Budget reality check needed for Jindal, Legislature

A bad week on budgetary matters for Gov. Bobby Jindal got worse when the Revenue Estimating Conference unexpectedly found itself approving a forecast that was not more but less, by $77 million, than those previously approved. This news, contrary to expectations voiced at the last REC meeting a couple of months ago, now means the Jindal Administration and the Legislature will have to grapple with a hole nearly $300 million greater than envisioned in the Administration’s initial budget.

Only Tuesday did the dominoes began falling and quickly. Then, the House Appropriations Committee decided to remove two contingent sources of funds, $86 million from the sales of prisons and $92 million by channeling money from the Millennium Trust Fund to fund Taylor Opportunity Program for Scholars grants. The former would require legislation that the administration has ceased to back actively, while the latter depends on an affirmative legislative vote and one from the people no earlier than October, months after the new fiscal year’s start.

In part, this budgetary strategy was somewhat reckless by the Jindal Administration because its appropriations language did not really address from where monies to make up for the lack of funds if the contingencies didn’t come through. For example, on p. 166 of HB 1 (as originally):

Provided, however, that the State General Fund (Direct) and TOPS Fund appropriated herein for the Tuition Opportunity Program for Students (TOPS), associated expenditures and the number of TOPS awards are more or less estimated.

Provided, however, notwithstanding that the amount shown appropriated from the TOPS fund is $15,924,186, it is expected that this amount will increase by approximately $92.3 million in Fiscal Year 2011-2012, subsequent to passage of proposed legislation and a voter referendum to more strategically utilize the Millennium Trust Funds.

However, it is the commitment of this Administration, verified by the recommended “More or Less Estimated” language relative to the appropriation, that the TOPS needs will be fully funded in Fiscal Year 2011-2012.

That’s just too vague for a responsible approach to presenting a balanced budget. Perhaps one motivation as to why Jindal went in this direction was to put political pressure on legislators to pass his initiatives, hoping the REC might boost the next forecast and knowing that he could roll $118 million of unencumbered cash into the fiscal year beyond the next if either thing failed. Suddenly, that amount has fallen as a result of the revised forecast to $41 million, insufficient to cover either contingency if failed.

And it may go close to zero, because the next day the Joint Legislative Committee on the Budget also derailed another $37 million, when it refused to allow state universities to increase tuition by 10 rather than five percent. Legislation granting the extra five percent stipulated the JLCB had to approve, and its rules say a majority of both House and Senate delegations on it must approve; the Senate’s delegates deadlocked at four votes apiece.

At the same time, neither did Appropriations come up with an entirely satisfactory solution itself. Basically, it will force state government to forgo paying a portion of state workers’ salaries (because of a calendar issue that puts 27 two-week pay periods into the upcoming fiscal year where most years only 26 periods need budgeting) and on top of that reduce travel and supplies expenses, together totaling $81 million. Given already extensive retrenchment in the latter area, unless an unusual amount of attrition occurs it means more layoffs beyond the thousands of jobs already scheduled for elimination under the budget, which may begin to impact important state services.

The unspecific and nebulous nature of the further cuts seemed to have little regard to any kind of priority planning. But one solid change did come from these amendments, and that was emptying the state’s bribery-to-business funds, better known as the Mega-Projects Funds, by $82 million. It never has been good policy to dole out corporate welfare to bribe businesses to locate in Louisiana when a far more effective use of such funds would be to provide permanent tax relief that would provide even greater and broader incentives for the same purpose, so this was a positive development.

Jindal probably can get the JLCB to go along eventually, and the Administration should be clever enough to understand that if it can’t succeed with prison sales that it should find a bill onto which to graft a change in state law to contract operations at more than the two prisons currently legally enabled. Some savings will result from the latter and the rest of the unencumbered cash for there not being a sale. That leaves the TOPS diversion in the air, and the Mega-Fund money can be encumbered for that until the amendment, as is likely, passes, and then the new flow can take over.

Rather than issue apocalyptic scenarios to pressure legislators, the Jindal Administration should work along these lines. And rather than designate cuts and then throw their hands up in the air, legislators should just make sure that contingencies are covered in a way that promotes rational budgeting based upon a genuine assessment of needs, priorities, and resources available. The latest disappointing REC numbers put an exclamation point on commending this approach.