PAR Calls for Major Overhaul of State Government

Louisiana state government requires a major overhaul of its functions and the way they are financed, the Public Affairs Research Council (PAR) said in its “White Paper on State Finance and Taxation” released today. “The next administration should immediately begin a thorough restructuring of the state’s basic service delivery systems, eliminate unneeded programs, divest local responsibilities and improve productivity,” said Jim Brandt, PAR president. The recommended financial overhaul would include revising the state tax system, expanding local governments’ fiscal capacity, improving the business tax environment and finding alternative funding mechanisms. A number of recent studies and planning efforts have begun laying the ground work for redesigning various state services including: health and hospitals, public education finance, higher education, the court system, the juvenile justice system and highway construction. Some efforts have produced recommendations, others have only raised options or are ongoing. “Building on these efforts, the next administration should prepare an overall, coordinated plan for reinventing’ state government, Brandt explained. “The next step would be a constitutional convention to authorize the structural and financial changes needed to fully implement the plan.” Unfortunately, upgrading higher education, public education and highwaysareas which could contribute the most to the state’s economic developmentcannot be achieved simply through improved efficiency. Significant added funding in each of these areas would be needed to ensure full funding for the colleges and a nationally ranked research university, the ability of all school systems to compete for qualified teachers, and a highway program that can begin reducing the backlog in construction needs. The report suggests that the funding needed to make these functions truly competitive might include a combination of the following:

• Savings from economies and program reductions in other functional areas.
• Shifting of some fiscal responsibilities to local governments.
• Expanding the property tax base by improving assessment accuracy and equity as a precursor to considering reductions in the homestead, industrial and other tax exemptions.
• Expanding local fiscal capacity and taxing authority.
• Capturing sales taxes on internet and catalogue purchases
• Generating revenue growth through expanded economic activity
• Making use of additional user revenue, if needed (i.e., tuition, road tolls, motor vehicle license).

The report warned that any tax increase should be the last option to consider after all others have been exhausted. Tough decisions and political courage will be needed to restructure major state services, upgrade those functions key to economic development and reform the tax structure. This will be complicated by the need to balance state budgets over the next two years with a loss of nearly $700 million in temporary funding. “Moving the state forward will not be simple,” Brandt concluded, “but living with the alternative will be far more difficult.” The “White Paper” offers 19 recommendations for making specific improvements in the state and local tax structure and the state budget process. The report notes that a comprehensive restructuring of the state’s revenue system is needed, but would not provide immediate solutions. The changes recommended in the report, however, are designed to spur future economic growth and improve the fiscal stability of the state in the long term. This is the second report in PAR’s four-part white paper series dealing with major issues facing the new administration and Legislature to be elected this fall. The first report addressed higher education and the next two will cover public education and governmental ethics/constitutional revision. The series focuses on the significant relationship between these issues and the state’s economic development. PAR members will receive a free copy of the “White Paper on State Finance and Taxation.” Others may order copies for $3.50 each by writing PAR at P.O. Box 14776, Baton Rouge, LA 70898-4776 or, by calling (225) 926-8414. Special pricing is available for bulk orders. The series may also be viewed on PAR’s Web Site at www.la-par.org.