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After 30 years, Louisiana still pursues its failed industrial inducement policy that only serves to empty state treasury

Posted in ALEC, American Legislative Exchange Council, Broadband, Internet, Budget, Business, Economy, Education, Exemptions, Incentives, Finances, Governor's Office, Higher Education, Incentives, Legislature, Legislators, Politicians, Revenue on February 24, 2016| 11 Comments »

As it turns out, that quote was attributed to Einstein in error but the fact that he never said it doesn’t alter the accuracy of the definition.

And for at least three decades, Louisiana along with the rest of the South, has insisted on following the same outdated industrial inducement policies first warned about in a 1986 report by MDC, Inc. (Manpower Development Corp.) of Durham, N.C.

One of the members of the MDC Panel on Rural Economic Development which produced the 16-page report Shadows in the Sunbelt was Dr. Norman Francis, then President of Xavier University and Chairman of Liberty Bank in New Orleans. https://gri.unc.edu/files/2011/10/Shadows-in-the-Sunbelt-86.pdf

That 1986 report was followed up in 2002 when MDC published a 44-page report entitled The State of the South. http://mdcinc.org/sites/default/files/resources/MDC_StateOfTheSouth_2014.pdf

Both reports said much the same thing: that the market had dried up. There were, the reports said, 15,000 industrial inducement committees in the South chasing 1500 industries—and if they relocated at all, it would be whether inducements in the form of tax incentives were offered or not. “At best, the states have assisted businesses in doing what they wanted to do anyway,” the ’86 report said.

“The factors which once made the rural South attractive (to industry) are now losing relevance,” it said. That’s because the South, which once boasted an abundance of low-cost labor, can no longer complete in the global market. Where American apparel workers would earn $6.52 an hour (remember, this was in 1986, but the numbers are still comparable), their counterparts in Korea and Taiwan earned $1 and $1.43, respectively, and Chinese workers made about 26 cents per hour.

Shadows in the Sunbelt called southern states’ tax incentives to lure business and industry a “buffalo hunt,” an analogy to the great buffalo hunts of the 19th century which nearly wiped out the North American bison population. “Yet the hunters (states) continue in their pursuit, hoping to bag one of the remaining hides,” the report said.

The stampede actually started in Mississippi 80 years ago through a program called “Balance Agriculture with Industry” whereby the state used municipal bonds to finance construction of new plants. That practice evolved into tax breaks offered to prospective industries as states began forfeiting property tax revenues to lure new jobs.

Today, Louisiana gives up about $3 billion each year in tax breaks and credits doled out in various programs, all of which are designed ostensibly to attract industry and raise the standard of living through more and better jobs but which in reality, do little of either.

What we’ve received instead are tax breaks for duck hunters, chicken plucking plants, Wal-Mart stores, fast food franchises and for industries that either (a) get the tax incentives but which soon shut down operations (Nucor Steel, General Motors) or (b) claim the creation of great numbers of new jobs but which actually are far fewer than announced.

In fact, the ’86 report said, a long-term study of job promises in South Carolina revealed that only 52 percent of the jobs promised actually materialized. In Louisiana, when Bobby Jindal ran for re-election in 2011, he claimed in TV ads that the Louisiana Department of Economic Development during his first term handed out incentives that brought 25,425 new jobs to Louisiana. The actual number, however, was only 6,729. That’s only 26.5 percent of the jobs promised. https://louisianavoice.com/2011/09/29/jindal-plays-fast-and-loose-with-jobs-claim-tv-campaign-ad/

The ’86 report said as much. “The costs of inducements offered to attract industry are also heavy—and in some cases counterproductive,” it said. Evidence showed that tax breaks did not significantly affect plant location decisions but states nevertheless open up the state treasury for companies to loot even though the benefits do not offset the costs. “Whatever the effectiveness of industrial recruiting in the past, current trends clearly indicate that its value as a tool for economic development is declining,” it said.

That was 30 years ago and we’re still giving away the store by adhering to a faulty ALEC-backed policy of favoring corporations over citizens.

As an alternative, the report recommended that in lieu of spending millions to attract out-of-state industries, states should implement programs to support local development and to encourage entrepreneurship.

The 2002 report, State of the South, only reiterated the recommendations of the study of 16 years earlier. It also should have sent a clear message to the Louisiana Legislature and to Bobby Jindal six years before he came to power. The latter report’s recommendations included:

  • Refocus state agencies responsible for economic development to pursue a broader, more strategic approach;
  • State governments should not measure success simply by the number of new jobs, but also in terms of higher incomes for people and improved competitiveness of regions within the states;
  • Modernize tax systems so that states have the fiscal capacity to provide excellent educatin, widely accessible job training, necessary infrastructure, and community amenities that enrich the soil for economic development;
  • Tighten performance criteria for industrial incentives—and encourage associations of Southern governors and legislators to reexamine the one-dimensional, incentives-driven recruitment strategy in favor of a comprehensive economic development strategy;
  • Dramatically expand efforts to erase serious deficits along the entire education continuum in the South, and bolster the education, health and well-being of children;
  • Draw on universities and community colleges to act as catalysts for state and regional economic advancement.

