Don’t let Louisiana’s artificial economy fool you, nor misdirect on where surplus funds should go.
The Democrat Gov. John Bel Edwards Administration recently announced a budget surplus for the past fiscal year that came in around $850 million, minus certain dedications. Not that elected officials had much to do with that; unprecedented levels of borrowing by the Democrat-controlled federal government followed by flushing that cash to state and local governments and directly to citizens created a huge monetary injection into the economy, with states and their local governments the beneficiary of $500 billion of that directly with more coming from government raking taxes from people spending their granted borrowed funds.
Nor did Louisiana distinguish itself among its peers. While spooling out surpluses in the hundreds of millions of dollars, many states did much better on a per capita basis, largely as a consequence of lackluster discipline among Louisiana policy-makers by the Republican-controlled Legislature too easily acquiescing to the big government vision of Edwards. Things would have been worse except for the series of strictures the Constitution lays down for use of surplus dollars.
For decades, added to on occasion, the Constitution put at the front of the line use of any surplus in a past fiscal year a list of several items of a nonrecurring nature. However, five years ago voters approved a somewhat-unnecessary diversion (because the existing Budget Stabilization Fund could have had its four percent current revenue cap raised and its uses slightly tweaked) of a special tranche of funds into a new Revenue Stabilization Trust Fund. It went to the front of the line by isolating two sources of revenue, excess corporate income taxes and mineral revenues (shared with the BSF) as defined by law, and sliced these off first into its coffers.
That resulted in a first-time deposit of $205 million off the top, heading towards $5 billion whereupon up to a tenth can go towards capital outlay. While this allows the state to greatly increase its savings (the BSF never has gone over even a billion bucks), a provision allowing siphoning any amount by two-thirds majorities in both legislative chambers for ill-defined purposes ultimately may make it ineffective and enabling of oversized government.
The remainder follows the traditional path: a quarter of the roughly $650 million left to the BSF and a tenth to pay down the unfunded accrued liabilities in retirement accounts, a portion of which constitutionally must be paid off within eight years. That would leave around $423 million on other one-time items, which the Edwards Administration wants to spread out on a variety of capital outlay projects, with legislative approval.
It’s the wrong move. Two much more compelling items loom that provide better use, beginning with the next installment of a debt the state owes to the federal government for flood protection. Wisely, last year the state chose the option of paying off around $350 million a year over three years starting this September, which included half a billion smackers of interest forgiveness. Otherwise, a three decade-long repayment schedule with lots of interest piled on would have nearly tripled the figure.
The announced surplus, in part or whole, should towards making at least the next payment. If choosing just to make the next payment, the roughly $60 million left over has another excellent destination for use, paying down the UAL.
Louisiana, in both absolute and comparative terms, has created an unsound fiscal situation with these and other obligations. Taxpayers owe nearly $19,000 each for government debt obligations, mostly because of the UAL, ranking in the bottom ten of states for per capita owed. By way of example, to satisfy constitutional requirements unfunded pension liabilities cost Louisiana schools $853 million last year out of their operating funds. Money left over from the debt payment would ease this burden a bit.
The false economy built upon unsustainable borrowing by the federal government won’t last, especially in Louisiana which has the worst recovery among the states from the Wuhan coronavirus pandemic, the event Democrats used to put the paper money printing presses into overdrive. If Democrats are going to risk permanent attenuation of the American economy by sending the country deeply into debt, the least Louisiana can do is use that largesse to attenuate its debt.
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