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8.1.09

Budget critics miss mark, but larger truth emerges

Complaining regarding some budget deficit strategy being employed by the Gov. Bobby Jindal administration is akin to a mountain being made out of a molehill, but from the peripheral froth there appears a central point that policy-makers would do well to implement in this year’s budget deliberations.

The Administration and Legislature made a concerted effort in the 2008 cycle to create a budget where continuing operations were not funded by so-called “one-time” funds, these often arriving in the form of federal grants. That commitment has been called into question because now under the emergency conditions of a state budget deficit, part of the Administration strategy has been to take funds that will not appear to be spent on a certain activity and shift it to others that appear will run short. Some call these unexpended funds “one-time” money but fail to recognize the conceptual difference between the planned strategy of 2008 and the strategy in the breach of 2009.

If an item is budgeted for some kind of continuing cost, whether it be to pay for salaries, supplies, reimbursements for outside services, etc., there is consistency when the revenue source itself also recurs, through some type of taxation or investment returns. Budgeting is an imprecise practice so it is common in government for there to be surpluses in certain accounts because of inaccurate predictions, and as common to shift funds from one category in surplus to another that is in deficit.

Making this situation different only in degree is its scale. Here, we are not considering shifting a hundred bucks from supplies to travel in a department, but millions from one agency to another. Still, the principle remains the same: if in retrospect too much of a recurring source of revenue got put into a budget account for textbooks and not enough for Medicaid reimbursements, the former does not become a “savings” or “one-time” money just because it didn’t get spent for a particular purpose.

By contrast, if money comes in from a windfall, or a grant of limited duration that then would allow money that might have been committed to one purpose to be shifted to another, that is very conceptually different since there is no dependable recurring source for that funding. That is why Jindal also can claim $400 million set aside for economic development purposes is “one-time” that should not be used: a specific appropriation at one time and for one time only was set up to fund this, so subsequently it becomes a source of revenue to be spent on a specific purpose. It cannot be a recurring source of funds for things that do not fit its purpose.

However, this leads to the larger question of whether the end purposes of budgeting are accounted for correctly. That a surplus appeared in the textbook account, for example, could be a result of poor planning which is not uncommon given typical budgetary strategies used in government. Unfortunately, a widespread practice in budgeting in government is the incremental inflation tactic, where a budget is calculated merely by taking last year’s accounts and adding a sum around the rate of inflation to them.

Practices such as this are supposed to be taken care of by RS 39:87.1-87.4 which mandates that Louisiana government tie budgeting to performance. In reality, this can be done in a cursory way that invites mismatching of resources to task. In its review of the budget to look for cuts in regards to the deficit, one hopes Jindal made clear such criteria were used, and, if not, his administration would do well to emphasize this approach in budgeting for 2009-10 to bring about better alignment and likely cuts that will little affect performance.

But superior practice does not mitigate poor policy choices. The $400 million fund stands as a good example. If the purpose of such a pot is only to pay for quick infrastructural improvements for a large employer, the sum in it should be far smaller in size. Any thought to use its funds to induce financial incentives for employers to locate in the state fundamentally misunderstands human behavior. A state looks lovely for commercial interests and they want to be there as a result of policy (such as low tax rates and reduced regulation), not bribery. No amount of cash inducements can make the unlovely lovely.

So to tackle what appears to be a $2 billion deficit coming up in 2009-10, Jindal needs to focus on procedure and substance. Following the latter, it also means Jindal must be willing to admit past mistakes in priorities and rectify them in the present budget.

7.1.09

LA GOP House members can perform valuable service

If Republican, it’s tempting to assign too much import to the fact that the majority of new GOP U.S. House members comes from Louisiana, and a recent such state member is now the only elected non-Hispanic non-white governor in the nation who is also a Republican. At the same time, it would be a mistake to neglect the larger lessons present.

While some may be eager to hold out Louisiana as a model on how the GOP can both win and do so with candidates of diverse ethnic backgrounds, it must be tempered by the fact that special conditions allowed all three winners, Reps. Anh “Joseph” Cao, John Fleming, and Bill Cassidy, to triumph. Cao took advantage of being up against an incumbent in legal disgrace, Fleming by having a postponed election that washed away potential black Democrat support for his opponent without pres.-elect Barack Obama on the top of the ballot, and Cassidy may not have defeated a short-time white Democrat incumbent except for the independent candidacy of a black Democrat.

But without unapologetically conservative-themed campaigns, Fleming and Cassidy despite being put in a position to win could not have won. Since 2004, learning from the lessons of that election cycle Democrat strategy has been to obscure the ideological content of their campaigns because of the understanding that Americans’ ideological leanings as a whole are moderately conservative. It culminated in the most intellectually vacuous presidential contest in decades, where the Obama campaign was akin to a teenager asking for keys to the family car and a six-pack of cold brew on the basis of a slew of vague promises to be good that ran counter to past behavior.

