For Louisiana Republicans, A Crisis Is Also An Opportunity

Sam Hanna’s editorial yesterday in the Ouachita Citizen makes the case that the mantle of leadership now being assumed by Republicans in the Louisiana legislature after party switches and Jonathan Perry’s win over Nathan Granger in the Senate District 26 special election is a little less of a blessing than one might believe.

Hanna notes that with a $1.6 billion deficit – one, incidentally, which is borne of a bipartisan failure of fiscal competence, as the Republican-led House last year had stripped out much of the spending that has ballooned the deficit only to see the spending put back into the budget by the then-Democrat led Senate with Republican Gov. Bobby Jindal’s backing – it might not be the best time to trumpet a new era of GOP leadership.

In this, he’s partially correct. But not completely so.

The fact is, a deficit of that size is an opportunity. And with the GOP holding majorities in both houses and the governor’s mansion, there is no reason the state’s new leadership can’t galvanize around a new, more sustainable direction.

When you’re $1.6 billion in the hole, there is no longer a case to be made that you’re structurally sound. It’s no longer workable to say your fisc can be made whole if you just raise cigarette taxes. Nor is it valid to defend your current model.

No, a deficit that size – frankly, a deficit of any size – is a structural deficit. In any enterprise, other than perhaps in a startup business of which Louisiana’s government is most certainly not one, if you’re spending more than you’re taking in you’re doing it wrong.

It’s time to address that structural deficit and put the state on a footing whereby it starts running a surplus. The right set of choices and a sense of fiscal responsibility and openness to innovation could put Louisiana in a position to realize decades of unfulfilled promise.

Louisiana’s mineral wealth – which with the development of the Haynesville Shale and the skyrocketing, triple-figure price of oil (plus the possible end to the ridiculous federal drilling moratorium) puts the state in a position as an economic dynamo going forward. The most important industry in the world is energy, and few states can deliver what we can. Without question there are federal threats to our oil and gas industries, and those must be beaten back. But assuming we’re allowed to do business in something approaching a normal fashion, in the next 5-10 years this state is poised for a third great economic boom.

There have been two other energy-fueled booms in the state’s post-Civil War era. The first hit in the 1930’s and 1940’s, when Louisiana began developing its immense resources, and it was largely squandered by Huey Long and his cronies. The Longites used what oil wealth they didn’t steal on building up a massive and wasteful government bureaucracy, the legacy of which is still with us in the form of the state’s unsustainable and uncompetitive Charity Hospital system.

The second boom hit in the 1970’s, and once again Louisiana was unprepared to capitalize. Edwin Edwards was Louisiana’s governor then, and Edwards and his cronies openly stole whatever they could get their hands on. He’s still remembered well by many in the state who attribute to him the prosperity of that oil boom, despite the fact he had little to do with creating it. In fact, while next door in Texas the wealth the oil production delivered was leveraged into economic diversity, under Edwards Louisiana actually saw industries outside of oil diminish. We became less diversified in the 1970’s, and when the boom went bust in the 1980’s our economy devolved into a 15-year swoon we still haven’t completely recovered from.

But now the high price of oil and the massive finds in the deepwater Gulf are supplemented by the Haynesville Shale. A third boom would likely have already been underway had it not been for the Deepwater Horizon and the Obama administration’s opportunistic clampdown on offshore drilling. Assuming that episode is fading into the background – an assumption which might not be the case – this third boom could be bigger and more protracted than either of the others.

Further, while Jindal’s record as governor does contain some blemishes he’s clearly a cut above Long or Edwards when it comes to producing a business-friendly environment. Louisiana now places third in Site Selection Magazine’s rankings of states for economic development, with most of the state’s markets showing up at or near the top of their classes. New Orleans, which Newsweek wrote off as dead (between New Orleans and Newsweek, in terms of viability I’ll bet on New Orleans any day) two weeks ago, ranked #10 among cities with over 1 million people (by metro area). Baton Rouge ranks first among cities of between 200,000 and 1 million people. In that same class, Shreveport and Houma/Thibodaux ranked 4th and 5th. Lake Charles ranked best among cities under 200,000, with Monroe 4th and Alexandria 6th.

