Louisiana definitely doesn’t need to emulate Shreveport when it comes to disposing of the bonus generated by hyperinflated, live for today by paying for it tomorrow economic policy of Washington Democrats.
As recently noted, the largesse from huge national debt-fueled spending has created a false economy windfall for state and local governments, with Louisiana running big surpluses from forecast revenue levels. Of course, it will end soon and with lower economic growth nationwide in the future because of higher debt levels while the outsized price inflation from it will hit people and governments sooner.
Louisiana will benefit in the short term from revenue picked up by cramming borrowed money through the economy, but with known big one-time expenses on the horizon and policy changes set to reduce tax revenues for operating expenses, its best course of action would put the bonus to use in fulfilling those looming costs and not to make new commitments. If only Shreveport would have done the same.
Instead, earlier this week its City Council approved an across-the-board city wage hike of 13 percent (or 10.25 percent above an already-budgeted elevation), on top of a previous boost to its minimum wage that redounded across other wage grades, at the behest of Democrat Mayor Adrian Perkins. While pumping up the minimum wage required spending only around a million dollars more, the subsequent global increase adds $21 million a year to city commitments.
And every indication is it can’t afford this. To plug this in, the city will raid various reserve funds plus will depend upon federal government largesse from the spending bills passed in response to the Wuhan coronavirus pandemic that will flood city coffers for the next couple of years. But this isn’t a sustainable strategy as reserves become even more depleted and the federal government gift dries up.
Still, the economic juicing to state and local government revenues, reflected in Shreveport by a 17 percent increase in sales tax collections year-to-date, provides enough that would about cover the wage increase this year, if it doesn’t dissipate. But it will, as this is a short-term phenomenon unlikely to last past next year, and other collections already have shown a small lag with an economically-depressive property tax hike on the way that will dampen the future revenue outlook further.
In short, by 2024 this commitment will put undue strain on already-stressed city finances, a warning sounded by the two Republican councilors Grayson Boucher and John Nickelson. The four Democrat and one no party (for now) councilors paid no heed – including Democrat LeVette Fuller, who previously had supported only a pay raise of that magnitude for public safety personnel.
Fuller’s abandonment of fiscal probity may signal political ambition. Typically less supportive of Perkins’ agenda than other councilors of her party, she may have calculated as the measure would pass regardless she could get more political mileage needed to challenge Perkins in his reelection bid by not crossing the hopes of city employees than in futilely putting down a marker for sounder fiscal policy that might attract votes from the political center and right.
Although it had been over a decade since Shreveport employees as a whole had seen cost-of-living pay increases, a better strategy to address that would have trimmed elsewhere in the budget to support this move, or to limit it to the most essential areas as was the point behind the public safety personnel increase with the city facing a noticeable uptick in violent crime. Rather, the approach taken spends today what the city unlikely will have tomorrow and ratchets up the pain level of a future day of fiscal reckoning.