A Rich State with A Poor Structure

Louisiana is a rich state with a poor structure.

Consider for a moment our economic assets:  the Mississippi River, which connects us to commerce in over 30 states; resources and infrastructure that make us a top energy and petro-chemical producer in the USA; and, a world-renowned culture that has New Orleans named “America’s Favorite City” and a “Top 10 City in the World” by Travel + Leisure.

Ironically, because of this, we have suffered perhaps from a “curse of riches.”  For decades, we were able to get by with bad habits and unorthodox rules, simply because we had such bounty.  But over time our less blessed – but better behaved – competitors passed us by, and today we are left with competitive challenges and cumbersome state structures in taxes, budget, education and many other areas.

While Louisiana has a $2B structural deficit, Texas consistently runs a surplus.  What’s the difference?  I would argue that largely it’s structure.  Texas has a devolved state government, with many functions handled at the county level.  Most importantly, they have significant property taxes, but no income taxes – which is a huge competitive advantage.

Yet, despite our structural challenges, we have made remarkable progress over the past decade, and we are now considered a Top 10 state for business in nearly all rankings.  But it will be difficult for us to sustain this progress over time if we do not make fundamental changes, as the current budget crisis is making clear.

So, as our elected leaders now grapple with a $940M+ mid-year shortfall, and a nearly $2B structural deficit, GNO, Inc. has two important messages and an offer of support:

First, don’t throw out the economic baby with the budget bathwater.  Understand that the recent economic progress of Louisiana is a fundamental part of the long-term budget solution, as the factories and offices that are coming on-line today will provide thousands of new jobs and millions in new revenue in the coming years.  So when addressing the budget deficit, do so in a way that protects Louisiana’s real but fragile economic growth.  Most of all, understand that capital is mobile, and business flees uncertainty – therefore don’t create an environment were CEOs feel the economic ground rules will constantly change beneath their feet.

Second, ensure that our short-term pain leads to long-term gain.  We need to be discussing fundamental structural change that:

  • Creates a more competitive and reliable business environment
  • Creates a more diverse and resilient economy
  • Stabilizes state and local budgets, while increasing flexibility to prioritize investment
  • Ensures all Louisianans are trained and ready for job opportunities
  • Supports the physical infrastructure and assets needed for people and commerce
  • Improves the perception and reality of Louisiana as a place to work and live, now and for the future

To help support this change, GNO, Inc. has produced a document, Reform for Louisiana’s Future, that includes not only policy suggestions in 13 areas, but also bill language that can be used to help implement the change.  Reform for Louisiana’s Future can be found here.

The obvious risk of the next year is that the budget crisis shuts down Louisiana.  The less apparent, but deeper, risk is that we do not take this opportunity to fundamentally change our poor structure.  If we summon the will to do so, however, the reward will be a future Louisiana that fully realizes its riches.


Michael Hecht
President & CEO
Greater New Orleans, Inc.