Shortfalls, streamlining, tax reform – as Louisiana’s budget problems continue to dominate discussions at the capitol, now would be a good time for a basic review. Let’s call it “Budget 101”.
We’ll start with state income –also known as revenue.
55-percent of the $29.2 billion total state budget comes from the federal government. The rest, which is known as “State General Fund”, comes primarily from taxes.
“Sales tax revenues are 36%, whereas the next closest category is individual income tax, which is predicted to be 25%,” Louisiana Revenue Secretary Kimberly Robinson explains, adding that changes enacted last spring changed the balance of those revenue streams.
“We made the state very reliant on sales tax revenues.”
In addition, personal income tax collections have declined as jobs have been lost. Economist Jim Richardson discussed that with legislative fiscal analyst Greg Albrecht last week.
“The employment numbers have fallen rather substantially?” Richardson asked, during the Revenue Estimating Conference meeting. “I just wonder how many jobs we’ve lost.”
“From our peak point in December 2014 to November 2016, we’re down just about 26,000 jobs,” Albrecht answered, noting, “For all practical purposes, we’ve lost jobs in the highest wage sectors.”
“So for our income taxes to get a boost, we need to get jobs back in those areas?” Richardson inquired.
“Definitely.”
Those job areas include oil and gas, where price drops have reduced production, as well as the state’s income from royalties and severance taxes. Now mineral revenues (as they’re collectively called) make up just 6 percent of total state revenue.
We get a bigger chunk from gaming – the riverboats, video poker, slots at horse racetracks -- 9 percent of the total, but even that is stagnant.
“Because it’s all discretionary spending, if you’ve got a weak economy you’re going to have weak spending there,” Albrecht explains, “And it’s showing up in the revenue collections.”
What about corporate taxes, you ask? They’re only 4 percent of the state’s total income.
Tomorrow we’ll look at where the state’s money goes.