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26.3.09

Jindal, megafund as well as fowl face gutting with deal

From the beginning of his term, Gov. Bobby Jindal’s administration’s soft underbelly has been his curious belief that government interference in the marketplace – a concept he almost universally rejects in every other situation – is suitable when it comes to stimulating large business activity. He now has fully exposed his gut and offers his opponents or dissenting lawmakers a magnificent opportunity to slice into it.

Jindal unwisely has continued the Louisiana Mega-Project Fund, created a few months before he took office, and more than doubled it size to pushing $420 million now. The fund is supposed to provide capital to firms that create 500 new jobs in the state and make a minimum initial investment of $100 million; the state can’t provide more than 30 percent of the total project cost, and until a few days ago never had been committed to use.

Then Jindal announced money from it would go to allow Fosters Farms to buy from Pilgrim’s Pride a chicken processing plant in Farmerville, where the state will subsidize half of an $80 million purchase price plus throw in $10 million for an upgrade. This would prevent the loss of many if not all of the 1,300 jobs there as well as buffer any ripple effects to local producers, the state argues as its rationale for this action.

The problem is this deal violates every aspect of the law governing the fund. It is not bringing new jobs, the investment initially for Fosters is only $40 million, and the state is providing over 55.5 percent of the project cost from the fund. Therefore, the law is going to have to be changed, and changed quickly, for the deal to happen.

There are two reasons apparently why Jindal is taking a $50 million square peg and trying to bang it into a round, money-losing hole. No governor likes to see jobs disappear because of the economic hardship and increased demands made on government that result – and because a rescue might incline the employees and others around them to cast votes towards Jindal’s way during his reelection campaign. Also, the “megafund” has been a bust to this point and needs some justification for its existence – even if it means altering its concept completely.

So for this to work legally, the Legislature will have to rewrite the law which operates over they very pot of money many of them increasingly are casting covetous eyes over as the state faces massive budget cuts particularly in the areas of health care and higher education. They have every reason to believe that as long as they are rewriting the law for the governor’s benefit, they can do it for their purposes, too.

Do not be surprised at all if a bill emerges from the Legislature that gives Jindal everything he wants with the changes – and also empties the fund of its remaining money. Legislators can have a field day arguing about how if the state is going to save jobs plucking chickens it sure can do the same thing with saving higher education, for example. Worse for Jindal, he pledged to have this wrapped up in May so legislators can use time as a weapon as well, dictating to the governor terms in order for a speedy resolution. If they are on the ball they will tell Jindal not to make too many more, if any, commitments from the fund or no changes will happen. Because the worst thing of all would be for the deal thereby to fall apart thus making Jindal look incompetent and unable to live up to promises.

It will be instructive on how much political capital Jindal will burn if he tries to resist the dismantling of the fund, when there are so many other larger issues he has to deal with such as health care reform. The blinders he has on this issue may cause a tunnel vision that prompts him to give in on far more important things in order to salvage the fund. And the largest irony is that the whole idea is doomed from the start: the reason why the subsidy became offered is because the operation loses money, and there’s no reason to suspect state money is going to create conditions that will make it profitable. So not only may Jindal end up sacrificing important parts of his agenda, it will be for a waste of taxpayers’ money.

Hopefully, if he doesn’t already, Jindal will recognize his predicament and take it like a man, suffering the indignity of legislators significantly if not totally depleting the legal bribery fund. For if he fights, while chickens may be the things getting gutted in Farmerville, in Baton Rouge it’s going to be the governor.

3 comments:

Smadraji said...

Nice Posting
Gay

Anonymous said...

Take a ride around the state (especially Central LA) and tell all of those people who have lost jobs in the timber industry over the past 10+ years that a chicken plant is worth saving, but their jobs/lively-hood was not.

Our country's leaders (federal and apparently now our state) have gone brain dead and think the normal business cycle and principles no longer apply. I guess I'll have to go back through business school to learn this new "savior-based economy."

Good post, btw.

petrenkov said...

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Best wishes
Alice Tudes