Tuesday, 05 April 2011 15:29

Jindal’s Louisiana Garage Sale Budget Has Leaks

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Albert Samuels Ph.D.The Jindal administration is gushing with one bad policy idea after another these days. Last Wednesday, Commissioner of Administration Paul Rainwater told the House Appropriations Committee that the legislature had two options: go along with the administration’s plan to sell three state prisons or cut health services to the poor. The following day, the newly appointed Commissioner of Higher Education Jim Purcell urged the same committee to support the administration’s package of tuition and fee increases included in the governor’s $24.9 billion budget proposal. Without these cuts, the commissioner warns, higher education stands poised for an additional $95 million in budget cuts (on top of the $315 million in cuts that higher education has suffered in the last two and a half years). And since the governor refuses to consider any tax increases (no matter how sensible they might be) the legislature is given a choice: support Jindal’s proposals or cut the budget. It is almost as if Governor Jindal has placed a proverbial revolver to the heads of every legislator in order to coerce them to go along with his agenda.


Bobby Jindal, Louisiana budget, Louisiana legislature, Paul Rainwater, taxes, higher education, healthcare, Stelly Plan, state prisons, Blanco,  Ronald Reagan


This approach asks that the legislature and the citizens ignore how the state’s finances got in such a sorry state in the first place. Louisiana, like every other state, has experienced revenue declines because of the national impact of the Great Recession. Tax revenues decline naturally during recessions, as unemployment rises and business activity contracts. People who lose jobs usually also lose their health insurance, thereby they often are forced to enroll in Medicaid. Demand for services such as LaCHIP and food stamps increase. In addition, those impacted by recession frequently respond by seeking more education and training; therefore, community college enrollment typically increases during economic downturns. And all of these things have happened in Louisiana.

But Louisiana’s problems are also self-inflicted. The precipitous decline in state revenues are also attributable to the fact that the Louisiana legislature in 2007 and 2008 enacted the two largest tax cuts in the history of the state. These tax cuts effectively repealed the Stelly Tax Plan, the “income tax-sales tax swap” approved by the voters through referendum in 2002.  At the time these tax cuts were enacted, critics warned policymakers that, in the event of an economic downturn, the state would not have enough revenues to pay for state services. The economic collapse of September 2008 came and that is exactly what happened. There is bipartisan culpability for this turn of events: the Stelly rollbacks started under Democratic Governor Kathleen Blanco’s administration.  The actions of the legislature and Governor Jindal in 2008 accelerated the pace of the rollback that Blanco’s signature set in motion.

According to the Institute of Taxation and Economic Policy (ITEP), the three-year cost of the Stelly tax rollbacks have been $1.8 billion. More pointedly, the Stelly rollbacks cost Louisiana $649 million in Fiscal Year 2010, $82 million dollars less than the budget shortfall during that budget cycle. And the budget deficits in the succeeding years would have been considerably less than what Louisiana has actually experienced. In fact, the ITEP estimates that, had Louisiana kept the Stelly Plan in place, lawmakers would be facing a $328 million deficit for Fiscal Year 2012 (a far cry from the $1.6 billion deficit the legislature faces today). In fact, had it not been for the federal stimulus which Governor Jindal and his Republican allies like to lambast, the state’s financial picture in the last two years would have been far worse. Now that the stimulus dollars are no longer available, Louisiana faces a record $1.6 billion deficit. What is worse, state policymakers have known since the 2009 legislative session that once the stimulus ended in 2011, the state would be facing deficits north of $1 billion for years to come if nothing changed. But they did nothing of any real substance to avert the current situation.

However, rather than admit that they made a mistake in repealing the Stelly Plan, Governor Jindal and his legislative allies have insisted that the state has no alternative but to savagely slash education and health services. This is what conservatives like to refer to as “big government” (as if teachers and janitors and state workers are somehow aliens from another planet). The problem is made worse by the fact that Louisiana’s constitution insulates most of the budget from deep budget cuts – consequently, higher education and health care (the two largest “unprotected” areas) bear a disproportionate share of budget cuts during lean years. (The governor did “support” a proposed constitutional amendment in the 2009 session to “unprotect” the constitutionally protected funding areas of the budget. However, he did not really spend any serious “political capital” to ensure its passage; consequently, it predictably died in the Legislature and never reached the voters.) Louisiana, they insist, does not have a revenue problem; it has a spending problem. Once again, the hypocrisy of supply side economics is on display. The very ones who pride themselves on their “fiscal conservatism” have created the largest deficits in the history of this state.  We should not be surprised – after all, supply side economics in Washington, D.C. created trillion dollar annual deficits at the national level. Ronald Reagan would be proud.

