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Budget News and Notes

Posted on January 13, 2012

While Gov. Bobby Jindal has focused on education, his administration has been conspicuously quiet on another issue that’s sure to grab headlines in the months ahead: the state budget.

But the calendar doesn’t lie. In less than four weeks the governor will lay out his spending plan for 2012-13. And what we have learned so far is not encouraging.

As states across the country begin to rebound from the Great Recession, Louisiana is one of just seven states that experienced a mid-year shortfall in the current fiscal year. And while Louisiana’s $198 million gap was smaller than those in California, Illinois, New York and Washington, it is the second-biggest gap when measured as a percentage of the overall budget.

For fiscal year 2012-13, states across the country have identified a collective $44 billion in budget shortfalls. That’s a major improvement over last year, when states faced $103 billion in shortfalls that had to be fixed through spending cuts or new measures. But next year’s list is incomplete, and Louisiana is among a handful of states that have yet to detail the size of next year’s budget gap (that figure is expected later this month, when the Joint Legislative Committee on the Budget meets).

According to the Center on Budget and Policy Priorities:

“These preliminary totals may be down somewhat from the daunting budget gaps of the last several years, but they are still very large by historical standards. And it is reasonable to expect that this total will grow as governors issue new gap projections along with the budget proposals they will be releasing in the coming months.

Making matters worse, the latest downturn comes in a year when Congress is unlikely to ride to Louisiana’s rescue, as it has done several times in the recent past. As Stateline.org reported this week, last summer’s deal to raise the federal debt ceiling is likely to trigger automatic, across-the-board cuts in the federal money that states receive for education, social welfare and other programs:

“A long siege of deadlock and dysfunction in Washington has left states frustratingly unclear what to expect from the federal government in the coming year. About the only thing they know for sure is that it is not going to be a year of generosity.”

It’s too early to tell how Gov. Jindal will propose to cope with these challenges. But with the governor having ruled out new revenue measures – and having already raided various pots of one-time money to balance the current-year budget – our fear is that the cuts will come from the health-care and social welfare programs that poor and moderate-income residents depend on.

– On another note, it appears from this Bloomberg story that the state Bond Commission got snookered in 2005 when it overruled the advice of its staff and decided on a risky scheme to borrow money for Superdome upgrades. The cost of financing $187 million worth of repairs has climbed to $42 million and led outside analysts to conclude that the state was “unsophisticated” compared to the Wall Street bankers who sold them on the plan:

“In most cases, the elected political leadership are part- time amateurs,” said Roger Noll, professor emeritus of economics at Stanford University near Palo Alto, California. “They get a noisy political grassroots movement that wants to subsidize a team, and then they get sold a bill of goods.”

Quotable:

“It’s a fallacy to say reductions in Medicaid rates impact the economy,”

– Louisiana Health and Hospitals Secretary Bruce Greenstein, who gets paid $242,001 per year as a state employee, pretending that government spending does not create jobs.

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