus far (the stimulus legislation, bailouts, plus the vast infusion of “liquidity” into the financial system) comes to $9.7 trillion. It is almost impossible to envision how big $9.7 trillion is, but here are some illustrations:
It would pay off 90 percent of all the home mortgages in the United States.
It would take spending $13.2 million a day from the birth of Christ until today to equal $9.7 trillion.
It is 13 times more than what has been spent on the Iraq and Afghanistan wars combined.
It could be used to write a check for $1430 to every man, woman, and child alive on the planet today.
It is more than three times the annual federal budget.
Our leaders had better come up with a plan that will work to solve this crisis. There isn’t another $9.7 trillion available for them to take a mulligan on addressing the problems. It is incredible that Congress has rushed to pass a stimulus bill that will cost taxpayers over $1 trillion once the interest on the borrowing is figured in. It is the biggest single piece of appropriations legislation in history, and it is supposed to help reverse a dire economic crisis—yet few will know exactly what they are voting on when the votes are cast. That is a bad way to do business.
THE STATE BUDGET: the Revenue Estimating Conference (REC) is scheduled to meet next week in Baton Rouge. The REC just met in December and usually meets again in May, so it is somewhat unusual for it to be meeting in February. It is highly unlikely that the economists who develop the revenue forecasts for the REC will have any new data that will significantly change the revenue estimate. If that is the case, there is only one reason for the meeting: to certify money coming from the federal stimulus legislation as recurring revenue. If that is done, it would soften the budget cuts that the Jindal administration must submit in its executive budget that must be presented to the Legislature in March. If those revenues are truly recurring in nature, then the REC meeting would be timely. If the revenues are only going to be around for a year or two with no guarantee of them continuing in the future, it will be tantamount to kicking the can down the road for the governor and Legislature to use the money to fund recurring expenses in the budget.
THE LARGEST BUSINESS TAX INCREASE IN LOUISIANA HISTORY: If some legislators and assessors have their way in the upcoming legislative session, businesses in Louisiana could see the biggest hike in their tax burden in modern history. How? By the enactment of a significant increase the homestead exemption which, at $75,000, is at the top of the list in the nation. Currently, $680 million in property tax is shifted from some homeowners to other homeowners and businesses due to the high homestead exemption level. If the exemption is doubled, it would automatically result in a large roll-up of millages to offset the drop in taxable property. Those who pay property taxes would pay much more, and businesses currently pay 80 percent of all property taxes in Louisiana. If the governor and the Legislature don’t want to stifle jobs and make Louisiana even less attractive for economic development, they should nip this huge tax increase in the bud.
Tuesday, February 10, 2009
Small Business Tax Increase
February 9, 2009
The 2009 legislative session begins April 27, 2009 in Baton Rouge. So far there has been little or no talk of tax increases at the state level, but don’t let that fool you. During the session legislators will be debating proposals to enact one of the largest property tax increases on small business in the history of the state – by increasing the homestead exemption!
Homestead Exemption Shifts Property Tax Burden to Business
Increasing the homestead exemption would further remove residential property and improvements from the property tax rolls, thereby decreasing total assessed values in each parish. Our state constitution requires that, when assessed values decrease, millage rates automatically increase, so that the local taxing bodies will continue to generate the same revenue as collected in the prior year. Increasing the homestead exemption does not result in lower tax collections or lower tax rates – but, rather the tax burden of residential homeowners is passed on to businesses, renters, and middle-class homeowners by imposing higher millage rates necessary to generate the same tax collections as the prior year.
Louisiana’s $75,000 homestead exemption is already one of the highest in the country. The result – over 50% of Louisiana homeowners pay ZERO property tax! Other fixed-income homeowners, who are 65 years old and older and make less than $64,500, receive the benefit of special level assessments that freeze their property values. On the other hand, 100% of businesses pay property tax, which is why business and industry pays over 80% of all of the property taxes paid in the state.
