Radical change needed or budget follies to continue

Mistakes made in fabricating the fiscal year 2016 budget for Louisiana provide lessons for what should come next year to shape the 2017 edition.

Not that legislators or Gov. Bobby Jindal had an easy task at hand. The FY 2015 budget the day it went into effect started about $1 billion short, or four percent, for FY 2016. This did not count known spending growth demands (such as in health care driven by federal grant strictures) nor subsequent coming up short in forecast revenues (about $275 million worth), largely because of the steep decline in the energy sector (although almost half of that was recovered by an unseen surplus developing during the session).

In previous years, funds sweeps – where monies for a particular purpose had pooled but lack of the need for which they were intended built up their balances then made accessible for other purposes by appropriation – had made up much of the imbalance. But this year, a combination of the larger size of the deficit plus the deterioration of these funds’ positions (such as with the Medicaid Trust Fund for the Elderly, which was depleted in time for a constitutional amendment to kick in locking in reimbursement rates for nursing homes funds for which had been drawn from the fund) made this strategy unable to close the gap entirely, with only around $135 million sorted out this way.

Pay for play another reason to consolidate systems

While many times this space has counseled on the desirability of merging and increasing transparency of Louisiana’s state and state-affiliated retirement systems, another incident reinforces that wisdom and sheds additional light on the potential problems that come by ignoring this advice.

In a story that echoes from other systems in the recent past, the longtime executive director of the Municipal Employees Retirement System of Louisiana Robert Rust is under investigation for questionable expenses after media reports, by both authorities and its board which has suspended him with pay when staffers reported they suspected in connection with those reports that he began tampering with records related to these. Based on those reports, board member (as this elected official is on all the 13 state and statewide systems) Treasurer John Kennedy has questioned over $100,000 of expenses in recent years, which appear to violate laws and regulations, and tomorrow a meeting concerning that will occur where Rust can answer for these. (The chairmen of the Legislature’s committees on retirement also are members but seldom interact with the boards; often but not always does the Department of the Treasury attend meetings, usually that not being Kennedy.)

In previous communications with the board, Rust’s alibi has been that the expenditures did happen, but that much did not involve retirement system money. Instead, he has contended that these were drawn from an account designed for “educational” purposes, from money donated. Some of the other he claims were for legitimate business purposes, even as some of the amounts were eye-popping in their size. Most expenditures came in conjunction with conferences Rust organized, which he said served a purpose of continuing education for board members (legally required for all 13 state and statewide systems’ boards) they must have annually – eight hours of investment training, four hours of actuarial science information education, two hours of education regarding the laws, rules, and regulations applicable to each’s system, and two hours of instruction on fiduciary duty and ethics.

Unless followed up, LA film tax credit changed little

State Sen. JP Morrell should not be worried, but be happy with HB 829, for the ticking time bomb it contains makes the Motion Picture Investor Tax Credit look more and more like an undead vampire you can’t kill that continues to suck the life out of Louisiana.

Morrell acted all upset when the conference committee forwarded state Rep. Joel Robideaux’s instrument approved ultimately by the Legislature, which then progressed on to Gov. Bobby Jindal’s disposition. Echoing the industry’s representatives, he decried the outcome, claiming he was left out of final negotiations over the bill – even though he sat on the conference committee dealing with it. That’s probably because from the start of the year in discussions of reforming the wildly generous credit he acted as the industry’s most reliable shill among legislators, and those individuals more interested in beginning to address the program’s chronic wastefulness – at best it returns less than a quarter to taxpayers for every dollar they surrender to filmmakers – knew he would contribute nothing to addressing the fiscal hemorrhage it has become.

Except that they didn’t quite accomplish it. The bill establishes a $180 million annual cap – although considering that implies a waste of over $135 million a year this actually makes progress as the last few years have averaged in credits paid out of over $250 million annually – on credits redeemed, not certified. The industry fears that, with several hundred million of these outstanding, redemptions could crowd out a significant portion of new expenditures that qualify for credits (Morrell did have several bills pass that marginally tightened program qualifications that should save a little on the amount of credits issued).

St. George saga suggests changes to legal process

In the wake of the close-but-no-cigar effort to incorporate the city of St. George in East Baton Rouge Parish, the silver lining to an outcome that smothered democratic impulses and the exercise of liberty should be to reform a process that instead strengthens these.

Witnessing this process play out as by statute revealed that the law needlessly suppresses people’s abilities to choose their own form of government, weighing matters far too heavily in favor of opposition that, in the case of St. George, represented in large part greedy self-interest of some elements in the city of Baton Rouge. This effort highlighted several changes that should occur to these laws.

There are some general matters necessitating change, as noted previously. The open-ended nature of the process leaves too much uncertainty, where currently a petition is gathered over any length of time and temporal constraints don’t begin until this is turned in officially. Over the passage of too much time, geographic and demographic conditions can change too much, distorting actual popular will. Thus, the procedure should have a notice of intent first filed, where the parish registrar in 30 days ascertains the exact number of registered voters in the specified geographic area. Then, the organizers have nine months to collect signatures, the registrar 30 days to check them, and then a final 30 days for organizers to collect the number short, if any. If it all checks out, the question goes to the ballot at the next regularly scheduled election if completed prior to the deadline to submit a ballot proposition; if not, then on the ballot of the one after that.

Myths about LA budget hide its disappointing features

One of the more disappointing recent regular sessions of the Louisiana Legislature has concluded, and the mythology already spreading about its budgeting when analyzed thoroughly and dispassionately explains why this deserves lamentation. Let’s check out these elements of the mythical narrative:

Myth: SAVE is a cypher, its only use being to give cover to Gov. Bobby Jindal and others to claim taxes did not go up as a result of the various actions of the session, so it may be superfluous but essentially is harmless.

Reality: The Student Assessment for a Valuable Education tax credit (in SB 93), derided for gimmickry by its sucking in funds from reduction or elimination of other tax credits to act as an offset, actually has a substantive impact on budgeting. In essence, it creates a new dedication in a budget where 81 percent of state revenue collection already has a dedicated destination, almost $350 million to higher education, or locking in another 4 percent. Thus, through its sunset in fiscal year 2020 it tightens the fiscal straitjacket that serves as a major cause for Louisiana’s budgetary problems.