For decades, Louisiana state government has been growing with reckless abandon. Louisiana politicians have funded the welfare state with high taxes, mineral revenues and plenty of cash from Uncle Sam. Sadly, for the politicians in Baton Rouge, the party is over. The national recession, coupled with the decline in hurricane related federal funding, means that our state government needs to embark on a massive diet.
The pain really began last year. Since our constitution requires the state to balance the budget each year, significant spending reductions were required, especially in the areas of higher education and healthcare. Over the past year, about one quarter of a billion dollars has been cut from the higher education budget and some services will be permanently eliminated. For example, the LSU agricultural center will no longer be able to have a presence in all 64 parishes in the state.
Next year, the cuts will have to be larger as budget analysts predict that there will be a deficit of at least $3 billion. Yet, there should be plenty of areas, other than vital services, that can be trimmed. For example, the legislative slush funds should be eliminated and religious organizations and non-profit organizations affiliated with legislators should not receive one dime of state funding.
In reality, it should not be difficult for the size of our state government to be prudently reduced. In the past fifteen years, the budget of state government has tripled from $10 billion to approximately $30 billion. During that time, the private sector has not grown and the state’s population has remained stagnant. In fact, this sluggish population growth will cost the state of Louisiana a congressional seat after the 2010 census.
To deal with the problems, Governor Bobby Jindal created a streamlining commission which conducted hearings across the state and drafted a set of recommendations. While some of these recommendations are meaningful, the really significant measures proposed by State Treasurer John Kennedy were rejected.
Kennedy suggested that the state consolidate the multiple higher education boards into a single board. He also recommended that the number of state government employees be reduced by 5,000 per year for the next three years. The State Treasurer also proposed that 20 percent of state consulting contracts be eliminated. All of these ideas need to be implemented; unfortunately, there is a lack of political will in Baton Rouge.
It is time for drastic action since the economic times are so harsh. Here are a few statistics that illustrate that Louisiana is not immune to this deep recession:
· In Louisiana, international trade is a major component of our economy. However, during the first three quarters of 2009, the value of our total exports declined 29 percent compared to the same period last year
· Bankruptcies surged in Louisiana in the past year, increasing 18 percent compared to 2008. Analysts pointed to the depressed housing market, mounting credit card debt and the decreased retail sales among other troubling economic indicators
· In the fiscal year 2009, state personal income tax collections in Louisiana declined for the first time in twenty two years.
· The number of Louisiana citizens receiving jobless benefits doubled during the last year, while the number of households receiving food stamps surged approximately 25 percent in the last two years
· In the fiscal period that ended in October, sales tax revenue that fund the state treasury decreased 17 percent compared to the previous year
· Compared to last year, state personal income taxes fell 10 percent, while corporate tax revenue plummeted 25 percent
· Overall, the personal income of Louisiana residents in the third quarter of 2009 declined per capita more than any other state in the nation
These figures illustrate that the national recession, which has engulfed the rest of the nation since the fall of 2008, has now reached Louisiana. While our state has not been hit as hard as Michigan or Florida, our economic problems are mounting. Louisiana does not have the housing problems or the manufacturing decline that has devastated other states, but it has been affected by the poor economy. A good portion of our economy in the New Orleans area is based on tourism; however, the local hospitality industry is hurting. Both leisure tourism and business travel has declined significantly in the last year. In 2009, only 7.6 million people visited the New Orleans area, but the goal of the industry is to attract almost double that amount by 2018, approximately 13.7 million visitors.
Until the economy recovers, our vital industries such as tourism will be impacted. Therefore, tax revenue will be either stagnant or declining. It is time for our state politicians to radically adjust their spending habits. While there has been some progress with the streamlining commission, much more needs to be accomplished in the years to come. The excesses and duplicate services that state government used to offer are luxuries we can no longer afford. It is essential that spending be cut because the last thing that Louisiana citizens need now, in the midst of a severe recession, is an increase in taxes.