Small Business Already Hurt by Current Homestead Exemption
Today, the homestead exemption shifts in excess of $650 million of the residential property tax burden to businesses, renters, and middle-class homeowners. Projections show that as all of the remaining residential property in the state approaches $75,000 in value, another $250 million tax increase will be shifted to business, even if there is no change in the current homestead exemption.
The ultimate cost of fully implementing the current $75,000 homestead exemption will be over a $900 million tax increase on the small businesses of our state. This does not take into account any increases in the homestead exemption that will be considered during the regular session – simple math would suggest that doubling the homestead exemption to $150,000 would eventually result in a total tax increase to business in excess of $1.8 billion!
Business Pays at a 50% Higher Tax Rate
Under current law, businesses pay property tax at a 15% tax rate (some businesses even pay 25%), while the homeowner’s tax rate is only 10% -- that’s a 50% higher tax rate paid by business. This disparity is illustrated as follows.
HOMESTEAD BUSINESS
PROPERTY PROPERTY
FAIR MARKET VALUE $100,000 $100,000
ASSESSMENT RATE X 10% X 15%
ASSESSED VALUE $10,000 $15,000
LESS: HOMESTEAD EXEMPTION ($7,500) N/A
TAXABLE VALUE $2,500 $15,000
PROPERTY TAX (100 MILLS) $250 $1,500
The Solution – Limit Millage Roll-Forwards
Rather than increasing the homestead exemption and special level assessments, the resolution of higher property tax bills needs to be properly focused on its root cause – property tax millage rates. When assessors perform their constitutional function of valuing property at fair market value, the higher property values result in an automatic roll-back of millages. Generally, the combination of higher property values and reduced millage rates has the overall effect of leveling off property tax bills, which benefits all taxpayers, not just a few select classes of homeowners.
However, following the automatic roll-back of millages, local taxing bodies are authorized under the state constitution, and without voter approval, to roll-forward millage rates with only a two-thirds vote of the members of the taxing body. It is this subsequent rolling-forward of the millage rates, and not the reassessment of property to current fair market value, that produces sticker shock property tax bills. Many of these taxing bodies that choose to roll-forward their millages are not even elected officials, but rather appointed members of boards that have the power of taxation.
Limiting the ability of taxing bodies to roll-forward millages without voter approval will help lower both property tax millages rates and the property tax bills of all taxpayers.
Action Needed – Now!
The proponents of increasing the homestead exemption are getting their message out, and even circulating a petition for signatures. Your legislators need to hear from you TODAY – don’t wait until the session starts, and don’t assume they will be with us. Tell them, as business owners, we are already paying $650 million of the property tax burden of homeowners and enough is enough! Also tell them the focus needs to be on the millage rates, and limiting the rolling forward of millages will result in lower overall millage rates for all taxpayers.
Click the link below to log in and send your message:
http://www.votervoice.net/link/target/labi28823666.aspx
Wednesday, February 4, 2009
The Politics of Stimulus!
01/30/2009
During the last decade, Republican members of Congress have taken a beating in elections around the country. In most instances, those who lost elections-or whose vacant seats were turned over-were replaced by Democrats who proclaimed to be moderate or conservative. Most of those Democrats belong to the "Blue Dog" coalition. The hallmark of this caucus is their self-proclaimed strong belief in conservative fiscal policies. The Blue Dogs could hold the balance of power in the House, especially on budgetary issues-if they were willing to buck their liberal leadership and occasionally join with Republicans.
The Blue Dogs recently had such an opportunity. On January 27, the House voted on the resolution that would allow the leadership's "stimulus" bill to come to the floor. Most of the Blue Dogs felt that the bill contained entirely too much spending and was out of line with what President Obama claimed he wanted in a stimulus package. Had most of the Blue Dogs voted against the resolution, the bill would have gone back to the drawing board along with a clear message to Speaker Pelosi and her leadership that a more conservative approach was needed. The Blue Dogs would have served the nation well by taking such an action and would have put Speaker Pelosi on notice that they were a force to be reckoned with.
