Readers may be forgiven if they get a headache trying to figure Louisiana’s budget situation at this time five days before session close. Typically in a session at this point details are being haggled about to fit a defined number. Instead, not only do we have no defined numbers, but even bigger breaks with precedent loom on the horizon.
Almost at adjournment sine die, the House and Senate differ over not just numbers, but over several assumptions after conclusion of Senate work on the budget yesterday. The Senate assumes use of the Budget Stabilization Fund ($198 million), proceeds from this fiscal year’s tax amnesty ($242 million), a deficit $261 million larger that must be paid this year out of next year’s funds, a deficit for next year of $57 million more, and the Mega-Projects Fund ($55 million) is committed to uses and unavailable for use. In addition, whether the BSF can be used next year, either by legislative change to make it easier to tap or because circumstance will make it available under present rules, and whether it must be refilled next year even if used this year, are unknowns subject to the political process. To add more uncertainty, nobody knows whether $13.6 million will be around as Gov. Bobby Jindal has yet to decide on the fate of a bill that would reduce drivers’ license collections by that much.
These assumptions of the Senate run entirely counter to the desires of the House leadership, where Speaker Jim Tucker refuses to use the BSF without paying it back next year (although he said he had a plan to make it over three years, which seems to be part of the bill to make fund tapping easier), refused to recognize the tax amnesty money, refused to recognize the extra deficit amounts, and remains skeptical about whether Mega-Project funds have been committed. Except for the last, until he gives legal assent to the Senate assumptions, they do not exist in a legal sense.
Thus, as noted previously, Tucker pretty much holds most of the cards in a strategy designed to reduce more spending now to make it easier and more certain to cut in the future. As such, his method is to be preferred. However, this does not mean that there are not some merits to the Senate’s approach. It reverses House cuts in higher education to about $25 million and health care to $25 million in part by getting rid of all House member amendments, surprisingly allowing none of their own, and funding to the governor’s office semi-version of them. These “slush funds” while attenuated by the efforts of Jindal, never were completely eliminated by him or legislators. This should be retained by the House.
The Senate also boosted spending on Medicaid to attract more federal dollars. As long as this extra money is used wisely, not just flung out there but coordinated with reform plans that include closing state charity hospitals, supports and services centers, and privatization of mental health services, it can properly broker the state into a transition to a more efficient system that will be challenged by the coming of the national Democrat-passed health care legislation that will increase demand for Medicaid while simultaneously increasing its costs and lowering quality.
Therefore, the best strategy would be to take the basic details of the House budget minus the slush and leverage that into about $100 million more for Medicaid. The Senate may have thought it was being clever and could think it would work a deal to restore these and add their own if Tucker gave in on something like recognizing amnesty proceeds or permitting BSF withdrawal. Instead, this alternative could delegitimize whole concept as legislators would find out over the next year that the world will not end if local groups and governments have to raise money on their own if the needs are even important enough to try to do so.
Tucker also should stand firm on draining the Mega-Projects Fund, which Jindal also apparently would oppose and could through a line-item veto; again, a historic opportunity that should not be passed up to end the counterproductive practice of paying people to do business in the state. The problem is for Jindal then he’d have to make $55 million in cuts elsewhere and no slush funds to excise to punish legislators. This tactic could then square with the Senate’s preferred amounts on higher education and health care, and if Jindal complained about “commitments” to the fund, Tucker could remind him that if they actually come about (few ever do), he’d find a way to rustle up the money when needed. The only leverage Jindal would have is whether to veto the $13.6 million fee reduction in exchange and have that retained money available for the fund, but given the large majorities that passed the bill he may risk an override with, again, no slush funds excising as a counter-threat to prevent that.
As painful as budgetary concerns have become and will escalate, it’ll be worth it, if this blueprint is followed, to have stakes driven through the hearts of two of the vampires that plague good policy-making in Louisiana, with the end of slush funds and removing of remaining funds from the corporate welfare program to where they may be used more wisely.
Another act has been added to the drama of Louisiana budget-balancing, in a fashion that points finally to the denouement.
Last week, even as budget analysts projected a $261 million additional revenue shortfall for the fiscal year to close Jun. 30, the Revenue Estimating Commission refused to recognize this and incorporate it into state planning. The REC needs unanimity to act, and one of its four members, House Speaker Jim Tucker, refused to give his assent to this to the consternation of both the Gov. Bobby Jindal Administration and the Senate in the form of its Pres. Joel Chaisson.
Recently, Tucker had raised Chaisson’s hackles by maintaining he would not approve of use of the Budget Stabilization Fund to offset the already-existing current year shortfall unless it was replenished over the next budget year, which Chaisson rejected. Impressively, Tucker called the implicit bluff – the assumption the House had to have the funds available – by budgeting without them which has left the Senate consternated and the Administration uncertain and confused.
While there is some uncertainty to the projections, if they manifest when the next required fiscal snapshot is taken, by the beginning of October to close out the previous fiscal year, then they must be dealt with in the next budget. In essence, they would lop revenues off next year’s budget. This strategy may be better because the projections may be too pessimistic. Tucker also continues to refuse to recognize $406 million in tax amnesty money which could go to replenishment (since much of it would be classified as nonrecurring and one use of such funds would be to chunk them into the BSF).
However, doing so also plays into Tucker’s current position of resisting using the BSF (immediate replenishment in essence, as Chaisson has stated, is little more than a bookkeeping maneuver, so, even if he agreed, the net effect would be like not using the Fund). By hanging a deficit out already into next year, it may cool ardor to use it now.
He also newly has suggested paying back funds over three years instead of immediately. How this squares with the previous contention that the Constitution requires repayment quickly that trumped the Senate position that by statute it could wait remains unclear. But, most intriguingly, analysts say the state-sourced revenue declines may not yet be over, meaning the BSF could be used year as its use is triggered when revenues fall from previous levels.
That until now it was not predicted to do so has led to legislation – Chaisson’s SB1 and SB 2 – that would permit usage when revenues as a whole (meaning state plus federal) fall. Tucker has not been in favor of this and momentum to allow this, which would alter the fundamental idea of what the Fund is all about, now may recede.
These events suggest Tucker is trying to frame the issue to force deeper cuts now and use the Fund later, as opposed to Chaisson’s doing the opposite, without tampering with the present BSF mechanism. By refusing recognition, he almost assures that revenue projections will be lowered for next year, allowing BSF use under its current rules for next year. Taking deeper cuts now may mean reduced cuts next year and beyond, and the Fund will be full and available for use in the next three years, especially the fiscal year after the upcoming one where the removal of federal extra spending funds will create an even bigger hole (as long as the state part also continues to decline, but this may not happen). The lengthened repayment process also would facilitate this strategy.
Tucker holds all the cards to allow this to unfold. He can get the House to block any use of the BSF, force a slimmer budget onto the Senate and Administration, arrange revenue recognition to allow the Fund to be tapped starting next fiscal year, and get his three-year plan tacked onto something and into law within the week (final adjournment occurs no later than 6 PM Jun. 21). In exchange, he may let SB 1 and SB 2 go through which (with voter assent this fall) can allow for use of the Fund over the 2011-13 period as well as the 2010-11 fiscal year.This well could be the optimal path out of short-term fiscal difficulty for the state. And if Tucker can have the public assign credit to him for it, it may begin to erase the negative image that many got of him when he spearheaded the vetoed effort to pay part-time legislators like full-timers. In this case, his chances of continuing a political career after his last term is up in two years may be experiencing a resurrection.