The 2002 report said high-poverty, sparsely-populated areas are last to get telecommunications infrastructure. More than 60 percent of the zip codes in the Delta areas of Arkansas, Mississippi and Louisiana have no broadband internet provider which further widens the competitive gap for these areas. Yet Jindal rejected an $80 million federal grant to install broadband in Louisiana’s rural areas. http://www.nola.com/politics/index.ssf/2011/11/80_million_grant_for_rural_bro.html

Because Louisiana, along with the rest of the South, made a commitment to low taxes, low public investment, and low education in return for jobs. That strategy trapped the state in a cycle of low-wage, low-skill industry “begetting more low-wage, low-skill industry,” and thus perpetuating the “Wal-Mart Syndrome.”

Mac Holladay, who served as head of economic development for three Southern states summed up the situation. “If we had put the vast majority of our economic development resources into incubators, small business services, export training, and existing business assistance instead of recruitment and overseas offices, it might have made a big difference.”

Tax abatements and other financial giveaways, the 2002 report said, “inevitably drain resources from schools, community colleges and universities—public investments that are crucial to long-term economic advancement. Incentives provide a better return on investment when they build a community’s infrastructure, provide workers with higher skills and attract jobs that pay markedly more than the prevailing wages.”

Even when Mississippi granted $68 million in incentives for Nissan’s assembly plant in Canton, a small town just north of Jackson, the company’s director of human resources told the Jackson Clarion-Ledger that he could not name any Canton resident likely to be hired for one of the 5,300 jobs starting at $12 per hour. He attributed that to the town’s 27 percent poverty rate, 76 percent of out-of-wedlock births and 44 percent of adults without a high school diploma.

Carley Fiorina, former chief executive for Hewlett-Packard and more recently an unsuccessful candidate for the Republican presidential nomination said, “Keep your incentives and highway interchanges. We will go where the highly skilled people are.”

“Not so long ago,” said the 2002 State of the South report, “the South sought to build its economy by enticing companies from afar to relocate with the bait of cheap land, low taxes, and a surplus of hardworking but undereducated workers. That old recipe no longer works to feed families and sustain communities.

“No comprehensive strategy would be complete without further efforts to bolster public schools,” the report said.

“There must be a recognition that the ultimate challenge lies in the educational and economic advancement of people who have gotten left behind,” it said. “We must get the message out to every household, every poor household, that the only road out of poverty runs by the schoolhouse.

“The line that separates the well-education from the poorly education is the harshest fault line of all.”

Yet, Louisiana’s leaders insist on doing the same thing over and over and expecting different results.

And we keep electing the same failed policy makers over and over and over…

Insanity.

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Wal-Mart: feeding at the public trough while underpaying workers, destroying Louisiana’s mom and pop businesses

Posted in Auditor, Business, Corruption, Economy, Ethics, Exemptions, Incentives, Finances, Incentives, Jobs, Legislature, Legislators, Public Records, Revenue, Taxes on February 24, 2016| 6 Comments »

The past is prologue

                                    —William Shakespeare (The Tempest)

In 1936, Mississippi Gov. Hugh White successfully pushed through the state legislature his answer to President Franklin Roosevelt’s New Deal so despised by southern states.

Mississippi could grow and prosper through his landmark “Balance Agriculture with Industry” program, according to Mississippi native Joseph B. Atkins, author of the little-known but important book Covering for the Bosses. The book is an examination of how newspapers in the South refused to give fair coverage to labor unions in their attempt to gain equitable working conditions for workers first in the textile mills and later the automobile industry.

https://books.google.com/books?id=o6AfWT79t2MC&pg=PA237&lpg=PA237&dq=shadows+in+the+sunbelt+1986&source=bl&ots=7Wb_bKCn48&sig=FIjJetyw-Li-lCk0c3zN_muV3MA&hl=en&sa=X&ved=0ahUKEwjL-Ob4k4_LAhWFPiYKHchPD50Q6AEIUDAJ#v=onepage&q=shadows%20in%20the%20sunbelt%201986&f=false

According to Atkins, White figured he could attract industry to Mississippi through the then-radical concept of offering attractive tax incentives and promises of low wages—and, of course, no unions.