While those might not represent the actual economic circumstances we face in each of the markets in question – Baton Rouge consistently ranks as one of the top job markets in the country, and that is frankly disturbing since most people in this town will tell you the place doesn’t particularly feel like it’s booming – it’s clear that the perception of this state has gone from a basket case to a place with some economic potential. That’s without the energy industry’s strong prospects.

So we’ve got a potentially massive economic boom coming that could outstrip two previous booms, we’ve got leadership in place that is substantially better from a standpoint of creating economic growth and now that leadership is supplemented with a legislature better suited to work with the governor than what he’s had over the past three years. In fact, a Republican majority in the state legislature might actually push Jindal further into a small-government, growth agenda than he heretofore has pursued.

But while that could be the state’s future, the deficit has to be addressed first. And it has to be addressed not with gimmicks, which have sadly been and continue to be too much of Jindal’s proposed solution, but with structural change.

We have little to lose.

Louisiana’s system of higher education is inefficient. Everyone knows this. Jindal has taken the important step of asking for a study to merge SUNO and UNO, though that clearly represents only the first step in what needs to be several moves to consolidate an unsustainable 14-campus multi-system of four-year schools. Jindal has also made moves to free those schools from legislative and bureaucratic control on things like tuition, though much more must be done along those lines. In fact, it might be time in this state to look at funding universities solely through tuition and use the TOPS program as a vehicle toward doing that on a merit basis. But that’s a separate post.

And it’s time to greatly expand school choice in Louisiana, which is something that will bring this new legislative majority into stark contrast with the state’s teacher’s unions.

Those unions fought the creation of the charter schools in New Orleans which mark the single most hopeful development in that city in 50 years, and they’ll fight any other proposed changes – even ones so minor as Jindal offering to local school boards the opportunity to escape state regulations they don’t believe benefit them. Fights like that one indicate the intractability of the union bosses; they oppose the smallest changes to education in Louisiana when public schools here are among the worst in the country. It’s so bad right now that when Jindal proposed to fully fund the state’s Minimum Foundation Program, which pays for teacher salaries, the Louisiana Federation of Teachers screamed bloody murder because no increase in pay was given amid a $1.6 billion deficit, and denounced Jindal for supporting business tax incentives aimed at growing the state’s tax base. With the mess in Wisconsin soaking up the headlines, the LFT’s shocking arrogance went largely unnoticed.

It’s time to pick that fight anew. The fact is, Louisiana has the same problems in public education other states have. Bad teachers go unaddressed. Good teachers aren’t incentivized. Administrative costs chew up far too many precious resources. And on average, public schools in Louisiana spend some $10,500 per student – which translated into tuition would cover the cost of any private school in the state save for four. There is fat in the education budget at the K-12 level, but the only way to get at it is to introduce market competition.

And while virtually every politico in Louisiana will admit that the Charity system is a fossil, and an expensive one at that, to date no one has had the sand to come forth and discuss its dissolution. Estimates of some $600 million in savings could be realized by moving away from a system of brick-and-mortar hospitals and instead letting state health care dollars follow the patient. But politics has so far prevented such a discussion; Jindal has moved the ball further than the legislature by contracting with Our Lady of the Lake Hospital in Baton Rouge to take over the mission of dilapidated Earl K. Long. That needs to be done all over the state, save for perhaps a Charity campus in New Orleans and Shreveport to serve as teaching hospitals attached to the LSU medical schools there. It’s going to require some hard-core fiscal conservatives in the legislature to withstand the demonization asking for such changes will bring on, but it needs to be done.

There are lots of other changes Louisiana needs to make. The state’s payroll is distended and obese, and it has to be trimmed. There are too many special funds and sacred cows in the budget, and those need to be brought back into the general fund so as to give elected officials the freedom to carry out the will of the voters. The state income tax, the presence of which puts us at a disadvantage against Texas and other Southern states, needs to be phased out.

But if real reform and restructuring can be accomplished, whether this year or next year – after a statewide election which should deliver the most fiscally-conservative legislative majority in Louisiana’s history – Louisiana can mix the energy boom and the favorable private-sector conditions generated by that reform into a bright future.

It’s an opportunity the state GOP has never had before. If it comes out of a $1.6 billion deficit, so be it. Show courage and make the changes the state needs and the people, regardless of the screaming unions and race-hustlers on the left, earnestly desire.



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