Using unneeded federal bucks may fiscally damage LA

The liberal dogmatists that run Washington (at least for another 143 days or so) have tossed another landmine Gov. Bobby Jindal’s way, creating for him potentially a difficult decision that could end up harming the state financially.

Another bailout has emanated from Democrats who don’t want to learn from their past mistakes, this one primarily addressing funding educator job provision (the bill doesn’t specify the money must go to classroom positions) and supplementing Medicaid expenditures in the states. But the biggest bailout attendant to it is for teachers’ unions, who get created potentially hundreds of thousands of positions where a percentage of those salaries will go to union dues, where these organizations will then pass on a significant portion of that to – guess who – Democrat candidates for office. And who said Democrats couldn’t find yet another way to reach into people’s pockets to try to perpetuate their rule?

It’s not the only usurpation of resources that the bill creates. By increasing taxes on corporations, that will have the effect of raising prices to consumers, and since the raise came related to outsourcing of jobs overseas, the discouragement of that will hike labor costs as well, promoting more higher prices in addition and greater working family distress. In turn, this kills jobs at home, just another day’s work for the Pres. Barack Obama Administration which has proven itself remarkably proficient in erasing jobs over its short lifetime.

Yet regarding Louisiana state finances, it puts Republican Jindal in a bind he first experienced a year-and-a-half ago when the first spending bill was passed. Then, the issue was over changes in the unemployment insurance program that would have forced the state to spend more money than necessary to qualify for a share in the spending bill, so Jindal declined nearly $100 million of that.

This time, it’s over the requirement in the law that its funds must supplement, not replace, state spending on education. Also, in each state, next year's spending on elementary and secondary education as a percentage of total state revenues must be equal to or greater than the previous year's level. Neighboring Mississippi already has determined these provisions would force it to spend $50 to $100 million extra in education that must be taken out of other areas in order to qualify for its $98 million.

With $147 million on the line, this could be tricky for Louisiana. Last year the state authorized (using schedules 19-653 through 19-699 of the operating budget bill HB 1) $5.58 billion for education out of $28.493 billion (revenues budgeted for 2010-11 including the funds if accepted, not the means of financing which include $1.42 billion in one-time state funds). Adding in both sets of money for the education and Medicaid parts of the spending bill produces an elementary and secondary education spending proportion of 20.1 percent.

But the big problem is the state’s one-time money pumped into this year’s budget that cannot be expected to be there next year. The latest revenue forecast for next year shows state revenues expected to go up $436 million but that leaves almost a billion-dollar gap – and keep in mind that $1.5 billion of state revenues this year were federal one-time dollars as well. Matching federal funds to that increased state revenue will offset some of that, but it’s not unlikely that the state will be in a revenue hole of some $2 billion.

By accepting the education additional money, Jindal would remove from the discretion of the Board of Elementary and Secondary Education and Legislature to change the Minimum Foundation Program formula to cut spending more than a 1:5 ratio compared to other state revenues. However, in reality the MFP likely would be kept at a standstill formula as it was this year, removing 60 percent or so of the current year spending in this area.

Now the other around $2.2 billion in non-MFP elementary and secondary education would be protected by the 1:5 ratio meaning cuts might not be as deep as necessity would dictate while other areas of the state budget of higher priority get cut, both because of the essentially absolutely protected MFP money – nudged higher by the $147 million – and somewhat protected other spending.

It also hamstrings the state in how to use increases in revenues, whether from its own resources or from more bailouts. Ironically, Louisiana’s problem is less grave than Mississippi’s because the latter shied away from non-recurring funding, magnifying the impact that a rise it its own revenues would force it to spend more on education by its funding acceptance as opposed to restoring cuts in other areas. Still, Louisiana faces the same choice for next year if on a lesser scale.

Jindal will have to balance whether pumping in an extra $147 million to education is worth the constraints he may face in dealing with the upcoming year’s serious budget difficulties. Especially trenchant to the decision is that education spending overall is about the same as last year yet statewide the public school system is in decline. For the 1999-2000 school year, average daily attendance was over 696,000 with 51,331 teachers and principals. In 2003-04, the respective numbers were over 668,000 and 51,383, and for 2007-08 they were over 605,000 and 47,360. In terms of spending, it’s gone from $3.335 billion to $3.829 billion to $5.341 billion over that time span. In terms of per pupil spending it’s gone from $4,792 to $5,732 to $8,828, in terms of per teacher/principal it’s been $64,970, $74,519, and $112,774, and all the while the educator/pupil ratio has dropped from 13.56 to 13 to 12.77. Why exactly do we need to inject more money into a system which in eight years has lost 13 percent of its students, whose costs on a per pupil or per educator ratio have gone up 84 and 74 percent, respectively, and who on a per pupil basis teach classes about 6 percent smaller?

Funding not exactly needed by schools versus hamstrung budgetary decisions for next year, that’s what Jindal has to figure out. In others, in what liberals may see as a big favor to Louisiana for education outside of political consideration to Louisianans may be no favor at all.