Jindal budget cleverly forces choice to erode populism

Despite the griping, coming largely from the usual suspects of the past three years, guess what, the fiscal year 2011-12 budget laid down by Gov. Bobby Jindal largely will be the one that comes forth as Act 11 of the 2011 regular session of the Louisiana Legislature at session’s end and may hasten the demise of the populist persuasion that has held back the state.

A few minor alterations may crop up. Perhaps most likely not to make it into the final version of this year’s HB 1 is sales of prisons, hoping to generate about $86 million, even as that move makes economic sense. Problematically, too many legislators see prisons more as job providers for which they can take credit for reelection purposes than as correctional facilities, demonstrated by comments made by state Sen. Eric LaFleur to a rally against privatization (ironically, some attendees of which were not state employees but already are employed by private concerns to run state prisons) where he expressed concern that the number of jobs would decrease as a result of the sales – while questions of increased effectiveness and efficiency and greater savings merited none of his attention.

Also of some concern was dependence on a proposed constitutional amendment to provide $92 million more to fund the Taylor Opportunity Program for Scholars. While the change sought, which would divert money going into a fund on which TOPS draws instead to have it flow directly to TOPS funding, provides more solid footing for the program, it does rely upon amendment passage months later to go into effect, which is uncertain. Further, necessary changes to TOPS to make it a more efficient distributor of state resources have yet to be made, so it is unwise to propose to voters the amendment without making the alterations, for it could end up guaranteeing more money to TOPS than needed – the problem supposed to be fixed regarding another fund by that very amendment.

Then there’s the issue of use for operating expenses of “one-time” money -- funds from intergovernmental grants or taken from the 225 pots of money with dedicated revenue streams (the latter at the end of the last fiscal year amounting to around $5 billion that was undesignated and unreserved). Legislators, in particular House leaders, have indicated  a preference that the use of such funds should be no more than the predicted rise in general fund revenues for the next fiscal year – the theory being the increase could compensate for such monies going forward. The Jindal budget pegs that number at $417 million, while the latest Revenue Estimating Conference accepted forecast saw an increase in general fund revenues for next fiscal year of $433 million. However, should either of the above measures not come to fruition, any additional use of one-time funds would violate that standard and could trigger deeper cuts than the relatively mild ones offered up by Jindal. Failure by voters to pass the amendment also would force usage of more one-time money through mid-year adjustments

This scenario would challenge the delicate balance struck that kept reductions in higher education expenditures close to zero and only minimally reduced health care spending, both areas having suffered the majority of mid-year reductions over the past six months. The latter certainly appears manageable through the state’s ability to restructure provision of health care to the indigent and in finding other efficiencies such as discontinuing a duplicative urgent care program and privatization. The fact that where whatever cuts intend to come in large part fall upon the charity hospital system may indicate continued movement to the state getting out of that business except for their use as teaching hospitals. However, unless the financial impact of the increased efficiencies have been predicted correctly, any underestimation may cause mid-year deficits to appear, so the Legislature could budget more cautiously, requiring cuts elsewhere.

A final potential pitfall could come if the Legislature cannot muster the two-thirds vote to allow higher education institutions to increase their own tuition, including charging for 13-15 hours taken in a semester. The budget essentially shifts $82 million out of the general fund’s responsibility to be taken up by self-generated revenues. (It has no savings for system or school consolidations, because these cannot occur until the next fiscal year at the earliest.)

Despite the loss of about a billion dollars from the federal government from the previous year, the Jindal Administration did remarkably well with this duty of producing the least painful, most productive budget possible, but it all could be upset if the Legislature does not follow the script Jindal wants. And that’s precisely how the Administration wanted to frame the budget – create an either/or situation as an incentive for the Legislature to make some tough choices. Either allow tuition and fees to go up, accept shifting a dedication from one purpose to another, and increase privatization of prisons, or the Legislature gets the unenviable task of finding at least $260 million in additional cuts, largely to higher education and health care whose supporters have squawked long and loud about the disproportionateness of previous cuts and who insist the core missions of each stand on the brink of destruction.

Because Jindal has vowed no tax increases and has the veto power to back that up, cuts that could rile constituents are the only thing legislators could pursue if they reject his plans. In an election year, such potential negative feedback could provide enough incentive to overcome populist attitudes of seeing bigger government with more employees and inexpensive college for everyone as desirable. If this budget encourages acceleration of the erosion of populism in Louisiana, it becomes more remarkable still.