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Lack of political will crippling best LA budget solutions

Smoke signals emanating from important decision-makers concerning Louisiana’s 2011-12 budget suggest competing views on its formation, and that some degree of synthesis will end on shaping the plan.

At a panel set up by the Louisiana Association of Business and Industry, member of the Senate Finance Committee state Sen. Jack Donahue argued that the state needed more aggressively to pursue cost-cutting recommendations made by a commission he headed, which would include constitutional and statutory changes to add flexibility to state spending choices. As it stood, a forecast deficit of $1.6 billion (more guidance to be provided on that later today) would have to be removed from a pool of $2.6 billion because of the hundreds of dedicated funds existing in the state. Almost by default, this strategy removes rationality and prioritization as a goal from budgeting decisions.

However, it seems little enthusiasm exists for Donahue’s call to increase ability to plan by importance of function, at least in time for the upcoming budget. Because constitutional amending would have to occur, necessitating a vote of the people, these could make their way to the people in time to affect this budget cycle only by dealing with them in a special session. While one is on the way to deal with redistricting, no hint has emerged this other issue will come up during that.

Instead, another view articulated by House Appropriations Committee Chairman Jim Fannin is that the two major areas funded by the $2.6 billion, health care for the indigent and higher education that comprise two-thirds of that amount, can bear much of the brunt. This simply is unrealistic, for both legal and practical reasons.

While this space has featured many posts on how changes in practice can make both enterprises run more efficiently and thereby save the state money, these things cannot be implemented in the short run to save so much money for next year. Constitutionally, a certain kind of health care must be provided to the poor and disabled, and legal requirements must be met because federal funding takes care of a large portion of this. Although the provision of higher education involves none of these questions (except that it can’t fall below spending a certain level because of requirements for money doled out by the 2009 federal spending bill), the fundamental reforms here by their nature simply cannot happen so quickly, and probably would take a decade to discharge fully, given the politics of the situation.

With reimbursement rates teetering on the verge of encouraging providers to vacate the system and with the 2010 federal health care changes imposing additional costs to states in order to provide a smokescreen that they actually will save money, reduction of coverage is the only way to spend significantly less in health care, which can run afoul of constitutional and statutory imperatives. And there seems no political will by Fannin or any other elected official to do the only thing that will save enough money in higher education: immediate merging and closings of programs, schools, and higher education governing systems. Thus, if this comprises Fannin’s plan, he speaks irresponsibly and does not contribute to any constructive attempt to produce a realistic and workable budget. Worse, he tries to create a straw man argument that the public would not vote to accept bigger cuts in the most prominent dedications if Donahue’s changes were presented; the point is it would be more than willing to allow for redirections from the 90 percent or more of the picayunish dedications which a carefully worded amendment would permit.

Commissioner of Administration Paul Rainwater, by contrast, has continued on the only politically-manageable course to date: force reductions sprinkled in with dropping a few functions, which is all the executive branch can do without legislative approval, and continuing efforts to increase efficiency. Such efforts (like almost no merit raises for state employees as part of a gambit to introduce more efficiency, better matching of need to resources in health care, privatization, etc.) already have paid off to the tune of hundreds of millions of dollars but it’s not going to be enough fast enough to balance the budget for next fiscal year.

(Part of this strategy also entails raiding every year the funds into which dedications flow, by legislative direction via appropriations bills since money is not spent because of personnel and programmatic reductions, the excess piles up in a fund and must be removed to be used elsewhere. Here, Fannin is hypocritical in that he rails against the use of these “one-time” funds yet does not endorse the fiscal changes necessary to prevent the practice he criticizes.)

It bears repeating that Louisiana has a spending problem by per capita measures of spending and personnel. But solving it requires putting the state into the position where it can be done in a manner that maximizes the ability to spend in the most needed areas while jettisoning low priority expenditures, as well as doing it more efficiently. Only Donahue’s view suggests this, while Rainwater primarily addresses the efficiency aspect and Fannin’s denies the necessity of any need to set priorities and just to hack at is what possible. (And then there’s Treasurer John Kennedy, who takes a mix of Rainwater’s and Fannin’s approaches and puts them on steroids to provide many good, but some questionable or unrealistic, suggestions.)

Political resolve seems in short supply for the most optimal solution here. Hopefully, its paucity won’t be such that least optimal one gets chosen.

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