Get ready for more smoke and mirrors than ever seen in Louisiana state government as Democrat Gov. John Bel Edwards tries to save oversized government in the face of the Wuhan coronavirus pandemic, or at least score some political points in the process.
That’s saying a lot. Until the late 1980’s, Louisiana policy-makers routinely would adjust revenue forecasts however they saw fit to justify spending levels they wanted to achieve. While the advent of the Revenue Estimating Conference sidelined that tactic, others remained, with the most flagrant example being the Louisiana Recovery District that circumvented constitutional prohibitions of issuing debt to pay for continuing operations, budgeting over multiple years, and increasing taxes without supermajority approval in the Legislature.
At least these tactics passed legal muster, before constitutional changes voided them. Saturday, Edwards released plans designed to prevent busting the fiscal year 2020 budget and a proposed FY 2021 budget in the face of revenues dropping over $1 billion as a result of the economic slowdown caused by the virus spread and proclamations by Edwards stalling a significant portion of the state’s economy. Both plans must be regarded as dubious.
Apparently, in filling both gaps Edwards hopes to stretch to the absolute limit the legal prohibition in the CARES Act, which shunted $1.8 billion to the state to respond to the virus threat, against using these funds for continuing operations. The law didn’t seem to deter Commissioner of Administration Jay Dardenne, who appeared to say with a straight face when asked about this, “The guidelines that have been issued by the U.S. treasury are extremely broad and give us a great deal of latitude … to reimburse for expenses.”
To say this merely creatively reconstructs the Treasury’s guidance in the most favorable way is as understated as noting the Democrats’ presumptive presidential nominee former Vice President Joe Biden has a senior moment now and then. A really expansive reading of the documentation finds a place you could shoehorn in a bit of swapping current operations with alleged emergency expenditures. For example, in its distributions to nongovernmental organizations that end up as meals-on-wheels programs, the state could claim all of these come as a result of the pandemic when of course in reality much would occur regardless.
Others might include funding payrolls for state troopers, state health workers, and emergency personnel (altogether personnel expenses budgeted for FY 2020 of $455 million) at plus some prison guards, and the state supplemental pay for law enforcement at the local level ($124 million budgeted for FY 2020). But there just aren’t that many legitimate expenditures, given the size of the deficit, which credibly could bypass the guidance’s stark statements: “Funds may not be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the statute. Although a broad range of uses is allowed, revenue replacement is not a permissible use of Fund payments.” In fact, only two areas with any substantial expenditures seem to qualify.
One would be unemployment insurance payouts. But that wouldn’t impact the 2021 budget in any event, as any borrowing after depletion of the state’s trust fund would not need payback until five months into the 2022 cycle.
The other is education, which does take up a substantial portion of the budget, insofar as guidance permits payouts to “[e]xpenses to facilitate distance learning, including technological improvements, in connection with school closings to enable compliance with COVID-19 precautions.” But consider what that would mean: schools at any level wouldn’t reopen in the fall and distance learning would continue until the end of 2020, regardless that the threat level will have fallen to just a fraction of its level presently.
This brings up another consideration: the expenditures eligible last only halfway through Louisiana’s fiscal year, making any such shell game only half as effective. Keep in mind as well that the state, as of the end of the week before last, already had spent $118 million as its share of emergency expenses of federal disaster money that the Act could reimburse. And, the state will suffer approximately $134 million more in Medicaid costs that the Act money could cover, but it is an additional expense not anticipated. Finally, it seems inevitable that the state will have to pass on a chunk of this money to local governments as well, further draining the pot.
To summarize: over two budget years, unless the Edwards Administration through 2020 intends to force distance learning on schools (which it could onto universities but couldn’t onto elementary and secondary schools without the Board of Elementary and Secondary Education’s approval, and his allies don’t command a majority there), there just aren’t enough eligible uses out there to suck up enough Act dollars to prevent cuts well beyond what Edwards alleges would happen.
Obviously, Edwards never will acknowledge the irony that he has proposed such a tricked-up budget when claiming only last year he had halted such tactics he alleged endemic in his predecessor’s spending plans. During his reelection campaign he stated, “The way he ran his budget was the most dishonest, gimmicky, smoke and mirrors,” Edwards said. “We are doing so much better because we jettisoned all those irresponsible practices of the past.”
Hopefully the adults in this process, the Republican legislative leadership, will put the brakes on this chicanery. Although the federal government won’t vet expenditures registered, the Act set aside a quarter-billion dollars for oversight and individuals may bring suits against offending governments. Louisiana House of Representatives Appropriations Chairman Republican Zee Zeringue rightly sounded a note of caution upon receipt of the information, saying staff would vet the proposals’ use of federal funds closely because “[w]e want to make sure that we’re doing our due diligence.”
And even if somehow Edwards would get this into law largely unscathed, it only delays the day of reckoning. All indications are that the billion-plus bucks that disappeared for FY 2021 won’t return even close to full for FY 2022, so keeping spending levels needlessly higher only makes it that much harder to come back to reality later.
So, why would Edwards throw out there something that unrealistic? Primarily because it could stick, and you don’t know if you don’t try. However, it also gives him a chance to abdicate responsibility and shift blame. If Republicans come back contesting uses of some money, thereby meaning more drastic cuts must occur, this will give Edwards a chance to declare them at fault. If we have learned nothing else about Edwards, it is that he will try to deflect culpability for his policy mistakes that have made Louisiana during his years in office the worst economy and biggest per capita exporter of residents among the states, as a ploy to retain political power.
Never short in supply of hypocrisy and chutzpah, Edwards will try to talk his way through this, as always providing unserious leadership despite the seriousness of the times.