The program, Atkins writes, eventually became a model for the entire South and today, Mississippi, in the latest rankings of the best states for business, can be found sitting firmly in….47th place among the 50 states, ranked ahead of only (in order) Kentucky, Louisiana, and West Virginia. In fact, the South can lay claim to six of the bottom 10 spots in the national rankings. They also include Arkansas (42nd) and Alabama (45th). Tennessee was only slightly better at 38th. Virginia (10th) and North Carolina (15th) were the only southern state in the top 20. http://247wallst.com/special-report/2016/02/17/the-best-and-worst-states-for-business-2/

So what went wrong with White’s grand scheme for Mississippi? Simply put, the same thing that doomed Louisiana, Alabama, Arkansas and Tennessee to the bottom one-fourth of the heap. They gave away their tax bases while at the same time condemning their citizens to lives of low wages and poor benefits. And Wal-Mart was first in line to fully exploit the plethora of incentives, be they the 10-year property tax exemptions, Enterprise Zone initiatives or some other inducement.

Wal-Mart, described by Wall Street Journal writer Bob Ortega in his book In Sam We Trust as “an amoral construct with one imperative: the profit motive.”

In October 2005, Atkins writes in Covering for the Bosses, that an internal Wal-Mart memo was leaked which revealed the true, impersonal attitude of the corporate office toward its 1.3 million American workers, 30 percent of whom are part-time workers.

In her memo to Wal-Mart executive vice president M. Susan Chambers complained of the costs of long-term workers. The company, she said, spent 55 percent more on them than on one-year workers even though “there is no difference in (the employee’s) productivity.” She said because Wal-Mart pays an associate “more in salary and benefits as his or her tenure increases, we are pricing that associate out of the labor market, increasing the likelihood that he or she will stay with Wal-Mart….The least health, least productive associates are more satisfied with their benefits than other segments and are interested in longer careers with Wal-Mart,” she said.

In plain language, she was advocating throwing older workers to the curb in favor of newer, lower-salaried workers.

Yet Wal-Mart has shoved its way to the public trough, securing some $100 million in economic development subsidies from the state in 20 cities from Abbeville ($1.67 million) to Vidalia ($1.65 million), from Shreveport ($6.3 million) to New Orleans ($7 million), from Monroe ($3.9 million) to Sulphur ($1.8 million).

Nationally, estimated annual subsidies and tax breaks to Wal-Mart and the Walton family total $7.8 billion per year. This for six Walton heirs whose collective net worth of $148.8 billion is more than 49 million American families combined. http://www.americansfortaxfairness.org/files/Walmart-on-Tax-Day-Americans-for-Tax-Fairness-1.pdf

A congressional report estimated that each Wal-Mart store in America generated an average of $421,000 in Medicaid, SNAP and public housing costs to taxpayers. That’s in addition to the estimated $1 billion taxpayers anted up in local and state government subsidies to have a Wal-Mart in their communities. Wal-Mart workers, who earn less than $10 an hour (about $18,000 per year), are offered a family health care plan with a $1,000 deductible costing $141 per month.

And remember that warm fuzzy “Made in USA” advertising campaign of Wal-Mart in which Wal-Mart in 2013 said it was starting a 10-year plan to increase spending on U.S. made products by $250 billion? Well fuggeboutit. It didn’t happen and last October, the company removed the “Made in the USA” logos from all product listings on its Web site after the Federal Trade Commission caught the company (gasp) lying. http://fortune.com/2015/10/20/walmart-made-in-the-usa/

Instead, much of its merchandise, clothing in particular, comes from third-world sweatshops where workers are paid pennies per hour in wages and children work up to 20 hours per day to make the clothing we purchase from Wal-Mart. https://www.dosomething.org/us/facts/11-facts-about-sweatshops

And here’s a real eye-opener.

In her book Cheap, author Ellen Ruppel Shell reveals a dirty little secret most consumers are unaware of: name-brand clothing sold at Wal-Mart aren’t quite what consumers think they are. “Discounting dilutes brands, making it less certain that they are a mark of quality,” Shell writes. http://www.nytimes.com/2009/07/19/books/review/Shapiro-t.html?_r=0

Hundreds of brands “slice and dice their offerings for various markets, selling different products in different types of stores for different prices under the same brand,” she said. “Chains such as Wal-Mart, Best Buy, Target and Home Depot have items manufactured ‘to their specifications,’ meaning that the brand name is almost devoid of meaning.”

That means a television with a model number available only at Wal-Mart is not really a Sony or a Samsung, for example, but a Wal-Mart television.

“Brands have become an end in themselves,” she writes. “…It is not the brand alone that entices discount shoppers; it is the high value we link to the brand versus the low price we pay that is so seductive.”

