August 22: LBP on NPR

August 22: LBP on NPR

In the two decades since the federal government transformed America’s welfare system into a block grant, Louisiana’s poverty rate hasn’t budged - but the number of poor families receiving cash assistance and help finding jobs has plunged.


In the two decades since the federal government transformed America’s welfare system into a block grant, Louisiana’s poverty rate hasn’t budged – but the number of poor families receiving cash assistance and help finding jobs has plunged. NPR’s Pam Fessler takes a long look at what’s happened in Louisiana and elsewhere, including a cameo by LBP Director Jan Moller discussing the findings of Grace Reinke’s new report about Louisiana’s frayed safety net.

Marketa Garner Walters, the new secretary of Louisiana’s Department of Family and Children Services, is sympathetic. “We’re not the most accessible or user-friendly,” she says. “We have to figure out how to meet our clients where they are and how to make the help that we are giving them more accessible and readily available.” Walters says one problem is that over the years, welfare spending in the state has been slashed. The law Clinton signed allowed states to use federal TANF funds for things other than welfare. And when state budgets were stressed after the Great Recession, that’s exactly what many of them did. “So we now use TANF money to pay for things that are not traditional TANF expenditures,” she says — such as early childhood education and other programs that used to be funded by the state. She says her administration is concerned about the state’s poor and wants to replenish some of those welfare funds. But Jan Moller of the Louisiana Budget Project is not optimistic the state will be able to find the money. He says welfare became something of a slush fund. The result is that today Louisiana uses only 8 percent of its welfare money on cash benefits for the poor and only 1 percent on programs to help them find jobs. It’s one reason benefits are so low.


Who’ll pay the bills?

Even before the catastrophic South Louisiana floods, state government was expecting to be awash in red ink. A slowdown in corporate tax collections had officials predicting that Louisiana would finish the 2016 fiscal year with a $200 million deficit. Now the state financial picture is even more muddled, as the state racked up $12.5 million in extra expenses in just the first week. Times-Picayune’s Julie O’Donghue notes that the federal government will pick up at least 75 percent of the state’s cost, but that the disaster makes it more likely that the state will need a short-term loan to cover its cash flow.

Staff from the state treasurer’s office said Louisiana wouldn’t have its current “cash flow” issue if then-Gov. Bobby Jindal and legislators on the budget committees hadn’t approved using $345 million in one-time money back in October of 2014. The Jindal administration pushed the Legislature to spend the $300-million-plus pot of extra money it discovered was sitting in the state’s bank account. … The $345 million had previously been used as a financial cushion, in case the state accidentally overspent. But legislators approved Jindal’s plan to spent it as if it were tax revenue.

Jeremy Alford of notes in his weekly newsletter (subscription required) that a leading state economist expects an uptick in the revenue forecast as people replace vehicles and repair their homes.

LSU economist and (Revenue Estimating Conference) member Jim Richardson said the REC will gather next at it’s regularly-scheduled meeting some time next month, but he doesn’t see a need for a downward revision at this time. “For Katrina, we didn’t know what the impact on business was going to be and we chose to be prudent,” Richardson said. Today economists in Louisiana know that a bounce in tax collections can be expected in the months following a major flooding event. “By October or November you will see numbers moving up,” said Richardson, adding that collections should be back to normal by the summer of 2017.

The AP’s star reporter, Melinda Deslatte, writes that it’s too early to tell how the floods will affect state finances, but notes that people in affected areas have been granted extensions to pay their taxes.

In the long-term, the damaging impact on the state treasury could be deepened by lost economic activity caused by the flooding, or it could be boosted by an influx of spending on construction supplies, replaced cars and new furniture. The question marks are large.

The Advocate’s editorial page takes a pessimistic view, and says recovery spending is unlikely to boost the local economy or the state budget.

If experience from the hurricanes of 2005 is any guide, a big disaster will cause a short-term rise in spending, and thus tax proceeds, as insurance payments come in and people need to replace cars and major appliances, and rebuild homes and businesses. A difference, though, is that the insurance payout from the flooding of 2016 is not going to be the same, as vast numbers of afflicted households did not have flood insurance. Regular homeowners’ policies typically won’t pay for flood damage. Additional federal assistance may be available to some extent, but the jury is out as to the likelihood of Congress sending more billions our way, as happened after Hurricane Katrina. So the economic impact of floods in the Baton Rouge and Lafayette areas, added to those earlier this year in northern parishes and in St. Tammany and the northshore, is likely to be a serious negative blow to the economy. Property owners, including many small businesses, may take on considerable additional debt, for example.


Floods and the fiscal revamp
The catastrophic flooding in South Louisiana has pushed other state policy issues to the side for the time being. But The Advocate’s Mark Ballard notes that policymakers have little choice but to grapple with long-term changes to the state’s broken revenue structure, as several temporary revenue measures are due to expire in 2018.

Recovery, obviously, has to be the first priority, but the state really can’t put off the fiscal revamp, said Senate President John Alario, who more than anyone else will be called upon to push the bills that start repairing the state’s finances. And while it’s somewhat insensitive to chat about money at a time when people need to be rescued, if nothing is done to stabilize the financial system, the state will again find itself on the brink of catastrophe, said the Westwego Republican with 44 years of experience in the Legislature. “It’ll be difficult to do both, but something has got to happen,” he said.


Child care and economic growth

Providing American families with high-quality, affordable child care isn’t just good for children, who will be more likely to become productive citizens as a result. It also would boost the overall economy – a lesson many advanced democracies have already learned but has yet to catch on in the United States. The New York Times editorial board:

International comparisons indicate that more family-friendly policies in the United States, including quality child care, would allow roughly 5.5 million more women to work, assuming the economy was adding jobs at a reasonable pace. All else being equal, that surge could generate an astounding $500 billion a year in economic growth, or about 3.5 percent of gross domestic product. Proper child care also lays the foundation for future productivity gains. Research shows that public investment in early education yields benefits for children far in excess of its cost, including higher academic and career achievement well into adulthood, as well as better health.


Number of the Day

11 – Percentage of Louisiana’s welfare spending that goes to the three core goals of the 1996 federal reform effort – cash assistance, child care and helping families find jobs (Source: LBP research)