This was replicated down the line, with the typical Democrat candidacy assigning bogeymen to blame (often for problems created by their own policies), offering vague ideas and/or more specific unsustainable/ignorant policy prescriptions on the basis of these issues and, in the South in particular, sounding select conservative themes in an attempt to inoculate themselves from being found out that they supported a much more liberal policy agenda.

In many places, they got away with it for two reasons, because too many Republicans had not governed in a fashion that was sufficiently conservative to make a credible contrast, and that their GOP opponents did not try to expose them for what they were. To (especially) Fleming’s and Cassidy’s credit, they not only had the conservative credentials, they embraced and articulated conservative philosophies and did not give their opponents passes. (Cao’s campaign was much less ideological, being that he was running in one of 15 percent or so districts in American where its composition makes conservatism unpopular at present). Both made efforts to connect their opponents, long-time politicians, to their liberal fellow-travelers, and largely succeeded.

It’s simple, conservatism wins elections – not everywhere in America, but in enough places overall to give conservatives a natural majority. It’s why over the next four years Obama and Democrats are going to govern as if they were still campaigning – do only what seems popular, in public for cover present some of these things in conservative light (whether they are in execution will be another matter), and implement ruthlessly a liberal agenda behind the scenes and in the shadows out of the inattentive public’s view, hoping in four years to secure majorities again. Then the hammer comes down on America, as in the next four years they take off the mask and govern openly and blatantly on the hard left to push things through that could take decades to correct.

This is makes the electoral model of Fleming and Cassidy most valuable, for we will need Members who credibly will call things like they are as the nation prepares for years of spin, smoke, and mirrors from the Democrats.

6.1.09

Policy must encourage fewer beds to boost quality

Disappointingly, but perhaps not surprisingly, the long-awaited federal government rating system for nursing homes showed Louisiana had the highest proportion of lowest-rated facilities in the nation. A change in state policy concerning long term care can bring incentives to boost the ratings and probably save the state money simultaneously while serving more of its needy citizens.

The official reason for the high incidence of low-rated places given by the industry itself is that Medicaid reimbursement rates paid by the state make more difficult hiring sufficient staff numbers. The majority of people in nursing homes are supported by and the revenues collected by the industry in the state are provided by Medicaid.

But other states pay lower rates than Louisiana and still manage to do a better job. The reason why is that for decades state policy deliberately has favored warehousing the elderly in nursing homes, as opposed to home- and community-based solutions to which increasing other states have gravitated. So has Louisiana, more slowly and somewhat unwillingly, and largely as a result of the Barthelemy settlement a few years ago, but despite that the state’s facilities proportion of Medicaid revenues are almost double that of the national average.

5.1.09

Jindal's first year misunderstood by many observers

Before we can figure out how to assess Gov. Bobby Jindal’s first year in office, we need to get straight what he did and did not do. Some seem confused about exactly what that was, while others don’t seem to want to understand what that was.

Conservative watchdog C.B. Forgotston argues that in his first year, Jindal increased spending by $1 billion and the government employee headcount by 2,700. His numbers are not far off – Jindal proposed an increase in non-disaster related spending of $760 million and total state employees as of last Jun. 30 were up 3,181 over the previous 12 months – but these tend to obscure the picture somewhat. If we look at only the general fund amounts excluding that portion tied to disaster relief, that budgeted figure (which was a little less than actually budgeted but will be more than what actually gets spent) was an increase of $466.5 million or an increase of 3.31 percent. Headcount associated with this spending actually was scheduled to be down 1,035.

The general fund numbers are the best representation because they are the ones that Jindal (and the Legislature which must pass budget bills) have most control over. Most of the rest of spending and positions associated with it are tied to the federal money coming into the state over which state politicians only have partial control (for example, some is mandated by the federal government and matched to a certain extent given state actions). Of course, this does not include hundreds of million of dollars in nonrecurring state funds from the general fund’s past spent in 2008’s second special session with Jindal’s blessing.

By this metric, Jindal did a decent job of holding spending to around the rate of inflation and, further, in the spending of federal money reduced dramatically the amount that came from nonrecurring sources which meant where state spending would have to increase in the future – such as in Medicaid where the state’s share is scheduled this year will go from 28 to 32 percent of the total (which Jindal hopes will not take place, arguing the continuing disaster recovery mode justifies the lower share) – would necessitate less surprise, unbudgeted state expenditures. Whether this makes Jindal a “fiscal conservative” may be in the eyes of the beholder.

Definitional issues aside, at least Forgotston pays attention to what Jindal actually does. Others seem unable to grasp what Jindal seeks to achieve even though it is right in front of them. Jindal’s most prominent leftist media critic insinuates he makes his record appear more accomplished that it actually is, while the state’s most famous liberal former politician/ex-prisoner claims Jindal is all perception without tangible results, and the head of a leading interest group with a hit-and-miss record on sensible state reform argues Jindal doesn’t have a clear vision on what he wants to do.