In recent years, Louisiana taxpayers have subsidized the construction of Wal-Mart stores in two affluent suburbs to the tune of a $700,000 tax credit. A tax credit is a dollar for dollar reduction of a tax liability meaning a $1 tax credit reduces one’s taxes by a full dollar. Bear in mind, these subsidies were Enterprise Zone projects. The Enterprise Zone program is designed specifically to lure business and industry into areas of high unemployment in order to help economically depressed areas. Instead, one of these stores were built in St. Tammany, one of the most affluent communities in the state.

Likewise, $330,000 in Enterprise Zone tax credits were awarded in 2013 to Lakeview Regional Medical Center in St. Tammany Parish for an upgrade to its facilities which created a grand total of five new jobs.

As far back as 2012, then-Secretary of the Department of Economic Development Stephen Moret said the Enterprise Zone program no longer fulfilled its purpose. http://www.nola.com/politics/index.ssf/2012/12/louisiana_economic_development_1.html

A Legislative Auditor’s report agreed, saying that 75 percent of new jobs, 68 percent of new businesses and 60 percent of capital investments were made outside the EZs. http://app1.lla.state.la.us/PublicReports.nsf/92629A33AAE8C55F862579EB0072ACEB/$FILE/00029DFA.pdf

That’s because unlike other states, Louisiana’s Enterprise Zone program allows the generous five-year tax breaks for retail establishments, businesses whose salaries traditionally are at the low end of the pay scale. Those include, besides Wal-Mart, chain stores like Walgreens and Raising Cane’s chicken outlets.

“Most of the projects are larger companies investing in relative affluent areas in Louisiana today,” Moret said in something of an understatement. He said that fact alone underscored the importance of making changes to the program.

Were changes made? No. In fact, in 2013, the year after his comments, the state awarded EZ tax credits totaling $19.6 million for projects that produced 4,857 new jobs which in turn generated about $10 million in state income taxes, or a net loss of more than $9 million to the state.

Meanwhile, Atkins quotes author Bill Quinn as saying Wal-Mart “has done more to stomp out Middle-class America than all other discount houses put together.”

Yet, the official policy of Louisiana has been to continue to give generous tax breaks to a company that underpays its employees, deceives customers into thinking they are “buying American” when in reality, they are propping up third-world sweatshops whose workers churn out second line brand names under slave-like working conditions.

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Bobby Jindal’s parade of lies and distortions about state’s wonderful business climate exposed in yet another survey

Posted in Business, Corruption, Economy, Education, Ethics, Exemptions, Incentives, Finances, Governor's Office, Incentives, Jobs, Politicians on February 23, 2016| 20 Comments »

After eight years of Bobby Jindal’s whiz-kid ALEC-backed policies of awarding tax incentives, exemptions, and inducements to the business and industry lobby and his constant boasting to Iowans and to Fox News of his smashing successes, Louisiana remains mired as the second-worst state in the nation for business.

So says the latest report of 24/7 Wall St., a financial news and opinion company headquartered in Delaware which publishes more than 30 articles per days on economics, health, and politics.

For its most recent survey, 24/7 compiled 47 measures into eight separate categories to determine the business climate for each state: business costs, cost of living, economy, infrastructure, labor and human capital, quality of life, regulation, and technology and innovation.

The U.S. has seen 71 consecutive months of private sector job growth through January, the report noted. Despite the consistent improvement, which dates back to February 2009 (the month after Jindal was first sworn in as governor), the recovery has been uneven and some states have experienced substantially less growth than others.

One of those is Louisiana, where the gross domestic product (GDP) growth of 1.5 percent was 21st lowest in the nation and average wages and salaries of $46,136 was 24th lowest.

Both of those ratings put the state at about the middle of the pack but other indicators showed a much bleaker picture. But only one other state, Maine, has experienced an annualized GDP decline over the past five years.

The 434 patents issued to residents in 2014 was 14th lowest in the nation. The projected working-age population growth through the year 2020 of minus 3.2 percent was seventh lowest and the 22.9 percent of adults with bachelor’s degrees was fifth lowest.

A decreasing working-age population, combined with the relatively low educational attainment means trouble for employers to fill positions with qualified job candidates. That could explain the high number of tax incentives to industries with low-paying, unskilled workers such as chicken plants and Wal Marts.

Almost 20 percent of Louisiana’s population lives below the poverty line, a statistic Jindal refused to address during his entire eight years of running for president. Moreover, the state unemployment rate was 6.4 percent. Both figures are higher than the national rates.

So, if Louisiana was second worst for business, which state was worst? Well, this time it wasn’t Mississippi which traditionally holds down the anchor spot. In this case it was West Virginia with lower GDP growth, lower average salaries, lower percentage of adults with a bachelor’s degree (actually the lowest), lower number of patents issued to residents and a lower projected working-age population growth than Louisiana.

The best state for business? That would be Utah. Where Louisiana and West Virginia each had a minus projected working-age population growth rate, Utah’s projected working-age population growth of 20.5 percent was second-highest. Despite the healthy projected population growth, Utah had an unemployment rate of 3.8 percent, fourth lowest in the nation.

