Deteriorating budget figures demands saving, not spending

At the risk of sounding like a broken record, there shouldn’t be much debate about what to do with the $865 million soon-to-be-declared Louisiana budgetary surplus, with a projected 2009-10 operating budget deficit of $1.3 billion according to the Gov. Bobby Jindal Administration.

The surplus from the 2007-08 fiscal year must be declared as nonrecurring and therefore constitutionally may be spent on only a half-dozen purposes, none of which can be recurring operations for next fiscal year. However, ways can be devised to cushion the blow.

By statute, a minimum portion of the nonrecurring surplus must be put into the Budget Stabilization Fund which acts as a savings account for the state. But it also provides that much more than this minimum can land here, as the fund can contain a maximum of four percent of the state’s last declared revenue receipts (excepting disaster relief grants’ amounts). That would be in the neighborhood of $1.2 billion, meaning the fund can take in about $400 million more. Then, a third of this or $400 million again can be used to balance the budget.

(I would like to give more exact figures, and legally I should be able to as statutes stipulate that the Revenue Estimating Conference, the body that will make the official surplus declaration, must compute a fund balance and publish it in the September Louisiana Register, the compendium of executive branch proclamations with the force of law. But for whatever reason despite L.R.S. 39:95 that information was not published as required, so I am using older information)

The remainder legally could be used to pay off debt scheduled for redemption next fiscal year. Interest savings from that would only be an estimated $20 million or so for next year, but if the principal retained is then not rolled forward to pay off other future debt that could be now also paid off earlier, the whole remaining figure could be used. Together they would not make up all of the deficit, but they substantially could eat into it.

The Jindal Administration is said to be reviewing its spending options for the portion that is not required to go into the Budget Stabilization Fund, presumably in areas such as road construction, coastal restoration, and addressing unfunded accrued liabilities in retirement pension programs. While particular political benefits may be realized by spending on road projects, and all areas have some need, the greater need clearly is for buffering continuing future operations. Such discussions need to cease and the solution above then implemented.