Recent editorials from Louisiana newspapers:
The Times-Picayune on offshore oil revenue:
There are some numbers that everybody concerned about Louisiana’s eroding coast knows offhand. Every 38 minutes, the state loses about a football-field-sized chunk of land. In 2017, the state is scheduled to receive 37.5 percent of the royalties that come from offshore oil and gas exploration and devote 100 percent of that money received to restoring and rebuilding the Louisiana coast. That money is eagerly anticipated because the state hasn’t been getting anything. Though offshore oil and gas exploration has cost Louisiana much of its land, the federal government has been getting all the resulting royalties.
The law providing a share of royalties for offshore oil and gas exploration applies to the Gulf Coast states, but Senators David Vitter and Bill Cassidy are among the lawmakers proposing a change that would expand the number of states getting a 37.5 percent share of money and, starting in 2027, raise the amount of money each state could get per year from $500 million to $1 billion. The change is proposed in an amendment to the Energy Policy Modernization Act, and it would expand off-shore revenue sharing to Alaska, Virginia, North Carolina, South Carolina and Georgia.
Since 2006, when the law passed promising Louisiana and its Gulf Coast neighbors a share of those royalties, there has been some grumbling in Washington that the arrangement will be too costly, that is, that it will divert too much money away from the U.S. Treasury. About a year ago, for example, Secretary of the Interior Sally Jewell said, “The outer continental shelf is owned by all Americans. We believe (the revenue sharing agreement of 2006) needs to be re-examined to look at what is a fair return to taxpayers across the whole United States.”
While the outer continental shelf does, indeed, belong to all Americans, getting oil and gas from there doesn’t cost Kansas anything. It doesn’t cost Minnesota anything or Tennessee anything or Nebraska anything. Yet, to hear Secretary Jewell tell it, those landlocked states have as much right to offshore oil and gas revenue as the Gulf states that have been torn up by that exploration.
After his interior secretary suggested that fairness demanded that the revenue continue to be deposited into the federal treasury, President Barack Obama softened the tone a little bit and expressed a willingness “to work with Louisiana and other Gulf states to create a mechanism for sharing of federal offshore oil and gas revenues.”
Of course, that mechanism already exists. It was that mechanism Secretary Jewell was criticizing in her assertion that the continental shelf belongs to everybody.
For the past year, Louisiana officials have been playing a game of defense: doing everything they can to keep the president and other lawmakers from trying to take away Louisiana’s anticipated revenue even before the state gets it. But with this new amendment, Senators Cassidy and Vitter shift into offense. No longer are they saying that the states should get up to $500 million a year. They’re saying that, starting in 2027, each state should be able to take in twice that.
And perhaps more importantly, no longer are they arguing that the Gulf Coast states deserve revenue; they’re arguing that other coastal states deserve the same. That’s an important maneuver politically. If revenue sharing only benefits a few states, then it’s that much easier to threaten. If there’s an increase in the number of the states that would benefit from it, then there’s an automatic increase in the political support for the idea.
But even without Alaska, Virginia, South Carolina and Georgia being added, revenue sharing with the Gulf Coast states is still the right thing to do. Sen. Vitter explained while speaking in favor of the proposed amendment Feb. 2. He said revenue sharing is fair because “energy producing states incur costs and impacts from that production, including environmental costs, and those states need to be properly compensated to deal with those real costs and impacts.”
That’s as true now as it’s ever been. Americans have counted on Louisiana and the Gulf Coast for oil and gas that has helped power the nation. We ought to be able to count on America to give us a fair share of that revenue to mitigate some of the damage oil and gas exploration has caused.
The Advocate on the effects of plummeting oil prices on Louisiana’s budget:
As The Advocate recently reported, Louisiana public school officials are worried about the prospect of the first cut in state aid in decades. It’s a distinct possibility because of the state’s looming budget crisis, which Gov. John Bel Edwards and lawmakers will address in a special session next month. The state is grappling with a shortfall of up to $750 million between now and June 30 — and another $1.9 billion shortfall for the fiscal year that begins on July 1.
Much of that red ink can be traced to the failed budget policies of former Gov. Bobby Jindal, as well as the lawmakers who agreed to his no-new-taxes absolutism.
