Within the next few weeks, the Revenue Estimating Conference (REC) will meet to review data and establish a new official revenue estimate for state government. The new estimate will serve as the certified amount of revenue the Legislature has to spend in the FY 2006-07 state budget.
From all indications, the REC is going to be revising the revenue estimate upward-perhaps substantially. This would come on the heels of the upward revision (by $600 million) the REC made in February, after slashing the estimate by $900 million last October in the wake of the hurricanes. It is no secret that sales tax collections-outside of Orleans, St. Bernard and Plaquemines Parishes-have increased significantly, undoubtedly influenced by replacement purchases from those who suffered losses. Another likely area of revenue forecast increase is in the category of oil and gas revenues. Crude oil prices have soared even more since February, and natural gas prices remain high. When the REC meets, a revised estimate in the $150-$300 million range would not be surprising.
The REC's job is to forecast revenues accurately. The Legislature decides how those revenues will be used, with significant input from the governor's office. There will be a mighty temptation to spend the "found" money on perks and projects that would ingratiate legislators with constituents back home. After all, 2007 is an election year, and what better way to increase popularity than by handing out some checks and cutting a few ribbons? While the Legislature will probably not be bold and arrogant enough to use the new money to restore its revered urban and rural slush funds, it can certainly find places to hide the lollipops and pork in the massive state budget. For openers, if the media are interested, they can look at the Department of Economic Development (DED) budget, since legislators love to stash projects never requested by DED in its budget. Almost any grant or project can be called "economic development."
Before the Legislature starts committing revenues that may not be available in the future to pork or recurring expenditures, legislators should think seriously about spending any new dollars in areas that can stabilize state finances and provide one-time assistance where it is needed in the wake of the storms.
Legislation has been introduced that would save the taxpayers almost $2 billion over time by paying down the unfunded accrued liability (UAL) of the state retirement systems. By putting up $100 million of the "new" money now, the Legislature could save the taxpayers almost 20 times as much in the future. Wouldn't that be a wiser use of the money than making grants to fairs and festivals, or starting up a new non-profit organization to create jobs for a favored few?
Another bill that has been introduced would essentially create a FEMA repayment fund. The legislation calls for putting aside money now to be used to pay the bills we will get from FEMA for the state's share of debris removal, reconstruction and disaster relief. Why not take some of this money we didn't expect to have and put it aside to help pay some huge bills we know will be coming our way soon?
If the higher-than-expected revenues are used as "smart money," the taxpayers' best interest will be served and the state's fiscal future will be brighter. But no one is betting "smart money" on that happening. If the past is a prologue, the new money will go to new programs, more hiring, and the hog-slaughtering party where the favored legislators pledge their fealty and carry home their pork.