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18.12.08

Vitter opponents' rhetoric only helping his reelection

If his opponents want to oust Sen. David Vitter from office in 2010, they have found exactly the wrong way to do it. He now enjoys the happy coincidence of an issue where he can come out in favor of his conservative principles and ride public sentiment in his favor while making opponents look sanctimonious and simultaneously devalue the only real vulnerable issue concerning Vitter.

Until last year, Vitter was 99.44 percent assured of reelection, given his strong conservative voting record in a majority conservative state. Then he revealed commission of a “serious sin” in the past, likely the usage of a prostitution ring prior to election to federal office. Given his record on the issues, his apparent contrition, and that many voters will accept somebody who votes the right way as long he doesn’t abuse the powers of his office, his chances for reelection may have plunged to 90 percent.

But with the emergence the possibility of the federal government bailing out one or more failing domestic automakers, he may be on the way to that higher plateau of reelection possibility. This issue not only allows Vitter to remind Louisianans of his specific opposition to this, shared nationally, and general dislike of government intervention into the economy, but the way in which his opponents have attacked him about it makes him look even better while pushing away the “character” issue. Just one sample of the rhetoric from a union hack that plays into Vitter’s hands:

“I don't know what Sen. Vitter has against GM [which has a major facility in Shreveport] or the United Auto Workers or the entire domestic auto industry; whatever it is, whatever he thinks we've done, it's time for him to forgive us, just like Sen. Vitter has asked the citizens of Louisiana to forgive him,” said [Morgan] Johnson, president of [Shreveport] Local 2166. Otherwise, Johnson said of Vitter, it would appear, “He'd rather pay a prostitute than pay auto workers.”

Is it possible to critique Vitter in a less intelligent way than this? Here’s a guy defending an industry losing money hand over fist because of an inadequate business model that allows a $30 differential in labor costs to its rivals promoted by his very union which allow typical workers to make $55,000 a year (exclusive of benefits worth 150 percent more), which until recently paid people not to work up to two years, paid them more in early retirement than when they worked, and supplies health benefits that even members of Congress would envy. And has the audacity to ask taxpayers many of whom are poorer that these unionized workers to subsidize this? Especially when Vitter would have supported a bailout bill that moved up minor union concessions only two years?

(It’s not like the UAW has been a fan of Vitter’s. Over his career, on average he has supported the UAW in votes only 6 percent of the time. So what did they expect? And General Motors hasn’t exactly been generous to Vitter during his 9 years in office: for the first time, earlier this year it gave him a contribution, of $1,000. Contrast this with the $19,000 they have thrown at Republican Vitter’s Democrat colleague Sen. Mary Landrieu in her 12 years in office, who wanted the bailout to go through.)

All this rhetoric does is it makes Vitter look like a champion of taxpayers, the middle class, and even more courageous because he is going against a special interest in his own state. And to drag in the shot about “pay” not only looks stupid because it’s clear that Vitter, nor anybody else, is obligated to “pay” any workers, but by coming up with such a strained metaphor on the character issue reduces its effectiveness. That is, when people see such an attack and recognize it is so ludicrous, it desensitizes them to the issue forcibly tied to it.

It also helps Vitter that he has attackers from outside the state that also seem to be part of a greedy cabal asking for handout to save them from their own folly. Speaking of paying, Vitter could not have had the funds to fund all the favorable publicity he can derive from a column appearing in the Detroit Free Press which basically called Vitter and others ingrates from not supporting the handout when Detroit manufacturers had sent aid after the 2005 hurricane disasters – never mind the difference between a natural disaster and bringing your own problems onto yourself, and not having the wisdom to figure out that if you’re doing something wrong that put you in this situation you don’t ask for a handout and not make more than cosmetic changes. (Perhaps it’s no surprise that with such simplemindedness in its product this outlet is losing so much money it is eliminating home delivery every day of the week; maybe it should ask for a bailout, too.)

If Vitter keeps getting these political softballs to whack over the fence, nobody is going to remember he had a “transgression” at all. If his opponents allow Vitter to demonstrate conservative credentials favored by the state’s majority over and over again, they might as well save their resources and give up on defeating him now.