Unfortunately, as has happened numerous times in the past, when push came to shove, the Blue Dogs stayed on the porch.
The massive spending bill ($1.2 trillion if you count the interest on the borrowing, which certainly is a legitimate element to count) was passed without a single Republican vote and with only 11 Democrats opposing it. It is the total property of the Democrats. If it does what they claim it will do, they can take the credit. If it doesn't create 4 million jobs, if it doesn't begin to immediately jumpstart the economy, and if it only leads to bigger government and super-inflation, they will shoulder the blame.
That must be an uncomfortable thought for many of the Blue Dogs. Their constituents are certainly concerned about the health of the economy and the security of their jobs. But most of them aren't likely to believe that adding greatly to the size of government (financed through more borrowing) is going to improve the economy to any appreciable degree. That is a dilemma for the Blue Dogs, since the one thing certain about the House passed version of the bill is that it will greatly expand government and pay for the expansion by burdening future generations. The champions of "pay-go" (not allowing any tax cut or increased spending without paying for it with budget reductions or new taxes) went for the biggest increase in deficit spending in history because they couldn't stand up to their liberal leadership.
If the Democratic stimulus bill doesn't work, the Blue Dogs have a problem. If their constituents are taxed later to pay for this extravagance, they have a larger problem. If inflation soars when the economy starts to rebound because the "stimulus" wasn't designed to work immediately, they have a lot of explaining to do.
The most vulnerable Democrats are those who come from districts that were held previously by Republicans. To remain in good standing with their fiscally conservative constituents, they can't simply talk a good game in Washington. They lost an opportunity to shape a more conservative approach on the stimulus, and they may live to regret not having the courage to stand up for what they say they championed.
During the last decade, Republican members of Congress have taken a beating in elections around the country. In most instances, those who lost elections-or whose vacant seats were turned over-were replaced by Democrats who proclaimed to be moderate or conservative. Most of those Democrats belong to the "Blue Dog" coalition. The hallmark of this caucus is their self-proclaimed strong belief in conservative fiscal policies. The Blue Dogs could hold the balance of power in the House, especially on budgetary issues-if they were willing to buck their liberal leadership and occasionally join with Republicans.
The Blue Dogs recently had such an opportunity. On January 27, the House voted on the resolution that would allow the leadership's "stimulus" bill to come to the floor. Most of the Blue Dogs felt that the bill contained entirely too much spending and was out of line with what President Obama claimed he wanted in a stimulus package. Had most of the Blue Dogs voted against the resolution, the bill would have gone back to the drawing board along with a clear message to Speaker Pelosi and her leadership that a more conservative approach was needed. The Blue Dogs would have served the nation well by taking such an action and would have put Speaker Pelosi on notice that they were a force to be reckoned with.
Unfortunately, as has happened numerous times in the past, when push came to shove, the Blue Dogs stayed on the porch.
The massive spending bill ($1.2 trillion if you count the interest on the borrowing, which certainly is a legitimate element to count) was passed without a single Republican vote and with only 11 Democrats opposing it. It is the total property of the Democrats. If it does what they claim it will do, they can take the credit. If it doesn't create 4 million jobs, if it doesn't begin to immediately jumpstart the economy, and if it only leads to bigger government and super-inflation, they will shoulder the blame.
That must be an uncomfortable thought for many of the Blue Dogs. Their constituents are certainly concerned about the health of the economy and the security of their jobs. But most of them aren't likely to believe that adding greatly to the size of government (financed through more borrowing) is going to improve the economy to any appreciable degree. That is a dilemma for the Blue Dogs, since the one thing certain about the House passed version of the bill is that it will greatly expand government and pay for the expansion by burdening future generations. The champions of "pay-go" (not allowing any tax cut or increased spending without paying for it with budget reductions or new taxes) went for the biggest increase in deficit spending in history because they couldn't stand up to their liberal leadership.
