2014 Legislative Session — maintaining an unsustainable status quo
A mostly absent governor and a legislature often passive on budget issues made for a fiscal “status quo” in the 2014 legislative session. Unfortunately, in this case “status quo” means a continuation of irresponsible budget policies that have undermined Louisiana’s ability to invest in higher education and health care, while sowing the seeds for further fiscal problems in the near future. Policymakers also did little to improve economic security for Louisiana’s families, rejecting modest payday loan regulations, a raise for minimum wage workers and, for the second year in a row, refusing to expand health coverage to uninsured adults. Read more in LBP’s 2014 session review.
Recently passed state budget relies on nearly $1 billion in “one-time” money
Legislators left Baton Rouge this week after passing a Fiscal Year 2015 budget that includes $991 million in funding from “non-recurring sources”—money that isn’t expected to materialize in 2016 and will have to be replaced, reports the Associated Press. Among the larger source of one-time revenue is the Medicaid Trust Fund for the Elderly (MTFE), which has been used to fund nursing homes and will run out of money next year, leaving a $234 million hole. The nursing home fund was drained from a balance of more than $800 million just a few short years ago. The state also is filling holes with $157 million in tax amnesty dollars—basically money borrowed from the future, according to a report from the Legislative Fiscal Office. Another $260 million from legal settlements, property sales and “fund sweeps” will also need to replaced, along with $210 million that was generated through a debt repayment gimmick and another $130 million from miscellaneous sources. Absent replacement money, health care and higher education will be back on the chopping block next year facing brutal cuts.
Treasurer says budget might already be unbalanced
Treasurer John Kennedy, long a critic of Gov. Bobby Jindal’s approach to budgeting, claims that the administration and Legislature created a $40 million hole in next year’s budget by using proceeds from a pharmacy settlement to keep the lights on at colleges and universities this year, reports LaPolitics. At the root of the issue is cash-flow problems that have plagued higher education this year as money that was expected to materialize did not. Commissioner of Administration Kristy Nichols had previously offered assurances that money from advanced hospital lease payments and property sales would materialize in April, then June, but when the money didn’t come the administration had to take out two “seed loans” from the Treasury to cover shortfalls. “We’re borrowing from ourselves. It’s a pretend budget,”Kennedy told LaPolitics, “I understand the division has a very hard job to do, but you can’t pretend all is well when it isn’t.”
Attorney general recommends veto of oil and gas lawsuit bill
Senate Bill 469, aimed at pulling the plug on the lawsuit filed against 97 oil and gas companies by a New Orleans-area levee board for the industry’s contribution to damaging coastal wetlands, was to be signed by the governor on Monday, until legal concerns were raised that it could interfere with ongoing claims against BP for the 2010 oil spill. On Wednesday, Attorney General Buddy Caldwell weighed in, saying the bill was “vaguely broad” and could have unintended consequences, according to nola.com. He recommended a veto of the bill, a stance the governor’s lawyers disagree with. With potentially billions of dollars at stake, some policymakers have chimed in supporting a veto, saying that legislators should wait and craft a more specific bill next session.
Alvarez & Marsal says sometimes you have to spend money to save money
LBP has finally managed to read through (most of) the 425-page report of policy recommendations from Alvarez & Marsal that was released a few hours before the end of the Legislative session on Monday. One takeaway from the report is that sometimes you have to spend money to make money — a lesson that has sometimes been lost in the cuts-only approach taken by policymakers during Louisiana’s budget crisis. For example, the consultants recommend hiring more tax auditors to improve revenue collection and compliance, and almost all of the recommendations for the Department of Correction (starting on page 158) involve spending more — not less — on rehabilitation, treatment and work programs for offenders – tactics that have been proven to reduce recidivism and bring long-term savings for taxpayers.