Just more evidence of how Jindal was perfectly willing to twist and distort numbers to fit his ambitious but hopeless agenda.

Does anyone still wonder whether he was simply clueless or callously committed to his own ambitions?

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Dedications: Does eliminating them give Louisiana an easy way out of the state’s fiscal crisis? Is there an easy way out?

Posted in Budget, Ethics, Finances, Governor's Office, Health Care, Higher Education, House, Senate, Legislature, Legislators, Politicians, Taxes on February 16, 2016| 85 Comments »

By Stephen Winham

Every day we hear the same thing: “If we could just get rid of those dedications, we could fix the budget and not have to always hit higher education and health care so hard when times are tough. There are plenty of things we could cut without hurting anybody or anything.”

It sounds so easy. You hear, in very broad terms, how the budget has grown and how out-of-bounds spending has gotten. Our current budget totals about $25 billion, of which $10 billion is federal. I will focus on state funding in the official revenue forecast – about $10.4 Billion in the current year, with strongest emphasis on the $7.9 Billion in state general fund spending we can most readily control. The official forecast numbers for next year are $10.4 billion and $8.2 billion, respectively.

We hear about $4.3 billion in dedicated funds ($3.5 billion in the currently-proposed FY 2016-2017 budget) that could be eliminated and go a long way toward fixing our budget problems. What we rarely hear about is the additional $4 billion in the state general fund that is allocated and/or protected by the State Constitution.

For starters, almost a half billion dollars comes directly off the top of the general fund, but IS NOT APPROPRIATED. That’s right, you don’t see or hear much about this money because it is not appropriated – rather, it is a direct draw on the state’s general fund.

If you go to page 177 of the FY 2016-2017 Executive Budget, you will find Schedule 22, Non-Appropriated Requirements. This schedule allocates $496.5 million from the state general fund in the treasury, pursuant to the State Constitution, for the following:

$404.8 M – General Obligation Bond Debt Service

[IMPORTANT DIGRESSION: G. O. Debt service is increasing by over $211 million (109%) next year due to one-time savings utilized in the current year from defeasance of debt – In other words, this is part of the one-time “fix” in the current budget that has to be covered next year.]

$90.0 M – General Revenue Sharing – goes to local governments as a partial offset for local property tax revenue lost due to the State Homestead Exemption

$ 1.7 M – The Interim Emergency Board – provides emergency funds during the budget year

Now I ask you, which of these would you be willing to vote out of existence? Eliminating or changing them would require constitutional amendments and a vote of the people.

The one of these three I would not cut, for sure, is our $405 million in debt service. Defaulting on our debt would cause immediate loss of a marketable bond rating and send a message to the rest of the country that we are truly bankrupt.

Cutting the other $91.7 million in non-appropriated items would have very serious implications, particularly for local governments. Even if you think local governments shouldn’t get the revenue sharing, how do you think they would make it up, if they didn’t?

In addition to non-appropriated allocations, the State Constitution also mandates general fund spending for a number of appropriations. The state’s Minimum Foundation Program for public elementary and secondary education is required by the constitution and has a $3.4 Billion state general fund appropriation. You might be inclined to cut administration and other programs in the Department of Education, but are you willing to vote for a constitutional amendment eliminating basic state support for our public schools, or even allowing for substantially reducing it? You may not directly use public education, but you have to agree we absolutely have to have it and it should be funded at no less than its current level. The education provided by our public schools is vital and is finally improving. We can’t afford to lose the ground we’ve gained.

So, between just the General Obligation Bond debt service and the MFP requirements for next year, we have $3.8 Billion of General Fund (46% of the total) expenses it would be simply stupid to cut.

In addition to the MFP, another $600 million of our general fund expenditures are currently required by the State Constitution. State supplemental pay for local law enforcement alone is $124 million of this. Also included are salaries of statewide elected officials and the costs of elections. You might not be happy with the salaries of your statewide elected officials, but we have to pay them and I don’t think you could possibly support not having the money to hold elections. If you think locals ought to fully fund the salaries of law enforcement personnel, where do you think they might get the money to do so?

[Digressing again and focusing on local government funding for a moment, what if we decided to cut it all? Except for capital outlay projects, we indirectly fund recurring local services, so we would, in essence, be shoving our problem down to the local level – and we all live somewhere.  If local governments were unable to raise local taxes to support the services, they would be eliminated or significantly degraded.  If they were able to raise local taxes to support them, how would the taxpayers see a difference?]

