Louisianans, Vote for Amendment 5
In a letter to the editor of The Times in Shreveport, Louisiana, Pew’s Brenna Erford urged Louisiana voters to support a ballot measure that would create a severance tax-based sovereign wealth fund.
Next month, Louisianans will vote on Amendment 5, "Steady Funding for Future Generations." If approved, the amendment would save a share of the state’s revenue from oil and gas production and turn it into a stable, long-term funding source—benefitting Louisiana’s citizens for years to come.
Natural resources are a backbone of the Louisiana economy, but energy markets are unpredictable and can swing wildly. Too often, past state leaders have spent revenue windfalls from oil and gas production on new programs or tax breaks in one year, only to see that money unexpectedly disappear in subsequent years when energy prices drop. The result: budget crisis after budget crisis.
Amendment 5 would help break this cycle. A yes vote would place a share of the state’s earnings from oil and gas production into a new investment account, the Revenue Stabilization Trust Fund—the first of its kind in Louisiana. Lawmakers would be constitutionally restricted from spending the first $5 billion set aside in the fund; instead, investment returns on the money in the account would be used to pay for critical long-term needs, such as roads and schools, as well as to pay down the state’s pension debt.
Research by the Pew Charitable Trusts suggests that these kinds of funds can help turn volatile severance taxes into sustained revenue streams. Seven other energy-producing U.S. states—including Alaska, New Mexico, and Wyoming—maintain similar funds. Louisiana voters should embrace this opportunity to share the state’s energy wealth with future generations by voting yes on Amendment 5.
The author is manager of states’ fiscal health at The Pew Charitable Trusts.