Year after year, Louisiana didn’t have enough money to cover its expenses, yet Gov. Bobby Jindal refused to roll back income tax cuts or ever-increasing corporate tax breaks. Instead, he raided reserve funds and sold off state property.
Jindal suggested job growth from his economic development wins would replenish those assets once the recession ended. It hasn’t — and money from the lucrative oil industry has taken a nose dive with crude prices. Now, the Republican is running out of short-term patches and is struggling to plug a $1.6 billion budget hole just as he tries to build support for a possible 2016 presidential run.
Funding for higher education and health care services will almost certainly be subject to cuts deeper than what they already have endured in recent years, and Jindal’s successor will have to repay a string of debts and IOUs.
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Louisiana Gov. Bobby Jindal talks about his plan for national education reform at a policy breakfast on Capitol Hill in Washington, Monday, Feb. 9, 2015. If he runs for president, Jindal is expected to make education a central part of his message with a focus on his opposition to Common Core. (AP Photo/J. Scott Applewhite)
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“They’ve used all the smoke that was in the can and all the mirrors that they could buy and now they’re out of tricks. Their solution is to gut higher education like a fish,” said Republican state Treasurer John Kennedy.
As for Jindal, he said in a recent interview that the shortfall isn’t his fault, and he dodged any talk of his temporary fixes.
“The shortfall next year is almost entirely due to the declining revenues, and the vast majority of that is due to falling oil prices,” he said.
The numbers, however, don’t back up the governor’s explanation.
More than $1 billion of the shortfall on the horizon for the fiscal year that begins July 1 can be tied to Jindal’s refusal to match the state’s spending to its yearly revenue over his two terms in office — as he also steadfastly refused to consider tax increases.
When Jindal took office in 2008, he positioned himself as a fiscal conservative who decried budget shell games akin to “using your credit card to pay your mortgage.” It didn’t take long to ditch that rhetoric and shift the focus to saving critical services with any money available.
Jindal scraped together what he could from all sorts of funds: railroad crossing safety, artificial reef construction, housing programs and the blind. He pieced together money from one-time legal settlements and property sales, using it to pay for continuing programs. Lawmakers went along, and Louisiana has careened from one budget crisis to the next as the dollars either don’t pan out or the sources of financing dry up and need replacing.
“Our budget has been full of sleights of hand — it’s almost a Ponzi scheme of moving moneys around, one-time money around, to serve recurring needs,” Lt. Gov. Jay Dardenne, one of the Republicans vying to be Louisiana’s next governor, said at a recent forum.
In early February, national credit rating agency Moody’s Investors Service described Louisiana’s budget as having a “structural deficit,” raising worries from Kennedy the state could be threatened with a rating downgrade that could make borrowing more difficult.
Jindal said those patchwork fixes aren’t really “one-time dollars” because the state has similar types of money available to pull together annually. “They have been here year after year,” he said.
The governor has successfully trimmed some spending by cutting more than 30,000 full-time state employees. He’s reduced the state’s vehicle fleet, privatized much of the Medicaid program, turned over the state’s charity hospitals to outside managers and looked for ways to make state government more efficient.
That hasn’t closed all the gaps, however, and Jindal’s short-term solutions leave a string of debts for Louisiana’s next governor to pay off.
The state owes $190 million to federal officials for improper Medicaid spending in hospital privatization deals, an order being appealed, and a $270 million repayment to the state “rainy day” fund in 2017 as part of a legal settlement. Economic development deals will cost the next governor at least $340 million over his first four years.
Far fewer savings accounts will be left to pay those liabilities because Jindal drained or reduced trust funds.
As complaints grew louder in recent years, the Jindal administration defended attacks from Democrats and conservative Republicans who decried budgets reliant on accounting gimmicks, claiming its budgeting protected needed programs without raising taxes.
When he talks of his record in national appearances, Jindal doesn’t mention the budget troubles. He describes cutting Louisiana’s budget from $34 billion in 2008 to $25 billion — but doesn’t explain much of that drop comes from spending down one-time federal recovery dollars after hurricanes Katrina and Rita.
The state’s general fund, by comparison, has only dipped from $8.7 billion to $8.4 billion during Jindal’s seven years in office.
