Because Louisiana is one of the lower-tax states in the nation, there remains “fiscal slack” here, as scholar Eileen Norcross of the Mercatus Center wrote in a recent national analysis of each state’s balance sheets.
In other words, although no one loves higher taxes, there’s room to raise taxes to pay some of the bills.
The bad news in her study is that there are a lot of bills outstanding. That’s the conclusion from Mercatus, a think tank promoting conservative economics, at George Mason University just outside Washington, D.C.
The methodology of the study is complicated, but its underlying conclusions aren’t that surprising.
Louisiana is 35th of the states in the Mercatus index, which measures the financial health of state governments. That’s not great.
It’s not a shock to people in Louisiana that we have a higher debt per person than the average state, and that Louisiana’s pension liabilities are not nearly paid up well enough. We have failed in the past to sock away money in good years for boring but necessary expenses like pension funds.
In Louisiana, many governing functions — unlike in most other states — are concentrated at the state level. We’ve long depended on state government to pay bills that in many other states, communities pay for from local revenues. That’s why our neighboring Texans have much higher property taxes; those local millages pay for services or projects that in Louisiana would be paid for at the state level.
So the structural issues are always going to be challenging for Louisiana, more so that in most states.
Perhaps there is some comfort in the fact that many states have challenges, whatever their particular tax structures may look like.
Many other states were stung harder than Louisiana in the “great recession” of 2008-09, especially in states where there had been a bonanza in revenues from capital gains taxes as the stock market skyrocketed, or where taxes on property transfers were found to be extremely volatile when the bottom fell out of the real estate markets.
Norcross’ conclusion is that many states have some hard assessments to undertake these days: “Most states are nearly back to normal since the Great Recession, although there are troubling signs that many states are still ignoring the risks on their books, mainly in underfunded pensions and health care benefits. Even states that appear to be fiscally robust — perhaps owing to large amounts of cash on hand or revenue streams from natural resources — must take stock of their long-term fiscal health before making future public policy decisions.”
Taking stock of long-term fiscal health? That’s a prescription that Louisiana has needed for a long time.
Who is the fiscal-physician among the men seeking to be the next governor in this fall’s election?