The Louisiana House GOP Leadership Is Claiming Victory With The State’s Budget Deal. Are They Right To Do So?

Here was a press release which went out last night…

Louisiana House Republicans Claim Victory After Special Session

Republican House Delegation Lists Budget Reform, Government Cuts, and Reductions in Unfunded Vacancies as Major Wins

As the 10-day special session comes to a close, House Republicans are claiming the session was a victory for their ideals.

“With the passage of Speaker Barras’ Bond Redemption resolution, House Republicans have instituted one of the most important budget reforms that has been passed in more than a decade,” Chairman of the House Republican Delegation Lance Harris (R-Alexandria) said. “This resolution could ensure up to $90 million is freed up in the state’s general fund every fiscal year going forward.”

The Republicans argue that the money the Bond Redemption resolution could free up in the general fund would assist with solving future deficits. This money could be used to fill budget gaps instead of having to raise taxes or tap the Rainy Day Fund. They also believe the $19.4 million in cuts made to unfunded vacancies this fiscal year was a major victory under their belts.

“After looking at the salary budgets of each department, we saw there were more than 1,700 positions funded in the budget that were not actually filled with a person doing the job,” Rep. Tony Bacala (R-Prairieville) said. “Our Delegation believes that we must make smart cuts before tapping into the Rainy Day Fund, and it made $19.4 million in cuts to the unfunded positions in our budget. This was a major step in ensuring our state government lives within its means.”

Overall, the cuts made to state government this special session equate to $82 million. However, while several state entities have called this cut “devastating,” many Republicans are pointing out the fact that government has grown since last year and is projecting to grow even more next fiscal year.

“Even after the cuts we have made, our state government is growing 6.7% from last year. That is about $1 billion more in state effort,” Chairman of Appropriation Cameron Henry (R-Metairie) said.” And next year, there are some departments requesting budget increases of more than 20%. We must change how this budget process works. If we continue to let agencies drive the budget, legislators might as well go home and the legislature should just close shop. These dollars belong to the hardworking people of Louisiana. They must be used more wisely than this. Ultimately, government must live within its means.”

In only 43 days, legislators will be convening the 2017 Regular Session where they will tackle a $403 million deficit. Republicans legislators say they are planning on annualizing cuts made this session to help solve the deficit and are looking at several additional measures to implement that will usher in long-term budget reform.

The Bond Redemption idea was a priority for Speaker Barras in making any budget deal involving the use of the state’s Rainy Day Fund, so getting that done is in fact a win for Barras.

For those of our readers unfamiliar with what this is, which is probably a large number of you because this is without question some in-the-weeds state budget stuff, yesterday on the Red Bayou Show Rep. John Schroder talked about the reform. Essentially, what it entails is this – Louisiana pays debt service on its bonds through the state general fund, and most of the debt those payments service was bonded through the various dedicated funds the state has. So Barras’ idea is to tap the little surpluses all of those dedicated funds generate through fees and special taxes to pay the debt service, and going forward they think they can save some $90 million a year for the general fund.

Is that a good thing? Sure. We all know that one of the key facets to Louisiana’s poor budget structure is too much of the state’s money is tied up in dedicated funds, which means the general fund isn’t big enough to take care of its spending priorities when the treasury isn’t flush. This is a problem which gets worse and worse every year when the legislators allow constitutional amendments to go to the voters dedicating even more money, and the voters have a very bad habit of passing those amendments making the general fund problems worse every year. But those dedications are often in pursuit of some project that involves state debt, so this is appropriate.

But this only frees up money that can be spent. It doesn’t actually cut state government. So while it’s a tool the legislature can use to lessen the effect of a structural budget deficit which has now persisted for most of a decade, it’s not a solution. The solution is to make state government smaller and less costly than the state’s economy has the means to pay for – and while being able to move money around might better optimize what the private sector has to give the public sector, we’re not shrinking the public sector here.

Meanwhile, Edwards wanted to drain $119 million out of the Rainy Day Fund and he got $99 million of that. Which means the Rainy Day Fund just got $99 million smaller while the structural deficit hardly shrank at all. The House’s initial bargaining position was that they wouldn’t tap the Rainy Day Fund at all.

Yes, there are budget cuts, and if those could be banked, or annualized, you could look at this special session as a measure of progress toward one day having a budget that actually balances. But other than some extreme low-hanging fruit, namely to agree not to fill positions in state government which were previously budgeted for but clearly aren’t needed since nobody rushed to fill them when they came open, there weren’t any substantial budget cuts made.

And it’s entirely likely, as the economic effect of Edwards’ massive tax increases last year continues to set in, that Louisiana will get to the end of the year with some part of the $304 million deficit supposedly solved in this deal still in place. Because the state has proven itself incapable of accurately forecasting its revenues, and particularly so with respect to its tax increases. Last year’s hikes were supposed to generate $2 billion in revenue and they’ll be lucky to have generated more than $1.6 billion.

All that said, we should be careful not to demand the impossible from the Republicans in the House. They simply do not have the power to drive the state’s budget policy. The governor steadfastly refuses to impose fiscal discipline among his agencies and in fast insists on growing the state’s budget, and the governor controls the Senate despite its Republican majority thanks to his pet John Alario in the president’s chair. The House can resist tax increases somewhat effectively, a reputation which will be put to the test when the sales tax increase passed last year on a temporary basis comes up for renewal next year, but it can’t force Edwards or Alario to swallow budget cuts in any meaningful way.

So until Edwards and Alario are gone, this might be the best anyone can do. The House Republicans’ claims of victory have to be taken under the captive circumstances in which they operate. But with a $400 million deficit looming for the special session that begins in April, the fight is nowhere near over.

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