But the budget picture has been complicated by the plummeting price of oil, which means less revenue for state coffers. That misery is being shared in other energy states, with potentially profound consequences for public school systems, according to a recent story in Education Week, a national journal for educators.
“During the energy boom of the last decade, when a barrel of oil cost close to $100, school administrators in energy-producing states built football fields and gleaming new schools,” Education Week writer Daarel Burnette II tells readers.
But with the price of oil now less than half of that boom-time high, the budget picture in energy states has changed dramatically.
“It’s not just tax revenue from oil and gas companies that’s hurting these states,” Richard Auxier, a research associate at the Urban Institute, told Education Week. “It’s that oil and gas have become such a big part of the economy.”
The drop in oil prices is affecting income tax collections in energy states, too, Auxier said. “People aren’t making as much, and so they’re not spending as much. So much in these states is tied to that industry.”
Governors in at least eight states are expected to propose cuts in the near future that could include reduced support for public education. During the recent oil boom, Oklahoma Gov. Mary Fallin and her fellow Republican lawmakers approved big tax cuts and tax breaks, and the state now collects half the taxes it did in 2007. That state now faces a $900 million budget shortfall. In Alaska, which generates 89 percent of its state revenue from oil, the state recently told its education department to cut a third of its budget.
If there’s a lesson in this for Louisiana, it’s probably summarized best by North Dakota state Rep. Jeff Delzer.
“Education is not a one-time expense,” he told Education Week. “If you use oil revenue for ongoing expenses and then that money goes away, you’ve got big problems.”
The Lakes Charles American Press on financial challenges facing Louisiana state government:
Gov. John Bel Edwards is telling all who will listen that Louisiana state government is in a financial predicament like none other in its history and that none of the solutions are popular. While he appears to be right on both points, there are some who obviously don’t agree his suggestions are the only answer. However, there is no doubt that he is on target about the solutions being controversial.
Take the proposed 1-cent increase his administration is proposing, for example, in the state’s 4-cent sales tax. Sales taxes definitely hit poorer citizens the hardest, even though supporters think it’s a fairer tax. And if an increase is approved, Louisiana would have the highest local and state sales tax combination in the country.
Legislators had an opportunity in 2015 to increase the sales tax by a penny to fund construction of 18 major road and bridge projects. One of them is a new Interstate 10 bridge over the Calcasieu River at Lake Charles. The measure came up 20 votes short of the 70 (two-thirds) needed in the House.
Then, there are some income tax proposals that impact middle- and upper-income citizens the most. One of those would restore the income tax rates that were higher under the Stelly Plan approved by voters in 2002. The rates were reduced in 2008. Legislators can raise them on their own.
A second income tax proposal would eliminate the ability of state taxpayers to deduct federal income taxes paid on their state income tax forms. They were given that ability in the state’s 1974 constitution. Voters would have to approve that one as a constitutional amendment.
The third income tax idea would eliminate the ability of taxpayers to deduct 50 percent of their excess federal itemized deductions like home mortgage interest on state income tax returns. The Legislature can take that action without voter approval.
Other consumer tax increases have been proposed for telephones, tobacco products, alcohol and Internet sales.
Businesses are also in line for possible tax increases. They are currently paying one penny of the state sales tax on their utilities and would pay three pennies more under another tax proposal. Business interests fought the one penny increase approved last year, and are certain to oppose any additional utility taxation.
Higher inventory, corporate income and corporate franchise taxes have also been proposed. Efforts in the past have been directed toward eliminating or reducing those business and industry taxes. Businesses could also lose some tax advantages they enjoy.
Consumer and business interests are divided over how much each of them should contribute to help resolve the state’s financial dilemma. Some say they aren’t getting anything in return, but others accept the fact that everyone has to contribute something to get the state back on a sound financial footing.
It’s easy to understand why some veteran legislators have declined to serve on the money committees that will have to decide these critical issues in a special session beginning Feb. 14. The Greater Baton Rouge Business Report offered the best description when it called the current situation “an old fiscal crisis that continues to worsen and has so far proven elusive to solve.”
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