Hospitals face deep cuts even in “best-case” scenario

Members of the House Appropriations committee heard more bad news Tuesday, as state health officials laid out the effects of cuts that would be necessary without new revenues. Virtually every part of the state’s healthcare system would suffer: safety net hospitals, psychiatric care, and community-based services for people with disabilities. But even in a best-case revenue scenario, the Department of Health and Hospitals will still face drastic cuts, requiring some services to be rationed. The AP’s Melinda Deslatte explains:

Jared Stark, CEO of the state-owned hospital in Lafayette, said the likely cuts “would drastically reduce services.” He and other hospital managers wouldn’t commit to whether they would continue with the deals if the reductions happen. If the privatization deals fall apart, LSU – which previously ran the facilities – would have to take over the services, though it is unclear how they would manage the hospitals or the uninsured services that have been shifted to private hospitals. In addition to the hospital cuts, Reynolds said mental health facilities will suffer cuts and a pediatric day care program that cares for “medically fragile children” will be shuttered. … The worst-case scenario without tax hikes, Reynolds said, would end all payments to the safety net hospitals for the next four months, a cut of about $350 million, and could force closures across a wide array of programs for the elderly and disabled. No tax increases have received legislative support so far. Republicans in the House, where tax hike legislation must originate, say they want to look for deeper cuts in state services before turning to taxes.

Taxes in the polls

A new poll from Southern Media and Opinion Research shows that Governor John Bel Edwards’ tax plan to close the state’s historic budget gap could be unpopular among voters, making his job even harder as he works with the Legislature to find solutions during the three-week special session. Fifty-four percent of respondents believe that the current budget crisis can be solved with no new revenues, or tax increases, and 59 percent oppose the 1-cent sales tax proposal that Edwards hopes to get approved by the Legislature as soon as possible in order to help fix the $900 million mid-year problem. The Advocate’s Rebekah Allen has more:

“It’s not unusual for a governor who was in a controversial election, with low turnout,” said pollster Bernie Pinsonat. “Plus, there’s nothing but bad news out there. We’re in a recession, we don’t have any money. People don’t trust the government.” … A spokesman for Edwards said the governor understands why people are upset with the government. “Gov. Edwards shares the frustrations of so many Louisianans who did not cause this problem and who are forced to clean up the mess from the previous administration,” said Richard Carbo, an Edwards spokesman. “The hard choices we need to stabilize the budget aren’t likely to win any popularity contests, and even Gov. Edwards doesn’t like them, but with a combination of spending cuts and additional revenue, Louisiana will come out of this stronger than ever.”

The House Ways and Means committee will begin hearing tax proposals Wednesday.

The roots of the problem

The state’s editorial pages are not happy with short-sighted decisions made under the previous administration that are likely to hurt the state’s economy for years to come. First up is the Nola.com/The Times-Picayune editorial page, which examines a new audit that says Louisiana will owe an additional $71 million in interest payments – and could have saved an additional $160 million – had elected officials been more resopnsible with the state’s credit card.

Louisiana went on a borrowing spree while Gov. Jindal was in office, and the Legislature went along with all of it. Over the past five years, the State Bond Commission — which includes the governor, legislative leaders and several statewide officials — approved new capital outlay projects faster than it could sell bonds to pay for the work. That resulted in a $3.7 billion backlog of projects and “reduced the capacity for new projects until fiscal year 2024,” according to the auditor’s report. To handle general fund deficits averaging $1.2 billion per year between 2011 and 2016, the state relied heavily on “borrowed money and nonrecurring revenues to avoid cutting operating expenses or increasing revenues from taxes, licenses, or fees,” the auditor said.

The Advocate’s Lanny Keller, meanwhile, notes in his weekly column that many of the state’s current financial problems (but not all) are the result of a “something for nothing” philosophy that prevailed during the last eight years that could ultimately hurt economic growth in the capital region.

What is the way out? The large budget gap is not purely a consequence of the recent drop in the price of oil but of a something-for-nothing policy of tax cuts and tax breaks for favored businesses under Jindal and a compliant Legislature. Something-for-nothing right-wing populism is just as damaging to Louisiana’s budget and prospects as the old left-wing version.  Despite all the whining from the legislators, the consequences of closing institutions are not likely to be borne, so some taxes will have to go up this year. How will that be achieved? Today, the business community faces a stark choice: Support broad tax reforms that include restoring the so-called Stelly income tax revenues unwisely ditched by Jindal, or see legislators resort to back-door increases in fees and drastic levels of new costs on business. Indirect taxes are usually a politically easier set of choices. Among those bad choices are inventory taxes that are bad economic policy or large bills for utilities — millions a month — at the big industrial employers in the region.

Steep learning curve on money committees

With a historic state budget crisis to contend with, many freshman legislators will receive a crash course in budget and tax policy while sitting on the House Ways and Means and Appropriations committees during the current special session. The two money committees will play the biggest role in stabilizing a state budget that still faces a deficit of over $800 million for the current fiscal year that ends June 30, and about a third of those committee members are freshmen legislators, new to the Legislature and Louisiana’s budget policy. Nola.com/The Times-Picayune’s Julia O’Donoghue has more:

“I am not an accountant. I am not a tax attorney. I am not a CPA,” said Rep. Paula Davis, R-Baton Rouge, a freshman member of Ways and Means who will have to review upward of 60 tax bills in the three-week session. … Like Appropriations, the Ways and Means Committee had to go over some legislative basics on its first day of meeting. New Orleans Rep. Neil Abramson, the committee’s chairman, brought in the legislative economic staff to explain what purpose a bill’s “fiscal note” serves. … “It’s like drinking from a fire hydrant,” said Rep. Larry Bagley, R-Stonewall, a freshman on the Appropriations Committee, after his first day of budget meetings. “They don’t have a school for this.”

U.S. Poverty breeds “bad stress”

A new memo from the Brookings Institution sheds more light on the long-term effects of being poor. The authors point out that the chronic and continual stress that often plagues those in poverty has effects that last for a lifetime, and can even make planning and decision making more difficult. Author Carol Graham explains why this trend is particularly common in the United States:

For the U.S. poor, for example, common problems such as a sick child or a broken down car can result in the loss of a (typically low-quality) job and then a new spiral of associated problems, often exacerbated by lack of health care and other kinds of insurance. … The U.S. also stands out because despite relatively high average life satisfaction levels,gaps in levels of life satisfaction and stress between the poor and the rich are very large. The poor in the U.S. experience much more stress on a daily basis, for example, than do the poor in Latin America (a region which has relatively high levels of well-being but significantly lower levels of average income).

Number of the day

$64 million – Amount to be cut from the state Department of Health and Hospitals before June 30, in the “best-case” scenario. (Source: The AP)