BRAC’s 2021 Legislative Wrap Up
The 2021 Regular Session of the Louisiana Legislature was a clear success for economic development in the Capital Region, perhaps more than in any legislative session of recent history if they become law. Moreover, when taken in combination with tort reform passage in 2020, Louisiana is taking major strides to being more competitive for economic growth.
Substantial progress was achieved in nearly every component of BRAC’s legislative agenda, most notably in tax reform, centralizing sales tax collection, education and workforce, and redevelopment. The most significant infrastructure investment in years, as well as compromise unemployment legislation to address labor market disruptions, await positive action by the Governor to put in place, which BRAC hopes he will do.
The organization published its 2021 legislative priorities before session started and are available online here. An in-depth look at BRAC’s priority areas and bills can be found below.
Modernize the Tax Code
Tax reform was a major legislative priority for several organizations across the state, including BRAC. Progress was made on franchise tax and personal and corporate income taxes through a package consisting of four bills: HB 278 (Bishop), HB 292 (Riser), SB 161 (Allain) and SB 159 (Allain). These bills will eliminate the Federal Income Tax Deduction on both personal and corporate income tax while reducing the brackets and lowering the rates. The new corporate rates would be 3.5% on the first $50,000 of income; 5.5% on income between $50,000-$150,000; and 7.5% on income over $150,000 (changed from five brackets stepping from 4% to 8%). The personal income rate would move from 2% to 1.85% for the first $12,500 of income; from 4% to 3.5% on the next $37,500 of income; and from 6% to 4.25% on income in excess of $50,000. These changes give Louisiana the lowest top personal income tax rate in the southeast, excluding those with none, and fourth lowest overall for states with an income tax. To become law, these tax reform changes must be approved by the voters. A Constitutional Amendment on the ballot this fall will tie the income tax bills together for the October 2021 ballot.
SB 161 (Allain) removes the Franchise Tax for capital under $300,000 and reduces the rate from .3% to .275% on capital over $300,000. Existing tax policies have long made Louisiana an outlier nationally and these changes will put the state in line with peer averages and drastically improve business competitiveness.
The Legislature made a few additional significant reforms that went largely under the radar:
- SB 11 (Talbot) providing an individual and corporate income tax exemption for state and federal COVID-19 relief benefits (signed by governor: Act 54).
- SB 31 (Cathey) providing an individual income tax exemption on 50% of the gross wages of each taxpayer who qualifies as a digital nomad not to exceed $150,000 for two years between 2022-2025, not exceeding 500 participants.
- SB 36 (Reese) allowing for net operating loss to be carried forward until the loss is fully recovered.
Centralize Sales Tax Collection
At long last, the state made a step toward simplifying the state’s sales tax system with HB199 (Schexnayder), which sets a statewide commission to oversee a streamlined process. The bill establishes a commission comprised of eight members – four representing the state and four representing local officials – whom the Senate will confirm. Under this measure, the commission will be the auditor for out-of-state taxpayers and will develop rules to streamline the audit process for in-state taxpayers. HB 199 is a constitutional amendment, so it – like tax reform above – will go to voters in a statewide election this October. The need to simplify the collection of sales tax for businesses is critical. The overly complex nature of having over 50 different local tax collectors places a burden on companies operating in multiple parishes.
Address the Capital Region’s Transportation Crisis
Louisiana has ignored investing in infrastructure for 37 years. The Legislature passed HB 514 (Magee), which phases in over the next four years a 60% dedication of the sales tax on vehicles to the transportation sub-fund amounting to approximately $300 million annually once fully enacted in 2024. This bill calls upon DOTD to prioritize multiple projects in the Capital Region, including a new Mississippi River Bridge and its connectors, widening I-12 to the state line, and widening I-10 from LA 20 to LA 30. These projects will help to reduce the 55 hours in congestion annually and the extra 25 gallons of gas per year commuters in the Baton Rouge area currently spend in congestion on our roads. The Capital Region ranked as 5th worst in the country for congestion in the 2020 Tom Tom Traffic Index. Sustainably funding transportation infrastructure will drive economic growth, positively impact quality of life, and decrease the cost of doing business. Given the state’s significant infrastructure challenges, this is an important investment in our future growth.
Prioritize Capital Outlay for the Capital Region
Many of the priority projects BRAC identified in its legislative agenda received favorable funding through Capital Outlay, including funding to regional colleges and universities and the revitalization of the LSU/City Park Lakes. In addition, the Greater Baton Rouge Economic Partnership received $1 million to be used as an incentive for attracting new direct flights out of the Baton Rouge Metropolitan Airport. The Legislature, through both budget allocations and the Capital Outlay process, showed a significant commitment to the region.
Accelerate North Baton Rouge Economic Development
In conjunction with community partners, BRAC advocated for SB 227 (Barrow), which will establish the Plank Road Business Economic Development District (EDD). The bill marks an important milestone in accelerating economic development in the North Baton Rouge area. The EDD includes Plank Road from its southern origin to Hooper Road and surrounding areas. The EDD was created in collaboration with and supported by a broad coalition of community organizations including BRAC, Baton Rouge North Economic Development District, Build Baton Rouge, and the Office of Mayor-President Sharon Weston Broome. Taking the step of creating this district in North Baton Rouge will drive greater community reinvestment and can lead to greater access to employment and Black business ownership. Growing areas around these EDDs will help the Baton Rouge economy be more inclusive and bring new growth to areas that have been left to stagnate for too long.
Support Talent Development: Improved Workforce Education Analysis
The Legislature passed two bills that will enable the state to better measure workforce and career educational outcomes as well as job readiness. HB 459 (Freiberg) will provide for data sharing between the Louisiana Workforce Commission and the Board of Regents. This legislation allows for improved statistical analysis of higher education programs and their success at producing students ready to enter the workforce. As a result, the state can better find out what programs are working and what programs need to be improved to create the workforce necessary to grow the state’s economy and provide the level of talented workforce companies need to thrive.
The other half of this legislation is HB 711 (Garofalo), which will allow the Board of Regents and Department of Education to share data. This piece provides accountability for the K-12 education system, ensuring students graduating high school have the skills to enter the workforce or pursue a degree. These two bills will allow for cradle-to-career data to measure the effectiveness of the state’s educational programs. This information will be critical in preparing our workforce and children for the future. It is also important to note that these bills provide for aggregated data and protect personally identifiable information.
Support Talent Development: Education Improvements
BRAC has been a consistent voice for improving education in the state. The Legislature took several steps to do just that this year. HB 85 (McKnight) will create a literacy program named after the late Rep. Steve Carter for students struggling to read on grade level to improve poor outcomes in English Language Arts (ELA). Dr. Cade Brumley, the state superintendent of education, has stated that only 46% of students have mastered ELA by third grade. Improving ELA skills has been correlated with improved educational outcomes across the board. While HB 85 improves education outcomes for those attending school, SB 10 (Fields), requiring Kindergarten attendance, aims at ensuring children start school before age 7. For the state’s earliest learners, dedicated money for early education will come from anticipated funds raised through sports betting. The allocation from sports betting is not nearly enough, but is at least a small step in the right direction.
Perhaps the biggest piece of legislation impacting education relates to adult learners pursuing certificates and credentials in the Louisiana Community and and Technical College System. SB 148 (Cortez) will create the M.J. Foster Promise Program to provide $10.5 million annually in scholarships to upskill and retrain adult learners, or as LCTCS describes it, “TOPS for adults.” Named after Governor Mike Foster who created the LCTCS, the M.J. Foster Promise Program will provide funding for students 21 and older in high-demand, high-wage fields. This program will be key to helping improve the quality of the state’s workforce and to allowing people the means to return to school.
Responsibly Allocate Federal Funds
HB 642 (Schexnayder) is the Legislature’s plan for how the state will spend the first tranche of American Rescue Plan Funds, about $1.6 billion. Among the items included:
- $563 million for the Transportation Trust Fund to invest in state infrastructure immediately
- $490 million for the Unemployment Trust Fund, preventing business tax increases ($300 million to replenish the fund, $190 million to pay federal debt)
- $60 million for Tourism and Visitor Enterprise funds; $17.5 million for tourism marketing
- $50 million for ports
- $10 million for the Louisiana Non-profit Assistance Fund
- Funding for broadband and industries including loggers and small movie theaters
BRAC supported prioritizing the funds toward replenishing the Unemployment Trust Fund and toward infrastructure.
Other Issues: Ending the Federal Enhancement to Unemployment Benefits
In the session’s final hours, the Legislature agreed to HB 183 (Brown), which added $28 to the weekly unemployment benefit and required the end of the federal unemployment subsidy by July 31. At the end of virtually all COVID restrictions and the incredible demand for labor, there’s little justification for continuing the federal subsidy that disincentivizes residents from seeking employment. Moreover, the increase in the weekly benefit brings the state in closer alignment with southeast peers regarding unemployment benefits.
Importantly, the Legislature also approved SB 89 (Reese), maintaining the current levels of employer taxes and benefits through 2022. This bill is a continuation of a policy adopted during the pandemic preventing employers from paying higher unemployment taxes and reduced benefits for recipients.
Another successful bill, HB 380 (Lyons), eliminates the 10% discount for employers with a negative reserve ratio (those employers paying less in contributions than their employees claim benefits). This proposal came from a recommendation of the legislatively created Unemployment Compensation and Trust Fund Task Force.
Other Issues: Preserving BREC as a unified parish-wide parks and recreation system
BRAC spoke out against SB 205 (White), which aimed to divide the BREC park system, and successfully stopped the bill. Our benchmarking research comparing the Capital Region against peer metros points to the importance of quality of place for attracting and retaining business and talent. The Baton Rouge Area has been fortunate that one of the main assets that actually gives us a competitive advantage is our nationally-recognized EBR park system.
The work of the legislative session might have ended, but BRAC will continue to advocate for Capital Region businesses. We have asked the Governor to sign these bills outlined above, especially the legislation creating infrastructure funding. Our major victories on centralized sales tax collection and tax reform rely on voters approving two constitutional amendments on the October ballot. There is no time to rest as the campaign must shift gears from the Legislature to the voters. The Legislature will have some time off before they reconvene for an expected special session on redistricting before next year’s regular session. BRAC’s policy team will remain engaged and will provide updates as the year progresses.