It’s a bit curious why such comments would be made because there’s no lack of clarity at all in what Jindal has done. Simply, he is trying to move the state from its past populist leanings towards a more fiscally responsible and service-oriented posture that relies less on government intervention. This is not something those on the left wish to see happen because it empowers individuals at the expense of government and its liberal allies. Consider:

  • State spending is more restrained and somewhat more sensible, in great contrast to practically every prior administration
  • After years of talk, Jindal provided motive force to meaningful government ethics reform in the state to start changing the culture that government exists chiefly to redistribute resources to favored constituencies
  • After years of complaints, Jindal began slicing away at some of these redistribution efforts through use of the line-item veto
  • After years of lamentations, Jindal actually went out and eliminated without involving a drawn-out process some counterproductive business taxes
  • Even if he joined the parade late, Jindal did what no other governor likely would have done in recent memory, get behind an income tax cut for individuals even as he knew it would present big budget challenges this year, thereby ensuring its passage
  • Perhaps most radically to date, his scholarship/voucher education program that without his support never would have seen the light of day promises to challenge a state education system that puts more primacy on protecting educators’ jobs and salaries than in providing quality education
  • Perhaps most radically in the future, he has laid the groundwork for an indigent health care system that intends, if the idea is to provide such coverage comprehensively, to operate primarily on market forces rather than by government direction

    This is a record of at least some modest achievement (even if not enough for Jindal’s critics on the right like Forgotston) and is misunderstood by others either because they are inattentive or because they have an agenda in obfuscating it out of opposition to it. In some ways the latter harkens back to his campaign, where liberals in the media and elsewhere kept trying to convince voters before and after Jindal too office that he was being too vague, a kind of self-denial about Jindal that if they kept repeating long enough what they wanted Jindal to be (or not), he would (or would not) turn into it.

    So let’s call it like it is, even if Jindal himself doesn’t typically phrase his own actions in such terms: Jindal is pursuing a reform agenda of conservative leanings, and if he is acting cautiously with it because he is relatively new to his position of power, expect that reticence to dissipate in proportion to the passage of time and the resolution of budgetary dilemmas. To date, he had given no reason to expect otherwise.
  • 4.1.09

    Local govts continue attempt to skim from ratepayers

    Some local governments in Louisiana, conscious more than ever of revenue being squeezed, continue to resist reform legislation in cable television provision that recently has gone into effect. From the bellows emanating from the Louisiana Municipal Association and Police Jury Association of Louisiana, one would think fundamental rights of the citizenry are being violated with this law coming into force. But in the end, all it’s about is local governments decrying being unable to skim more money out of the citizenry.

    These groups have gone to court – and so far lost – to try to stop implementation on the new law, Act 433 of 2008. It allows for granting of statewide franchises for operators which gives far less discretion for local governments to attach on special conditions that can be used as backdoor methods to raise government revenue from ratepayers. Eager to deflect from this reality opponents of the law – who do not include the cable industry itself that once opposed but now supports the new standards – raise chimerical arguments that expose that the conflict really is about clipping local government power and not about citizens who subscribe to cable TV.

    One concern presumed discrimination against rural areas because on a per capita basis it is more expensive to provide such service. This was addressed previously by the onerous “build-out” requirements most local governments forced upon providers which not only passed costs on to urban ratepayers (as rates were invariant of population density) but also provided more potential sources of pass-through revenues for local governments. The new law gives market forces much greater priority and reduces any such complaints of reduced rural service to a big “so what:” it’s not like cable TV is essential to anybody’s life, you don’t have the right to have it and, if you really want more than broadcast choices, there’s always satellite.

    Another mountain-out-of-a-molehill complaint comes from local government who say they can’t get freebies that they used, such as compelled coverage of their governmental bodies or free service to government buildings. The former complaint is misleading: the law compels offering service for at least one channel of “public, educational, and governmental” access automatically for any local government upon request, and at least one additional channel if local governments use it enough. Whereas governments used to force companies not only to broadcast but to pay for production of certain things, the only difference now is that providers will have to only subsidize it partially. And why should government enrich itself with free service when if the company did not have to provide it, savings could be passed on to the ratepayers?

    Finally, there is the claim heretofore rejected by the courts of the unconstitutionality of the law because it allows the state to interfere in local contracts. But the law sets up a clear procedure to enter into and exit contracts, and what are permissible contracts. And because of grandfather provisions the majority of the state’s population isn’t even affected by the new law.

    Again, recognize this desperate attempt to undo the democratic will of the state for what it is – protecting government at the expense of the people. As the year passes and the greater competition that the bill triggers manifests, leading to more channels, more choices among them, and relatively lower costs, this truism will become all the more apparent.