Economic development analyst Greg LeRoy is coming to Louisiana this week to talk heresy.
“The main message is quit putting so many eggs in the petrochemical basket. You’re spending money in ways that aren’t effective,” LeRoy said in an interview from his Washington, D.C., office at Good Jobs First. Created in 1998 to study tax exemptions, the think tank operated off of $861,400 in donations in 2016.
LeRoy argues that Louisiana surrenders tax collections too promiscuously — 469 exemptions in all, leaving $6.9 billion on the table according to the House Fiscal Office — and is nevertheless creating jobs at a rate that lags the nation.
“That’s really crippled the state’s ability to diversify the economy,” LeRoy added.
For the business community, LeRoy’s position is more enraging than kneeling for the national anthem. The tax breaks are seen as essential to attract companies and jobs to Louisiana, a state with one of the nation’s highest unemployment rates.
That difference is the eye of the tempest that has been churning through Louisiana politics for several years now. The storm will come ashore in a few months when the Legislature, once again, tries to balance a budget with too little money coming in to pay for promised services.
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Ostensibly, LeRoy will be in Baton Rouge to attend a Together Louisiana seminar on Wednesday. Democratic Gov. John Bel Edwards also is scheduled to make an appearance at the forum put on by the faith-based group that advocates shifting more money from tax incentives to education, health care and other social programs.
But LeRoy’s real mission is to spread word of a change in accounting standards that he says amounts to a sea change in the decades-old practice of government giving taxpayer dollars to businesses — an estimated $70 billion per year — without really revealing how much those individual exemptions impact the tax base.
The newly established Statement No. 77 of the Governmental Accounting Standards Board requires all public entities to report the revenues passively lost to tax abatements beginning in 2016. That means every school district, police jury, and city government needs to put in their required Comprehensive Annual Financial Reports how many dollars would have been collected but for some tax break given to help, say, a privately owned refinery add a new catalytic cracking unit.
Reports from about 1,200 taxing authorities are coming in now. But a few hiccups need to be worked out for the accountants hired by the Louisiana Legislative Auditor.
Louisiana Legislative Auditor Daryl Purpera’s staff this week is developing rules that get down in the weeds of what auditors need to include on the financial reports.
For instance, how should they handle tax breaks that are in law as opposed to those granted to specific companies? Everybody receives a homestead exemption. So, should that be counted? asked Bradley Cryer, the certified public accountant who heads local government services for the auditor's office.
“We’re trying to make it consistent,” he said.
At the very least, the new reports should provide a higher level of transparency to a process that has had little, said Broderick Bagert, of Together Louisiana.
The group last year released a report on the local cost of the state’s Industrial Tax Exemption Program, called ITEP. Almost immediately, the business community and government officials, including state Economic Development Secretary Don Pierson, questioned the findings as the fuzzy math of people advocating a partisan position. And that could be, as costs haven’t been readily available in the eight decades of the exemption’s existence.
Bagert said he feels vindicated by how closely the initial Statement 77 reports, now posted on the Good Jobs website, track the calculations of Together Louisiana.
“These reports should take this debate beyond whether the numbers are right or wrong and into discussions” of whether the philosophy is right or wrong, Bagert said.
Bagert’s side contends factors such as proximity to raw materials or markets, good transportation, low-cost utilities, and a trained workforce matter to business far more than a tax break. Money should be spent on improving education, expanding roads and training workers.
The business side is articulated by Louisiana Association of Business & Industry’s Stephen Waguespack. The head of the powerful lobbying group writes that Louisiana’s poverty, workforce challenges, high crimes rates and poor education rankings are the fault of Huey Long and Louisiana’s subsequent history of relying on government spending programs. But manufacturers in Louisiana employ 6.9 percent of the workforce, paying an average of $85,000.
“We must improve our efforts to attract more of them and make it our mission to protect the ones we have today,” Waguespack said.