The Budget vs. The EconomyUnderstanding the Present,

Protecting the Future

Sources: Legislative Fiscal Office; Jim Richardson, LSU; LED; GNO, Inc. Analysis

Key Take Aways

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1. Louisiana has a structural budget deficit

2. Job growth is real – the economic revitalization of Louisiana is working

3. Economic development incentives areonly 4% of total exemptions

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1. Louisiana has a structural budget deficit.

Louisiana has a Structural Budget Deficit

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We are spending more than we are taking in.Sources/

UsesSurplus/(Deficit)

Louisiana Has a Structural Budget Deficit

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Katrina wind-down coincided with Stelly repeal and Recession

Katrina Funding

Stelly Repeal

Recession

Sources of Louisiana Funding

State Fees

State TaxesFederal Funding

Sources of Funds - Total

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Have fallen nearly $5B since the 2008 peak

$27.8B

$23.0B

Louisiana Has a Structural Budget Deficit

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There are multiple reasons for the revenue loss

Katrina Wind-Down$(1.0B)

National Recession$(1.6B)

Tax Cuts$(0.9B)

Oil Price Drop$(0.7B)

Total Loss$(4.1B)

Revenue Loss 2008 - 2010

Sources of Funds - Taxes and Licenses

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Most Taxes and Licenses have declined since 2008

Sources of Funds - Taxes and Licenses

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There are multiple reasons for the declines

Sales: Growth during Katrina recovery; hit by recession; long-term internet issues

Personal : Grew via Stelly, Fed tax cuts, Katrina; hit by Stelly repeal, recession

Other: Gas, tobacco, insurance, gaming, etc. move with economy

Mineral: Rises and falls with oil & gas prices; horizontal drilling exemption lowers

Gaming: Flat

Corporate: Hit by: Recession, NOL, Inventory Tax Credit, volatile tax base

Sources of Funds - Taxes and Licenses

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Note: drop in Corporate Income Tax could not have been caused entirely by economic development incentives:

• Only $296M total in 2013

• Only accounted for 4% of total corporate exemptions growth since FY07-08

Uses of Funds

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Spending has been generally flat in recent years

Note: Does not include Federal funds; interagency transfers not netted out

Uses of Funds

12Note: Does not include Federal funds; interagency transfers not netted out

Government: Rise/fall from Katrina

Education: Tuition replaces state support

Healthcare: Rises as with rest of nation

Public Safety: Flat; declining in real dollars

Transportation: Flat; declining in real dollars

Spending has been generally flat in recent years

Uses of Funds

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Spending has been generally flat in recent years

Uses of Funds - Education

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Both K-12 and Higher Ed rose until 2009, now flat

Uses of Funds – Higher Education

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Tuition has risen from 35% to 55% of total higher education

State General Fund

Tuition

StatutoryDedications

35% 55%Includes TOPS, funded by State

Louisiana Has a Structural Budget Deficit

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This is compounded by the fact that less than 10% of the budget is discretionary

<10% discretionary

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Job growth is real.

Job Growth is Real

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Greater New Orleans underperformed the USA for 4 decades

Job Growth is Real

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Today, Greater New Orleans ranks with the best in job growth

Job Growth is Real

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Greater New Orleans leads the South in economic development wins – and almost all are post-Katrina.

Job Growth is Real

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The industrial sector is booming, oil price and rising dollar notwithstanding

Job Growth is Real

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State announcements will add nearly 100,000 jobs over the next four years as they come on-line

-

20,000

40,000

60,000

80,000

100,000

120,000

Louisiana Direct and Indirect Jobs

Series1 Direct Indirect

Jobs

2015 2016 2017 2018

98,000new jobs

Source: GNO, Inc. analysis of LED announcements

Job Growth is Real

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We are creating new industries, with high-paying jobs.

Job Growth is Real

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We are diversifying the economy.

Job Growth is Real

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Per capita income has grown 15% over the past six years, and is at its highest point ever.

Job Growth is Real

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Louisiana has experienced seven consecutive years of in-migration, reversing decades of out-migration.

Job Growth is Real

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The positive economic trends are driving other wins – we are entering a “virtuous cycle.”

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Economic development incentives areless than 5% of total exemptions

(and only 1% of total budget).

Economic Development Incentives are Small

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Economic development incentives are only 4% of the total $7B of Louisiana exemptions in 2013, and only 1% of budget

Income Tax – Corp.21%

Income Tax - Individual28%

Sales Tax38%

Natural Resources - Severance7%

Tax Incentives and Exemption Con-tracts

5% Petroleum Products Tax1%

Tobacco Tax1%

Economic Development Incentives are Small

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The 4% of economic development incentives contain a range of programs that support job-creation

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ConclusionWe must address the structural budget

deficit, while continuing to grow our economy for the future.

Next Steps

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1. Education on the facts

• Legislators

• Media

• Social Media

2. Advocacy for solutions

• 2015 “punchlist” to solve immediate deficit

• Long-term structural reform

How do we not only survive this crisis, but use it to create a better Greater New Orleans and Louisiana?