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5.2.09

More symptoms appear; LA instead must treat disease

Yesterday a number of policy developments around Louisiana demonstrated why the state lags the country in so many ways. Disparate as they were, they share they common element that temptation to treat symptoms lets the disease rage on.

A legislative panel was told that the special TIMED tax of 4 cents per gallon of gas collected for the past 20 years still will not be enough to finish the 16 special projects the extra tax is supposed to fund. It appears one cent now will have to be diverted from the regular 16 cents per gallon tax for the next 35 years and maybe even beyond to pay off bonds issued to complete all but two projects by 2013 – at least an extra $1 billion that could have gone to other roads, and it still leaves off two projects.

Another panel heard about how local government retirees were unlikely to receive cost-of-living-adjustments because of the chronic underfunding of many state retirement funds. The latest estimates put the combined figure in the neighborhood of $12 billion, which constitutionally must be eliminated by 2029. As part of that amendment, retirees can’t get a COLA if a certain proportional target isn’t met annually towards fully funding by the target date. This may be met by a combination of actuarial dynamics, transfer of additional money into the system by the Legislature, or superior investment returns. With investments doing poorly in the current market environment, this may prevent COLAs for years.

And announced by the LSU System was the full extent of budget cuts under the most draconian assumptions which were said to impair significantly the quality of higher education in that system. These are foisted onto higher education because of constitutional and legal restrictions relevant to deficit avoidance that make it, in relative terms of its portion of the budget at risk, the most vulnerable function of state government when revenues slack.

There are solutions to each of these difficulties. Money can be diverted from the regular road fund to TIMED. The Legislature can override the prohibition of a COLA in order to not make those about to retire victims of bad timing. Creative budgetary maneuvers can reduce the impact on higher education, but to go without cuts or even accepting cuts that are not significant, only tax increases could fill the gap.

But recognize that all of these palliatives address symptoms of the larger disease, which is and has been in Louisiana for the better part of a century poor choices related to the purposes of raising revenue and spending them by the government. These policy responses in no way address, and even exacerbate, this fundamental shortcoming to which only recently has come slow change.

In the case of roads, there is no way that monetary inflation alone can explain how a set of projects has better than quadrupled in cost over 20 years (one, the Huey P. Long bridge, is now 20 times more expensive – meaning every year since the project was on the boards its costs have gone up by the original total amount). Only a combination of mismanagement and/or fraud could explain this stunning escalation. And so much money that could have gone to roads has been wasted on idiocy such as reservoirs that allowed, the state alleges, local government officials and their agents to corruptly profit on this.

Regarding pension COLAs, the fact is until recently Louisiana offered extremely generous benefits particularly in the area of retirement, only some years ago being reduced to just very generous (not just in terms of amounts, but in coverage such as allowing part-timers like elected officials to be in it). Reckless promises were made, and since 1986 the Legislature has made little effort to shore up the unfunded portion despite full knowledge of it. Here again, rather than pay for horse barns money could have gone to real needs.

Finally, with higher education the legal constraints are just part of larger problem of a state set of ethics, regulatory, and fiscal structures which historically have created disincentives for economic development. This means state revenues that provide the majority of funding for it are lower than they could have been, constricting provision of this good and inviting a response of raising taxes to compensate – which only aggravates the situation by choking off growth even further and perpetuating the cycle of trying to feed the golden goose of economic development by killing it.

All of these problems are coming home to roost, and the only solution in the short term that will not create problems in the longer term is to tighten belts. In the long term, the slow shift of attitudes from big government being the solution to problems to big government being the problem must continue if not accelerate. This alteration may cause short-term pain, but would be more than compensated for by long-term gain.

4.2.09

Shreveport burns itself again with tax dollar giveaway

It's signing day for college football teams across America, the first day recruits formally can commit themselves to a school's scholarship offer. But around northwest Louisiana, it additionally serves as a reminder to take that imposing structure next to the Fairgrounds called Independence Stadium and chuck it. And maybe some Shreveport politicians with it?

Seems like the stadium serves as a dangerous object to Shreveport politicians who are preternaturally compelled to throw money at things having to do with it in a way that ends up costing the taxpayer every time. One merely has to review the venture capital episode with the Shreveport Pirates in the Canadian Football League, or the remodeling and expansion of the Stadium a few years later which devolved into disputes, litigation, and extra city expense, and now bailing out the Independence Bowl Foundation. Each involved presumed defaults of hundreds of thousands to million of dollars. Each now additionally has required expensive litigation with the prospects that not all that is owed will be recouped.

Some fault needs to be assigned to the Foundation. Heads were scratched when a couple of years past it was announced PetroSun, currently sued by the Foundation for breach on contract even as Shreveport made good on the money owed and is promised by the Foundation to get whatever recompense the suit produces, was accepted by the Foundation as the title sponsor of the game. PetroSun essentially was a “pink sheet” company whose equities traded over-the-counter. They weren’t even required to post financial statements publicly.

3.2.09

Democrats wasting money on attacks on LA Republicans

Some have mused (including me) whether the election last Dec. 6 of Reps. Anh “Jospeh” Cao and John Fleming signaled Democrat fortunes had reached their crest and now Republicans would begin to ascend at their expense. That trend will manifest with surety if Democrats continue to help out their opponents.

As did every Republican in the House along with 10 Democrats, Cao, Fleming, and Rep. Bill Cassidy, another freshman elected a month prior to them, votes against the version of the “no government left behind” bill that produces massive government spending that swells the national debt almost 10 percent on a liberal wish list of items most of which will produce little economic stimulus in the near future. It also provides for one-time tax breaks of $500 or $1,000 to those families that draw paychecks, but also transfers wealth to those who pay little or no taxes up to the same amount, neither of which provides much if any boost compared permanent cuts for only those who pay taxes.

