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Tuesday, 02 February 2016 08:19
Waguespack: The business of running Louisiana's budget
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waguespack compressedby Stephen Waguespack, Publisher of Louisiana Association of Business and Industry
The Public Affairs Research Council (PAR), a well-respected good government group, declared in a 1988 report that, “Louisiana’s pattern of increased spending in boom times has resulted in an overall level of operating expenditures the state cannot support, even with frequent tax increases and budget cuts…State spending policies have remained essentially unchanged also – a plethora of programs and a large amount of state aid to local governments.”

Roughly 30 years later, PAR released a new report entitled, “A Plan to Control State Spending” that in many ways mirrors the organization’s research efforts in the last few decades. This latest report recommends that, “the governor and Legislature submit strong and specific assurances for budget cuts, controls and cost containments prior to approving tax increases.” PAR also asks the governor to call upon the Legislature to help him reform Louisiana’s budget process and control costs on several expenditure items in the budget, including debt, pensions and the group health benefits program.

Messages of reform are espoused over and over again by good government groups and editorial boards throughout the years. Legislators and governors come and go. The price of oil goes up, the price of oil goes down. Taxes are raised and then taxes are cut. Boom times are followed by bust times and the cycle repeats itself.

All the while, nothing really changes.

Louisiana appears stuck in a perpetual “Groundhog Day” recurring loop of budget challenges that seems to occur whether or not the economy is weak or strong. If the past has taught us anything, it is that the same old approach of addressing governmental challenges is not likely to permanently solve the problem this time either. Last year’s plan to solve the deficit by new taxes has led to more deficits and more demand for new taxes this year. As Yogi Berra would say, its déjà vu all over again.

Perhaps it is finally time to flip the question. 

Let’s stop asking what does government need and instead start asking what can government do to effectively serve the state? How can state government help advance the interest of all in Louisiana? How can it grow the economy, produce a ready workforce, connect us with roads and infrastructure, and make the state more competitive? When should it effectively provide a service to our people and when should it downsize and simply get out of our way?

In 1985, President Ronald Reagan also implied that we should flip the question when he said, “We in government should learn to look at our country through the eyes of the entrepreneur, seeing possibilities where others see only problems.”

The private sector faces the same tough economy the government faces. Less customer demand, smaller profits, higher costs, and new regulations to the private sector are just as daunting as escalating costs and less revenue for government. The same challenges are felt in many ways, but the responses could not be more different.

For government, the question is how much money is needed to continue the level of government we have traditionally provided. The latest number to this annual question appears to be $2 billion more dollars. How much more will be needed next year? How much will be neededfive years from now? How about the following five years?

Meanwhile, other state governments are making hard choices while the private sector is having a completely different conversation with a different menu of options.

For the private sector, there is no magic pot of money for companies running a deficit right now, facing a fragile economy. There is no putting off tough choices. There are no short-term fixes. There is no legislative majority that with one vote can sweep away the deficits facing small and large companies around the state.

Louisiana’s businesses are announcing mergers and consolidations. They are paring back the workforce and retraining existing workers for other jobs that are more in demand in order to keep them at work. They are innovating and finding new and creative ways to be more efficient and effective, to produce products and services their customers want at a price they can afford. They are doing whatever it takes to keep their doors open, hoping for a break to form in these dark economic clouds.

Government may be surprised to learn how innovative and efficient they can be by simply viewing their own challenges through the eyes of the entrepreneur just as Reagan advised back in 1985.

Louisiana’s budget challenges are not new and they are not unsolvable. Just because a solution is politically challenging doesn’t mean it is impossible to accomplish. For years, we have known the state’s budget structure is broken, spending rates are high, entitlement programs are expensive, subsidies are plentiful and the tax code is uncompetitive. We have known the problem for decades and we have avoided embracing the real solutions for just as long.

Hopefully, we can flip the question this time around by viewing our challenges and solutions through the eyes of the entrepreneur. If instead of this novel approach, we choose to once again view them through the traditional eyes of government, don’t be surprised when we find ourselves seeing red again next year.

 

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