Jindal uses cuts to advance reform agenda sooner

Gov. Bobby Jindal swung the budget axe and largely hit some unneeded trim. More importantly, some of the cuts, triggered by a $341 million current-year deficit, began to shape things into a more fiscally sound posture that he has advertised was a priority for him in governance.

By law, Jindal could cut up to three percent of the budget with no more than three percent from any budget unit. That made up a little less than half of the projected general fund deficit (doubled in relative terms since half of the year’s spending already has occurred at the higher levels) so technically the remainder of his suggestions still wait legislative approval. However, because the total deficit exceeds 0.7 percent, he also was allowed to go beyond just the fund in deficit, the general fund of which almost three-quarters of all appropriations go to health care and higher education, and make cuts in other dedicated funds – a panoply of appropriations attached to a certain revenue source or drawn from a revenue source or to satisfy a bookkeeping or legal requirement – of up to five percent.

In doing so, since these funds go certain activities, in essence Jindal told the departments with access to the funds to perform the same functions with less, absorbing a cut in operations. Although this constituted only about seven percent of the total, it increased flexibility and the necessity for the general fund to absorb everything (not all dedicated funds got the maximum cut; some didn’t get cut at all). Jindal also targeted strategically cuts within the general fund programs that will constitute $317 million or so of them.

How he did it was instructive. By the ratios of general fund spending, $252 million should have been pared from health care and higher education, but targeting cuts put the final total at only about $173 million. Some of this could be achieved by the hiring freeze earlier instituted also allowed by law which reached all sectors of government, not just those dependent in any way upon the general fund, but the remainder of it did not follow what some had advised, across-the-board measures.

Smartly, Jindal used this power to promote his agenda, in a way getting an opportunity early to shape parameters of the kinds of reform he wants to bring to these areas. In higher education, for example, he backed up his assertion that the most important area of development was in community colleges and technical schools by leaving them out of the cuts.

In health care, he showed that efficiency was going to be injected into the system even if some interests would get a smaller portion of the pie as a result. For example, he signaled reality had arrived more quickly that thought by instituting a measure he had talked of in reference to overall reform of the Medicaid system scheduled to commence in 18 months, limiting non-vital prescriptions paid for monthly from eight to five a person. He also began to reduce incentives towards institutionalization by sensibly cutting the state’s reimbursement rate for facilities that have residents who leave for short periods, instead of paying at the full 100 percent as has been custom. (Hopefully, reductions in waiver programs that also work as incentive not to institutionalize individuals that can be cared for in the community won’t sabotage this effort.) He also placed reductions on medical provision that have been identified as inefficiently used, either by lowering rates or by changing procedures.

In other areas, he looked to eliminate what seemed to be duplicative, not needed at the current level of consumption, or where federal dollars could be eased in. There will be some retrenchment in areas some people find beneficial. For example, prisoners and the indigent who need mental health services in some places will have to suffer more inconvenience in gaining physical access to those services, and the Department of Social Services will continue its hiring freeze the remainder of the budget year as positions come open, stretching its human resources further.

As it was, Jindal created opportunity out of crisis. Those who believe that state government, which features higher spending and personnel per capita than most states, should go on a diet by eating less (by cutting taxes) and exercise (to reduce its size) should be pleased by his actions and recommendations. Additionally, those who believe in certain priorities – education continue as unmolested as possible, restructuring of health care to promote efficiency without reduction in service, downsizing or elimination of low-payoff programs, aligning demand with resources – should take heart in his chopping block list. While nobody likes to see budgetary problems, the silver lining for Jindal and supporters of this agenda is that it allows him to commence reform efforts sooner and with less opposition (driven by the imperative of the crisis), and he appears to have done so in carrying out his duty.