La. budget woes could pit SUNO against Hollywood South

26th January 2015   ·   0 Comments

By Christopher Tidmore
Contributing Writer

In 2015, Louisiana faces a looming $1 billion deficit. With a budgetary situation this bad, fiscal reform advocates wonder if the window has finally opened to radically reform Louisiana’s uncompetitive tax system—reforms that could lower rates while at the same time increase revenues.

However, less ambitious budget writers have a simpler solution. They eye influential tax credit programs like Hollywood South for elimination, calling the incentive program a subsidy whose termination could plug the hole to the tune of a quarter of a billion dollars.

The continued existence of Hollywood South divides both political parties in Baton Rouge. Most recently, rumors have begun to abound that a coalition of liberal Democrats will join with some of the legislature’s most conservative Republicans to zero out the program in the coming legislative session.

Facing off against them, though, are the Democratic speaker pro tem of Louisiana House of Representatives, the chairman of the Louisiana Republican Party, and a prominent New Orleans actress who all maintain the film industry has not only provided good jobs, but adequate tax revenue as well. Each tell The Louisiana Weekly that legislators should think twice before targetting Hollywood South as an easy way to narrow the deficit.

Regardless, there is little debate that the fiscal picture is bleak. Years of raiding ‘rainy day’ funds by the Jindal Administration has widened an already catastrophic deficit with no safety net to cushion the blow. Moreover, with hospital funding now dedicated thanks to recent constitutional changes, only limited areas of healthcare, higher education, culture, recreation, and tourism, are available for budget cuts.

The 20 percent across-the-board figures that are being floated in these areas are so huge that they would mean the actual closure of museums and colleges. Mark Tullos, Director of the Louisiana State Museum system, told The Louisiana Weekly in an interview, that his office was not talking about laying off staff, or ending programs, “We’re facing the real possibility of closing the museums,” should this degree of cuts go through.

Historically Black Universities such as SUNO could likely be on the chopping block again come the dawn of the legislative session in order to preserve staffing and programs at more widely attended institutions such as LSU and UNO. Absent higher revenues or closing a college, the cuts would be so great to the entire university system that, as the chancellor of LSU recently put it, “the cost of state mandates would exceed the funding provided to meet them”.

And this year’s radically reduced budget would come on top of six years of cuts to the Pelican State’s higher education and cultural infrastructure. In other words, there may be no fat left to cut. Short of the politically impossible task of amending the state constitution to de-dedicate protected spending, or a sharp rise in oil prices and the corresponding severance taxes, a tax increase may be the only option.

Except that Presidential candidate Bobby Jindal would veto any attempt. Fiscal experts, noting this, are proposing something different. Eliminate all personal and corporate incentives in the tax code and roll back income tax rates to one percent to three percent. Such a move actually produces more revenue, i.e. tax dollars, while seemingly cutting taxes.

Fiscal expert and good government watchdog C.B. Forgotston has gone the furthest down this suggested pathway. As he explained to The Louisiana Weekly, “This is both a short-term and long-term fiscal solution as well as making Louisiana the most economically-attractive state in America. The plan finally rejects the fiscal polices initially put into place by Governors Huey and Earl Long.”

“This is not a pick and choose list. It’s an all-or-nothing list. [First,] Repeal ALL of the tax exemptions in the state constitution (Homestead, Industrial, Sales and Use, Personal Income Tax, etc.) and ALL in the statutes. [Second,] Repeal ALL of the constitutionally-mandated state payments to local government, i.e., supplemental pay for police, fire and deputy sheriffs. Revenue sharing with local governments will be unnecessary because there will be no state-imposed Homestead Exemption to reimburse. [Third,] Rollback ALL (state and local) tax rates to level at which the existing taxes will only bring in the amount projected for FY16 (begins July 1).”

“This NOT tax neutral;” Forgotston emphasized, “ it is revenue neutral. In other words, some taxpayers may pay more, but most will pay less.”