If the Democratic stimulus bill doesn't work, the Blue Dogs have a problem. If their constituents are taxed later to pay for this extravagance, they have a larger problem. If inflation soars when the economy starts to rebound because the "stimulus" wasn't designed to work immediately, they have a lot of explaining to do.
The most vulnerable Democrats are those who come from districts that were held previously by Republicans. To remain in good standing with their fiscally conservative constituents, they can't simply talk a good game in Washington. They lost an opportunity to shape a more conservative approach on the stimulus, and they may live to regret not having the courage to stand up for what they say they championed.
Tuesday, January 20, 2009
IS THE COST WORTH THE CURE?
It would be funny if it weren't so serious. Henry Waxman (D-
Ca.) proclaimed that his powerful committee in Congress will
rush "climate change" legislation to the House floor before
the Memorial Day recess. This was announced concurrently with
the coldest temperatures to hit the heartland of the country
in over a decade.
The President-elect and the Democratic majorities in Congress
are about to launch legislation that will hit every pocketbook
in America and could cost thousands of jobs as well. Their
goal: To reduce carbon emissions that some claim is creating
rising global temperatures that threaten life as we know it.
But what if they are wrong? There is certainly a body of
scientific evidence that indicates that the earth has never
been in the complete balance of heat energy entering and
leaving the atmosphere in equal proportions as "climate
change" adherents believe is now being altered by man-made
carbon emissions. Reputable scientists have strong evidence to
show that global warming and cooling cycles have persisted in
regular intervals throughout most of geologic time long before
the first carbon emission emanated from cavemen.
Unfortunately, the scientists who have sound theories that
stray from the orthodoxy of the man-made climate change
"religion" are ignored by most of the media as well as the
agencies that fund scientific research. Indeed, some have
their careers threatened by the "case closed" true believers
of the carbon induced climate change theory.
The legislation that will be proposed in Congress will
significantly drive up the cost for both the producers and
consumers of carbon-based energy sources. The higher costs
will lead to significant economic impacts immediately. The
vehicle of choice-"cap and trade" legislation-will require a
huge bureaucracy to administer a complicated system that would
penalize some companies, reward others, and have consumers in
some regions pay substantially higher energy costs than others
due to the type of energy sources available to them. Of
course, the element that puts gleams in the eyes of some in
Congress is that the federal government could reap huge
windfall revenues from such a system.
But where would the money come from? That's easy: From you and
me and millions like us. From businesses and industries
already having a hard time making a profit for the goods and
services they produce. Who will benefit most from the system
(besides the revenue-hungry federal government)? Smatterings
of companies whose lobbyists help influence the laws and rules
to put them at an advantage over others. Who will come out the
worst? The poor, the group that always seems to come out
worst, the individuals who can ill afford to pay more for
basic energy needs.
Yes, Congress seems to be in a mad rush to push through
legislation that can have a huge impact on the job security
and livelihood of American workers. "Change" is the mantra in
Washington, but change is a two-sided coin. Before
dramatically altering the economic landscape of the nation, if
I were a member of Congress, I would want to make darn sure
that:
- The "crisis" I was attempting to fix was real;
- That my "cure" for it was definitely going to work; and
- That the sacrifices that I was asking Americans to make
was unquestionably worth the price they would have to pay.
With all due respect, I don't think our elected representatives in Washington can give us those assurances.
Unfortunately, that probably won't stop them from pushing
through the biggest boondoggle since their "reforms" of Fannie
Mae and Freddie Mac.
Ca.) proclaimed that his powerful committee in Congress will
rush "climate change" legislation to the House floor before
the Memorial Day recess. This was announced concurrently with
the coldest temperatures to hit the heartland of the country
in over a decade.
The President-elect and the Democratic majorities in Congress
are about to launch legislation that will hit every pocketbook
in America and could cost thousands of jobs as well. Their
goal: To reduce carbon emissions that some claim is creating
rising global temperatures that threaten life as we know it.