17.12.08

Looming deficits beg reevaluation of handling mechanisms

As Louisiana goes forward to contend with a budget deficit of $341 million this year (so far; there are two more regularly checkpoints at minimum on this figure before the end of the fiscal year) and a potential $2 billion deficit for fiscal year 2009-10, the question arises how the state’s fiscal mechanisms can deal with these deficit situations which cannot exist according to the state’s Constitution except for extreme circumstances. A review of these procedures is in order.

As of this year note that about 65 percent of the state operating expenditures can be financed currently through federal monies of some kind. Thus, the total being discussed here is about $14.5 billion. (Recognize this excludes any disaster recovery federal dollars.) Of that, a little over 63 percent is discretionary funds that have no strings attached to them in their expenditures, a little over 10 percent are non-discretionary in that they are fees or other self-generated revenues that go back into the programs from which they are generated, and the remainder is by law revenues dedicated to a certain purpose. (Technically, about three percent of the grand total really goes to capital outlay projects.) The “undedicated” monies go into the general fund, and the dedicated funds have each of 36 funds into which they go.

When there is a budget deficit in the current year reported in a fund, appropriations from the fund in question may be reduced. Typically, the only meaningful deficits that exist are in the general fund, and to take care of those typically appropriations must be reduced to the discretionary areas. In this instance, on Friday the Joint Legislative Committee on the Budget is likely to certify the deficit numbers coming from the general fund with little or no deficits from the others.

If it occurs during the current fiscal year, the Constitution empowers for smaller cuts the governor, for larger cuts him and the Committee, and for the largest cuts special sessions of the Legislature, to authorize reductions in appropriations. Except in the latter case, cuts come only in the fund from which the deficit exists, because only in the latter case may statutory changes of a permanent nature be made to shift revenues around rather than interim measures that are not statutory in nature. The only way around this is for the governor to issue freeze executive orders that could cover any program (such as his recently declared ones on hiring and program implementation), which only address smaller amounts, or to get two-thirds approval of the Legislature to redirect revenues.

The problem with this regime as many have identified is that the general fund, except in the extreme cases, bears almost all or all of the cuts, and since health care makes up 40 percent of those expenditures and higher education 34 percent, those two areas in particular bears the brunt of any such cuts. This results potentially in drastic reductions in services, either in provision of low-income and indigent health care services (Medicaid), or in college instruction.

One suggestion (as mentioned here before) to spread the burden around is to reevaluate the dedicated funds and make statutory changes better matching revenues to identified needs, perhaps by removing dedications. This increases political disbursement of funds, but that flexibility may be what is needed.

Another suggestion is to amend the Constitution to make it easier (instead of having a special session) for interim measures to “break into” the dedicated funds – leaving them intact and the discretion to create and sustain them, but making them less secure in cases of emergency. This would require greater legislative will up front to produce the amendments to change the procedure and an affirmative vote of the people, and in a way begs reexamining the entire philosophy about “dedication” – as of now it implies a certain level of mistrust of legislative intent that can be set aside when reality doesn’t match budgets, so a procedural change might admit that when deficits are severe enough that trust is warranted?

In other words, if mistrust is high, the amendment solution would be preferred. If it is not so high, changes of dedication could occur to allow more annual discretion in appropriations, a statutory solution. Either way, in a midyear deficit situation, politicians would have more flexibility, but in the budgetary process itself, the former would be more constraining.

Finally, worth noting is that the Constitution permits far more flexibility in the budget compilation process than in deficit redress. If revenues for the next year being budgeted are forecast at least one percent below the revenues forecast for the current fiscal year, dedication disappears as an absolute concept as the budget may use up to five percent projected going into any fund to be appropriated for any purpose, not just that tied to the fund, as long as the total for this year and the next year combined do not equal five percent of the fund. To make this more flexible also would require an amendment. This consideration is relevant because the general fund next year is predicted to be down $1.3 billion over this current year (8.6 percent), and this method could reduce that shortage by nearly $200 million at maximum.

Gov. Bobby Jindal has said he prefers the statutory solution for midyear cuts which does place greater faith in politicians in their appropriations decisions, and it would be simpler to implement. Regardless, as the state looks to have a few lean years ahead, this debate over the system should occur.

15.12.08

LA tightened belt 4 years ago; it can work again

The news about Louisiana’s looming budget deficit probably was beyond what elected officials wanted to hear – current year $341 million, and if spending stays at the current projection factoring in known increases without adding services, it will be a billion dollars more and $1.2 billion less in revenues to cover it.

