SADOW: Louisiana’s Fiscal Day Of Reckoning Is Coming And Can’t Be Stopped

It’s too common for Louisiana elected officials to break the law, but in the instance of Gov. John Bel Edwards and the legislative leadership putting off the REC forecasts due this month, it’s a larger policy failure prompting the fiscal lawlessness we’re seeing.

This week, the state’s Revenue Estimating Conference announced it would it abrogate its legal duty to meet before the end of the year. The REC provides revenues estimates for the current fiscal year, which could require executive and legislative actions to trim an ongoing budget deficit, and for future fiscal years. This matters particularly for the upcoming fiscal year, in which a revenue baseline the REC determines sets the maximum amount that state government can spend in the budgeting process commencing this spring.

One of its four members, current chairman Commissioner of Administration Jay Dardenne who represents Democrat Gov. John Bel Edwards, asked for the abrogation of the REC’s duty. With a wink and a nod, the other members – House Speaker Republican Clay Schexnayder, Senate Pres. Republican Page Cortez, and university economist Stephen Barnes – assented.

Admittedly, the statutory deadline serves mainly as a convenience, to give the governor enough time to whip up a budget for submission to the Legislature, due next year on Feb. 26. The principals indicated that they thought as much as an extra month of data would lead to a more accurate forecast tied to the economic uncertainty created by the ongoing Wuhan coronavirus pandemic.

But the delay, in particular because it came at the behest of Dardenne, carried much greater significance. Edwards especially wants it because he is hoping against hope that a disastrous revenue picture – likely at least $1 billion below revenues predicated behind the current budget – will experience at least some amelioration in a month’s span.

Most particularly, he hopes for a similar bailout from federal taxpayers as all states experience earlier this year with the CARES Act and other more targeted subsidies such as in the area of higher education, a sentiment with which at least Cortez agrees. With Schexnayder, the three collaborated to spend on state government over a billion dollars of one-time money on continuing state operations for last and this fiscal year, not really attempting at all to trim hardly needed, if at all needed, state government spending.

Edwards certainly does, and Cortez and Schexnayder appear to, hope that lightning strikes twice in the form of another bailout. One might pop up over the next week, but it very well may not at all, and perhaps at a lower level than the CARES Act (the amount currently bandied about is comparable).

If this life preserver doesn’t fly Louisiana’s way, Edwards will find himself in an awful mess. More than the Legislature, because of his liberal populist (read: maximizing wealth redistribution) ideology, he doesn’t want to see smaller government. His past tactic of cajoling tax increases from a Legislature whose majority dislikes these but which has swallowed them in the past because it didn’t have the fortitude to impose fiscal reform and/or turn its back on favored special interests, won’t work this time because of the economic devastation the Edwards-directed lockdown has wrought that tax increases would amplify.

That’s the fact Edwards so desperately wants to keep the public from realizing in order to salvage any future political career he may have available: the economic misery he has foisted on the state, reflected in the drop of state revenues, by being too heavy-handed was an unforced and self-inflicted wound. There was a better way; Sweden’s light approach that, even with recent reimposition for the next month of public gathering limits and high school upperclassmen learning online, still has restrictions less onerous than Louisiana ever had, and it continues to have fewer infections and deaths most days than Louisiana which has only 40 percent of Sweden’s population, even as their residents have less chance to accumulate Vitamin D, and still registers next to no excess deaths over the past ten months unlike Louisiana and the much of the U.S.

That lighter touch translates into more economic activity. One study estimated a fifth of gross domestic product was affected by economic restrictiveness, split between COVID deaths that resulted and those the slowdown produced. And we should expect this impact to be higher for Louisiana, given its economy was the most vulnerable and damaged in the country by the pandemic.

Edwards’ policy produced more economic devastation than necessary while still having the fifth highest death rate per capita among the states. This subpar tradeoff with restrictions too onerous will become even more clear if the REC ends up within the month announcing a huge deficit without hope of filling it. That’s why Dardenne pitched to push back the public day of reckoning.

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