State Rundown 11/20: Incentives, Deficits and Unexpected Windfalls


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Oklahoma officials want an independent review of business incentives that cost the state more than $355 million each year. A new law that took effect at the beginning of this month established an Incentive Evaluation Commission charged with looking at tax credits, deductions, expenditures, rebates, grants and loans intended to promote business relocation and expansion. Under the law, each business incentive will be reviewed every four years. Currently, just two incentives – the Investment/New Jobs Tax Credit and the Quality Jobs Program – account for over $180 million in lost revenue for the state, and have failed to meet rosy job creation projections. State Auditor Inspector Gary Jones is cautiously optimistic about the independent review process, saying, “Some of these things ought to be eliminated….The problem is, you’re leaving so much to people whose jobs depend on campaign contributions.”

Gov. Bobby Jindal, who recently abandoned his bid for the presidency, returns to a state in budget turmoil. Louisiana’s budget officials predict the state faces a deficit of $370 million after downgrading their projections for 2015-2016 fiscal year revenue. The shortfall is due to freefalling oil and gas prices as well as anemic business tax collections. The state must also contend with a $117 million deficit from last fiscal year that has yet to be addressed. This mid-year deficit is the eighth time in Jindal’s eight years in office that revenue has come in under projections. There will likely be cuts to critical services. Both of the candidates vying to replace Jindal have said they will call a special session in 2016 to deal with the budget and revenue crisis.

Improved budget numbers in South Carolina have caused some officials to question whether the state needs to raise its gasoline excise tax – last increased over 26 years ago. Forecasters say the state will see an additional $1.2 billion next year in unallocated money and new tax revenues. State Sen. Tom Davis says that rather than increase the gas tax, road repairs should be funded with this unexpected revenue.  Of course, funding long-term infrastructure projects with what appears to be a one-time windfall will create sustainability problems down the road.  In the last session, Haley attempted to use the push for a gas tax increase as an opportunity to enact a significant income tax cut for high-income households. A similar “tax shift” will likely be on the table once again during the upcoming session.

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