“If you don’t vote for it then you own it” – was that a threat or a promise? I am not really sure but one of my colleagues clearly was trying to make the point that by voting “no” we would somehow need to explain to our constituents why we had just refused to accept the governor’s drive to keep us on the “Louisiana way;” the same way that we have followed for nearly a hundred years, a way that has resulted in our state being last in nearly all socio-economic measures . My peer’s spirited defense of the Louisiana way was carefully crafted to ignore how for us to continue down that path it would be necessary to increase state spending effort by $100 million in a time of economic recession and in the face of a looming “fiscal cliff” of over $1 billion.
Let me make this very clear, I voted “no” not because this was a bad budget, I voted no simply because it was a budget built on sand. By law spending resulting from our state’s budget is limited to the amount of revenue recognized by our Revenue Estimating Conference (REC). To the great satisfaction of the governor and his allies in the legislature, that is exactly what was done this session. In order to help him grow government the budget that was passed spent every penny of the REC projection plus $150 million from a postponed payment to medical providers, a practice that the governor had at once decried as an unconscionable policy from the Jindal era.
Ironically it is those that voted for the budget that will now actually have to “own it!” The REC has missed its target for revenue for the last 13 out of 15 projections. To make matters worse, it has not missed those targets by $50 or $60 million, it has missed every time by hundreds of millions of dollars. Many of those missed projections were made in times of relative economic stability but today we are mired in a statewide recession and 33 of our sister states nationally are facing budget deficits because of the non-recovery that resulted from the Obama economic agenda. The odds of the REC substantially missing this year’s target are high and, if that occurs, then we may expect a major budget shortfall in about six months or so.
It gets worse. We have no idea of the fiscal impact of the much heralded Medicaid expansion. For reasons known only to the Administration, the Louisiana Department of Health has not told us the amount of funds that will have to come from our General Fund in the next few years to support the growth of this program. LDH has conveniently only provided spending projections through the 2018 fiscal year, but we all know that our Federal match will increase from 3% to 10% in the next few years resulting in perhaps hundreds of millions in additional state subsidy. We also know that the entire structure of Federal support of Medicaid expansion is on the chopping block as Washington debates changes to Obamacare because it is on an economically unsustainable trajectory. Depending upon which changes do occur, state spending mandates that the governor unilaterally locked us into could quite simply balloon to budget busting levels.
The impact of Federal withdrawal from Medicaid is a concern for another day but, even assuming no Federal changes, state healthcare spending is literally depriving all other state services of sustainable revenues. No wonder the Administration has conveniently failed to promulgate healthcare spending projections for the next few years; as is often said – ignorance is bliss!
And then there is the “fiscal cliff” that is rushing toward us. We are facing a decline in revenues resulting from two sources; first there are a few sales taxes that expire and that will reduce revenue by about $1.1 billion. Second, there is the continuing decline in revenue coming from poor business performance due to our continuing in-state recession added to national economic lethargy. The ultimate REC recognized shortfall for 2019 could be between $1.2 and $1.6 billion. Of course renewal of the sales taxes would reduce that amount, but we would still need something between $100 and $500 million in new revenue or reduced spending to balance the budget.
Now back to the vote on the 2018 budget – this vote was the perfect time to undertake some reductions in state spending, reductions that would have started the process toward a soft landing in the next few years. When addressing the Senate my metaphor was that our state was as a space capsule hurtling through the atmosphere. The problem with the passage of this budget in the form that it was passed, was that we had failed to pull the rip cord on our parachutes. Now instead of a soft landing we are facing a very hard landing with all kinds of negative consequences.
I voted “no”, not because the budget was bad; I voted “no” because it was a great opportunity to exhibit good management practices and we didn’t. I voted “no” because instead of a reduction in 2018 of a few hundred million dollars out of $28 billion that would have eased impending shortfalls, our budget actually increased spending by $100 million in recurring expense. I voted “no” because keeping doing the same things and expecting somehow that a different result will occur is insanity!
If history is prologue we should expect a fiscal shortfall twice in the next few months; first in the 2018 budget when the REC misses targets and then again in the 2019 budget when the fiscal cliff arrives. In the legislature we all know that this will happen, but by a slim majority the “yes” votes have chosen to avoid having to make the courageous political decisions and instead they have chosen to follow the governor by supporting growing spending and no reform of a failed government.
In the end it will not be those of us who voted “no” that will have to own it. When, in but a few months, the governor comes at the legislature with the inevitable choice of massive tax increases or massive spending cuts, those that voted “yes” will have to explain to the taxpayers why they missed the opportunity to embark on a new path to a soft landing. I am happy to “own” my vote of demanding that government spend within its means and that we restructure government so that we can create a better future.