The document
wishes to prevent redirection of about $345 million in recurring funds that do
not go to the state’s general fund to it, as well as about $144 million more in
nonrecurring funds to the same place. Instead, much of the recurring portion will
be directed to nonrecurring uses, while much of the nonrecurring portion won’t
be used at all. To compensate, the plan from the group, composed almost exclusively
of House Republicans who teamed up with their Democrat colleagues, hopes for
some savings and bonus revenues, makes minor spending cuts, reduces marginally
a number tax credits that serve to act as subsidies of activities that may or
may not cost the state money, and raises taxes on businesses, considerably on a
few select industries, but also generally to any concern that sells things
currently taxed and on some individuals.
The cuts largely are tractable, if perhaps a bit overstated. For
example, travel by state employees is cut, but in my own job I haven’t had that
covered for years, so there’s a real question of whether the amount the plan
envisions will be realized. The proposal also avoids the trap
of cutting all contracting across the board, which not only makes targeting
and prioritizing of this difficult thereby risking elimination of high-value activities
but also may run into legal problems, by cutting just a tenth of these that
would receive general fund money. A smaller figure like that likely can slice only
low-priority items. Mostly troubling is the wishing away of increased Medicaid
payments in a program, despite efficiency-inducing reforms, that continues to
grow at a rate typically underestimated.
But regarding the revenue side, permeating the document throughout is
the air of dishonesty and cowardice. It begins at the very start, courtesy of a
handout from the bipartisan group, which states “This proposal would eliminate
the use of non-recurring revenues for recurring expenditures in the FY 13-14
budget that contributes to repeated mid-year and end-year budget cuts and year
after year [of] billion dollar budget shortfalls.” Interestingly and
remarkably, by their own logic, this statement contains not just one but two
falsehoods.
Consistently, the “hawks” (although perhaps not the Democrats in the
bunch) have maintained that “nonrecurring” money is created when it is
collected for one purpose – even when that collection is regular and
predictable – and then used for general fund purposes instead. Yet their plan
asks to sweep $21.2 million appropriated in prior years for other general fund purposes.
So how is this not an example of using “nonrecurring” money for “recurring”
purposes?
Also, the group has recently taken to arguing that adjustments in
spending, through cutting, have occurred during fiscal years because of the
funds sweeps that take this money – again, predictable in pattern and regular
in being realized as revenues yet called by them “nonrecurring” – out of the
vessel into which it originally got dumped and transplanted into the general
fund. But that has nothing to do with these spending cuts because they occur as
a result of changes in forecast revenue prediction by the official body with that
task, the Revenue Estimating Commission.
The only way this could conceivably happen they way they assert is if a
funds sweep is so thorough and the predicted inflows/outflows to a fund are so
far off that more money gets swept than gets put in plus any existing balance.
But until last year, when it applied to just a small amount, the past sweeps
did not take out more than existed in the previous ending balance. (This year,
the total proportion of these at-risk dollars increases somewhat more under the
budget submitted by Gov. Bobby
Jindal.) So funds sweeps did not cause any need for reductions.
And the authors of the statement even admit this later in the document.
They count on $45 million more of revenues to appear as a result of a new REC forecast
out this week. This is on
top of around $130 million in surplus declared last year. So if sweeps
cause deficits requiring cutting, then apparently these funds aren’t being
swept enough when there are surpluses? To make such a statement so patently
contradicting reality and actual procedures means either these legislators, some
of whom now are in their third terms, remain ignorant of the intricacies in performing
their jobs, or they are liars.
The cowardice emerges in the treatment of tax credits. The plan lists
two dozen to be reduced in amount disbursed by 15 percent. Most are under $7
million paid out annually, but not all of the bigger ones are equal in the
worth of their reductions. For example, it is entirely possible that the
enterprise zone credits (given to entities who conduct business of a sufficient
size in economically depressed areas) and investment tax credit for insurance
premiums (given to lenders on insurance providing investment capital) actually
might make more money for the state, or perhaps don’t have large net costs.
However, it is known
with certainty that the motion picture tax credit returns less than 14
cents on the dollar, and the solar and wind tax credits returns about 5 percent.
Yet the haircut is the same for all.
Prudence and realistic appraisal of the role that tax credits play
would dictate that the most egregious giveaways be slashed the most, meaning
for film and solar; if not at least half this year (because the calendar tax
year begins and ends in the middle of the fiscal year) then in stages over the
next couple. But too many of the “hawks” in whose districts, for example, are
film industries and solar installers are too spineless to stand up to these
special interests, and so they allow wasteful spending to continue. And it’s
not like they had to do this as a compromise, because Democrats themselves have
railed against some of these.
These feet of clay also impact the noticeable absence of a far simpler
solution in the proposal: loosening of statutory dedications. In the “hawk”
mythology, any money collected as a result of a dedication shunted to its own
specialized fund becomes the equivalent of 30 pieces of silver if then
redirected later to a general fund purpose; even if the dalit money piles higher and higher, they chant that it’s better to
remain there unused (as much does, into the billions
of dollars) than for state government to soil its hands by using it for a
general fund purpose. So then why not purify the money by changing statutes to
direct the money to the general fund in the first place?
Naturally, that in and of itself would signal some cowardice: the legitimate
course would be to decide, given the true necessities that ought to be provided
by government, what level of revenue should be collected, how best to get it, and
then to what purposes it should go. Yet even skipping this step and diverting
some of this funding into the general fund without such analysis would provide,
in their cosmology, clean money to fund things; for example,
instead of money paid to the state to allow a company to skip all the time and
expense in removing an offshore oil rig and to sink it instead going into a
fund for artificial reef maintenance where it piles up and never will be used,
have it instead go to the general fund where the Legislature will appropriate
money from time to time for that maintenance, and the remainder used for more
important priorities.
But, again, this takes political courage to make that future vote in an
environment where multiple interests compete for limited funds. It removes the
excuse that legislators’ hands are “tied” because of statute – although untying
some dedications politically is easier because they require only simple
majority votes, while changing tax credits require two-thirds supermajorities. And,
it seems, among the “hawks” they are more scared of this than they are in
raising taxes.
For the plan increases business taxes $313 million and those on
individuals $14.2 million. Much of the combined total comes in the former of
suspending half of a sales tax break on some kinds of business purchases, which
undoubtedly will be passed on to consumers. To counteract the charge that they
have joined Democrats in funding bigger government, the “hawks” may point out
that they are diverting funds to nonrecurring activities, some of which are
worthy (working down unfunded accrued liabilities), some of which are marginal
at best (increased infrastructure spending), and some not at all necessary at
this time (chunking bucks into the Budget Stabilization Fund, the “rainy day”
account).
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