Before the new fiscal year even begins, cracks are showing in the budget passed by legislators and hailed by Gov. Bobby Jindal just a few weeks ago.
We are not surprised. Nor should anyone else be, because of the cobbled-together nature of the budgets Jindal has pushed and legislators have approved for the past five years.
The latest problem is a spike in interest rates that might upset plans for sale of one of the state’s assets, a revenue stream derived from a tobacco lawsuit settlement years ago. The idea was to cash in future revenues for one-time cash to prop up part of the state budget.
Commissioner of Administration Kristy Nichols said the sale is still a good deal, although perhaps worth less than before the rise in interest rates. State Treasurer John N. Kennedy, often at odds with Jindal, says it’s a crisis.
We say it’s a symptom of bad fiscal management under Jindal’s administration.
This is only one of a many dubious uses of one-time money or property sales or tax “amnesty” — all ways to prop up an unstable budget with expedients that put orderly administration of the state at risk.
In 2008, when the state was flush with revenues, Jindal and lawmakers broke the No. 1 rule of governance: Never give away your tax base. With the huge cuts in taxes that year, some justifiable but many others very short-sighted, Louisiana lost a lot of its general fund revenues. Those are very difficult to get back, in part because Jindal is loath to admit his errors and raise even modest levels of revenues now.
Were the cuts all bad? After all, state government was forced to cut back in some areas that were cruising along on spending autopilot. And once state government was forced to look under the cushions for loose change, even veterans of the budget wars were surprised at how many millions were there. But those expedients are breaking down, and that’s the larger story behind the tobacco settlement problem.
With revenues increasingly volatile, there are no meaningful surpluses, and thus no back-up when one-time deals like the tobacco settlement sales get in trouble. Midyear budget cuts are standard.
Jindal has achieved California levels of instability in years when Louisiana’s economy did not suffer nearly what California or other states did in the national recession.
That’s the big story behind the convoluted discussion of interest rates and tobacco settlement money.