We’re going to hear nothing but the budget out of the state capitol for the next four years; that seems clear. It seems clear because the Governor-elect, on the day before he is to take office, published an op-ed in the Baton Rouge Advocate painting a dire picture of Louisiana’s finances palpably designed to set the predicate for a demand for new taxes.
In the week before you elected me in November, our state’s Revenue Estimating Conference met and projected a $487 million revenue shortfall for our state’s current budget year. Gov. Bobby Jindal’s proposed midyear budget fixes were approved by the Joint Legislative Committee on the Budget. Now we know that the real problem for this year’s budget extends another $700 million to $750 million beyond that number. In reality, the outgoing administration’s current fiscal year budget has resulted in a nearly $1.2 billion budget hole this year. Economists tell us this is due at least in part to the continuing drop in oil prices, a slump in corporate income tax collections and a slowing in the collection of sales taxes.
Unfortunately, our fiscal problems do not end there.
In order to build a budget for next year (fiscal year 2016-17) that reflects what it takes to operate state government without using undesirable measures like excessive one-time money or fund sweeps, fiscal experts tell my incoming commissioner of the Division of Administration that our state is facing a $1.9 billion shortfall: $1.3 billion short in revenues to fund our expenses and, based on November’s economic performance numbers, a prediction that Louisiana will bring in $600 million less in revenues than what was expected next fiscal year.
While you have heard talk of budget shortfalls in the past, these numbers clearly present us with a real fiscal chasm, deeper and more severe than earlier facts demonstrated to any of us. It is a chasm not easily crossed.
The Senate president has warned of potential state worker layoffs and furloughs unless Louisiana raises revenues before June 30. The business roundtable Committee of 100 for Economic Development noted that “we are past the stage of political rhetoric,” saying “we cannot simply ‘cut our way out’ of these budget problems in this time frame.”
As the Committee of 100 cautioned: “This is not a Democratic or Republican issue — this is a Louisiana challenge.” With reference to potential revenue-raising that might be necessary to cross this budgetary chasm, this newspaper’s editors have called upon legislators to “face the numbers they assisted in creating without flinching, because any budget solution must be bipartisan.”
That’s a “bipartisan” demand for new taxes. Or put a different way, it’s a demand for Republican support for tax increases.
Louisiana’s unemployment rate is nearly two points higher than the national average and the state’s economic growth has slowed to a crawl, a negative state of affairs driven chiefly by the low price of crude oil putting Louisiana’s oil and gas industry into hibernation. That makes for a rotten budget situation at the state capitol, but what it also means is the state’s economy is not in a position to find any more revenue.
We say this all the time, but if you think you’re going to raise taxes in Louisiana, you’re wrong. What you’re raising is Texas. Because Texas, just across the Sabine River, is where jobs and capital will go when Louisiana decides to starve its private sector to feed its gargantuan state government.
If we are to believe Edwards’ numbers, Louisiana has $23 billion to work with and is committed to spending $25 billion. And he is asking, surreptitiously at this point but in short order much more openly, for some large part of $2 billion in new taxes to make that public sector whole. This after a number of hiring decisions he’s made which suggest Edwards is less than fastidious about giving the taxpayer a good deal for his money. For example, the decision to pay his commissioner of administration Jay Dardenne $237,000 per year would cost Louisiana some $615,000 in increased pension liabilities above what Dardenne’s pension as Lt. Governor would cost the state. Outgoing governor Bobby Jindal was paying his commissioner of administration Kristy Nichols $204,000.
And Edwards is demanding Walt Leger, one of the more liberal Democrats in the House, as his Speaker to carry his agenda. Meaning that it will be a full-court press on the Republicans in the state legislature to show “bipartisanship” and impose the better part of a $2 billion tax increase on the state’s economy after having imposed $700 million in taxes a year ago.
There is a different approach, of course, because no one outside of the state’s public sector believes the Louisiana is a tightly-run fiscal ship. And the most outspoken political figure making the case for the state’s poor spending discipline is the state treasurer who was re-elected with 80 percent of the vote, John Kennedy.
Here is his retort to the narrative that Louisiana doesn’t have enough money, given a week and a half ago (hat tip: Sound Off Louisiana)…