Monday, November 2, 2015

Monday, November 2, 2015

Friday budget follies; After the inauguration; Getting to 70 and 26; and Is the economy in trouble?

 

Friday budget follies

The day before Halloween was appropriately scary for anyone watching the state budget. It started with the morning meeting of the Legislature’s Joint Budget Committee, where the Jindal administration announced that state government spent $117 million more than it took in last year – which means the state will have to cover that deficit by the end of the current budget year. But as Nola.com’s Julie O’Donoghue reports, that’s hardly the worst of it. The overall mid-year hole could be as large as $622 million.

 

Budget shortfalls tend to fall most heavily on Louisiana’s higher education institutions. In interviews Thursday, state higher education officials said they hoped the new governor and legislators would take “bold action” during those special sessions to address the state’s budget woes. But they weren’t optimistic significant cuts to colleges and universities could be avoided. We don’t see things getting much better soon. If anything, it’s going to get a little bit worse,” said LSU President King Alexander in a previous interview, “It boils down to making the right choices.”

 

The official size of the mid-year budget gap will be determined by the Revenue Estimating Conference, which is scheduled to meet Nov. 16. Once the number is known, the administration will announce its recommended cuts on Nov. 20 – the day before the runoff election.

 

Later on Friday – a time traditionally reserved for revealing bad news – the Department of Health and Hospitals announced that the Medicaid budget was running a $516 million deficit in the current fiscal year – largely as a result of higher-than-expected enrollment in the Bayou Health network. To plug the shortfall, DHH announced a series of fixes that include freezing enrollment for people with disabilities seeking home-care services. The Advocate’s Marsha Shuler had the story:

 

The state budget started out short of funding for home- and community-based services for the developmentally disabled. It earmarked dollars for a specific number of people who could be served but did not provide funds to pay for a full year of providing the services. So, (Secretary Kathy) Kliebert said those on the waiting list will have to stay there, barring emergency situations or changes in their circumstances. … Most of the gap is closed with extra state dollars — $128.1 million — from state mental health hospitals and LSU hospitals that went unused in prior fiscal years. The dollars were not anticipated in the current year’s budget.

 

After the inauguration

While John Bel Edwards and David Vitter hurl invective at each other, work is well underway behind the scenes to prepare for the busy – and consequential – special legislative session that both candidates have promised to convene shortly after taking office. The Advocate’s Mark Ballard pokes around and learns that Vitter and Edwards have plans for the budget that they’re not ready to tell the public about.

 

“Both gentlemen have something in mind already,” said Senate Finance Committee Chairman Jack Donahue, R-Mandeville. “They don’t want to be controversial right now.” None of the exemptions or statutory dedications likely to be targeted magically appeared in state law. Each has its own constituency — voters who, if their entitlement is messed with, likely will take it out on the politician at the ballot box. So, like Richard Nixon’s “secret plan” for ending the Vietnam War, which was rolled out during the 1968 presidential campaign, Vitter and Edwards essentially are asking voters and legislators to trust them until after the runoff.

 

Getting to 70 and 26

While John Bel Edwards and David Vitter are promising unspecified structural reforms to the budget if elected, The Advocate’s editorial page reminds us that any significant change will likely require two-thirds supermajorities in the state House and Senate – which can be elusive in an era of increased partisan divisions.

 

Some of the proposals might require changes in the bloated, overwritten Louisiana Constitution, where we’ve added tax breaks or basic provisions that are less flexible than in ordinary law. That means that the significant numbers are often going to be 70 and 26, because the first big hurdle to constitutional changes is a two-thirds vote of House and Senate. Then, the new governor and lawmakers have to sell the changes to a vote of the people.

 

Is the economy in trouble?

In the heat of a governor’s race it’s worth remembering that politicians and their policies have only a marginal effect on a state’s economic well-being. A great deal of it is determined by worldwide market forces and trends that are beyond the control of even the most powerful governors. Here in Louisiana, for example, the current-year state budget – and thousands of jobs – are at the mercy of global swings in the price of oil. So which way is the economy headed? The New York Times’ Neil Irwin looks at the recent batch of data and ends up just as confused as when he started.

 

A strong case could be made that it is in its most vulnerable spot in years, at risk of a new recession amid a global slowdown. The market for many types of risky bonds is in disarray, and “the dangers facing the global economy are more severe than at any time since the Lehman Brothers bankruptcy in 2008,” the former Treasury secretary Lawrence H. Summers wrote recently. There is also a strong case that the United States economy is robust enough to withstand whatever challenges might arise from overseas, and that the evidence of a slowdown is scattered and overstated. Fewer people have filed for unemployment insurance in recent weekly readings, for example, than any time since 1973. I’ve tried several times in the last few weeks to convince myself that one of those stories is correct, but just can’t decide between them.

 

Number of the Day
$117 million – Last year’s budget deficit, which will have to be resolved in the current budget year (Source: Nola.com)