Advocate, LFT agree on "Haynesville Bust"

In a recent editorial, The Advocate in Baton Rouge pointed out that the state is losing hundreds of millions of dollars because a loophole in our tax law gives petroleum producers a tax break on the boom in natural gas drilling.

The newspaper called it"the great Haynesville bust" because most of the action is in North Louisiana's Haynesville play, where landowners have become millionaires and oil companies are reaping vast profits.

Left our of the bonanza is the State of Louisiana: "In the 1990s," said the editorial, "when horizontal drilling and hydraulic fracturing were new methods, the state passed at the behest of the powerful oil industry a 100 percent tax exemption for the cost of drilling wells."

In this letter to the editor, LFT President Steve Monaghan wrote of the practical impact of the loophole. "While education, health care, the transportation infrastructure and other vital public services starve," Monaghan wrote, "vast fortunes are being made by the energy corporations."

It was not unexpected, said Monaghan:

Nearly two years ago, the Louisiana Federation of Teachers and the
Louisiana Budget Project were partners in creating the Better Choices for a
Better Louisiana coalition. The coalition’s main goal was a balanced approach to
our budget crisis and to ensure that Louisiana had the resources required to
provide the services our people need and deserve.
Early on, Better Choices was critical of the state tax loophole granted for horizontal drilling. As new discoveries in the Tuscaloosa Trend come into play, Louisiana stands to lose even more millions.

The LFT President ended his letter by urging Gov. Jindal and the legislature "to examine and reconsider the tax breaks for horizontal drilling and each of the more than 400 tax breaks on the books."

Monaghan: Place sunsets on tax exemptions

This week, Gov. Bobby Jindal issued a press release announcing a legislative plan that would, among other things, impose a sunset on fund dedications adopted by the legislature.

In a letter to the editor that is now appearing around the state, LFT President Steve Monaghan gives a nod of approval to the concept, saying that the idea should be applied to the state's 441 tax exemptions as well.

After all, if it is a good idea to periodically review fund dedications to see if they are serving their purpose, isn't the same true of tax exemptions?

Here's the text of Steve's letter:

In a press release issued this week, Gov. Bobby Jindal announced he will propose a package of bills including, among other things, a sunset provision for nearly all of the state's dedicated funds. These are the areas of the budget that are protected by either Constitution or legislation, which reportedly cannot be easily reduced.

And, as in all legislation, the devil sleeps comfortably in the detail, the governor's call for sunsets and reviews of statutorily protected funds speaks to common sense and good government.

The governor makes a strong point when he says these dedicated funds should be inspected by lawmakers on a regular basis to make sure their dedications serve a legitimate purpose, and are working as intended and that the intention satisfies a need and serves the public's interest.

This concept connotes transparency and accountability and it should also be applied to the 441 separate tax exemptions offered by the state that now cost taxpayers more than
$7.1 billion per year in lost revenue.

Is it really necessary to grant exemptions for drilling in the Haynesville gas find at a cost of more than $100 million to the state? Or to exempt sales taxes on purchases of gold bullion or Mardi Gras beads?

Perhaps these and the many other tax exemptions do serve the public well, but we don't know because once adopted, most tax exemptions are never revisited. Two-thirds have no sunset. So, while they can be passed by a simple majority in the legislature, it takes a two-thirds vote to repeal them.

We urge the governor to apply this standard to the tax exemption budget. Put a sunset clause on them, and give lawmakers the information they need to decide whether or not the exemptions should stay on the books.

Steve Monaghan, President
Louisiana Federation of Teachers

BESE freezes MFP, crisis declared in school districts

With the Board of Elementary and Secondary Education bowing to Gov. Bobby Jindal's demand for a third frozen year of school funding, districts around the state may be starting to fall into crisis like a line of dominoes.

As Advocate reporter Will Sentell wrote here, BESE agreed to forgo the traditional 2.75% growth factor in the Minimum Foundation Program, which funnels most state funds to local school boards.

BESE member Walter Lee, who is also superintendent of schools in DeSoto Parish, grimly predicted, "It is really going to be difficult for school systems."

The next day, the Livingston Parish School Board declared a "financial exigency" exists in the district, as a direct result of the BESE decision.

Advocate reporter Faimon Roberts put it this way: "The unanimous vote came after Superintendent Bill Spear told the board that by removing a 'growth factor' in its funding formula, the state had cut more than $7 million from Livingston Parish schools for the next three years, including the coming school year."

Teacher and staff layoffs are predicted, and a ripple effect from the cuts is feared. Board member Buddy Mincey Jr. said that the school system has been a driving factor in Livingston Parish's growth. "Strangling" education in Livingston could jeopardize the parish's future growth.

Just over the parish line in Tangipahoa, Superintendent of Schools Mark Kolwe told his board that their system, too, is in a state of exigency, and the board declared a financial crisis.

Hammond Daily Star reporter Bridgette Bonner wrote that layoffs are under consideration there, as well as the elimination of art and music programs, employee step raises, substitute teachers and other important education programs.

And as previously reported in EdLog, Gov. Jindal is recommending even more tax breaks for big business.

Top Republican talks about tax expenditures

"Spending programs disguised as tax breaks." That's how columnist Ruth Marcus defines tax expenditures. It lines up nicely with LFT's contention, based on research by the Louisiana Budget Project, that the $7 billion worth of deductions and credits that Louisiana spends every year ought to be reconsidered in light of our budgetary mess.

It's to be expected that a writer for the Washington Post would take a progressive position on tax expenditures. What's surprising is that the source of her column is Congressman John Boehner of Ohio, Minority Leader of the House and one of the most conservative Republicans in Congress.

While tax expenditures cost Louisiana $7 billion per year, they cost the federal government $1.2 trillion per year.

And like in Louisiana, once these expenditures become enshrined in law, they are seldom reconsidered. Even if their original purpose has been satisfied, and even if they have become a net drain on the economy.

In this excerpt from Marcus' column, the voice of reason is loud and clear, and could have come straight from the Louisiana Federation of Teachers' position on tax expenditures:

“We need to take a long and hard look at the undergrowth of deductions,
credits, and special carve-outs that our tax code has become,” Boehner said in his speech
to the City Club of Cleveland. “And, yes, we need to acknowledge that what
Washington sometimes calls ‘tax cuts’ are really just poorly disguised spending
programs that expand the role of government in the lives of individuals and
employers.”

Boehner cited the “tax extenders” bill now
making its way through Congress. “There’s everything in this bill: the research
and development tax credit, special expensing rules for the film industry, an
extension and modification of a tax credit for steel industry fuel, the mine
rescue team training tax credit, and tax incentives for investment in the
District of Columbia,” he said. “Are they worth it? Many are. But we just go
ahead and extend all of them temporarily -- and usually right at the last minute
-- so Washington can continue pandering to the loudest voices instead of
implementing the best ideas.”