And yet, even Ronald Reagan raised taxes. In fact, in 1982, Reagan signed into law what was then the largest tax increase in the nation’s history. Amazing how even Reagan, the conservative icon, raised taxes in response to a deep recession, a record deficit, and the conclusion that the 1981 budget cuts had been too deep. Reagan’s willingness to compromise his conservative principles in the face of stiff political and economic realities would be lambasted as treason by the Right today. Belief in the inherent efficacy of tax cuts has calcified into an idolatrous religion on the right – and they refuse to be confused with the facts. Despite all the hero worship of Ronald Reagan from right-wing Republicans, it is amazing how the present generation of Republicans (Bobby Jindal included) do not do what Ronald Reagan did. Consequently, conservatism has deteriorated from a necessary critique of the tendency to locate the solution to all of society’s problems in government into an inflexible, uncompromising brain dead ideology wholly detached and divorced from the lives and interests of average citizens and the real choices confronting policymakers.

Contrary to conventional wisdom at the State Capitol, the public is far more pragmatic that some of the rigid ideologues that currently hold office (especially those within the House of Representatives.)  In the annual public opinion survey conducted by the LSU Public Policy Lab, a majority of those surveyed indicated that the repeal of the Stelly Plan was a mistake. It is simply not true that the public is opposed to all tax increases. Rather, support for raising taxes increases when the new revenues are targeted for specific programs that voters favor – such as improving public education or providing health care services. Is anybody listening at the State Capitol?

The administration’s approach is an artful dodge from the substance of Jindal’s agenda. He wants to put the onus on the legislature to either agree with his proposals or to play the role of “Bad Guy” by cutting payments to doctors and hospitals and/or causing universities to lay off faculty members and reduce class offerings. This allows the governor to tell voters that he proposed no further cuts to higher education and health services – consequently, if they are unhappy, blame the Legislature.

But why should we sell state prisons in the first place? There are some fundamental things that government should do (and by extension, private companies should not be allowed to do some things). The provision of certain services (namely law enforcement and corrections) is partly the reason we have government in the first place. Moreover, the prison sales will only raise one-time money (roughly $86 million). But the underlying budget problems are not solved. What’s going to happen next year? What will the administration propose that we sell next – the State Capitol building? Will we sell Angola State Penitentiary? Or the State Library? In the face of a historic fiscal crisis, is this the best idea that the administration can come up with – that the state, in effect, have one great big garage sale?

Furthermore, it is disingenuous for the administration to continue to repeat a “no new taxes” pledge while raising college tuition on working and middle class families in Louisiana. These tuition hikes are tax increases by another name. The tuition hikes included in the governor’s budget are on top of ones already scheduled to go into effect as a result of the LA GRAD Act. The governor’s policies will make it more difficult for many struggling Louisiana college students and their families to afford a college education. What is more, Jindal’s policies tilt heavily in favor of the state’s most well-off citizens. For example, the TOPS program, which disproportionately subsidizes the college education of many upper income Louisiana families who could afford to pay for their children’s education, is projected to cost the state $152 million in the 2011-2012 academic year (up from $54 million when the program began in 1998). Meanwhile, GoGrants, the state’s need-based financial aid program that disproportionately benefits low-income African American students, is only slated to receive $26 million. Lower income students (many of whom are having a hard time paying for school now) will be most impacted by the governor’s proposals. Once again, the administration continues its pattern of placing the greatest burden on the shoulders of those Louisianians whom the Bible calls “the least of thee.” Meanwhile, the most well-off citizens among us who have received the lion’s share of the benefits from the administration’s tax and fiscal policies are not asked to sacrifice anything. That is immoral.

Unless the legislature musters uncharacteristic political will, the governor will get all or most of what he wants. Legislators will not want to be blamed for unpopular cuts in popular programs on the eve of an election. We will not give sufficient attention to whether the proposals offered by the administration should be enacted. That is precisely what the governor wants. I hope I’m wrong.

by Albert Samuels, Ph.D., Southern University

Talk About Louisiana Higher Education And The Budget-


1. Louisiana Politics: Republicans Eat Their Young

2. Bailout Bobby Jindal Bloats Louisiana Budget While Spending Feds' Cash

3. Inside Politics for April 3, 2011

4. College tuition increase urged

5. Fewer families to qualify for day-care help

6. Jindal: Prisons must be sold

7. College commissioner backs La. tuition increases
8. Fayard Goofed But Jindal Plays Louisiana For Goofs

9. Lawmakers propose 70-cent cigarette tax hike

10. Louisiana Politics: Fayard, Vitter, Carville, Hate Republicanse And Money

11. Why Not Hate Republicans In Louisiana and In US?

12. Medicaid program linked to sale of La. prisons

13. Jindal pushes BP funds for event

14. Jindal's SUNO-UNO Merger Is All About Louisiana Politics

15. Prison workers protest

16. Jindal plans to sell, privatize prisons protested



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