“They never get it right,” GOP House Majority Leader Lance Harris told the Chamber of Commerce of East Baton Rouge Parish last week.
Really, the Revenue Estimating Conference — rather than a series of jerry-rigged spending plans — was responsible for legislators returning 16 times over the past nine years to rebalance the state’s operating budget, Harris said to a group of conservative small business owners over lunch.
The REC determines how much money state government can spend and is “forcing us into budget cuts” when they adjust their projections after revenue collections don’t come in as anticipated, he said.
Though bashing pointy-headed intellectuals is always popular on the red-meat circuit, the REC rhetoric also is a cornerstone in the long-awaited plan House GOP leaders will officially roll out Monday to solve the budget.
Basically, Republicans argue that the budget was balanced as of March 1 from the fixes passed in February’s special session. And since the REC is “always wrong,” the House is recommending that the state appropriate only 97.6 percent of the monies that the conference estimates is available — rather than all of it, which is the custom. That’ll save $243 million, if the REC is correct, and help knock off about half of $1.4 billion needed after July 1, 2018 when the temporary taxes expire, Harris predicted.
Just days after opposition from Republicans doomed a key piece of the governor's budget-solv…
House Appropriations Chair Cameron Henry hauled the trio of economists who put pencil to paper to come up with those revenue estimates into a hearing with the representatives most responsible for writing the state’s budget, but “don’t know why you exist.”
Erath Republican Rep. Blake Miguez, whose Acadiana district has been wracked with oilfield unemployment, jabbed his finger at the economists. “We have to do everything we can to be as competitive as possible and send the right message to oil and gas? Do you agree?”
“I neither affirm nor deny. I work for a boss who is a policy maker,” responded Manfredo Dix, the administration’s German-accented economist, dressed in an argyle sweater and with a tendency to say “yah” at the end of sentences.
“My job is to tell what is.”
The Revenue Estimating Conference was one of the reforms installed by Gov. Buddy Roemer in the late 1980s after the last fiscal crisis. Prior to that time, the governor essentially decided how much money state government had available to spend. An obedient Legislature dutifully spent that amount.
In the mid-1980s, when the price of oil collapsed, throwing half of the workers in oilfield production — about 50,000 people — out of work, fanciful estimates didn’t pan out and state government had trouble making payroll.
The REC is made up of the speaker of the House, the president of the Senate, the governor and an independent economist to keep honest the three politicians with their hands on the checkbook. All four have to agree to an estimate calculated by two economists — one working for the governor and one working for the Legislature.
Basically, the two economists independently review the situations surrounding about 40 sources of state revenues, such as taxes on sales, income and energy. Then, they plug employment and other statistics that drive the economy into a model that calculates the projection. They subtract a sheaf of dollars dedicated to specific services and the result is the amount on which the budget is built.
Once final receipts come in and can be compared to their earlier estimates, the economists have been off an average of 2.1 percent over the past 28 years, said Greg Albrecht, the chief economist for the Louisiana Legislative Fiscal Office.
That’s a pretty good record by any measure, but being a little off translates into a lot of money — about $300 million last year.
“Forecasting is a science in some sense because you throw in any regressions you have, independent variables and dependent variables. You have “r-squared” and all that technical Greek letter stuff,” Dix said. “You also have an ‘art’ portion there, the human judgment. Do you really believe what the machine is telling you?”
Though the precipitous drop in the price of oil certainly contributed to the state’s current economic woes, it’s the rollback in taxes and explosion of tax breaks that has created a crisis situation that legislators fix with temporary measures, said Jim Richardson, the LSU professor who serves as the REC’s independent economist.
“We really need to find a stable tax structure that has more than one year of life expectancy,” Richardson said. “Everybody wants stability and it seems to be a popular thing except when you start making the hard decisions to get there, then it gets a little tough."