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13.12.10

Jindal threatens long run reform by his near-term timidity

Suggestions by Gov. Bobby Jindal for short-term revenue boosts to compensate for a forecasted upcoming large deficit in the 2011-2012 fiscal year indicate that Jindal’s go-slow remaking of state government may need some boldness and alacrity now for long-term success later.

Proposed last week, Jindal’s food for thought can provide some immediate savings, but not a whole lot. The obvious idea is to sell surplus state government property, netting an estimated nonrecurring $13 million. Also good is the contracting out of the current state worker health care plan, joining several other plans for state employees already operated in this fashion for a recurring savings of $100 million annually.

But other ideas are of limited merit. Going from contracting out to leasing from after a sale of prisons, which would net an nonrecurring estimated $13 million, only should be undertaken if a significant decline in the state’s prisoner rolls seems likely, because then a lack of flexibility could hamper correctional plans; for example, other states may pay more to house their prisoners and remove that space for use by Louisiana. Doing the same with state-owned office buildings poses reduced risk as downsizing of state government might create additional flexibility, but some space still will be needed and there must be a reasonable assurance that market rates wouldn’t go up dramatically to eliminate nonrecurring savings of $400 million. And while securitizing future lottery payments for a one-time estimated bonus of $250 million, much as the state did with the tobacco settlement of the 1990s that gave the state money then from a buyer that will have the state give its annuity payment to it for years to come, this creates a riskier difference here in that the state must make the money itself every year through the lottery and so any revenue below forecast could force the state to dip into operating funds to pay for it.

Even should these turn out cost effective, because all but the contracting of the health plan involves nonrecurring funds, the state’s Constitution would require that a quarter of that amount must go into the Budget Stabilization Fund. Then the remaining estimated $507 million only could be spent on non-recurring items, only one of which could translate into current revenues: paying down of debt, freeing up what would have been paid off in interest. On this sum of money, it might be $25 million. So, in reality, this strategy beyond the health care contracting part will yield little.

There would be additional recurring savings, such as personnel reductions for managing and maintaining buildings, but they won’t add up to a relatively large amount. Given these factors, why would Jindal even look at these four items with their gaudy numbers out front that after analysis and realistic appraisal of what could be shed might be less than the cost of a statewide election? Because Jindal, the cautious reformer, needs to buy time.

Jindal knows that if his initiatives come through – general privatization, Medicaid reform, civil service changes, and the like – Louisiana state government will work with increased efficiency, saving hundreds of millions of dollars yearly, maybe even higher. But it will take years for these to be fully realized and Jindal doesn’t have that luxury of time for the impending crisis.

This challenges Jindal as a leader as the past three years have demonstrated that Jindal has conservative reform instincts, but seems uncomfortable with spearheading bold, potentially difficult reform. Easy stuff like ethics he’ll pick off, but he has been hesitant to pursue vigorously when his agenda runs into stiffer opposition. Civil service changes to promote more efficient use of pay as an input and resource into better performance is a good example: he had an excellent idea here but he stalled out facing protracted resistance from political forces (and passed on a less-complete reform plan).

Jindal appears more comfortable when he sets up situations that force underlings to take dramatic steps. Thus he maneuvered higher education officials into finding their own sources of revenue, which as a strategy makes some sense as those closer to the actual service provision may have a better idea of what to do to close deficits. Yet for the broader budget the mostly marginal suggestions he gives for next year seem half-hearted, as if he wanted to provide evidence that he had some revenue ideas for the short-term. Still, the fact is that, as has been so obvious for so long, Louisiana has a spending, not revenue, problem, so the real solutions must come from the spending side. And that means taking on some powerful, entrenched interests, which is difficult.

The most helpful tactic Jindal could pursue would be amending the Constitution to take the state out of the straitjacket of dedicated funds that forces revenues to lower-priority areas at the expense of more important functions. However, this would require a special session of the Legislature and some considerable lobbying against the special interests that benefit from the dedications. So far, Jindal does not show he has the stomach for this fight. Nor does he seem inclined to get rid of big giveaways that cost taxpayers far more than they earn such as paying for empty beds in nursing homes and giving away money to make movies.

Jindal has great potential for producing fundamental, beneficial, and lasting reform of Louisiana state government. Whether such necessary transformation can come only from tinkering to make government work better is the risk he continues to run until he asserts bold leadership.

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