Previous governors have used piecemeal financing to fill budget gaps over the years. Jindal’s two immediate predecessors, Republican Mike Foster and Democrat Kathleen Blanco, each used up to $600 million in such “one-time” funding to stop cuts in particular years.
But Jindal’s use of such financing reached new highs, a situation the chair of the Louisiana Democratic Party, state Sen. Karen Carter Peterson of New Orleans, called “a ticking time bomb.”
New money hasn’t rolled in, despite promises that tax revenue would increase from multibillion-dollar manufacturing and petrochemical projects announced by the Jindal administration in the last few years.
The escalating price tag for tax breaks has only made things worse.
In his first year in office, Jindal signed off on the largest individual income tax cut in Louisiana history, stripping hundreds of millions from the state treasury at the same time the national recession hit.
Meanwhile, the cost for the state’s various tax credits, rebates and exemptions has ballooned by more than $600 million in the last five years alone, according to the Department of Revenue.
The Legislature’s chief economist, Greg Albrecht, has described Louisiana’s tax break programs as spending with no annual oversight from state lawmakers before the money goes out the door.
But Jindal considers any attempt to scale back a tax break equal to a tax hike and has successfully fought legislative efforts to rein in the state’s giveaways.
As they ran into Jindal’s resistance to tax break changes, lawmakers who voted for budgets packed with the governor’s patchwork funding say removing the dollars would force harmful cuts to colleges, public safety and health care. For the upcoming session that begins in April, lawmakers are scrambling to find loopholes to generate new money but allow Jindal to call the plans “revenue neutral.”
“Everybody says, ‘Oh, you’re using one-time money.’ I tell people that say that, ‘Well, tell me what you want to cut,'” said Senate Finance Committee Chairman Jack Donahue, a Republican. “‘Is it higher education? Or is it health care? What university do you want to close?’ The truth is, from a political standpoint, that’s not possible.”
Jindal’s budgeting tactics have heavily relied on quick fixes rather than matching state spending to annual revenue. Here are some of the ways Jindal made the math work each year:
To piece together the budgets each year, Jindal has raided a series of reserve funds across state government. The reserves tracked by the state treasurer’s office have dropped from $9.3 billion when Jindal first took office to $6.8 billion today, some of which is untouchable.
The state’s “rainy day” fund has fallen from $776 million in 2008 to $445 million this year, and part of that reduction will have to be repaid by Jindal’s successor as part of a legal settlement. A trust fund set up for elderly services sat at $832 million seven years ago and will be almost entirely drained by the end of the budget year on June 30.
A state employee health insurance reserve fund that is used to pay patient claims once reached $500 million. It has dwindled to $123 million and its balance continues falling, as the Jindal administration temporarily lowered health premiums to help drop state agency costs in tight budget years, eating into the reserves to cover insurance costs.
Jindal, backed by lawmakers, increased the use of budget maneuvers called “fund sweeps,” where dollars earmarked for other purposes are instead transferred to plug general holes in the budget.
In many instances, the dollars come from fines and fees that people paid for specific purposes, but the money was diverted from those uses. The sweeps range from as little as a few hundred dollars to millions redirected from their intended purposes.
To fill budget gaps, Jindal took money that had been earmarked for post-conviction DNA testing for the poor, state park repairs, litter prevention, oyster sanitation, seafood marketing, derelict crab trap removal, reptile research and tobacco regulation. He used slot machine proceeds that were supposed to pay for services for the blind to instead cover financial holes elsewhere.
In one of the largest diversions, Jindal and lawmakers took at least $45 million that oil and gas companies had donated to turn old drilling rigs into artificial reefs that help attract marine life, create fishing spots and aid in coastal restoration efforts. Instead, it was used to pay for general government services.
Even with all the patchwork financing, Jindal couldn’t stave off cuts. The heaviest hits have fallen on Louisiana’s higher education institutions. State financing for the four university systems has been cut by about $700 million since 2008.
With a more than 34 percent reduction over five years, no other state in the nation has cut higher education financing more than Louisiana, according to Grapevine, which tracks state support for colleges and is overseen by Illinois State University’s Center for the Study of Education Policy.
Meanwhile, costs have been shifted to students and their families. Average in-state student tuition at Louisiana’s four-year public colleges has increased 66 percent since Jindal took office, according to data from the College Board.