What other general fund expenditures, currently considered mandated should we consider cutting? How about the $130 million in appropriated debt service (in addition to G. O. Debt)? How about the $400 million plus it costs to incarcerate adult inmates in our state prisons? Or, the $157 million we pay local sheriffs to house state inmates? The $27 million we pay in District Attorney and assistants’ salaries? How much of the $73 million legislative and $160 million judicial general fund appropriations are we and the legislature willing to cut? How much of the $848 million in general fund we consider sacrosanct because of federal mandates should we cut and what will happen if we do? How much can we realistically cut from our Medicaid program and still attempt to meet the health care needs of our citizens?

Finally, how about the elephant hiding behind the sofa, our annual payments via the state payroll system toward the Unfunded Accrued Liabilities of our state retirement systems? I’m no actuary, but using the actuarial reports generated by the Legislative Auditor, I estimate annual payments toward this liability, in state funds, is no less than $600 million and growing rapidly because of the way the amortization is structured. The State Constitution requires this debt to be liquidated by 2029.

We often hear that 67% of our general fund budget is non-discretionary. Let’s pretend we don’t have to do a lot of these things and, just for the sake of argument, say only 55% should not be touched. That still leaves only $3.7 billion of state general fund on the table subject to cut and we certainly aren’t going to cut over half of that to solve a projected $2 Billion problem next year. And, by the way, remember that any of the current year deficit not liquidated this fiscal year will, by law, have to be added to that problem.

Take a look at John Bel Edwards’ first Executive Budget. It is balanced to the official revenue forecast of general fund revenue. Look at what is cut and where. Look closely.

http://www.doa.la.gov/opb/pub/FY17/FY17_Executive_Budget.pdf

For more details, look at the supporting document:

http://www.doa.la.gov/Pages/opb/pub/FY17/FY17ExecBudget.aspx

Now, finally, let’s get back to those dedicated funds. The Legislative Auditor has just released a comprehensive document detailing these dedications. He points out there were 370 dedicated funds in Fiscal Year 2013-2014 (the last year for which complete documentation is available), 344 statutory and 26 constitutional. Let’s see which ones of these we want to eliminate.

How about the $1.4 Billion Transportation Trust Fund? Our roads are in great shape, right? Plus, we blow part of this on public safety rather than roads and public safety certainly isn’t important, is it?

How about the $159 million in Lottery proceeds? Surely we can find a better use than education for that money. The $184 million in the Medicaid Trust Fund for the Elderly? We only have to change a statute to cut the old folks off. The Oil Spill Contingency Fund at $52.7 million? We never have oil spills, do we? And, why should we share $39 million of our severance taxes with the parishes where the minerals are severed? TOPS is draining us dry, so let’s free up that money and spend it elsewhere.

I’m being facetious, but, seriously, don’t you think there is a constituency for every one of those 370 dedications (except maybe the 21 that have no revenue or expenditures)? How many times have dedications been studied and how many have been eliminated so far? The Joint Legislative Committee on the Budget has reviewed 25% of these dedications every other year since 2009, but has made no recommendations for modifying or eliminating any of them.

Whatever we do with dedicated funds can’t and shouldn’t be done overnight. Many of them support local governments, but the Transportation Trust Fund is the largest of them all and, in addition to the Department of Transportation, other state departments and agencies derive substantial operating funds from dedications, most notably the Public Service Commission, the departments of Environmental Quality, Wildlife and Fisheries, Economic Development, Agriculture and Forestry, Natural Resources and Public Safety Services.

Shouldn’t we look at each dedicated fund in depth to determine it source, its purpose, and the extent to which collections exceed needs? Isn’t this just what the Joint Legislative Committee on the Budget should have done? Wouldn’t it have made a lot more sense to examine the historical inflows and outflows of each of these dedicated funds before creating a $442 million Overcollections Fund from their balances in FY 2014? This was yet another statutory dedication and a big reason statutory dedications spending rose so much. Worse, we then used the Overcollections Fund to pay for recurring expenses elsewhere – a significant part of why we are in our current mess.

Obviously, some collections in excess of needs should revert to the general fund. Others, justifiably, should not. In many cases, these funds are created from fees people pay for which they expect certain services. Some dedications to locals are used to service bonds.

Should we continue to look at potential modifications or eliminations of statutory dedication as a partial solution to our problems? Absolutely, but given our history and the realities of today, should we place an inordinate amount of blame for our current problems on them, or expect a miraculous cure to emerge from further study? I frankly don’t see why we would.

I urge you to look at the Legislative Auditor’s report here:

http://app.lla.state.la.us/PublicReports.nsf/0/13D9277344A19B9086257F560076E83A/$FILE/0000CAA1.pdf

It will give you a much better understanding of the dedications and is formatted in such a way as to drill down from a relatively high level to a very detailed level, so you can stop where you’d like and still gain valuable insight.

