Amid all the turmoil in the stock markets and damage to Louisiana’s economy caused by international trade wars and self-inflicted wounds in state policy, there remain reasons for optimism.
With about 2 million Louisiana folks going to work every day, unemployment rates lower — if far from the lowest among southern states — and a robust economic driver in petrochemical manufacturing expansion, our state is in better shape these days in a lot of ways.
But that doesn’t mean that the state’s government is financially prepared for hard times, should they come around again.
The data-crunchers at Moody’s Analytics reported that Louisiana is the least-prepared of the states — in terms of cash in its “rainy day” fund — for a moderate national recession.
A mix of other states followed: Illinois, Kentucky, Oklahoma and New Jersey. Rounding out the bottom 10 were Pennsylvania, Mississippi, Arkansas, New Hampshire and Florida.
Financial pressures are a fact of life for state governments. Unlike Congress, they must balance their budgets every year. Debts like pension fund obligations lie heavy on most states, with perhaps Illinois having the most pressing problem.
But the last few years have seen states adding to their financial reserves, including many states where energy production caused an economic boom, such as North Dakota.
Louisiana may not so badly off as its ranking might indicate: A $535 million annual surplus will mean more money added to what is formally known as the Budget Stabilization Fund. Under the Louisiana Constitution, nearly $134 million of the surplus goes to the “rainy day” account.
That brings the state’s savings about to the level at the beginning of Gov. John Bel Edwards’ first term.
Before then, misguided budget policies — including reckless levels of tax cuts and use of one-time money for recurring expenses — forced state leaders to tap the savings account.
The gradual replenishment of the account should continue if a new Legislature does not revert to the politically popular but financially ruinous mania of tax cutting. Louisiana has one of the lowest tax burdens of any state in the Union, considering local and state levies.
We’re not fond of sales taxes, which are too high in Louisiana, although no longer the highest in the nation among the states. But paying the state’s obligations must not be sacrificed to tax reductions, as the state House foolishly proposed last spring. Fortunately, the state Senate had more sense, and scuttled the budget-busting measure to reduce the sales tax without making up the difference elsewhere.
Louisiana needs tax reform but it also needs a stronger financial base, not only for the operations of state government but to increase gradually its reserves.
A rainy day may not come soon but it will come. Our state needs cash in its pockets when a recession does occur.