Lost in the debate about the state budget crisis is the desire by Louisianans to see the state grow businesses and attract jobs. It’s perhaps interesting to take a look at the recent Volvo project and think about the implications on today’s budget debate.
Last year, Volvo announced it would locate a new manufacturing plant in South Carolina outside of Charleston. Volvo will add 2,500 jobs, and as many as 4,000 by 2030. By all accounts, this project will be transformational to the regional economy for Charleston and for the people of South Carolina. To win, against stiff competition and a similar incentive proposal from Savannah, Georgia, South Carolina put up a large incentive package for the project, including funding for site work and infrastructure, workforce and utility support, stretched out over a decade or more.
Louisiana is eager to win economic development projects, and for something like Volvo, it would be a deal worth doing. We can look at Lake Charles today or the IBM project in Baton Rouge a few years ago and see what game changers large economic development projects can be.
Louisianans are competitive by nature; we want to win. Some may lament the competition between states for projects like Volvo’s, but the fact remains that the competition happens. For decades, we weren’t even in the economic development game. Today, Louisiana is finally competing. How did we get here?
In 1991, Louisiana moved to get rid of the unorthodox “inventory tax,” a business tax not typically charged in other states. Unfortunately, the solution, while effective, was unorthodox itself, retaining the tax but establishing a 100 percent state credit in return. Then, in 2002, the Foster Administration held a Special Session for Economic Development, creating an incentive toolkit comparable to peer states, creating important programs like the Quality Jobs program. In 2005, Gov. Kathleen Blanco created the Digital Media Tax Credit, the mega-fund for economic development projects, and began to phase out the corporate franchise tax on debt and sales tax on manufacturing machinery and equipment. In 2012, Louisiana leveled the playing field with Texas, which doesn’t tax a key input into the manufacturing process: business utilities.
All of these actions were made over 20 years to address historic weaknesses that Louisiana faced compared to peer states. The result? Over the last 15 years, under bipartisan leadership, Louisiana has seen steady increases in the number of projects won, representing more than 120,000 announced jobs, and growing private investment in the state almost tenfold, according to Site Selection. Louisiana’s number of announced projects and jobs have both increased by 150 percent, when you compare the five-year period of 2011-15 to the period of 2001-05.
Unfortunately, every one of these improvements to our competitiveness is under threat during the current Special Session.
So what? Lawmakers face tough decisions. BRAC fundamentally agrees with the importance of finding new, short- and long-term solutions to funding for higher education and health care. We live in a region whose economy is tied, for example, to the future of LSU and the importance of the health care economy. We cannot compete sustainably without better education outcomes, a better trained workforce, healthy citizens or transportation infrastructure. However, as state leaders face choices about what revenues to increase, the wrong choices can absolutely make us less competitive. That can cause Louisiana to regress and undo 20 years of bipartisan efforts to make Louisiana stronger for job growth.
At the same time, our business community must recognize that the budget crisis is real and must be closed immediately and that the state has to get through the short-term crisis while demanding structural reforms to make us stronger in the long run.
Louisiana is not an island. We want to compete for projects like the next Volvo and the next IBM. The governor and the Legislature’s revenue choices can create lasting harm. We urge lawmakers and the governor to score their proposals not just on the fiscal benefit to the state budget, but on their impact to state competitiveness and our ability to attract and grow jobs. Let’s make smart, measured decisions for the long term while we fix our budget mess.
Adam Knapp is president and CEO of the Baton Rouge Area Chamber.