Louisiana

Rating: Making progress

Louisiana approved legislation in 2013 that requires state agencies to annually evaluate the incentives they administer.^b However, the evaluations have generally included only a few paragraphs of discussion of each incentive. While the reviews sometimes provide useful insights on the design of the programs, they do not generally offer original economic or fiscal analysis.^c Louisiana’s legislative auditor has highlighted the weaknesses of the studies, finding, for example, that only 33 of 71 evaluations in 2016 complied with a requirement to include information on the incentive’s return on investment.^d

Louisiana lawmakers could improve the process in several ways. Six agencies evaluate incentives, with Louisiana Economic Development (LED)—the state agency charged with recruiting and growing businesses— and the Department of Revenue responsible for the bulk of the studies.^e Having agencies study the incentives they administer potentially puts the agencies in an awkward position, as they are asked to critically analyze programs they are simultaneously promoting. In contrast, many states have tasked one office that possesses both independence and relevant expertise with evaluating incentives. Independent professional staff with the capacity to produce rigorous economic and fiscal impact analysis could provide Louisiana lawmakers with more meaningful, consistent information.

Many states have also set up a rotating cycle for evaluation, rather than attempting to study every incentive in a single year. This approach allows analysts and lawmakers to focus on a subset of incentives each year.

Due to their shortcomings, the evaluations have had little influence on debates over incentive policy that have roiled the Louisiana Legislature in recent years. With the state facing severe budget challenges, lawmakers curtailed many of the state’s incentives in 2015. Several of the changes, however, were temporary. For example, the state instituted a three-year cap on claims under its film tax credit, which cost Louisiana about $250 million a year at its peak.^f As these temporary changes expire, lawmakers will need high-quality information to guide their decisions.

When Louisiana lawmakers have had good information, they have proved they will use it. A 2010 LED evaluation of the Enterprise Zone Program found that providing incentives to restaurants and retailers under the program resulted in weaker job creation than providing incentives to manufacturers.^g Subsequent LED analyses echoed those findings.^h Lawmakers approved legislation in 2015 that ended the ability of restaurants and retailers to participate in the program, a change that stands to make the Enterprise Zone Program a more effective job creation tool, while saving the state millions of dollars.ⁱ By improving the state’s evaluation process, Louisiana lawmakers will be more likely to have the information they need to achieve similar outcomes in the future.

Endnotes

1. Louisiana Rev. Stat. Ann. § 47:1517.1, http://www.legis.la.gov/Legis/Law.aspx?d=861187.
2. Ibid.
3. Louisiana Economic Development, “Act 191 of 2013 Annual Report” (March 1, 2016).
4. Louisiana Legislative Auditor, “Tax Incentive Reporting: Follow-Up on Agency Compliance With Act 191 of the 2013 Regular Session” (Sept. 14, 2016), 4–5, https://app.lla.state.la.us/PublicReports.nsf/ 5BC8E5593D9D81418625802C005AB919/$FILE/00010E0E.pdf.
5. Ibid., 2.
6. Steve Spires and Jan Moller, “The 2015 Louisiana Legislature: Modest Progress, Missed Opportunities,” Louisiana Budget Project (June 23, 2015), 4–5, http://www.labudget.org/lbp/wp-content/uploads/2015/06/Session-Wrap-up.pdf.
7. Louisiana Economic Development, “Enterprise Zone Program: 2009 Annual Report” (March 2010), 19, https://www.opportunitylouisiana.com/assets/LED/docs/ Performance_Reporting/2009_Annual_Report_Enterprise_Zone.pdf.
8. Louisiana Economic Development, “Act 191 of 2013 Annual Report” (March 1, 2014), 11.
9. Louisiana H.B. 635 (2015), http://www.legis.la.gov/legis/BillInfo.aspx?s=15RS&b=HB635&sbi=y.