Louisiana’s budget crisis goes national
The chronic mismanagement of Louisiana’s finances by the state’s elected officials is hardly news to most people in Baton Rouge – and certainly not to regular readers of this newsletter. But on Friday the story was told to a national audience through two widely-read publications. In The New York Times, Campbell Robertson picks up on the fact that oil prices are only partly to blame for the state’s budget shortfall.

The downturn in oil prices has undoubtedly worsened the problem, forcing midyear cuts to the current budget. But economists, policy experts and lawmakers of both parties, pointing out that next year’s projected shortfall was well over a billion dollars even when oil prices were riding high, turn to a primary culprit: the fiscal policy pushed by the Jindal administration and backed by the State Legislature.

In an interview with the Paper of Record, Gov. Bobby Jindal said the devastation to the state’s budget was entirely deliberate:

“We made an explicit decision and commitment that we were going to cut the government, the public sector economy, as opposed to the private sector economy,” he said, adding that per capita income in the state is at its highest. “We made the intentional policy decision we think it’d be better to shrink government and cut taxes. That’s unusual for Louisiana.”

Also weighing in is Politico Magazine, with a story that catalogues the various one-time gimmicks used by the administration to postpone the day of reckoning.

Louisiana’s budget is hemorrhaging red ink, and it’s getting worse. He inherited a $900 million surplus when he became governor seven years ago, and his administration’s own budget documents now show the state is facing deficits of more than $1 billion for as far as the eye can see. There are no easy solutions today because Jindal has increasingly balanced the budget by resorting to one-time fixes, depleting the state’s reserve funds and taking money meant for other purposes.

Budget woes contribute to ER closure
Executives at Baton Rouge General Medical Center were negotiating with Gov. Bobby Jindal’s administration to keep the hospital’s emergency room from closing when the state’s slumping revenue picture ground the talks to a halt. As the Business Report’s Stephanie Riegel reports,

(CEO Mark) Slyter declines to says specifically what possible options hospital officials had presented to Louisiana’s Department of Health and Hospitals or how much they were asking for. He also won’t say whether Baton Rouge General was pressing for changes to the state’s reimbursement structure, which gives Our Lady of the Lake the lion’s share of reimbursements for providing care for the poor while giving very little to Baton Rouge General and other providers. Slyter would only say, “We had presented them with some options, but we exhausted all of those.”

Meanwhile, state Rep. Ted James writes in The Advocate that the closure will affect everyone in central Baton Rouge, not just the poor and uninsured.

Sure, it will hit the indigent and working poor the hardest, but shutting that ER will hit all of Baton Rouge: poor, middle class and even the rich. Losing this ER puts more strain on every other emergency room in our city and means longer waits and lower-quality emergency care for our citizens, no matter their income.

Film Fight
While the state budget craters, one out of control spending program that hasn’t had a hair touched on its pretty little head is the state’s film industry. David Jacobs of the Business Report says reforming the credits will likely be a hot topic at the Legislature this year. But major changes to the program, while inevitable, probably won’t happen until a new governor has been elected.

Even many incentive supporters say something should be done to reduce costs or improve the return on investment. Louisiana could decide to limit subsidies for big-money talent and invest the savings in industry-specific education and grants for small films that fall below the current $300,000 eligibility threshold, which might help create a truly homegrown film sector that wouldn’t be quite so quick to leave if the incentive winds shift a little. But a cap on subsidies for salaries over $1 million has been floated before and shot down out of fear that the change would scare off big studio productions. Gov. Bobby Jindal typically describes proposed cuts to incentives as possible tax increases, which he opposes.

Mann: Where are the supply-siders?

The trickle-down, supply-side economic theory touted for decades by conservative politicians holds that the surest way to energize a sluggish economy is to cut taxes. But Nola.com columnist Bob Mann says the supply-siders have been curiously silent about Louisiana’s budget crisis.

If they really believed that slashing income and corporate taxes supercharged the economy, wouldn’t this be an auspicious time to enact their theories? If trickle-down economics worked like Jindal and so many Republicans insist, then why aren’t we doing it now? Could it be they know what serious economists have understood for years — supply-side economics is a fraud.

Number of the Day

$700 million – Approximate amount of money removed from Louisiana’s tax base on an annual basis by rolling back the Stelly Plan. (Source: Politico)