As Jindal’s G.O.P. Profile Grows, So Do Louisiana’s Budget Woes

Gov. Bobby Jindal of Louisiana after speaking at the American Principles Project State Lunch in Washington on Wednesday. Credit Gabriella Demczuk for The New York Times
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BATON ROUGE, La. — In recent weeks, the office of Gov. Bobby Jindal of Louisiana has issued news releases about the “mindless naïveté” of Hillary Rodham Clinton, the folly of opening diplomatic relations with Cuba and the threat of radical Islam in Europe, prompting a flurry of commentary about what it all might mean to Republican voters in Iowa and South Carolina should Mr. Jindal decide, as has long been expected, to run for president.

But here in the Louisiana capital, there is mostly one topic on everyone’s mind these days, and it is quite distressingly close to home: the fiscal reckoning the state is facing for next year and perhaps for multiple budgets to come.

“Since I’ve been in Louisiana I’ve never seen a budget cycle as desperate as this one,” said Robert Travis Scott, the president of the Public Affairs Research Council, a nonpartisan group based in Baton Rouge.

Louisiana’s budget shortfall is projected to reach $1.6 billion next year and to remain in that ballpark for a while. The downturn in oil prices has undoubtedly worsened the problem, forcing midyear cuts to the current budget. But economists, policy experts and lawmakers of both parties, pointing out that next year’s projected shortfall was well over a billion dollars even when oil prices were riding high, turn to a different culprit: the fiscal policy pushed by the Jindal administration and backed by the State Legislature.
Mr. Jindal spoke in Washington on Thursday. He withdrew a tax overhaul plan for Louisiana after widespread criticism. Credit Gabriella Demczuk for The New York Times

“Is he responsible for the full $1.6 billion?” Mr. Scott asked. “I’d say no. But I’d say he’s responsible for the order of magnitude.”

In a state the size of Louisiana, the shortfall is huge. But it is all the more daunting considering that the governor has unequivocally ruled out any plans for new revenue, bone-deep cuts have already been made to health care and higher education, ad hoc revenue sources have been all but drained and robust economic growth has yet to materialize.

Mr. Jindal’s first term began in 2008 with a heady surplus of around $1 billion, high oil prices and a stream of federal disaster recovery money after Hurricanes Katrina and Rita in 2005. He threw his support behind the largest tax cut in the state’s history and, for a time, had reason to boast about an economy that outperformed the nation’s. But oil prices are fickle, and the recovery money dried up and the recession arrived, if late and in a milder strain than in other states. Since 2010, here as elsewhere, middling has been the new normal.

“The underlying economy has been weaker or more sluggishly growing than we might want to believe,” said Greg Albrecht, the chief economist for the Louisiana Legislature, ticking off a list of metrics that are not picking up steam, including total payroll employment growth and personal income tax receipts.

But a slower-than-ideal recovery is not unique to Louisiana. How the state has dealt with it is the root of the problem, said Mr. Jindal’s policy critics. That group includes some of his own party members running to replace Mr. Jindal, who is barred by term limits from seeking a third term as governor.
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“In many ways the economy’s doing pretty good, but there’s a disconnect because of this broken fiscal policy,” said United States Senator David Vitter, a Republican and the current favorite in the governor’s race.

Among Mr. Vitter’s targets are the state’s generous and expanding buffet of tax incentives and its increasing reliance on one-time sources of revenue to plug budget gaps. “I don’t agree with his general approach,” he said of Mr. Jindal.

In a telephone interview, Mr. Jindal defended his record, attributing “the vast majority” of the shortfall to the downturn in oil prices and insisting that a shrunken state government was the goal, not an unfortunate side effect.

“We made an explicit decision and commitment that we were going to cut the government, the public sector economy, as opposed to the private sector economy,” he said, adding that per capita income in the state is at its highest. “We made the intentional policy decision we think it’d be better to shrink government and cut taxes. That’s unusual for Louisiana.”
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Who Is Running for President (or Not)?

At least a dozen Republicans and a handful of Democrats have expressed an interest in running for their party’s 2016 presidential nomination.

A movement to re-examine tax credits and exemptions — which quickly add up to more than $1 billion a year — has been gaining steam in the Republican-controlled Legislature. But Mr. Jindal is firmly against any changes that would result in net new revenue. Last year he even vetoed a bill that would have required the state to tally up the costs of those tax credits and rebates on the grounds that it could “create uncertainty about the state’s commitment to job creation and economic development.”

In the interview, Mr. Jindal said he agreed that some tax credits were probably ineffective, pointing out that he had addressed such issues in a comprehensive tax overhaul he proposed in 2013, but quickly withdrew after widespread criticism.

With revenues limited, Mr. Jindal has turned to privatization and cuts to balance the budget, commended by some policy experts as corrections to a bloated government and roundly condemned by others as shortsighted.

Louisiana’s higher education budget, one of the few discretionary targets, has been slashed by more than just about any other state since 2008; there are a thousand fewer full-time college faculty members on the state payroll, and next year Louisiana State University, the state’s flagship institution, is facing a potential 40 percent cut in its operating budget. Possible cuts to health care for next year, when compounded by the loss of matching federal dollars, could approach $1 billion.

But deep cuts like these have not closed the gap before, leaving Mr. Jindal and the Legislature to turn to other solutions. The use of ad hoc money to plug holes is by no means a new practice here, but it has rarely been done on this scale: Trust funds for infrastructure and low-income older adults have been sapped, buildings sold, tax amnesties repeatedly declared, legal settlements spent and reserves drained.

Such one-time sources added up to around $1 billion in this year’s budget alone, and lawmakers fear that these “gimmicks, games and accounting tricks,” as State Representative Brett Geymann put it, have run out.
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“The number is so big that it’s not going to take care of the problem like it has in the past,” said Mr. Geymann, a Republican and a member of a coalition of conservative legislators known as the fiscal hawks.

On Monday, Moody’s Investors Service, the credit ratings agency, noted a number of warning signs about the state’s credit outlook, including the plunge in oil prices, “muted job growth” and “a structural deficit.” John Kennedy, the state treasurer, a Republican, pointed to the report as evidence of how “fiscally irresponsible” the state had been for the last seven years.

But while so much attention is on the governor, Mr. Kennedy focused his blame on the Legislature. He argued that Mr. Jindal was not ultimately in charge of the purse strings and that, in any case, he was preoccupied at the moment.

“Governor Jindal is running for president,” Mr. Kennedy said. “I wish him well. He’s a very talented guy, and I hope he’ll multitask as he’s working on his national campaign and come down and help us with this budget problem. But if he doesn’t, the Legislature needs to do the job.”