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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.

25.3.09

Redistricting options point to LA Democrat House reduction

I suppose it’s never too early to start discussing redistricting in Louisiana, even if we’re a little more than a year from the actual census and two years from the process. Certainly a couple of interest groups agree with their recent contributions to the debate.

The Public Affairs Research Council of Louisiana came out with a plan that allegedly would remove “politics” from the process. It argues for creation of a “nonpartisan” body filled by presidents of state universities to select a plan, but did not endorse a specific plan. In contrast, the Louisiana Family Forum cut to the chase and produced one, assuming population decrease from the hurricane disasters of 2005 would remove a seat from the Louisiana House delegation, that essentially combined the Second and Third Districts and lopping off their outlying areas to surrounding districts.

But as I have argued elsewhere, the PAR plan is a pipe dream, it simply would not remove politics from the process, although with some alteration a process that balances political interests that would move redistricting, outside of the Legislature where it presently resides, could be accomplished. (The organization lists every salutary reference in the media to its activities on its website, which is why there’s no link to my critique on it.) In any event, the Legislature is highly unlikely to give away this power.

Recognizing this, the LFF plan gets to the heart of the matter with its presumed elimination of a seat. It fits the data well, follows judicial guidelines that districts within a state be compact, contiguous, and equiproportional, and therefore creates a massive problem for the state’s Democrats.

As mentioned elsewhere, the Third District represents somewhat of an outlier to the state’s political order with Democrat Charlie Melancon holding that position. Of course, it is not the biggest outlier since the election of Republican Anh “Joseph” Cao to the Second District who entirely contradicts this majority black Democrat district, an overwhelmingly Democrat district. So the combination of the two preserves every other district incumbent, all Republicans and all currently relatively new legislators who could be expected to stay a few more terms each, and packs Democrats into the second where, at best, a freshman Democrat with little influence will occupy the Second’s chair during the redistricting process.

But worse for Melancon, that occupant is likely to be a black Democrat who himself because of the population changes will be representing an endangered-for-elimination state legislative spot who will call upon his comrades in the Legislature to create a safe district for himself – an especially trenchant consideration given Cao’s upset win. Given the imperatives of geography and juridical considerations, the LFF plan is the optimal one to accomplish this given the lack of political heft a freshman would have to try to convince the Legislature to combine two districts that have GOP incumbents.

This makes Melancon the odd man out, with enough Republicans in the Legislature plus black Democrats willing to follow the path of least resistance, additionally discouraged from any other alternative by the presence of a Republican in the Governor’s Mansion with veto power over plans, to combine forces to accept something like the LFF plan. The significance of this is that the LFF has shown it can be done by the creation of a realistic plan.

This could change Melancon’s political calculations and make him willing to run in 2010 against GOP Sen. David Vitter. But he would give up sure reelection to another House term (thereby increasing future pension payments and lobbyist earning power) and at the end of 2012 when the redistricting would go into effect he will be 65 and perhaps ready to retire in any event. Melancon has said he has no plans to face off against Vitter and with Vitter looking stronger every day following his admission of a “serious sin” this may be too much of a gamble.

In the final analysis, the LFF plan presents not only a workable public policy solution, but also politically raises the odds that a single Democrat will continue to represent the state in the House after 2012.

24.3.09

Pare higher education first, then stabilize with megafund

Despite the feelings, and pretty decent arguments, of some, the fact of the matter is higher education in Louisiana is going to endure some significant cuts simply because much of what can be cut to balance the state’s budget already lies in that area. Since it must be done, a plan to do it in a way that best retains the capacity of higher education to serve as an input to economic development must be pursued.

As a part of the exercise, the appropriate level of reduction must be established, which means that, although a static figure has been produced of $219 million in deficit, revenue enhancement may reduce that figure if it proves too detrimental for higher education to serve its mission. To determine whether this is necessary, first reductions to the point of incapacitating the mission must be formulated.

In doing this, above all else, the paramount principle for the enterprise must be to target cuts and not make them across-the-board or indiscriminately. One decent start is the performance formula that is nearing completion, so long as procedures are put in place to prevent gaming the system and to recognize the mobile nature of today’s student population, i.e. if a student starts at one Louisiana public institution but graduates from another, each should share in the credit for that successful outcome. This means some institutions’ cuts will be buffered while others would become more severe.

Logically following this, consolidation of institutions should occur as well, for reasons that have been made obvious. That alone could reduce the deficit significantly. But it is not a short-term situation which does not remove its desirability, but such moves would be of limited utility for this upcoming year. Also vital but without a large initial impact would be reviewing the status of dedicated vs. non-dedicated funding by law and in the state Constitution. As recommended elsewhere, this process needs to begin this next fiscal year in order to better allocate funds to priorities such as higher education and reduce the needs for large cuts in deficit times in this area (and in health care), and the general law covering a response to a deficit needs alteration to put less burden on higher education. If nothing else, it prevents the long-term problematic nature of the current funding regime from becoming worse.