But what if they are wrong? There is certainly a body of
scientific evidence that indicates that the earth has never
been in the complete balance of heat energy entering and
leaving the atmosphere in equal proportions as "climate
change" adherents believe is now being altered by man-made
carbon emissions. Reputable scientists have strong evidence to
show that global warming and cooling cycles have persisted in
regular intervals throughout most of geologic time long before
the first carbon emission emanated from cavemen.
Unfortunately, the scientists who have sound theories that
stray from the orthodoxy of the man-made climate change
"religion" are ignored by most of the media as well as the
agencies that fund scientific research. Indeed, some have
their careers threatened by the "case closed" true believers
of the carbon induced climate change theory.
The legislation that will be proposed in Congress will
significantly drive up the cost for both the producers and
consumers of carbon-based energy sources. The higher costs
will lead to significant economic impacts immediately. The
vehicle of choice-"cap and trade" legislation-will require a
huge bureaucracy to administer a complicated system that would
penalize some companies, reward others, and have consumers in
some regions pay substantially higher energy costs than others
due to the type of energy sources available to them. Of
course, the element that puts gleams in the eyes of some in
Congress is that the federal government could reap huge
windfall revenues from such a system.
But where would the money come from? That's easy: From you and
me and millions like us. From businesses and industries
already having a hard time making a profit for the goods and
services they produce. Who will benefit most from the system
(besides the revenue-hungry federal government)? Smatterings
of companies whose lobbyists help influence the laws and rules
to put them at an advantage over others. Who will come out the
worst? The poor, the group that always seems to come out
worst, the individuals who can ill afford to pay more for
basic energy needs.
Yes, Congress seems to be in a mad rush to push through
legislation that can have a huge impact on the job security
and livelihood of American workers. "Change" is the mantra in
Washington, but change is a two-sided coin. Before
dramatically altering the economic landscape of the nation, if
I were a member of Congress, I would want to make darn sure
that:
- The "crisis" I was attempting to fix was real;
- That my "cure" for it was definitely going to work; and
- That the sacrifices that I was asking Americans to make
was unquestionably worth the price they would have to pay.
With all due respect, I don't think our elected representatives in Washington can give us those assurances.
Unfortunately, that probably won't stop them from pushing
through the biggest boondoggle since their "reforms" of Fannie
Mae and Freddie Mac.
Friday, January 9, 2009
ANATOMY OF A DEFICIT
The Revenue Estimating Conference (REC) met on December 15 to do its constitutionally required task of giving the official estimate for state revenues for both the current budget and the one for the fiscal year beginning next July 1. According to the economist for the Legislative Fiscal Office, the news was “bad and badder.” The REC adopted estimates that result in a revenue shortfall of $341 million in the current budget and $1.1 billion for the 2009/2010 fiscal year.
The Joint Legislative Committee on the Budget officially adopted the revenue forecasts and authorized that a letter be sent to the governor notifying him of a deficit for the current budget. That notification triggers a constitutional requirement that the budget be balanced within 30 days. State law allows the governor to cut up to 3 percent of each budgetary unit and the Joint Budget Committee to cut up to 2 percent more, without the Legislature being in session.
The media reports of the REC meeting mentioned a $2 billion estimated deficit for the 2009/2010 fiscal year. That led to some confusion since the revenue shortfall for that budget year is only estimated to be $1.1 billion. One might reasonably ask how a $1.1 billion drop in revenue triggers a $2 billion deficit. Here is some information to shed some light on that difference:
Part of the difference comes from the use of “continuation” budgeting. What “continuation” in a budget means to ordinary folks doesn’t necessarily carry the same meaning in government. In government, “continuation” doesn’t mean “carry on with what you have.” It means carry on with an automatic increase in spending. Not many households or businesses are going to fashion budgets with automatic increases next year. State government won’t have that luxury either.