Let’s face it, as Gov. Edwards has said, if it is so easy to cut the budget, why has it not been cut to size long before now? This is particularly true in light of the fact we had a governor who travelled the United States for the past 8 years professing to be a budget cutter extraordinaire. If he actually cut expenditures to meet revenues and wrought such an economic miracle why do we find ourselves so out of whack? No, Virginia, it’s not just oil prices.

State Treasurer John Kennedy and others point to things the administration should do to eliminate fraud, abuse, and waste in state government. Who can disagree? To the extent these occur, we are all losers – the biggest are the intended beneficiaries of the services.

It is important that citizens believe their tax dollars and fees are being spent as wisely as possible or, at the minimum, that somebody is consistently and comprehensively trying to ensure this is the case. In my opinion, the accountability for this lies with the administration, not the legislative auditor or anybody else.

The administration has not yet provided specifics or even examples of what it plans to do about specific contracts that make no sense, bureaucratic structures that may be bloated, and more effective and efficient delivery of health care services. Gov. Edwards has said he will do something about these things, but he is yet to provide even anecdotal evidence like Kennedy and others to support his claim.

The executive branch needs to hold its appointed officials to the highest standards and demand they investigate dedications and everything else in the departments they are paid well to manage toward doing everything they possibly can to make our government as efficient and responsive as it can be. The public needs to know this is being done. They should not have to see an increasing succession of negative findings by the Legislative Auditor or, worse, disturbing reports of mismanagement and abuse in the media and elsewhere that go largely unanswered.

But, all that said, can these efforts bear fruit overnight? Can they come close to eliminating the gap? Look deeper than the rhetoric and you have to answer “no” and “no.”

One more link is below – an excellent presentation by the Louisiana House Fiscal Division done just a month ago. Check it out:

http://house.louisiana.gov/housefiscal/0112_16_OS_FiscalBriefing2.pdf

There is a lot of really good information out there from a variety of sources inside and outside government. Our decision-makers need to use it.

 

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Some legislators are already diving for cover on academic funding even as they spend campaign funds on LSU tickets

Posted in Budget, Campaign Contributions, Corruption, Ethics, Finances, Higher Education, House, Senate, Legislature, Legislators, LSU, Politicians, Revenue, Taxes on February 16, 2016| 13 Comments »

True to form, some legislators are already diving for cover or accusing higher education officials of crying wolf over the state’s lack of support for state colleges and universities. Either way, it all amounts to a shameless attempt to shift the blame as a means of deflecting attention from their pitiful performance over the past eight years

Some of those doing the loudest protesting might want to look inward to examine the hypocrisy of their current positions on funding higher education.

Sen. Conrad Appel (R-Metairie), for example. Appel opined in a Senate Education Committee meeting on Monday that he just didn’t think it is fair that education leaders are getting the public all worked up with scare tactics and doomsday propheteering—not to be confused with his own profiteering, of course.

“This is the first day of the process and the news media is flashing all this stuff up and getting the people all worked up,” Appel said in accusing higher ed leaders of sensationalizing the real impact of budget cuts and of creating what he termed “a self-fulfilling prophecy.”

Of course, Appel is not one to pass up a good opportunity when he gets the chance. As Chairman of the Senate Education Committee two years ago, he was in a unique position to know of the pending deal between Discovery Education and the Louisiana Board of Elementary and Secondary Education (BESE) in time to sink between $5,000 and $24,999 into Discovery Communications stock just in time to make a killing. APPEL REPORT PDF

Senate Education Chairman Appel purchases Discovery stock week before company enters into state Techbook agreement

Since 2003, former and current members of the Louisiana House and Senate have used more than $710,000 of their personal campaign funds to purchase tickets to LSU athletic events. This despite the existence of several opinions issued by the State Board of Ethics specifically prohibiting the purchase of athletic tickets “for any personal use unrelated to a campaign or the holding of public office.” (Emphasis ours) http://ethics.la.gov/EthicsOpinion/DocView.aspx?id=7169&searchid=1e6d42e0-0081-4d47-b252-2473624ce865&dbid=0

LSU SPORTS PAYMENTS FROM CAMPAIGN FUNDS

So now we have legislators like State Sen. Mike Walsworth (R-West Monroe) criticizing taking higher education officials to task for suggesting that schools might close and TOPS may be ended because of a mere $970 million budgetary shortfall this fiscal year and a pending $2 billion budget hole for next fiscal year.

Walsworth, it should be noted, used $4,210 of his campaign funds in 2013 and 2014 on LSU athletic events.

But that pales in comparison to State Sen. Norbert Chabert (R-Houma) who went ballistic over a report that his alma mater Nicholls State University in Thibodaux might be forced to close temporarily. http://www.thenewsstar.com/story/news/2016/02/15/even-best-case-nicholls-close-temporarily/80403372/

“This is the first I’ve heard of it,” he said. “I think it’s unnecessary and a bad call. Are you telling me that the university in the fifth largest market in Louisiana that serves 6,300 students is going to close? This isn’t going to happen.”

