Search This Blog


Has clueless Blanco caught fiscal reform religion?

When it comes to the state’s response to the fiscal challenges presented by the recent hurricane disasters, can elite and popular opinion bludgeon Gov. Kathleen Blanco into doing the right thing?

While within Blanco beats the heart of a liberal ideologue (save on social issues), throughout her governorship history has shown when her ideological opponents make enough of a ruckus she often caves in to them. Such seemed to be the genesis of her Saturday night massacre of a number of state agencies budgets, after mainly Republican legislators put the heat on her calling for her during the special session to throw her weight behind large budget cuts.

At first, it appeared that she would make cuts only up to 5 percent in most parts of government, some inquiring mind on her staff brought up language from Act 16 of this year’s regular session, the appropriations bill for the budget which, in the interpretation the administration sought from Attorney General Charles Foti, allowed her to cut up to 10 percent.

Legislators have cried foul over this, disagreeing with the ruling and saying their Joint Legislative Committee of the Budget statutorily needed to review this (although this language has been in the appropriations bill at least for almost a decade, and none of them ever bothered to find a definitive answer for this?). But Blanco bulldozed ahead and not only expanded the total reductions since the disasters to about a half-billion dollars, or about halfway to closing the deficit at present (although it will go higher), she made some good choices, particularly in choking closed the grant programs in the Office of Urban Affairs and the Office of Rural Development within the Office of the Governor – better known as the Urban and Rural (slush) Funds which are capital outlay gifts from the regular budget to individual legislators’ districts.

But before we can conclude that Blanco has caught the religion of fiscal discipline, we must note that she has yet to rule out a raid on the Budget Stabilization Fund and seems even more enthusiastic about the use of debt to fund current operations in the short term. And her apparent cluelessness on the differences between government and business borrowing erodes this confidence still more:

Blanco countered that borrowing money is just what businesses have to do when they get into a desperate situation outside their control. "Every business that is in trouble is happy to borrow some quick money. It is not very different from what we are experiencing," she said.

For one thing, if businesses are truly in a “desperate situation outside their control,” that implies it would be reckless to borrow money since, because these businesses cannot control the situation, by definition there is no plan that can bring about profitability, so why throw good money after bad? Also, if borrowed debt cannot turn around the situation, it is only the owners of the business (and, to a lesser extent if at all, the business’ creditors) who get hurt. Borrowing to fund expenses rather than assets of a sort leaves future taxpayers with nothing more except promissory notes to fulfill, which hurts the entire state. Finally, businesses don’t have to borrow to stay afloat, they can cut back operations, something even easier for government to do because it faces no marketplace where better competitors could drive it out of business because it cut services.

Hopefully, this fiction of hers one way or the other will get vanquished from her mind and she’ll concentrate on a combination of cuts and the presently available funds constitutionally from the Budget Stabilization Fund (one-third its balance). In fact, legislators may dare her to demonstrate her lurch towards fiscal sanity.

Normally a Blanco ally, state Sen. Francis Heitmeier, the Joint Committee chairman, asserts “Whatever cuts [Blanco] make[s] will be on the table as to whether we as a Legislature decide to keep them, enhance them, borrow money and fund them or restore them.” Maybe so, but then Blanco will have the chance to wield her veto pen, and will if she truly has caught fiscal reform religion.

No comments: