I have seen this movie before, several times. Oil and gas prices spike, pouring revenues into the state’s coffers. The money hardly makes it there before it is spent. If there isn’t time to spend it wisely, it is thrown against the wall—but it is always spent. Then oil and gas prices go down—usually quickly and precipitously—depleting the coffers and fostering yet another fiscal crisis. We never seem to learn our lesson, and here we are again.
By the most accurate estimate, the state is about $1.5 billion short of the revenue needed to maintain the level of spending in the current state budget. Of course, the current budget—like the two before it—is stuffed with one-time revenues that everyone knew wouldn’t be available in the next fiscal year. State officials have forebodingly referred to “The Cliff” for the last two years, but did little to minimize the use of one-time money and bring expenditures in line with realistic revenues. Now the familiar themes are coming once again from the usual sources.
Some in the media and many who receive state funds complain that most of the budget is constitutionally protected from cuts, forcing education and health care to bear the burden in tough times. Let’s take a close look at these off-limit funds that have constitutional dedications.
As of October 25, the balances for the 48 constitutionally dedicated funds totaled $4.9 billion. Some $432 million of that is the bond redemption fund to pay debt requirements. About $735 million comprise the various highway construction trust funds. The 8g Trust Fund for elementary and post-secondary education currently contains $1.02 billion. The Coastal Protection and Restoration Fund contains about $440 million. The Millennium Fund—containing the remaining proceeds of the state’s tobacco lawsuit settlement—currently totals about $1.2 billion and funds part of TOPS as well as health care and education excellence projects. The Budget Stabilization Fund—whose main purpose is to help us stay out of fiscal crises—contains $645 million and was recently tapped to help with the deficit. The Louisiana Lottery Proceeds Fund is at the $104 million level and is used to help fund the Minimum Foundation Program (MFP) formula for K-12 education. The MFP is also protected by the constitution and currently provides about $3 billion in funding to local schools systems.
All but $190 million of the $4.9 billion contained in the constitutionally dedicated funds fall into the funds listed above—excluding the MFP. Most of that money is already going to education and health care—much of it into education at all levels.
The other highly predictable response to a budget crisis centers on funding for post-secondary education. Governor Jindal is taking heat for budget cuts for higher education. He has started punching back. He recently noted that higher education was boosted by $60 million in 2008 before any of the current budget cuts began, on top of another huge increase in higher education funding in Governor Blanco’s last year. Recent tuition increases added almost $125 million more to university funding. The combination of the two, Jindal claims, makes the cuts thus far less than 5 percent.
Post-secondary education remains top-heavy with bureaucracy and contains far too many institutions to fund properly (even in good economic times) and get anything but mediocre results. What Jindal can be legitimately criticized for, is not leading the charge for a major reduction in post-secondary education bureaucracy, along with merging—or closing—poorly performing institutions.
The sad fact of the matter is, our state government has been collecting about $9 billion of stable revenues and has been using non-recurring revenues to maintain the $11-plus billion level of state spending appropriated in Governor Jindal’s first year when oil and gas prices were skyrocketing.
The party is over and it is time to clean up the mess.