Political Hay

Bobby Jindal’s Budget Blind Spot

A persistent difficulty in managing fiscal matters threatens the rise of Louisiana’s new political star.

By 6.4.12

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It's been decades since Louisiana had a political star noticed on a national stage, and with the passage of one of the nation's most aggressive, landmark education reform packages this spring Gov. Bobby Jindal has become just such a star. So much so that Jindal's name is one of several being mentioned for vice president by multiple national pundits.

Jindal, a Republican, won re-election in last year's statewide cycle with an overwhelming 66 percent of the vote. His victory was such a foregone conclusion that the Louisiana Democratic Party could not find a credible challenger against him; the second place finisher was Tara Hollis, a middle-school teacher from tiny Haynesville who had never run for political office.

And the governor had some coattails. When the dust settled after the 2011 statewide elections, Republicans controlled 58 seats in the 105-member House of Representatives and 24 of the 39 seats in the Senate -- the first controlling majority for the GOP in Louisiana since Reconstruction. In addition, the six other statewide elected offices remained under Republican control, with no serious Democrat challengers for any of them.

One would expect, given this governing majority-cum-monopoly, an aggressive program of conservative governance would have been in the offing to propel Jindal's star into the heavens as the Veepstakes beckoned. And when the governor's education package, complete with an aggressive school choice program and a revamp of the teacher tenure rules, sailed through the legislature over the loud but effectively feeble objection of the teachers' unions and their Democrat water-carriers in the House and Senate, it seemed such a program was well underway.

But a little more than two months later, Jindal's critics are no longer restricted to the moribund Democrats. He is, in fact, hearing his loudest complaints from the state's conservatives. Because the state's budget is a shambles -- and the governor, whose record as a conservative policy wonk is both impressive and long-standing, is being blamed for the Bayou State's sloppy fisc.

How big is the problem? On Thursday, the Jindal-friendly Louisiana Senate voted unanimously to replace some $300 million in budget cuts for fiscal year 2013 passed by the more fiscally-conservative House, using a combination of "sweeps" from dedicated funds and one-time revenue sources to finance the increased spending. That vote was whipped vigorously by the governor, whose budget proposal the Senate was largely restoring after it had been trimmed by the House fiscal hawks.

This after the Senate voted to tap the state's Budget Stabilization Fund to the tune of $205 million in order to cover a mid-year 2012 deficit, which materialized when revenue projections from the previous year's budget exercise proved overly optimistic.

State law indicates the Budget Stabilization Fund, or "rainy-day fund" as it's commonly called, can only be tapped once every three years. And that means Louisiana's fiscal future is dire indeed. Local blogger C.B. Forgotston, who has been ringing firebells in the night for years over the poor performance of our political class in painting a sustainable budgetary picture, summed up the concerns of fiscal conservatives thusly:

"According to the experts, the outlook for the 2013 fiscal year is dismal. State government will face another mid-year budget cut in December in excess of $500 Million. In the spring there will be another shortfall and thus another mid-year cut. The only question is whether Bobby Jindal is in Baton Rouge or D.C."

Jindal's potential ascension to the national political picture ought to be a positive for the state, but the perspective Forgotston offers -- that he's biding his time before decamping to Washington while critical state business isn't being done -- is one that has gained purchase among the governor's detractors on the Right as the budget debate has proceeded.

To be fair, Jindal didn't create the problem Louisiana faces today. In fact, the governor's supporters can rightly argue that he's made progress in whittling away much of the structural deficit the state faces while upholding a hard pledge not to balance the budget by raising taxes. Jindal has eliminated over 6,000 positions in state government during his term as governor, he has ratcheted real spending downward over the past two years and he's undergone structural reforms designed to reduce Louisiana's Medicaid and state retirement costs. Louisiana's higher education establishment and health care providers, spending on whose services has been the primary target of the budget reductions given that higher education and health care represent the majority of the state's discretionary spending, are anything but Jindal fans.

But his detractors aren't measuring Jindal's budgetary performance against recent history, when the state's economy was riding high and its treasury was replete with recovery dollars from Hurricane Katrina. They're measuring his performance against the state's revenues. And for the past three years the budget process has been a mad scramble to break piggy banks from Bastrop to Cocodrie in an effort to fund what is now $25.6 billion in state spending.

Jindal, like all Louisiana governors, has the leverage and power over the Legislature to get most of his agenda passed in crunch time -- and he's been ruthless in using that leverage on the budget. As longtime political observer Jim Beam of the Lake Charles American Press noted:

No one was really surprised Monday when the Senate Finance Committee beefed up the budget for fiscal 2012-13 with $350 million in additional spending. The money appears almost out of nowhere, as it does every year.

Cooperative legislators always get rewards in the two money bills. The Senate Revenue and Fiscal Affairs Committee, for example, approved a capital construction bill containing $100 million more in projects than there is money to spend in the year beginning July 1.

And guess who gets to decide which projects get funding? None other than Gov. Jindal. He also has line-item veto power over the state budget and can penalize legislators who fail to toe the line.

With the kind of power Beam describes, Jindal has the stroke to force through the cuts to balance Louisiana's budget if he chooses. But the governor has opted for the one-time money instead.

Why? Because to actually balance Louisiana's budget requires choices that are nightmarishly difficult for a modern politician, even one who was recently re-elected with 66 percent of the vote. Jindal is hoping that a raft of pro-business policies he's managed to have enacted will begin to create the economic growth needed for revenues to catch up to state spending. Louisiana's rankings on business friendliness have skyrocketed under Jindal and that will inevitably bear fruit -- though next-door Texas, without a state income tax -- has served as a vacuum for economic growth at Louisiana's expense for decades.

Which means to actually balance Louisiana's budget for the foreseeable future requires not just cutting health care and higher education but downsizing their delivery systems.

For example, Louisiana's public colleges graduate just 38 percent of their students in six years. Only three of those colleges -- state flagship LSU, Louisiana Tech, and the University of Louisiana at Lafayette -- graduate more than 40 percent. And of the 14 public four-year campuses, only LSU, UL-Lafayette, and Southeastern Louisiana University have enrollments above 10,000 students. Clearly, the state is overbuilt where higher education is concerned and even in good times it's difficult to fund the panoply of public universities at levels they would require for high-quality operations. Merging or eliminating some of those schools is an obvious necessity, but Jindal doesn't have a taste for it this year.

And Louisiana maintains a network of what it calls Charity Hospitals, which now involve nine facilities spread out across the state. Two of the "Charities" are teaching hospitals directly connected with medical schools that LSU operates in New Orleans and Shreveport; the rest maintain elements of a teaching function but generally serve as brick-and-mortar operations serving Medicaid, Medicare and indigent patients. Only about four percent of the patients served by the "Charities" have private insurance. And with health-care dollars generally following the patients in today's environment, the entire business model of a network of state-run hospitals is a needless drag on the state budget to the tune of hundreds of millions of dollars. But the idea of selling off some of the "Charities" is one none of the state's political class, Jindal included, will touch.

Decisions like the ones described above aren't easy. But if Forgotston is correct and a budget deficit in excess of $500 million looms, with no more opportunities to raid the rainy day fund, they're the kinds of decisions Jindal will have to make.

Or perhaps Jindal's successor will have to make them. If he's in Washington by the time the budget ax must finally fall, though, today's political star won't be remembered as well as he'd like to be.

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About the Author

Scott McKay is publisher of the Hayride, which offers news and commentary on Louisiana and national politics.