APPEL: Louisiana Needs To Stop Talking About Budget Cuts And Start Talking About Reform

Just as there is a huge difference between governance and politics, there is an equally major difference between spending “cuts” and government reform. One of our most defining problems has been that we elect politicians whose primary defining characteristic is that they are funny, personable, or can talk a good game. The underlying fault is that despite good political acumen, they haven’t possessed skills or experience in managing anything, let alone governing the business of a $29 billion state organization.

The same differential in terms holds true in when discussing the budget. There is always much discussion in the media, originating from the governor, about expectations that the legislature should instigate undefined “cuts” if it won’t raise taxes as the way to solve budget problems. The fallacy is that “cuts” are a negative, very destructive reaction to a budget shortfall. They are panic-driven, resulting from a lack of foresight and ability to manage a major enterprise. They are not based upon any good strategic principles and result in very poor systemic outcomes.

Reforms, on the other hand, can develop the same savings as “cuts,” though granted over longer time frames. They are a positive because they are more long-term in effect and they are strategic as to effective and efficient outcomes. Reforms differ from “cuts” in that in order to be implemented successfully they require good management skills and foresight as well as political courage.

The fundamental purpose of the CEO of any organization, be it a business or government, is to achieve an organization-wide vision of long-term goals. The CEO must use strategic planning to define a path that leads to implementation of that vision and then convince his followers, be they a corporate board or legislators, of the wisdom of his plan. Once he has achieved buy-in he must then use leadership to succeed in executing that strategy. The success or failure of the organization resides solely with the abilities of the CEO.

In an existing organization such as our state government, the execution of the CEO’s vision usually takes the form of reform of existing stagnant goals and programmatic or policy practices. Herein lies Louisiana’s problem. We have no vision and therefore no goals. Our leadership refuses to undertake any reforms that could lead to a better state and a lower cost to the taxpayer. We are adrift.

Instead we have a steady drumbeat of demands for the Legislature to define “cuts.” As I noted, “cuts” damage the operations of the state organization by not being strategic and by cutting off funding to important state functions to satisfy political priorities over visionary priorities. It’s the governor’s job to set out the path to success and to the lead the state, not the Legislature’s.

In our January budget meeting I asked the governor and the Commissioner of Administration about their position on numerous fundamental reforms that have been discussed over the years. I asked knowing that it is highly improbable that any meaningful reform would be possible without the governor’s leadership. The answers were silence and the silence was telling.

Our state would not desperately need new revenue or “cuts” except that we have not made any attempt at aligning revenue to spending nor undertaken reforms. This problem is being met with strong reaction in the legislature as the governor’s demand to raise job-killing taxes is counterproductive to the welfare of the people (Louisiana ranks lowest in the South in projected growth of Gross State Product even before his taxes).

So, should the legislature vote to support the governor’s income tax package? Not a chance. If we are ever to achieve substantial reform in major structural areas of state government we must not give this governor the resources to avoid the hard decisions on true reform. To do otherwise would assure that reform will always be equated to “cuts;” it would assure the status quo into the distant future. In case you haven’t noticed that’s a bad future!

Before I start receiving stupid comments from defenders of the existing ways blaming me, the messenger, for delivering a message that they don’t like, the following are what some systemic reforms would look like. Reforms that have been attempted by legislators before; reforms that would solve our problems; reforms that the governor has refused to even discuss or assist with…

  • Eliminate statutory dedications and have the legislature appropriate;
  • Eliminate the inventory tax and re-orient the relationship between the state and local governments, especially about revenue sharing;
  • Merge the five Boards of Higher Education into one and demand true institutional reform;
  • Reform the pension systems in many areas but absolutely include the creation of a 401K-style program for all new hires;
  • Align nursing home rates with other states (saves about $84mn per yr.) and create a Long Term Managed Care system for seniors (saves about $100-$200mn a yr.);
  • Undertake true tort reform (would attract business and lower home and auto rates);
  • Align Louisiana’s Film Credits with other southern states (save about $100mn a yr. that should go to Higher Ed);
  • Create an Open Checkbook web-based system so that even local government’s spending is outlined in an easy-to-read manner’
  • Move to statewide collection of sales taxes;
  • Demand accountability of local school boards in their spending of $8 billion with little success;
  • Eliminate the income tax as has been done in Texas, Florida, and Tennessee with great success in prosperity for their citizens;
  • Identify the top reasons why business avoids Louisiana and FIX them (some are on this list);
  • Eliminate the deadhead Boards and Commissions and only keep meaningful ones; and
  • Restructure Capital Outlay so that only consensus priorities get funded and take the petty politics out.

There are so many more. It wouldn’t be difficult to develop a short list of major reforms that would fix our fiscal issues and, at the same time, make Louisiana a far better place to live and prosper. It only takes the attributes of a good CEO and the understanding that “cuts” are bad and reform is good!

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