Fortune 500 CEO sounds alarm on education cuts Spending is critical to economy, he says Sunday, May 24, 2009 By Jan Moller Capital bureau BATON ROUGE -

- Warning that Louisiana is on the verge of taking a "permanent step backward" in higher education, the head of one of the state's largest corporations urged lawmakers Saturday to restore money for public colleges and universities that Gov. Bobby Jindal seeks to cut.

The comments by Shaw Group founder and chief executive Jim Bernhard ramped up pressure on the Jindal administration and legislative leaders to fill a budget gap that university officials say would lead to program cancellations, furloughs and layoffs.

Also calling for restoration of the money was the chairman of Blueprint Louisiana, a coalition of business and community leaders. Sean Reilly, the chief operating officer of Lamar Advertising, called the higher-education cuts "draconian" and offered qualified endorsement of a bill that would raise $118 million by postponing a scheduled tax cut

. Bernhard's comments came three weeks after his Baton Rouge corporation announced it would return $13.5 million in incentives from a state economic development fund and forgo $28.5 million next year from a "megaproject" development fund. He has said he would rather see the money spent on higher education or other needs. Bernhard stopped short of endorsing a plan that would restore money to colleges by delaying a tax cut slated to take effect next year. Senate Bill 335 by Sen. Lydia Jackson, D-Shreveport, would free up $118 million for next year's budget by postponing until 2012 a law that would let taxpayers deduct 100 percent of federal excess itemized deductions from state taxes

. Current law lets taxpayers deduct 65 percent of the federal itemized deductions on their state returns. That would not change under Jackson's bill. Advertisement The bill has been endorsed by a cross-section of Senate leaders, but Jindal has promised a veto if it passes.

House Speaker Jim Tucker, R-Algiers, has said there is little appetite in the House for a bill that many members consider a tax increase. Jindal's press secretary, Kyle Plotkin, said by e-mail Saturday that the administration has "worked and will continue to work with the Legislature in the current session to mitigate reductions" in health care and higher education.

But he offered no suggestions for doing so in next year's budget and instead reiterated the governor's opposition to raising taxes or using one-time revenue to plug gaps. Jindal's executive budget proposes $219 million in cuts for higher education. The reduction would have been twice as high were it not for the inclusion of federal economic stimulus dollars in the spending bill.

The House has restored about $100 million by increasing tuition, recouping the Shaw money and tapping a tax-amnesty program still awaiting approval from the Legislature. But there are questions about how much of the $100 million can be used to forestall the budget cuts.

The tax-amnesty money, for example, could be declared "non-recurring" and therefore unavailable for use in the operating budget. Blueprint Louisiana's Reilly said Saturday he would support delaying the tax cut if the money is used for higher education and tied to the implementation of a new "performance-based" financing formula. He said he hopes the Blueprint board will endorse that view. "We think higher education is on the right track, and we cannot destroy the momentum we have," Reilly said

. Bernhard's high-profile stand is likely to fuel speculation about his political ambitions. A former chairman of the Louisiana Democratic Party, he is considered a possible rival to Republican U.S. Sen. David Vitter, who is up for re-election in 2010. Bernhard said his committee testimony was unrelated to any political plans. He said legislators also should consider tapping the state's rainy-day fund. Bernhard told the Senate Finance Committee that proper financing for higher education is key to creating a "knowledge-based" economy

. Louisiana's failure to spend enough on higher education has cost it economic opportunities, he said. "We have never been able to recruit a knowledge-based company, no matter what incentives we give," Bernhard said. He blamed the lack of an educated work force in Louisiana for his company's decision three years ago to open an engineering office in Charlotte, N.C., that now employs 1,200 people.

"Certainly, Baton Rouge was not anywhere close to the available talent and labor pool that we needed," Bernhard said. The comments appeared to strike a chord with some committee members, who are preparing changes to the $27.9 billion state budget. "To have a CEO of a Fortune 500 company come to the Senate to talk to us, I think is impressive," said Sen. Jack Donahue, R-Covington

. Although the budget bill would cut a broad array of government services, the proposed cuts to higher education have caused the most hand-wringing. Education officials have warned that reduced budgets would destroy recent progress to align Louisiana's institutions with their Southern peers.