On Tuesday afternoon, as legislators grappled with how best to solve Louisiana’s current $957 million budget shortfall and next year’s projected $2 billion shortfall, State Treasurer (and U.S. Senate candidate) John Kennedy continued his campaign to convince anyone who will listen that Louisiana “has a spending problem and not a revenue problem,” appearing as a guest on WWL’s Garland Robinette’s radio show.

Last week, in his statewide “Republican response” to Gov. Edwards’ televised primetime speech on the budget crisis, Kennedy claimed to have outlined 400 ways to cut spending and solve the shortfalls without increasing taxes. But critically, he didn’t reveal that his 400-point plan was based on a hodgepodge of recommendations made in reports that have been mothballed since 1995, 2001, and 2010, back when Louisiana operated with surpluses and well before the impact of the Jindal administration’s policies hit the state’s balance sheets. No doubt, it was embarrassing for Kennedy when the Governor himself, in an address to the entire state legislature, singled out politicians who rely on “studies that are 15 and 20 years old” and elected officials who care more about running for their next job than in doing the one they were hired to do. But, in my opinion at least, it was righteous truth-telling.

Tuesday, Treasurer Kennedy doubled-down on his “spending problem” rhetoric, and this time, perhaps having learned his lesson about old studies, he referenced a report issued just last year by the Louisiana legislative auditor. Quoting from WWL (bold mine):

The cutting waste versus new revenue debate continued on WWL today with Louisiana State Treasurer John Kennedy insisting there is a lot for government to gain by running a tighter ship.

“The legislative auditor last year did 36 audits,” Kennedy told WWL’s Garland Robinette. “The total amount of waste and inefficiencies that the legislative auditor in these 36 reports identified just last year, in 2015, is 1.745 billion dollars.

Immediately after I read Kennedy’s statements on WWL, I asked the governor’s office for a copy of the report to which he was referring. The Treasurer, it turns out, had sent them a letter shortly before he went on the air with Robinette.
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Download the report here: Kennedy Legislative Auditor 2-16-16.

As you’ll quickly gather, the vast majority of the legislative auditor’s findings pertained to sloppy paperwork and the failures of state agencies to follow proper procedures in allocating federal monies. It’s hardly a ringing indictment against government waste, fraud, and abuse. To be sure, the auditor identifies instances in which the state overpaid for services and instances in which it paid for things for which it could not account. Primarily, though, it’s a laundry list of the ways in which the state government, under the Jindal administration, acted incompetently, not criminally.

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But what caught my eye, in particular, was that $1.1 billion of the nearly $1.8 billion identified in the report concerned the state’s temporary exemption on taxing horizontal drilling from 2010-2014. Put another way, more than 60% of the “wasteful spending” that Treasurer Kennedy hails as the cause of our budget crisis wasn’t actually spending; it was uncollected revenue. So, when he suggests Louisiana has a spending problem and not a revenue problem, he’s apparently counting the $1.1 billion in uncollected revenue from horizontal drilling, or fracking, as “wasteful spending.”

Here is a perfect breakdown:

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According to the report,  revenue losses from fracking amounts to $1.148B,  of which the majority, $1.106B, was revenue lost due from fracking on gas wells. There was an additional $42 million in oil money in oil severance. Initially, when the technology was still in development and the land hadn’t been fully understored, the temporary moratorium on horizontal drilling was hailed as the best way to encourage to with what-was-then experimental drilling. It did work, to the tune of billions a year. In the meantime, despite the robust returns, the severance tax for horizontal wells remained in place, costing the state over $1B in revenue.

Ironically, when State Treasurer Kennedy suggests that has identified $1.8B (more precisely $1.745B) as a prime example of wasteful spending and in an effort to bolster is claim that Louisiana doesn’t have a revenue problem, the very study to which he refers argues that 61% of the state’s “waste and inefficiencies” are the result of a “revenue problem.”

This begs the question: Does Treasurer Kennedy support severance taxes for horizontal drilling? It’s a pretty easy question. According to the very report he referenced, the bulk of the problem is due to an unwillingness to lift exemptions and increase and collect taxes on horizontal drilling, probably one of the largest taxes increases in state history.

If so, he will need to rework his talking point about Louisiana not having a “revenue problem. By his own admission, it’s undeniable true.

13 thoughts

  1. It is now naive to think the state financial disaster is the result of an accident or incompetence. Destruction of government IS the Republican plan. Only poor people need a government, they think people should buy their roads, healthcare, and protection from them. Which is a play on words, because the biggest need we need in 2016 truly is protection from them, and their planned destruction of government.

  2. Lamar, the legislature last year passed and Jindal signed HB-549 providing a 100% tax exemption to all forms of horizontal energy production. The exemption is “supposedly” effective for 2015-2017. Thus, severance taxes from horizontal production, be it oil or gas, is literally “dead in the water”. Couple this with the fact that Jindal moved responsibility for auditing all energy production in 2011 from the Dept of Revenue to the Dept of Natural resources and that an audit of energy production has not been conducted since then placing energy production on the “honor system”, one can only speculate how much production has been under or simply not reported.

  3. yes some of Kennedy’s plans were from old, but does that not mean that we wasted money back then, just because we had excess does not mean that we did not waste. And as to him saying this because of his plans to run for the Senate, well he has been saying the same thing to the Jindal Administration for the last 5 or 6 years, but no body will listen to him. and my third point about blaming this all on Jindal, while he was the one who “supposedly” cooked this up, it had to be voted into being by the legislature, which was Edwards, Angelle, and Dardene. And supposedly means that Jindal’s people were working behind the scenes to help get Edwards elected.. so this could have all been cooked up..

    1. You realize that, although you’re writing under a pseudonym, I can still see your real e-mail address? And you realize it took me about 30 seconds to discover that you have donated more than $3,000 to the Kennedy’s various campaigns?

    2. Come on man, even those that like Kennedy don’t accuse him of being intelligent. The balls part, I don’t know about but you seem to be close to him so maybe you know.
      Pulling some old files out of a drawer of other people’s work and sending it off to the governor is hardly a plan. It’s flat out lazy and cynical. He’s got as much chance of making it to the senate as Vitter had at being governor. The people have seen enough.

  4. and the difference between exempting tax revenue and or sending it back to the companies, after it is collected, like we do the inventory tax, is what? You are missing Kennedy’s point. Exempting companies for taxes is the same as sending it back to them as “economic development” spending. you say potato, he says … The state spending has come in the form of tax credits and tax exemptions to businesses, such as mine. On the theory that it will increase tax collection. hows that working?

    State gives away $7 billion in tax breaks


  5. The census bureau collects and publishes individual state tax collection information quarter by quarter, year by year, tax program by tax program. It’s not a mystery.

    Louisiana collects a little more tax per capita than Texas (although if you take into account the multi billion dollar toll road fees the Texans pay, the difference almost disappears). Arkansas collects considerably more tax per capita, and even those notorious tax and spend liberals in Mississippi collect more tax per capita than Louisiana.

    In other words, Kennedy is a big fat liar.

    Moreover, he multiplies his lie by using it to foment race hatred by his complaints that the money is being siphoned away by blaming the budget woes on the welfare recipients. We all know what he means, don’t we?

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