Of course not, Norby. And Merrill Lynch, AIG, Lehman Brothers, Washington Mutual and a few hundred banks weren’t going to bite the dust starting back in 2008 either, were they? And shoot, Bernie Madoff was a man to be trusted with our investments, right? https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_United_States_(2008%E2%80%93present)

While while we ponder the wisdom of Chabert’s assurances, it might be worth noting that since 2009, he spent a cool $35,750 on tickets to LSU athletic events. It seems it’s okay to plow OPM (other people’s money—and that’s what campaign funds really are) into athletics, but don’t let university come crying about the shortage of funding for academics or the deplorable conditions of university infrastructure.

It would also be timely to point out here that athletics are not the only expenditure items for legislators’ campaign funds. There are the expensive meals, the leasing of luxury automobiles, Saints and Pelicans tickets, payments of ethics fines for campaign violations (expressly prohibited but done with impunity), and in at least one case, one legislator paying his personal federal income taxes with campaign money. https://louisianavoice.com/2015/05/11/hidden-in-plain-sight-campaign-funds-provide-opulent-lifestyle-of-meals-game-tickets-and-travel-for-legislators/

But because the focus for the moment is on higher education, we will limit our examination of campaign expenditures to LSU sports.

Here are some of the more flagrant cases we found:

  • Senate President John Alario, one of those who signed off on Grover Norquist’s no-tax pledge, spent more than $19,000 on LSU tickets;
  • Rep. James Armes (D-Leesville): $11,500 since 2008;
  • Rep. John Berthelot (R-Gonzales): $19,280 since 2011;
  • Rep. Thomas Carmody (R-Shreveport): $21,660 since 2010;
  • Rep. Patrick Connick (R-Marrero): $24,540 since 2008;
  • Rep. Michael Danahay (D-Sulphur): $17,600 since 2008;
  • Former Rep. Noble Ellington (recently appointed as legislative director for Gov. Edwards): $46,500 since 2002);
  • Sen. Dale Erdy (R-Livingston): $24,000 since 2003;
  • Former legislator and former Alcohol and Tobacco Control Commissioner Troy Hebert: $13,700 since 2009);
  • Rep. Frank Hoffman (R-West Monroe): $22,700 since 2009;
  • Former House Speaker Chuck Kleckley (R-Lake Charles): $31,900 since 2008;
  • Rep. Bernard LeBas (D-Ville Platte): $18,400 since 2009;
  • Sen. Danny Martiny (R-Metairie): $13,800 since 2002;
  • Sen. Jonathan Perry (R-Kaplan): $21,000 since 2009;
  • Former Rep. Erich Ponti (R-Baton Rouge): $18,700;
  • Former Rep. Joel Robideaux (R-Lafayette): $23,600 since 2004;
  • Sen. Gary Smith (D-Norco): $33,800 since 2002;
  • Sen. Francis Thompson (D-Delhi): $15,100 since 2010;
  • Former Sen. Sherri Buffington (R-Shreveport): $23,800 since 2009.

Buffington, then Sherri Cheek, is the same legislator who, in January 2004 traveled to New Orleans to attend the NCAA national championship football game between LSU and Oklahoma but forgot his tickets. No problem. She simply called State Police and arranged for a Pony Express-type relay by state troopers from Shreveport to New Orleans to deliver the six tickets. When word of the special deliver leaked out, she expressed her regret (don’t they always feel just awful—after they’re caught?) and said she would repay State Police $448.50, based on her computation of 12 hours of trooper pay. http://www.freerepublic.com/focus/f-news/1060246/posts

So while certain members of the legislature grandstand over the current and projected budgetary issues, it is important to remember they are a large part of the problem.

And higher ed is by no means the only fiscal issues before the legislature during the current special session.

There are grave cuts being proposed for health care which will be covered in greater detail in future posts here.

But a quick overview shows drastic cuts to programs serving the elderly, those on dialysis, the developmentally disadvantaged, hospice, and, of course, the disastrous venture into privatizing state hospitals.

It’s going to be difficult for legislators to rail against those with real needs to help keep them alive or well. To do so would truly expose the hypocrisy of those who claim to represent their constituencies.

As we said in an earlier post, this is the one chance lawmakers have to get it right. Rhetoric will not save the day. Denial will not solve the problems. Continuing the same fiscally irresponsible practices will not plug the gaping hole in the state budget.

And this is not the time to be point fingers or scolding administrators.

The time is now and the place is here to come together and to do what must be done to solve the state’s multitude of problems.

Anything less and wholesale recalls should be initiated immediately as soon as this session is over.

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