Busting budget myths

There are a lot of theories and ideas floating around about how Louisiana can fix its historic budget problems. But not all of them hold up to close scrutiny. As The Advocate points out in a must-read editorial, many of the easy answers being offered by those unwilling to look at new revenues would do little to plug the $900 million mid-year deficit and $2 billion imbalance in next year’s budget. Welcome to the Louisiana budget version of “mythbusters:”

Faced with a deluge of red ink in the state budget, some have resorted to magical thinking.

Unlocking “statutory dedications” and reducing fraud in Medicaid are among the ideas that get the mythbusters treatment. To wit:

Myth No. 3: The state can realize massive savings by eliminating “waste, fraud and abuse” in the giant Medicaid budget. State Treasurer John N. Kennedy, who has a talent for glib, back-of-the-envelope analysis of state fiscal issues, has made much of anecdotes about poor people racking up hospital charges for hangnails and indigestion. But we reject the notion that there are hundreds of millions in savings that can be had here. Neither the government nor private insurers nor hospitals and doctors have made much of a dent in ballooning medical care costs. Jindal put in place a “managed care” Medicaid plan called Bayou Health, but it will take time — years, not months — to slow the pace of medical expenditures, if that is possible at all.

Myth No. 4: Eliminating state dedications can produce a big budget windfall. The Louisiana Association of Business and Industry has proposed eliminating the dedicated funding that puts as much as $1 billion of the operating budget on autopilot. We’ve long supported the elimination of statutory dedications, the so-called “stat-deds,” because they reduce the state’s flexibility in controlling spending. But many of these stat-deds address important needs, such as public defenders and debt service. Such funding can’t be chopped without real impacts. Dardenne proposes a significant cut in stat-deds, though, hoping to save $150 million or so in the budget.

Higher ed funding: academics vs athletics

As Louisiana’s colleges and universities face dramatic reductions in state support and scholarship revenue, a new investigative report from WVUE New Orleans sheds light on where previous cuts have fallen- and it’s not to the university  athletic departments. While state support for academic programs has plummeted in recent years, Lee Zurik and Tom Wright report that athletic budgets keep getting fatter.

“I think all presidents, all campus leadership would like to have successful teams,” [Higher Education] Commissioner Rallo says. “They believe that it adds to the texture, if you will, of that educational experience.” But university sports come with a cost.  Budgets show these 10 universities will give close to $35 million this year to their athletics departments. You certainly don’t have to be on an athletic scholarship to enjoy university sports. “It’s definitely a valued part of university,” a Louisiana Tech student reminds us. “I love going to watch sports,” a Southeastern student says. But these students think, when times get tough, their university leaders need to prioritize, and push athletic programs to spend wisely. … Their futures won’t play out on the Jumbotron but inside the classroom, where it’s harder than ever to make those big plays after so many years of big budget cuts.

Social services “stretched too thin” facing more cuts

The Louisiana Department of Children and Family Services got its turn to testify on the budget on Wednesday, and assured legislators that the severe effects of proposed cuts to the agency were not “scare tactics.” Secretary Marketa Garner Walters said her staff is already overburdened as the department’s budget has already been slashed from $1.2 billion to $681 million in the past eight years. As The Advocate’s Elizabeth Crisp reports,

The department’s budget for the current year relied on more than $10.9 million in federal funding that has become tangled in the process. “There’s no hope of that money coming this year,” Commissioner of Administration Jay Dardenne said. “It’s going to be a real reduction, and there’s no money to offset that.” … “We’re at the bottom of the barrel here. There is no fluff in this agency,” Walters said. “We simply cannot sustain more cuts and serve the families that we are obligated to serve.” Walters, who took over the agency when Edwards was sworn in Jan. 11, told the legislative panel about the needs that her department attempts to meet — from placing children in foster care to attempting to recoup owed child support payments to determining whether families are eligible for benefits from the federal Supplemental Nutrition Assistance Program, commonly referred to as food stamps.

Oil producers in “survival mode”

Legislative leaders and Gov. John Bel Edwards’ administration remain far apart on the best ways to solve the budget crisis. With slumping oil prices being a main reason why state revenues are down, leaders from that industry said they shouldn’t be asked to pay more into the state’s coffers. Louisiana Oil and Gas Association (LOGA) president Don Briggs gave a sobering talk at LOGA’s “State of the Industry” meeting, indicating that the struggling oil sector is “just as broke” as the state itself. Nola.com/The Times-Picayune’s Jennifer Larino has the story:

Briggs spent most of his talk describing how a global oil glut threatens to keep prices low for the foreseeable future. Regional producers are in “survival mode” as new work dries up and profits diminish, he said. … “Where can the state get its money from? I don’t know. You can’t get it from us,” Briggs said. Both the state budget and the oil patch are intricately linked to oil prices, which have been locked in an historic slide. Oil futures are currently trading around $30 a barrel, down from a high near $100 in 2014. Over that time, Louisiana has lost 11,600 jobs in the mining and logging sector, which includes oil and gas. Drilling has slowed just short of a halt and new projects are on hold.

Number of the Day:

$4.1 million – Amount cut from the Louisiana Department of Children and Family Services budget this year. The agency is in line for another $10.9 million reduction. (Source: The Advocate)