The flip side of the coin has arrived

By Dan Juneau

November 25, 2008 at 11:03 am  | Mobile Reader | Pring this storyPrint 

It was exhilarating, from a fiscal standpoint, to be a Louisiana legislator for the last few years. Money was rolling in from a combination of hurricane recovery spending, higher oil and gas prices, and an uptick in economic activity.

Unfortunately, everything that goes up must come down. Next year, legislators get to see the flip side of the fiscal coin. Instead of being the dispensers of largesse, they will have to adapt to the role of cutting the budget and telling people no. That won’t be fun, but it comes with the territory.

Current projections call for state revenues to be approximately $1.3 billion lower for the budget the governor and the Legislature will fashion for next year. So what do the folks who increased spending by billions over the last few years do when faced with a huge revenue shortfall? It will be interesting to see.

There are some obvious approaches that come to mind. The most important thing that the Jindal administration can do is to submit a true standstill budget to the Legislature when he submits his executive budget in a few months. Folks in government often don’t have the same definition of “standstill” that folks outside of government understand. “Standstill” budgets in government often mean taking the previous budget as a base and then adding an inflation factor to it. If Governor Jindal submits—and the Legislature passes—a budget with no increase for inflation, he eliminates almost half of the potential problem. That would be a good start.

Another action the governor could take immediately to address the problem would be to reinstate the freeze on state hiring. One was in effect earlier this year but expired when the new budget went into effect. It makes no sense to allow any growth in state government’s workforce in the face of a huge predicted drop in state revenues. The governor also has the authority to place a freeze or severe restrictions on state employee travel. That would mitigate the gloomy financial picture somewhat as well.

Those actions in themselves will not entirely solve the potential $1.3 billion problem. To address the rest of the shortfall, the governor and the Legislature might want to look back at the recent past when they develop their blueprint for how to go forward.

In the aftermath of Hurricanes Katrina and Rita, state government was faced with a projected $900 million shortfall toward the end of 2005. Governor Blanco and the Legislature cut that amount out of the operating budget and the silence was deafening. There were no mass protests at the state Capitol. Hordes of homeless people did not swell the streets. Highways were patrolled, thousands of state employees were not given pink slips, education funding was not appreciably reduced, driver’s licenses were renewed, and no correctional facilities were closed.

Perhaps the governor and the Legislature should go back and look at that amended budget from late 2005 and see what was funded and at what levels. The next thing they should do is to see what spending has been added since that time in the different state departments—especially at levels exceeding the cost of living. That should give them a fairly good road map to use to bring state spending into line with state revenues. When government grows faster than the revenue streams that support it, it is time for government to stop growing.

For the past few years when money was flowing, it was fun to be a legislator or a governor. Now they get to grapple with the flip side of the coin.




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