Another practice that is a potential cause for the deficit exceeding the revenue loss has to do with the use of “special funds” in budgeting. When revenues were surging, the Legislature—in conjunction with sitting governors—often stuffed money into funds they created in order to prevent the money from rolling over into surpluses. (Our state constitution restricts the use of surpluses to one-time expenditures in limited areas. State officials don’t like to have their hands tied when it comes to spending.) This was especially true when state spending was bumping up against the expenditure cap. Recent budgets utilized a considerable number of these “special funds.” To the extent they were used for truly one-time expenditures, they shouldn’t have an impact on the 2009/2010 budget. If they were used to fund appropriations that were recurring in nature (or if there is no money left in the funds), it adds to the projected deficit.
To balance the current budget, state officials must cut more than the $341 million projected revenue shortfall. Half the budget year is over, so to balance the books, $600-$700 million must be reduced on an annualized basis. If Governor Jindal and the Legislature bite that bullet now (as required by the Constitution), they greatly reduce the potential $2 billion deficit for the 2009/2010 budget. If the actual 2008/2009 budget—adjusted for the cuts that must now be made—is used as a baseline instead of a “continuation” budget, the problem becomes manageable.
If those steps are taken and more still needs to be done, state officials should go back and look at what items were added to the 2008/2009 budget. The state general fund increased by approximately $1 billion in the current budget. Certainly some of those spending increases could be adjusted downward without ending critical services in Louisiana.
The Joint Legislative Committee on the Budget officially adopted the revenue forecasts and authorized that a letter be sent to the governor notifying him of a deficit for the current budget. That notification triggers a constitutional requirement that the budget be balanced within 30 days. State law allows the governor to cut up to 3 percent of each budgetary unit and the Joint Budget Committee to cut up to 2 percent more, without the Legislature being in session.
The media reports of the REC meeting mentioned a $2 billion estimated deficit for the 2009/2010 fiscal year. That led to some confusion since the revenue shortfall for that budget year is only estimated to be $1.1 billion. One might reasonably ask how a $1.1 billion drop in revenue triggers a $2 billion deficit. Here is some information to shed some light on that difference:
Part of the difference comes from the use of “continuation” budgeting. What “continuation” in a budget means to ordinary folks doesn’t necessarily carry the same meaning in government. In government, “continuation” doesn’t mean “carry on with what you have.” It means carry on with an automatic increase in spending. Not many households or businesses are going to fashion budgets with automatic increases next year. State government won’t have that luxury either.
Another practice that is a potential cause for the deficit exceeding the revenue loss has to do with the use of “special funds” in budgeting. When revenues were surging, the Legislature—in conjunction with sitting governors—often stuffed money into funds they created in order to prevent the money from rolling over into surpluses. (Our state constitution restricts the use of surpluses to one-time expenditures in limited areas. State officials don’t like to have their hands tied when it comes to spending.) This was especially true when state spending was bumping up against the expenditure cap. Recent budgets utilized a considerable number of these “special funds.” To the extent they were used for truly one-time expenditures, they shouldn’t have an impact on the 2009/2010 budget. If they were used to fund appropriations that were recurring in nature (or if there is no money left in the funds), it adds to the projected deficit.
To balance the current budget, state officials must cut more than the $341 million projected revenue shortfall. Half the budget year is over, so to balance the books, $600-$700 million must be reduced on an annualized basis. If Governor Jindal and the Legislature bite that bullet now (as required by the Constitution), they greatly reduce the potential $2 billion deficit for the 2009/2010 budget. If the actual 2008/2009 budget—adjusted for the cuts that must now be made—is used as a baseline instead of a “continuation” budget, the problem becomes manageable.
If those steps are taken and more still needs to be done, state officials should go back and look at what items were added to the 2008/2009 budget. The state general fund increased by approximately $1 billion in the current budget. Certainly some of those spending increases could be adjusted downward without ending critical services in Louisiana.
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