Some things to note about the issue for this fiscal year:

  • For this year as a whole, this projects to about a 3.5 percent hit on the general fund minus dedicated funds which constitutionally means Gov. Bobby Jindal and the Joint Legislative Committee on the Budget together can handle the cutting (although in reality, since half the year has gone by, it is a 7 percent real cut) by up to 5 percent in a fund
  • Over half of this, about $5 billion, for disbursement lies in statutory dedications many of which are stable but some potentially unpredictable in cost – for example, higher enrollments and tuitions at state universities through TOPS, those stemming from judicial proceedings, debt service increases, etc. – which must be paid without the budget going into deficit
  • The remainder is not statutorily dedicated and is considered totally discretionary in its treatment, of which almost 34 percent goes to higher education and 40 percent to health care – meaning that potentially if cuts are uniform across agencies at the 3.5 percent level, these two will absorb around $252 million in cuts, or a real reduction in their general fund allocations for the remainder of the fiscal year of 15.6 percent and to their overall budgets of 8 percent and 3.2 percent, respectively
  • About 29 percent, the largest portion, of the general fund goes to the Minimum Foundation Program, but that is the exception to the rule and can be cut at most only 1 percent, or around $27 million, providing less than 10 percent of the amount needed.
  • About $4.35 billion of statutory revenue dedications, as opposed to those of expenditures above, also come into the state’s coffers, but to redirect any of these immediately would require legislation from a special session, so the only savings here would be from operations such as those from executive orders recently issued by Jindal and then subsequent transfers of funds

    Next year’s numbers truly are sobering (although not unreal such as those of 20 years ago were with a $1 billion deficit to a general fund that then was less than $4 billion in generated revenue), a drop of about 13 percent to around $8 billion in revenue for the general fund (note that as recently as May, the forecast for next fiscal year was essentially flat). Jindal wisely has promised not to use the Budget Stabilization Fund monies to tackle this year’s deficit because next year’s really will call for these funds. It also cries out for him to dump the maximum amount of funds from the declared fiscal year 2007-08 surplus into it to use next year.

    This is serious. The head of my budget unit has called a faculty meeting tomorrow on 18 hours notice just to address this. It’s going to take quite a bit of skill to maneuver this just for this year’s alone so Jindal better be prepared to sacrifice his holidays (the budget must be brought in balance 30 days after a deficit projection or else a special session is triggered).

    As for the future, as Jindal wisely has ruled out tax increases that might depress the economy even further, tinkering around the margins as Jindal can do for this fiscal year will be insufficient. Still, to put matters in perspective, the initial revenue forecast after the 2005 hurricane disasters pegged the general fund at $6.6 billion and $700 million worth of cuts made that turned out to be not needed to match realized revenues. If it could be done then, it can be done again.
  • Months later, wisdom of line item vetoes confirmed

    Much wailing and gnashing of teeth occurred this summer when Gov. Bobby Jindal did what he said he would, cut down on state government money going to private interests. He employed his line item veto to excise around $16 million going to 258 nonprofit organizations, and some legislators who had one or more such entities in their districts made disapproving noises about how crippling the lack of funds would be for the organizations.

    But Jindal and supporters of these moves pointed out that if these truly were desirable functions being performed, other sources of money would compensate for the loss of state funds, or the organizations would find more efficient ways of doing these things, or government formally would oversee the function. Almost six months later, this is exactly what has happened as opposed to the apocalyptic scenarios some legislators asserted would be the outcome.

    Some organizations did find other philanthropic sources. Others relied more heavily on volunteers. Still others found ways to work more efficiently. Many had to cut back services to some degree, but that only demonstrates that perhaps they was an oversupply of that service to begin with or a more efficient way or alternative funding sources could not be found. In all, this demonstrates that government money was not being used as optimally as it should have been, as these other solutions and resolutions existed but had not been implemented precisely because of the free flow of money from government.

    This disposition also points out why the system has existed so long, not because it is a good use of taxpayers’ monies, but because it suited the political needs of politicians. Legislators could promise money to these organizations, the members of which no doubt would work for that legislator’s reelection and sing that person’s praises. The governor could use line item veto threats of these kinds of projects to entice legislators to support his initiatives.

