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Budget critics miss mark, but larger truth emerges

Complaining regarding some budget deficit strategy being employed by the Gov. Bobby Jindal administration is akin to a mountain being made out of a molehill, but from the peripheral froth there appears a central point that policy-makers would do well to implement in this year’s budget deliberations.

The Administration and Legislature made a concerted effort in the 2008 cycle to create a budget where continuing operations were not funded by so-called “one-time” funds, these often arriving in the form of federal grants. That commitment has been called into question because now under the emergency conditions of a state budget deficit, part of the Administration strategy has been to take funds that will not appear to be spent on a certain activity and shift it to others that appear will run short. Some call these unexpended funds “one-time” money but fail to recognize the conceptual difference between the planned strategy of 2008 and the strategy in the breach of 2009.

If an item is budgeted for some kind of continuing cost, whether it be to pay for salaries, supplies, reimbursements for outside services, etc., there is consistency when the revenue source itself also recurs, through some type of taxation or investment returns. Budgeting is an imprecise practice so it is common in government for there to be surpluses in certain accounts because of inaccurate predictions, and as common to shift funds from one category in surplus to another that is in deficit.

Making this situation different only in degree is its scale. Here, we are not considering shifting a hundred bucks from supplies to travel in a department, but millions from one agency to another. Still, the principle remains the same: if in retrospect too much of a recurring source of revenue got put into a budget account for textbooks and not enough for Medicaid reimbursements, the former does not become a “savings” or “one-time” money just because it didn’t get spent for a particular purpose.

By contrast, if money comes in from a windfall, or a grant of limited duration that then would allow money that might have been committed to one purpose to be shifted to another, that is very conceptually different since there is no dependable recurring source for that funding. That is why Jindal also can claim $400 million set aside for economic development purposes is “one-time” that should not be used: a specific appropriation at one time and for one time only was set up to fund this, so subsequently it becomes a source of revenue to be spent on a specific purpose. It cannot be a recurring source of funds for things that do not fit its purpose.

However, this leads to the larger question of whether the end purposes of budgeting are accounted for correctly. That a surplus appeared in the textbook account, for example, could be a result of poor planning which is not uncommon given typical budgetary strategies used in government. Unfortunately, a widespread practice in budgeting in government is the incremental inflation tactic, where a budget is calculated merely by taking last year’s accounts and adding a sum around the rate of inflation to them.

Practices such as this are supposed to be taken care of by RS 39:87.1-87.4 which mandates that Louisiana government tie budgeting to performance. In reality, this can be done in a cursory way that invites mismatching of resources to task. In its review of the budget to look for cuts in regards to the deficit, one hopes Jindal made clear such criteria were used, and, if not, his administration would do well to emphasize this approach in budgeting for 2009-10 to bring about better alignment and likely cuts that will little affect performance.

But superior practice does not mitigate poor policy choices. The $400 million fund stands as a good example. If the purpose of such a pot is only to pay for quick infrastructural improvements for a large employer, the sum in it should be far smaller in size. Any thought to use its funds to induce financial incentives for employers to locate in the state fundamentally misunderstands human behavior. A state looks lovely for commercial interests and they want to be there as a result of policy (such as low tax rates and reduced regulation), not bribery. No amount of cash inducements can make the unlovely lovely.

So to tackle what appears to be a $2 billion deficit coming up in 2009-10, Jindal needs to focus on procedure and substance. Following the latter, it also means Jindal must be willing to admit past mistakes in priorities and rectify them in the present budget.

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