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Friday, 12 August 2011 11:14
Kennedy: Louisiana Budget Balanced With Smoke And Mirrors, Liabilities Very High
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Louisiana


How bad off is the U.S. fiscal situation?  It's liabilities? 

Did the state really address its problems in its recent "balancing its budget"

These were some of the issues discussed in the third part of  Bayoubuzz's interview with Louisiana Treasurer John Kennedy.  , The last of the three-part interview focused upon the state's own risks and what Louisiana citizens can do to protect the state and themselves. 

 (Interviewer stated that he looked at a page on the Treasurer’s website and from that information it appeared that the legislature balanced the budget this past session but did so by extracting funds from various accounts and further balanced the budget by depending upon undefined “government efficiencies”.    The Treasurer then said:)

Well they balanced this budget, Steve, with smoke and mirrors.  I mean there was no fundamental reform done in terms of the budget.  They took money from funds like the Artificial Reef Fund and  the Louisiana Economic Development Mega Fund and spent it on Medicaid. They raised tuition. They took money from the State Group Benefits plan set aside to pay health claims of state employees and put that into the general budget.

They took 6,000 state employees in higher education off the books pretending that they don’t exist.  They still exist and they are still being paid with state money, but they are just pretending that they don’t exist.

The total amount of actual cuts is about $400 million which is well less than 1% of the budget so they didn’t do anything about the numbers of state employees in a meaningful way.  They didn’t do anything about the fact that 22% of our managers are managing one employee.  They didn’t do anything about consulting contracts.  They didn’t do anything about the 900,000 tax payer funded visits to emergency rooms that we will have this year for routine care.  They didn’t do any fundamental change in terms of how we spend tax payer money and that means in my, yea, the budget’s balanced but balancing the budget is not the same thing as doing long term fiscal reform and that just means that we will continue to live paycheck to paycheck and sort of lurch along from budget crisis to budget crisis.    

Listen      

 . (Interviewer  stated that he interviewed an expert  (Truth in Accounting) who said that Louisiana had a debt problem owing over $16,000 per family or close to $21 billion for the entire state)

We’re worse in the South.   We have more state debt, not state debt, I call it state liabilities, and I will explain why in a second.  We have more per capita than California.  And the reason is our pension system.  Our pension system is woefully underfunded.  Our actual state debt is right about in the middle of the pack but if you add in another type of liability which is a very real liability, your pension liability, and you add in the unfunded accrued  liability, and your health insurance program, the numbers get run up very high.    

Listen

 (Interviewer asked from a personal level what advice would  you give the people of Louisiana since many are concerned about their personal risks)

Well, what I would say to people in Louisiana who invested first in Louisiana bonds, don’t worry.  You know, the bonds are safe.  You will be paid your principle and your interest and there will be no defaults.  Those bonds are backed by the full faith and credit of the state and if you own the bonds you have first dibs on all state revenue. 

The people who have money in the stock markets, I know this is painful, but I believe in the American economy  and I think even when it’s sick, and this economy is sick, it has the flu; it’s not a cold, it’s the flu,  but even when it has the flu, this is the strongest economy in the history of the civilization and if you believe in the American economy and the greatness of the American people you got to believe in the stock market and ultimately this market will stabilize and go up.  I don’t know when that will happen.  But investors are clearly sending the political leadership in America and in other parts of the world a strong message; and they are saying do two things; stop spending more money than you take in, and No. 2, when you do spend money spend tax payer money on things that your people need, not things that, you know,   politicians, some politicians, simply wants to further his political future and I think that is a very good message to send.    

Listen

by Stephen Sabludowsky, Publisher of Bayoubuzz.com 

Related interviews:

  1. Treas. John Kennedy Talks Impact Of S & P Credit Rating Downgrade On Louisiana, U.S.
  2. Louisiana Treas. Kennedy Says Prepare For Less Fed $, Show Me The Numbers On OGB

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