What’s next for the “pretend” budget?

What’s next for the “pretend” budget?

The 2018-19 state budget is now on Gov. John Bel Edwards’ desk, after the House agreed with changes made by the Senate that spared health care services but gutted just about everything else in state government.

Number of the Day

-1.9%  - The percent change in real personal income in Louisiana from 2015 to 2016. (Source: Bureau of Economic Analysis )

The 2018-19 state budget is now on Gov. John Bel Edwards’ desk, after the House agreed with changes made by the Senate that spared health care services but gutted just about everything else in state government. But just about everyone knows this is just the start of the real negotiations. Edwards now faces a choice. He can sign the budget (highly unlikely), veto it altogether, or let it sit on his desk while the Legislature debates how to fill the $650 million shortfall that remains. The News Star’s Greg Hilburn reports:

The House sent the budget to the governor by a 61-37 vote, though few think it will stand. “This is a fake budget,” said state Rep. Kenny Havard, R-St. Francisville, who voted against passing the measure because it doesn’t fully fund TOPS, the state’s popular college scholarship program. “This is a pretend budget, and we represent real people,” said Rep. Robert Johnson of Marksville, chairman of the House Democratic Caucus. But House Appropriations Chairman Cameron Henry, R-Metairie, had a different perspective. “The positive thing about passing this budget is now it becomes real,” Henry said in a press conference afterward. Edwards has consistently said any of the budget versions that left the Senate and House during this Regular Session won’t go into effect, but he has avoided saying he will veto the measure. “One way or another it will not be guiding our appropriation for next year,” Edwards said this week. “(This budget) confirms and validates what we’ve said all along. It’s not possible to fund a responsible budget with the revenue currently available.”

The AP’s Melinda Deslatte highlights the specific cuts to state government included in the Legislature’s final budget:

The TOPS program would cover only 70 percent of college tuition. Louisiana’s food stamp program would end because the state couldn’t afford to administer it. Meat inspections done by the agriculture department would cease. Oversight of the state’s veterans cemeteries would shutter. Parks and museums would close. Inmates would be booted from local sheriff’s jails and sent to overcrowded state prisons. Financing for college campuses would be slashed.

 

U.S. investing less in children
Lawmakers at every level of government often talk about how important it is to make investments in children. But new research by the National Bureau of Economic Research shows that federal spending on poor children in the United States has dropped substantially since 1990 – largely due to cuts to the Aid to Families with Dependent Children (now TANF) program. These reductions make the United States an outlier among developed nations. Jeff Stein of the Washington Post:

In 1990, the government spent about $8,700 on every child whose family took in no income from work. By 2015, accounting for inflation, it spent less than $7,000 on children from these impoverished families, the paper calculates.Much of the drop was driven by cuts to direct welfare payment programs, which once went to 76 percent of poor families with children but now goes to 23 percent of them. Federal spending on all children, when measured as a portion of the economy as a whole, has increased since the 1990s, but it has not grown quickly enough to keep the United States from falling behind other countries with similarly developed economies.

One area where the federal government has successfully invested more in low-income families with children is through the expansion of the Earned Income Tax Credit:

The small increase in U.S. spending on childhood programs comes in large measure from multiple expansions of the Earned Income Tax Credit, a tax credit tied to work that has increased more than fivefold since the 1990s. That tax credit has helped reduce child poverty in America, although one in seven children — or 11 million of them — still remain in poverty. (Some estimates have put the number higher.)

A recent policy brief by LBP’s Neva Butkus outlines why Louisiana lawmakers should consider expanding the state’s Earned Income Tax Credit.

 

Louisiana depends on foreign trade
President Donald Trump’s saber-rattling on foreign trade, particularly with China, is having real-world effects in trade-dependent Louisiana. Farmers, petrochemical manufacturers and other industries are heavily dependent on free and open trade with the rest of the world, which is now threatened by the president’s rejection of the Trans-Pacific Partnership trade agreement. Carnegie Endowment for International Peace visiting scholar Maxwell Hamilton, writing in the Dallas Morning News, wonders why Louisiana is so supportive of a president whose economic agenda often runs contrary to the state’s interests.    

In my hometown of Baton Rouge, the most export-dependent major metro area in the country, conservative business leaders described the failure to pass the Trans-Pacific Partnership as a missed opportunity to expand access to Asia’s dynamic markets. … At the Port of New Orleans, officials said the Trump administration’s steel and aluminum tariffs would be catastrophic. In 2002, the last time the U.S. imposed steel tariffs, revenue at the Port of New Orleans plummeted. Spiking steel prices raised costs for construction and industry. U.S. agriculture exports became less competitive because fewer ships used the port. When Mark Twain plied the Mississippi River between Baton Rouge and New Orleans, the banks were lined with “dim forest-walls of bearded cypress.” Today, Twain would find multi-billion-dollar Chinese petrochemical plants. Attracted by cheap natural gas, foreign corporations have invested billions of dollars in Louisiana’s energy and petrochemicals sectors. Louisiana leads the nation in foreign direct investment per capita.

 

Public schools receive standstill funding
Despite school officials’ request for a $40 million funding increase, the Legislature approved a $3.7 billion standstill budget for Louisiana’s public schools on Thursday. This is the 10th time in the last 11 years that school funding has remained flat. While public schools have avoided cuts, the standstill budget doesn’t take into account inflation or the rising costs of retirement and healthcare. Will Sentell of the Advocate reports:

State aid used to be routinely increased by 2.75 percent per year, and sometimes more, for inflation and other costs. But state budget problems for the past decade ended that practice, and any future increases depend on that state finding new revenue. The Louisiana Association of School Superintendents, Louisiana School Boards Association, Louisiana Association of Principals and Louisiana Association of Public Charter Schools earlier this year urged Louisiana’s top school board to ask the Legislature for a $40 million increase, about 1.3 percent.Backers said flat teacher salaries, and the fact pay has slipped below the regional average, offered solid reasons for a boost. However, BESE voted in March to ask the Legislature for a standstill budget after Gov. John Bel Edwards took the same stance.

 

Number of the Day
-1.9%  – The percent change in real personal income in Louisiana from 2015 to 2016. (Source: Bureau of Economic Analysis )