Auditor: Tax credits cost Louisiana $3 billion

Advocate file photo -- The Louisiana state capitol in Baton Rouge. Show caption
Advocate file photo -- The Louisiana state capitol in Baton Rouge.

Louisiana gave away 55 percent of its corporate tax revenues, while continuing to struggle with higher education funding, retirement system obligations and paying for other government services, Legislative Auditor Daryl Purpera told legislators.

Over a five-year period, state government gave up about $3 billion in taxes to encourage companies to come to Louisiana or to stay here, according to a report prepared by Purpera and his financial auditors. That’s out of a $5.4 billion that otherwise would have been collected through “corporate and franchise tax.”

“We see the problems we have with funding our government today,” Purpera said in an interview after delivering the report to the Legislature. “It’s public policy to give away 55 percent of our corporate taxes.”

Taxpayer dollars are going out the door, but state government is not monitoring the programs to ensure that the companies delivering what they promise, Purpera said. He pointed to a number of audits his office prepared in 2013. Accountability is particularly important now because the Jindal administration is embarking on “bold initiatives,” such spending public dollars on tuition for private schools and contracting with private companies to manage the state’s charity hospitals.

The State Auditor, who is hired by the Louisiana Legislature, monitors public spending for more than 3,500 state and local governments and their related quasi-public enterprises. The annual report is required by law to identify for legislators the “significant issues” facing state and local government.

“I’m hopeful somebody will use it,” Purpera said. “I’m just trying to put the facts out.”

The goal is to encourage corrective action, such as policy changes or improved procedures, and increase both accountability and transparency in Louisiana government, Purpera said. “I’m not the policy guy, but you need to understand the full impact of what we are doing,” he said.

The report has three separate sections: one dealing with state government funding, another protecting the public trust, and a third on disaster recovery.

As credits reduced state revenues by $3 billion, income tax credits for individuals cost the state another $1.8 billion, according to the report.

Meanwhile, motion picture tax credits and the state’s expanded enterprise zone program originally designed to help with redevelopment of distressed areas are also costing the state tens of millions annually. The motion picture credit has a positive economic impact but a negative impact on state government, the report said. “Yes it’s creating jobs but the state is funding $25,000 for each of those jobs,” said Purpera.

The auditor’s report also recounted numerous instances of erroneous or improper payments being made through state programs, Purpera said underscores the need for improved procedures. Included were overpayments of severance tax refunds, payments to food stamp recipients who were not eligible to receive them and money being paid out for mental health services to individual who were deceased.

In the area of government accountability, the report stresses the need for “careful implementation, monitoring and continued evaluation” of privatization initiatives.

Initiatives that are aimed at making government services more efficient and less costly always come with risks. “Change has to be managed, implementation needs oversight,” Purpera said.

Several audits conducted during 2013 that underscored the annual report’s theme. For instance, a May 2013 audit found that the state Department of Education did not adequately monitoring some operations of charter schools . The department did not verify that data used to calculate how charter schools are faring is reliable and failed to do all the required academic oversight. State education officials disputed some of Purpera’s conclusions.

Charter schools are public schools run by private boards. They are designed to offer innovative alternatives to traditional public schools. About 45,000 students attend 104 charter schools in 15 parishes, including East Baton Rouge.