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1.3.08

Jindal's budget serves half a loaf, maybe more to come

Republican Gov. Bobby Jindal’s first crack at a budget is out, and it’s clear that while he’s making a departure from previous governors who didn’t see a whole lot wrong with growing the size of government, it’s not that clean of a break with the past and hopefully sets the stage for a greater turnaround in succeeding years.

The good news:

  • Overall spending, after backing out federal disaster recovery aid, is up only 3.6 percent, about the rate of inflation after steep increases approximately 100 percent of state funding in the past decade.
  • Much of that increase goes to plugging a hole that will open up when transportation-related revenues are directed solely to transportation-related capital outlays instead of the general fund, enabling the state to whittle down an estimated $14 billion backlog in roads needs.
  • Using 90 percent of excess, presumably recurring funds available for this year’s budget in next year’s to replace one-time revenues used this year under the budget strategy of former Gov. Kathleen Blanco – although because the administration sees a rapid slowdown in revenue growth in future years there’s a chance these recurring funds might be reduced and some portion unavailable in future years.
  • $42 million will be saved by eliminating over 1,000 jobs which are vacant presently.
  • $169 million additional for more efficient, less expensive home- and community-based health care, although $50 million was required by a law passed last year pulling 5 percent of declared surplus money up to that amount into creating waiver slots for Medicaid recipients to receive these services.
  • $30 million to improve education; $20 million in merit pay for teachers and $10 million to create a vaguely voucher-like program to increase competition among schools.

    The bad news:
  • Adding $307.1 million to a fund to attract large employers that already contains $140 million, leading to questions about why it should be so large when perhaps this money could be used to grant relief to businesses large and small already in Louisiana (with some questioners like Democrat state Sen. Eric LaFleur ironically being last year big boosters of a $300 million fund to do the same thing).
  • Sending $60 million more to nursing homes when they are already among the most overpaid and underutilized in the states.
  • Cutting taxes only $110 million (actually planned to be accomplished during the second special session starting in a week) and these just being certain business taxes.

    Worth noting:
  • Because the Legislature busted the spending cap (spending of state revenues may not exceed the private sector growth rate unless two-thirds of both chambers approve) last year under pressure from Blanco and because Jindal restrained the growth of state spending, his budget falls under the cap by about 1 percent or $116 million, meaning he won’t have to ask for a potentially politically controversial cap increase as did Blanco.
  • Of the 10 percent of excess revenues for this budget year that will be spent this year, some are going to pay for boll weevil eradication, because money intended to do that got pledged by former Agriculture Commissioner Bob Odom to support bonds for various wasteful capital outlay projects.

    To summarize, this budget is conservative not in terms of reducing the size of government by restoring money to its rightful owners, the people, but in the sense that on most accounts it creates a sounder fiscal plan and improved priorities. Half a loaf is better than none, and if Jindal’s planning in this regard (plus the Legislature’s cooperation) to offset the predicted no- to negative-growth in revenues the rest of his term succeeds then maybe the rest of the loaf, income tax cuts, may be possible at the end of the term.
  • 2 comments:

    Anonymous said...

    I do not understand your conclusion. If this budget is up 3.6%, it sets a new base line for future budgets. Since most of the recurring budget is labor related (and since we are heading into an inflationary period), these amounts are going to increase in the future. If even only a small amount of the revenue stream disappears due to reduced hurricane recovery spending (and that doesn't even consider possible recessionary dips), how can there ever be room for tax relief without a serious restructing of government - something which Jindal doesn't seem to want?

    Jeff Sadow said...

    Good question and really the subject for another post, but in brief here's what I hope happens.

    There will be a bit of a bump up in economic activity because of ethics reforms and the proposed business tax cuts, but it won't be enough to stimulate the revenue needed to make up these anticipated shortfalls. Some of the additional spending this year is what you would call "workforce development," some of it good, some not so (pay raises for teachers). That also will start to pay off but not soon enough nor large enough to offset projected deficits. Some spending in the special session also will reduce future claims as well but, again, still not enough.

    So, "restructuring" as you call it or "reprioritizing" as Jindal calls it is going to have to happen. Jindal already apparently is beginning to set that up in health care (although I question that additional nursing home money) and I hope other such efforts will occur. On that point I would disagree that Jindal isn't interested in restructuring, on the face of this budget. The problem is, can he do enough of it to be able to offer tax relief.

    Acutally, if you look at the projections coming from DOA, they are flatlining the budget more or less over the next couple of years in terms of spending. The problem is, revenue growth is essentially flat, too. (Although, to their credit, their assumptions are admirably conservative -- oil at $58 a barrel, for example, for the fiscal year after this next one.)

    One thing I have stressed over the past couple of years is that the Blanco budgeting strategy was setting up long-term problems which I'm glad to see now are being addressed but that is going to make tax relief more difficult. And Jindal did not ever promise income tax relief, but said it was a goal he would work towards the reduction or elimination of. So I admit this is an optimistic scenario of mine simply because there are problems of long standing that Jindal has to unwind before we can get tax relief. I'd say it's 50/50 at best this term, but likely if he gets a second term and nothing economically catastrophic happens.