GOP unforced LA budget errors leave room for mischief

While the parameters will become clear by the end of the day, the apparent compromise product for Louisiana’s operating budget represents a small defeat for conservatives in concessions on extra spending that perhaps did not have to be made and in the potential for bigger government down the road.

As previously noted, the conservative Republican faction that controlled the Senate, about a third of the House of Representatives, and had the backing of Gov. Bobby Jindal, largely could have dictated terms with the assistance of the non-conservative wing of the party (with a couple of other non-party members) in the House, the so-called “budget hawks” who comprised about another third, cutting Democrats out of the deal. Being that as a whole Republicans had a majority, that should have been the natural outcome, and it largely was.

The “hawks” came on board because the use of “one-time” money – a term that includes surplus recurring revenues dedicated for one purpose but which are used for another and nonrecurring monies from one-off transactions such as property sales – was limited and two bills, HB 437 and HB 620, were promised to be passed in addition to the budget in HB 1. They actually didn’t have much leverage over the former because the amount of that money fell under the total specified in the House rule that would have required a two-thirds vote. But there was trading going on with the legislation, because of the majority needed not just to pass a budget, but also because of the constitutional two-thirds vote requirement to take it up (and the other two bills) with less than three days to go in the session.

Had the conservatives not dealt with the “hawks,” the latter would have been free to gum up the works with the assistance of Democrats. There was no way that combination could force its budget into law, but it could prevent anything else from happening. So the legislation became part of the deal. It would be in statute, and make the Revenue Estimating Commission declare not just revenues but fund balances either recurring or nonrecurring in scope, in HB 437, and in HB 620 would produce a breakdown of expenditures into discretionary and nondiscretionary in the event the combination of health care and higher education expenditures are reduced from the previous year’s level.

The latter largely expands paperwork, but the former contains some potential for mischief because it fundamentally alters the nature of the REC as a body that forecasts the amount of revenues coming into government by adding to it the discretionary power to decide not in a government-wide fashion as present but specific to each fund whether money in it is recurring or nonrecurring, subject to no appropriation for any reason can exceed the fund balance plus dedicated revenues forecast to go into it (meaning, for example, no counting on future years’ revenue or lending money from elsewhere to go into that fund can be used) and that money that does not come from the same source for three consecutive years can be declared recurring (i.e., proceeds from a property sale could not be used for operating expenses). In short, rather than declaring a lump sum as nonrecurring and therefore usable only for a limited range of purposes, now some 300-plus such designations would be made.

Potential for political mischief increases this way. That already exists because whether and how much to recognize as revenues and in what form rest of unanimous decision of the four-member REC, three of who represent the governor, House, and Senate (the fourth being a public university economist), but becomes magnified because some funds, as their streams roughly match actual need of the function they back, remain relatively low in surplus while others, whose revenues gathered exceed actual need considerably, acquire relatively large surpluses. With a blanket declaration, much more discretion exists to dip into the underutilized funds, but those with a political agenda to expand government or prevent its reduction, if they control the three political positions and can convince the fourth, can balkanize surpluses into nonrecurring status more easily this way, limiting their use as revenues backstops and thereby increasing pressure to raise taxes to provide that revenue.

At least conservatives managed to block “hawk” attempts by constitutional amendments to increase the straitjacket on the state’s fiscal structure. For their part, “hawks” had to accept some one-time money in the budget but got these measure promised into law, even as more far-reaching measures that addressed more the taking some of the budget process power from the governor got tabled.

Whether conservatives in order to get a good budget had to give out a pay bonus to public school employers, minus administrators, and provide some additional funding to districts is another matter. Conceding part of the “hawk” agenda should have been enough to grab the two-thirds votes needed for the three bills without this, and the only reason that it’s not odious is it was put in the form of a bonus with a promise to seek its permanency in the future instead of doing that starting next month, even as votes may have been needed to make sure funding of the state’s scholarship voucher program was secured.

Any promise to increase per employee spending on public schools is unwise unless the Minimum Foundation Program formula, which funds public schools but cannot be used for the vouchers, can be written to exclude funding to districts representing students on the voucher program. This means less money would be allocated to public schools, which this then could remain in the general fund and be apportioned to the voucher program. As mostly conservative reformers now sit on the Board of Elementary and Secondary Education who wisely realize that a voucher program creates incentives for public schools to perform better, they may well change the formula to reflect this, which must be accepted by the Legislature or rejected without alteration. But if it doesn’t, then there’s reversion to the last acceptable formula which at present doesn’t do that, meaning then the only BESE option is not to include a 2.75 percent increase that can fund increased salaries permanently, which should be its course action in order to fund vouchers. Perhaps this is what Jindal meant when he said he would try to make the raises permanent, if the MFP is altered as such is accepted by the Legislature in the future.

If so, no harm is done. Assuming BESE cooperates, Jindal and conservatives can remind the Legislature that any permanent pay raise depends upon diversion of funds to vouchers. Only in the unlikely circumstance that BESE goes against reform would this come back to haunt them. Meanwhile, if there’s any case to be made for finding a dedicated source of funding for any single program in a state government with dedications gone wild, it’s for vouchers, and reformers should pursue this in the final two years of Jindal’s and BESE’s terms.

Again, whether that pay raise and other temporary public school bucks need have been given to get a budget remains in question, and that it gave Democrat fortunes a boost in indisputable. And the potential does exist for this measure and that involving the REC to fall prey to political machinations that will bloat government further contrary to conservatives’ wishes. Still, from Republican Party perspectives the resulting deal only was a minor if possibly unforced setback, even as perhaps it was one, because of internecine quarreling and political positioning within a party trying to learn how to govern the Legislature perhaps too lightly overseen by its symbolic leader the governor, that never needed to be inflicted upon itself.