Forgotston also calls for local authorities to be able to roll forward mileages with two-thirds vote of the governing board and to constitutionally prohibit state revenues from being spent on local functions. His reforms would create one of the most competitive tax systems in the nation, but as any student of Louisiana politics knows, a reduction or elimination of the homestead exemption would be DOA in Baton Rouge.

Other fiscal experts including LSS-S political scientist Dr. Jeffrey Sadow, Legislative Fiscal Office chief economist Greg Albrecht, and Public Affairs Research Council President Robert Travis Scott I have called for a more modest, but even more noteworthy, solution. Essentially they and several other critics have demanded an end to Louisiana film tax credit program, known to the public as Hollywood South.

The State budget shelled out about $250 million last year for 107 movie and TV projects, making the Pelican State’s credit program the most generous in the United States. Put another way one dollar out of every six dollars given to the domestic film industry comes from Louisiana taxpayers.

Doing away with the 35 percent credit on salaries (on productions more than $300,000) would save enough to preserve a university, Or at least that’s the theory. The idea is predicated on the notion that the state pays out far more to the film industry than the Louisiana Treasury takes in tax revenue.

It’s also quite a shortsighted view, argued LAGOP Chairman Roger Villere. He contended that the film industry provides tremendous positive effects to established local businesses—as well as generating sales tax dollars that economists are not calculating in their fiscal-revenue estimates.

As the owner of Villere’s Florist, he observed, “We’ve done a lot of work with the film industry. Service businesses like Florists are needed as part of the film industry. When they’re shooting a wedding scene, we might make three or four or five bouquets because the lights are hot, and they may have to shoot it multiple times. And so a lot of sales taxes are paid through service companies like ours. People that are supplying food, and drink, and people that are supplying automobiles,” and other below the line services, aren’t being counted.

Therefore, existing Louisiana tax estimates simply ignore the revenue these businesses produce for the state. As such, Villere said that local economists deliberately overlook the budgetary and corporate benefits that the film industry provides to the state—supporting almost 15,000 jobs at last count.

Democratic State Rep. Walt Leger echoed Villere, stating, “I don’t think we’re looking at the whole fiscal picture.”

Not only have local businesses prospered, but direct film industry employment has jumped as well. Leger pointed how film sound stages are being built across the state, with a new $63.5 million “Deep South Studios” facility breaking ground in the next couple of months on an 18-acre campus right below the Crescent City Connection in Algiers.

Film industry union members now number more than 1,400, a tenfold jump in just over a decade. And these Louisiana actors and cast personnel pay state income taxes. Moreover, many of them are actually locals who would have had to leave Louisiana in order to pursue their professions.

New Orleans born thespian Lucy Faust was first hired for a small role in the hit series “American Horror Story.” It was supposed to be a limited engagement, just a few months.

In December, Faust just completed filming her third season with the show, and it is the second TV program produced in Louisiana in which she has had a regular role.

In point of fact, the makers of “American Horror Story” had originally intended to visit Louisiana for just one season of filming. State incentives matched with the strong infrastructure of movie personnel convinced the producers to stay and tape in the Crescent City, even when the show setting was supposed to move to other parts of the country.

As Faust noted to this newspaper, “I don’t claim to be extremely well-versed on the tax and business side of the industry. I’m just trying to make a living, but if things were to disappear and opportunities were to dissipate somewhat, I think that would be devastating. As it is now I believe New Orleans has surpassed even New York and LA in production—in several aspects. So I think if the opportunities to go away, I would hate it.”

The myriad of movies and TV shows under production Louisiana would simply relocate other states that have almost equally generous incentive programs, she worried.

Yet with the difficult choices com­ing this legislative session, and the lack of willingness for fundamental fiscal reform, Hollywood South could bare the brunt of plugging the $1 billion hole, regardless of the direct and ancillary benefits. Especially since over the next decade Hollywood South is slated to shell out $1 .1 billion in credits, so fast does the film industry grow in Louisiana.

This article originally published in the January 26, 2015 print edition of The Louisiana Weekly newspaper.