Gov. Bobby Jindal is less responsible than some others for the state’s $1.6 billion budget gap, and his frequent absence from the scene does not absolve the Legislature of responsibility for solving it. If legislators show just a modicum of courage, the gap is quite bridgeable.
The right mix of harmless tax hikes with reasonable spending cuts can buy time for serious efforts at long-term reforms, especially of Louisiana’s tax code (more on which, in a future column). And yes, some tax hikes can be almost entirely harmless, especially in a state that ranks (depending on the measurement) as either the least , the third-least or the fifth-least taxed in the nation.
Start with tobacco taxes. Louisiana has the third-lowest cigarette taxes in the nation, at 36 cents per pack. The average nationwide is $1.54. Of the three states that border Louisiana, Mississippi’s is the lowest at 68 cents (with Arkansas and Texas much higher). If Louisiana hiked its per-pack levy to 75 cents, it wouldn’t cause a mass exodus of smokers to other states just to gain an edge. That would raise about $150 million annually and presumably cut health care costs down the road.
Jindal recommends eliminating the refundable portion of most state business-tax credits. I explained last week why the idea is flawed with regard to inventory taxes, but it makes sense for the other special-interest giveaways, for another $150 million in savings.
Then there are literally billions of dollars in various other “tax credits” that, according to numerous studies, aren’t producing much bang for the buck. While fiscal conservatives wisely believe most tax credits should be eliminated only in return for lower overall rates, some are so egregiously counterproductive that a cash-strapped state can’t afford to wait for full tax reform. Tightening standards for film-industry credits could save maybe $50 million (of $250 million). Even some cautious adjustments in other credit programs (for fracking, for example) could save another $50 million, with plenty left over for future, long-term tax reform.
So that’s $400 million recouped through tax changes. I’m told (by experts independent of Jindal) that Jindal is right that another $300 million can be cobbled together from what are technically “one-time” windfalls — some of which, despite the label, tend to recur every year. Then there are crude oil prices. There’s no way they’ll stay as low as they’ve been this winter. Even regaining an eighth of the drop will result in another $50 million for state coffers.
Jindal claims we’ll recoup $180 million next year from efficiencies identified by a special management review. Even if that’s optimistic, we can safely assume $120 million of it is a lead-pipe cinch. Jindal proposes $211 million in cuts from higher education; they won’t be easy, but they are far less painful than the $400 million some analysts had predicted. Let’s take $200 million of those (and give the other $11 million to more fully fund the state’s need-based financial aid program known as GO Grants).
On the other hand, Jindal proposes spending too much on the TOPS scholarship program, which has grown wildly beyond its original intent. Rather than giving it a 14 percent increase of $34 million, legislators should level-fund it at $250 million.
So — do the math — now we’ve closed $1.1 billion of the $1.6 billion gap, even before assessing a host of other cuts Jindal recommends. Meanwhile, the highly respected Public Affairs Research Council this week will recommend up to $500 million in spending cuts and minor tax adjustments separate from Jindal’s suggestions (only a few of which, I’m guessing, will overlap with my own suggestions in this column). PAR President Robert Travis Scott describes them as “modest sacrifices, shared by many stakeholders.”
So the one-year problem is solvable — not without a little sacrifice but still without major pain.
Because of billions in savings already spearheaded by Jindal in his first seven years, Scott said (in terms of state spending), “we’re in way better shape than we were before.” The situation would be better still, he said, if state legislators and courts hadn’t balked at various aspects of Jindal’s proposed pension reforms.
A little more active leadership from Jindal certainly would help make this all work for next year’s budget. From legislators, it will require a little less posturing, along with a rare but necessary dose of civic duty.
New Orleans native Quin Hillyer is a contributing editor for National Review. You can follow him on Twitter, @QuinHillyer. His email address is firstname.lastname@example.org, and he blogs at blogs.theadvocate.com/quin-essential.