This the American people see, that this is a far cry from what was promised by Pres. Barack Obama who said he would attack wasteful spending and provide meaningful tax cuts. Polling shows 54 percent do not want it passed in its current form, and even more believe it will not help much and certainly not immediately. Those are nationwide numbers; chances are that at least in Fleming’s Fourth and Cassidy’s Sixth Districts with their higher proportion of conservative voters the number for support are even more dismal.

Yet Democrats have gotten the notion that they should run ads criticizing these three for their votes against this unpopular plan, on the basis that Fleming won narrowly, they think Cassidy would not have won without a black Democrat the party alienated running in the general election as an independent, and because Cao won in a majority black district. Only in the case of Cao are they correct that such ads will pay off by assisting defeat of these incumbents. Even in Cao’s case, that is a kind of defeat, for this represents resources that the party would not usually have to spend, which could have gone elsewhere to help other Democrats.

So let Democrats waste their money on these enterprises. It may presage a coming Republican comeback in 2010 that grows more certain as Obama fumbles away his early days in office by botched appointments and policy charades the American people clearly see through.

2.2.09

Less govt proving effective for LA insurance provision

It’s good to know when state government gets something right and how to do even better. The evolution of homeowner insurance regulation in Louisiana over the past three years provides such an opportunity.

A few years ago, in order to insure riskier areas of the state, it altered its means of homeowner insurance provision by creating the Louisiana Citizens Property Insurance Corporation, a state-run insurer of last resort that would write policies where no private sector insurer would go. Unfortunately, a couple of years later before its accounts had built up, the hurricane disasters of 2005 wiped out its resources and led to a state bailout.

The agency also faced internal problems. Cozy arrangements with the insurance industry led to a lack of internal controls that now have brought allegations that its former head Terry Lisotta engaged in fraudulent if not corrupt practices. It also brought mismanagement, most prominently in its record-keeping that to this day casts doubt on the actual financial position of the agency. Finally, it might have broken the law by allowing rates that were too low; Citizens must charge a 10 percent higher rate than a basket of private providers in a parish except in 12 coastal parishes until Aug. 15. 2010.

But current management seems to have turned a corner. The number of policies written is beginning to fall as the state adopted less-intrusive procedures principally by abolishing the politically-charged Louisiana Insurance Rating Commission at the end of 2007, encouraging the private sector insurers to write policies. Keeping the 10 percent requirement has meant that, except in areas recovering from the hurricanes, they did not have to face government competition which is driving the industry out of Florida which does not have this standard.

The state also passed a law that provided an incentive pool to attract insurers in the storms wake, up to $100 million doled out to insurers who wrote a certain number of policies in the affected areas. But only $29 million has been used and so ratepayers may be getting a rebate soon, which would go some ways to alleviating the extra surcharge many paid to recapitalize Citizens after 2005.

So, progress is being made in a struggle that three years ago looked formidable, when talk about an insurance crisis was common where homeowners in the especially vulnerable parishes would be unable to get any except through Citizens. It also helped that the state revised its building code that encourages stouter structures that should prompt lower rates for new construction.

Challenges do remain that will finish the turnaround. The law that permitted competitive rates in the 12 parishes needs to lapse to get the state further out of the insurance business and encourage more of the private sector in, which will bring down rates. The incentive fund must also be allowed to wither away as it proved itself of little utility. And efforts to bring about a regional or national high risk pool to cover adverse weather events must be thwarted, for that only transfers risk to taxpayers and creates less incentive for insurance companies to manage their risks and assets well knowing government always will be a backstop, inflating rates and deflating coverage.

Things like these ignored in places like Florida are causing higher rates than need be. Louisiana must continue on the path it has been taking and what was once termed a crisis will dissipate with few of the predicted dire consequences.

1.2.09

Spreading federal election calendar out desirable option

Many of Louisiana’s registrars of voters made an intriguing suggestion last week, to push the primary election process for federal elections earlier in the calendar. The way it works now, four weeks separate the primary from a potential runoff, and then a month later the general election follows. Given that early voting starts two weeks before the Saturday elections and lasts essentially eight days, and that registrations at least 30 days prior to an election must be checked, the time periods between the elections are packed and put strains on the capacities of registrars.

Louisiana, as it is, for federal elections has the most condensed election cycle in the country. Only a couple of states have primaries later for these offices, and none that has which includes a runoff which most states don’t have has its primary as late as Louisiana’s first Saturday in September. Georgia’s first Tuesday in August is the latest of the four states with runoffs.

Campaigning already begins several months in advance from the actual general election day, so fears about earlier dates creating a longer campaign season should dissipate. Only campaign consultants and the media should abhor a quicker date, as there will be less time for candidates to blow money on ads and other campaign services.

In fact, there could be only one real objection to the change. In Texas, for example, primaries are in March and then almost eight months pass to the general election. With that much time in between, the fancy back then months later may not strike partisans as the optimal candidate to send as the party’s nominee. A more-compressed timeline, necessarily involving a later primary date, is likelier to produce a candidate whose concerns strike a chord closer to voters on the general election day, since those same dynamics will play a stronger role in a later rather than earlier contest.

But this is an extreme example. Adoption of a regime similar to Georgia’s (which actually may have a runoff to a general election), a month earlier, should not substantially separate a primary choice from conditions more trenchant around the general election. A first-week-in- August with a third-week-in-September runoff might serve Louisiana just as well, and certainly would provide for less overtime and likely better performance therefore from the state’s registrars. And it might do a better job of dodging the odd hurricane here and there, which disrupted the 2008 elections, also. Hopefully we’ll see such a bill in the 2009 legislative session.