After these, it is up to the institutions themselves. Again, it is important to assess the management of each of them because some do a better job than others in efficient use of taxpayer dollars. Even some simple accounting measures should reveal this kind of information, and better-run institutions need to be rewarded for their thrift.

If as a result of this process it is determined the minimally-acceptable service level still would produce a deficit, three revenue sources should be considered. First, while some students will be unhappy at it, the fact is tuition at Louisiana state schools is a bargain compared to most states. Institutions are able to increase tuition costs as much as five percent and many students because of the Tuition Opportunity Program for Scholars won’t see any increase. However, this also means that, as far as overall state spending goes, a tuition hike won’t produce that much revenue, perhaps just in the tens of millions of dollars.

While some have suggested using the Budget Stabilization Fund, a giant savings account the state can draw a third from every other year, to stabilize the situation that probably is not wise. The Gov. Bobby Jindal Administration astutely recognizes the fiscal year after next could be even worse, and the federal spending bill runs out the following year from that, so the fund could be crucial in later years with the initial paring done this upcoming fiscal year.

But begging to be used is the so-called “megafund” initially designed by the Gov. Kathleen Blanco Administration to attract new business prospects of at least $100 million with 500 jobs created. Perhaps the biggest blindspot of the Jindal Administration has been its slavish devotion to the notion that it can bribe business into coming into the state with this fund of now over $400 million. Yet last week its purpose suddenly became altered when only $10 million of it was to be used not to create jobs, but to “save” them at a chicken-processing plant, and there has been talk of “saving” additional existing enterprises with it.

This demonstrates the bribery concept is not working, and at the same time if this money is to get used to subsidize retaining business, that’s a similar principle to retaining higher education. This is the optimal pot of money to be used this upcoming fiscal year should higher education need support. Unfortunately, it may take concerted legislative action to snap Jindal out of the spell of incentive-based economic development nonsense to allow this diversion.

If these strictures are adopted, higher education in the state would become positioned admirably to assist in economic development so desperately needed in Louisiana. Ignore them, and its ability in the near future to provide this crucial input would be severely impaired.

23.3.09

Some LA House members make Americorps mistake

Louisiana Republicans were doing pretty well in terms of voting in the people’s interest until encountering H.R. 1388 last week where they extended one of the biggest boondoggle giveaways in the federal government.

Appropriately called the GIVE Act, it vastly expands the Corporation for National Service (“Americorps”) giveaway program, where government pays “volunteers” to do whatever it thinks ought to be done, a make-work strategy that harkens back to the failed idea of the New Deal that government can tax and spend America’s way to prosperity, which in this case not only tremendously wastes money but crowds out genuine volunteerism. Regrettably, the bill advanced from the House on Wednesday even as the majority of Republicans voted against it.

Never one to shy away from throwing good (borrowed) money after bad, Democrat Rep. Charlie Melancon, the self-proclaimed thereby hypocritical fiscal conservative, voted for it as did all but one Democrat. But while Republican Reps. Steve Scalise, John Fleming, and Rodney Alexander did the right thing and voted nay, their party cohorts Anh “Joseph” Cao and Bill Cassidy lined up with the big spenders on this one.

Cao perhaps almost may be forgiven on this one. New Orleans has seen a tremendous influx of Americorps activities so his district probably by far receives more per capita spending this way than any other, and, further, the dependency Americorps fosters concerning citizens to their government fits in so well to New Orleans’ culture of dependency and attitude of entitlement that he might be lynched had he voted against it.

As flimsy as this excuse is for voting against both principle and the best interests of the American people as a whole, it’s much better than Cassidy’s. His explanation for a yea vote was that some of the resources would go to the nonprofit Teach for America program which has provided some teachers in his district and has been shown to do a superior job of teacher preparation.

However, there’s nothing in the bill that designates funds directly to the organization. In fact, in 2007 the organization received less than $10 million of its $75 million in donations from the federal government – less than any of individuals, corporations, or foundations. This means while such monies could be missed, they would not significantly impact the organization which has been in rapid growth mode. Either Cassidy sold out on this, or he didn’t do his homework if this is his rationale for voting for a potential tripling of this wasteful government spending.

In these times where reckless spending and the specter of bigger and bigger government threaten a prolonged recession in the near term and prosperity for future generations, all Louisiana members of Congress (but especially Cassidy and Melancon) need to pay attention and understand the damage they do to the country by approving such nonsense.