To get rid of one-time money, hawks embrace it

Q: What do “fiscal hawks” do when they want to spend scarlet “one-time money” on general fund operating expenses?

A: They call it “amnesty.”

And there’s the rabbit pulled from the hat by the “hawks,” a group almost entirely composed of Republican members of the Louisiana House of Representatives, as they contrived to extricate themselves from a mess of their own making. The group once had been known for its jihad against one-time money, or money gathered from recurring sources not tied into the general fund and from nonrecurring sources such as property sales, declaring long and loudly that such money could not stain spending coming from the general fund no matter what legal machinations made it eligible for use in the general fund.

Until in order to save the concept, they had to destroy it. Given the opportunity to excise about $490 million in such funds, where roughly two-thirds was of the recurring kind and the remainder nonrecurring, with House Democrats egging them on they hatched a plan to cut spending somewhat, pare back on tax credits, much of this being little more than pure subsidization of some grossly inefficient economic activity, and to finance the bulk by raising taxes, mostly on business.

Sick tax resurrection requires vigilance to stop later

Don’t look now, and it may take while, but on top of increased premiums, pricing, and taxes resulting from imposition of the Patient Protection and Affordable Care Act (“Obamacare”), now the Louisiana Legislature is setting the stage for its own tax increase on health care.

HB 532 by Speaker Chuck Kleckley by itself is innocuous. It creates a special fund called the Hospital Stabilization Fund into which money may flow that state government then will use to attract federal reimbursements for Medicaid, at a claimed leverage of three extra bucks for every two thrown in. It has sailed out of two committees unanimously and got overwhelming support on the House floor.

But its consequences could turn ugly in two years. The master plan on this calls for legislation then that charges an “assessment” on hospitals that backers claim would come out revenues of hospitals. If this sounds familiar, take the cue from state Rep. Sam Jones who worked in the Gov. Kathleen Blanco Administration when they ran an identical idea into law in 2005 – a “bed tax,” as he so honestly if somewhat imprecisely termed it on the floor during debate; more accurately, this is a “sick tax.”

Funding affirmed voucher program poses little difficulty

The Louisiana Supreme Court’s decision to strike down the funding mechanism for the state’s scholarship voucher program causes another complication for Gov. Bobby Jindal and state Legislature, but represents little more than a bump in the road for the path-breaking program.

In a 6-1 decision, the Court ruled that the Constitution said that the funding, dollars given to families to purchase education at participating public and private schools, could not be part of the Minimum Foundation Program that funds public education. The MFP is created by formula approved by the Board of Elementary and Secondary Education and ratified by the Legislature to distribute general fund tax dollars to the 70 independent agencies (including any charter schools within them) involved in educating at this level.

For last year, that program funding is estimated to be about $22 million for the almost 5,000 students taking part. For this year, with an expected 3,000 additional students at present with the chance that more could come, expenses could be closer to $40 million, although this is contingent on nonpublic school pricings. Because those levels charged cannot exceed the MFP average, the state saved $18 million last year through this program.

Hawks endorse selling out smaller govt for more taxes

With the presentation of their New Coke-like alternative budget plan for Louisiana’s upcoming fiscal year, the self-styled “fiscal hawk” budget reformers finally uncloak themselves in confirmation of the worst fears of genuine budget reformers and true fiscal conservatives.

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.

Despite window dressing, expansion bill merits rejection

While the latest attempt to expand Medicaid coverage in Louisiana has been greeted with some success politically and in public relations terms, it’s merely a matter of old sour wine in new bottles that compels its rejection.

Last week, SB 125 by Sen. Karen Peterson passed a Senate committee. Heavily amended from its original form, the bill seeks to emulate a similar measure passed in Arkansas concerning the controversial expansion of Medicaid built upon implementation of the Patient Protection and Affordable Care Act (“Obamacare”). Heretofore state lawmakers as well as Gov. Bobby Jindal have balked at the extra costs this move would impose on the state, which have been estimated to be $93 million by 2023 and by then growing at a rate of 15 percent per year, and with no guarantee that cost burdens will not rise further by changes in federal policy. The law and regulations also prevent the state from opting in during the initial period, purposely created to entice states into it with the lowest costs (although still increasing the overall burden onto taxpayers nationwide), and then withdrawing.

Last month, Arkansas worked out a deal with the federal government to allow the state to pursue expansion by tapping into Medicaid money to purchase private insurance to give to the population targeted for addition onto roles by Obamacare. In essence, it would route these clients through the new mandated exchanges. However, while Senate committee members, the crucial vote provided by Republican state Sen. Fred Mills whose pharmacy business no doubt would benefit from the extra anticipated business brought by expansion, were willing to push the similar measure forward, Jindal has continued to express skepticism.

Hawks may empower Jindal, Democrats while maiming selves

First, it was the political agenda of the moribund Louisiana Democrats that the so-called “fiscal hawks” may revive. And depending on what they do this week in the Louisiana Legislature, Gov. Bobby Jindal’s prospects may be brightened as well while they destroy theirs.

Better known as the Louisiana Budget Reform Campaign, the “hawks,” comprised almost exclusively of House Republicans, joined forces with House Democrats to sideline last week the budget supported by Jindal and other Republicans, in favor potentially of their own concoction. They object to the use in the operating budget of what is termed “one-time” money, or a combination of nonrecurring, one-off revenues, and recurring revenues (as defined by R.S. 39:2) from sources not directly tied to the general fund but instead demand a bookkeeping entry in legislation to get them into the general fund (the latter point apparently not realized even by at least one long-time legislator.)

Instead, they seem ready, with Democrats, to offer up their own version – but potentially at the cost of accepting tax increases and growth of government, which would seem to go against the rhetoric espoused by many of their members. This empowers Democrats in a way they could not have imagined a month ago, and that could extend beyond their wildest dreams.