    By taking the issue off the table, however, these political dynamics no longer apply. It was a bold move by Jindal, unilaterally surrendering this tool of power, but he did so and by his continuing to enforce this standard, the state will be better off.

    14.12.08

    Fleming takes Democrats' best shot, likely to stay awhile

    A year ago, when Rep. Jim McCrery semi-surprisingly announced his retirement, it would have been hard to believe that an obscure coroner from Webster Parish would succeed him. Lessons both locally and nationally may be learned from this.

    Dr. John Fleming not only was not considered a contender at the time, he wasn’t even on the radar screen. But after a couple of big names passed as they liked their current situations, local Republicans were presented with a thin bench of elected officials to compete for this due to a mixture of age, inexperience, too much flirtation with the Democrats, or interest in keeping some semblance of a private life.

    Still another factor loomed as well – 2008 was not shaping up to be a good GOP year on the national front. When around Baton Rouge a Democrat slid into that seat in a special election months later, that seemed to confirm the trend, and by then it was known a lackluster nominee would head the Republican ticket for the presidency.

    This opened up the field for candidates willing to take risks and those who had little connection with government, given the anti-incumbent sentiment that more than anything else was hurting the GOP. Of the three Republicans who finally contested the nomination, only Fleming had any experience in elective office – serving as Webster Parish coroner from 1996-2000 by virtue of racking up about 7,000 votes, and then bowing out after a single term.

    With no real record for any of these candidates to fall back on yet unabashedly conservative in their orientations, Fleming ultimately would come out on top because his personal story was the most compelling. Born of humble circumstances, by grit and wit he had persevered to become an extremely successful businessman – the antithesis to what many saw as the typical Washington politician. This was despite his being probably the most conservative candidate in the contest, articulating some issue preferences that on the surface can be easily caricatured negatively but in reality are nuanced, complex, and on the whole comprise very sound public policy.

    Fleming then caught a couple of breaks with his Democrat opponent, retiring First District (Caddo Parish) Attorney Paul Carmouche. While Carmouche fit well the Democrat playbook for the South – be conservative on a few, mainly social, issues to mask a willingness to serve liberal interests in Washington – and had a much larger geographical base, the fact that he was a career politician who had not run a campaign in decades not only provided a lengthy record with sufficient negative fodder to publicize, but made it easy to have him appear as just another political insider.

    However, as important was Mother Nature which sent Hurricane Gustav to cause postponement of state elections. Without this, the general election would have been held the same day as all national elections; instead, the runoff primaries for party nomination were pushed back to then. Carmouche would show his weakness as a competitor in two ways here: first, when he got forced into a runoff with a black retiree from the rural southern part of the district who spent a tenth of what Carmouche did, and that he, an old-time white politician preaching that he was conservative, depended so much on black voters for support. On Nov. 4, with Barack Obama on the top of the ticket, Carmouche got about 93,000 votes in wining the nomination.

    But on Dec. 6, with no other contest on the ballot, in the general election that should have been on Nov. 4, not even 93,000 votes total were cast. Carmouche’s total was only about 47 percent of his runoff total, while Fleming exceeded his total from a month previous by 3 percent. In other words, a significant portion of Republicans who voted for Fleming’s runoff opponent showed up again and voted for Fleming, while many who had voted for Carmouche and his opponent, probably largely blacks, sat out the general election. Had an inspiring figure such as Obama topped the ticket as would have happened without the delay, Carmouche would have won.

    Republicans have faced a lot of bad luck this election cycle, with the difference in the presidential election being an economic crisis triggered by Democrat over-regulation of the mortgage industry yet blame placed on Republicans. Yet the postponed election finally got something to break their way, at least in northwest Louisiana. And it’s a break Democrats will rue for years, because the Fourth District’s history is that once elected, a Member of Congress typically stays as long as he likes. Unless he makes some seriously questionable and/or liberal policy choices, Fleming can stay in this seat as long as he likes, thereby adding another chapter to his interesting life story.

    Finally, when Republicans were down after Pres. Bill Clinton’s 1992 triumph, the first sign of a turnaround came when a Republican knocked off an incumbent Democrat senator a month later. Two years later, the GOP swept into power on Capitol Hill. Is the Fleming victory a sign that Republican fortunes are rebounding from their nadir?