The task of balancing public needs and citizens' tolerance for taxes is never easy, but Louisiana politicians seem to have a knack for making it even more difficult. Case in point: lawmakers' decision last year, which Gov. Bobby Jindal belatedly embraced as his own idea, to roll back the so-called Stelly Plan. Adopted by voters in 2002, the Stelly Plan "swapped" higher income taxes for regressive sales taxes on groceries and residential utilities. The higher income taxes were actually an adjustment in the tax brackets. The plan was designed to be revenue neutral at first and then to increase state revenues in subsequent years as personal incomes rose. It worked exactly as planned — and that, apparently, was the problem.
Last year at this time, Louisiana was flush with cash. Skyrocketing oil prices, a post-Katrina/Rita building and buying boom and billions in federal recovery aid filled state coffers and left a surplus of nearly $2 billion. For some reason, the new governor and a mostly new Legislature thought surpluses would continue indefinitely. They rushed to repeal — permanently — as many taxes as possible.
The idea of giving citizens their money back had a lot of appeal, but it also was fraught with danger. As we noted at the time ("R.I.P. Stelly," Commentary, May 20, 2008), "Louisiana still has many unmet needs, despite its current plethora of cash." We cautiously supported the Stelly rollback — but only on the condition that the state first start paying down its $10 billion in unfunded accrued liabilities; start catching up on more than $13 billion in deferred maintenance on roads, ports and bridges; fund coastal restoration and address $1.7 billion in deferred maintenance at state colleges and universities. Since then, only coastal restoration has gotten some attention. The other problem areas remain unaddressed. We also believed at the time — wrongfully — that the flush times would last at least a few more years. As it turns out, they lasted only a few more months.
Now the consequences of a shortsighted decision are upon us. The wolf is at the door of colleges and universities, hospitals and virtually every state agency. Worse, Jindal, who rushed to the front of the "roll back Stelly" parade only after it became clear the bill was going to pass over his objections, now refuses to entertain any talk of responsible revenue enhancement. Clearly, the governor cares more about his national ambitions, which require an arbitrary "no taxes" posture regardless of the consequences for Louisiana. Those consequences are dire: more than $200 million in cuts to higher education; more than $400 million in health care cuts; and hundreds of millions more cut from arts, culture, tourism, education, roads and more.
Does Louisiana spend too much? No doubt. However, the solution is not to focus cuts where they will do the most harm or to address each annual crisis in a vacuum. Instead, Louisiana needs three things: more annual budget-cutting flexibility, a set of long-range state priorities that makes sense, and a revenue stream with more long-term predictability than wildly fluctuating oil prices.
Gov. Jindal is addressing the first concern by supporting Senate Bills 1 and 2, which would give him greater authority to make deeper cuts in areas that are currently protected. In the second area, Commissioner of Administration Angele Davis has brought a "budgeting for outcomes" philosophy to the state's budget-writing process, although many dispute the wisdom of outcomes that include gutting higher education, health care and arts/culture funding. The third leg of responsible stewardship is where Jindal falls far short: He simply refuses to consider even modest tax increases to help prevent draconian cuts.
We agree with the Public Affairs Research Council (PAR), which recently suggested that Jindal and lawmakers delay or eliminate the Stelly rollback and an additional state income tax deduction for excess federal itemized deductions. We also like Rep. Karen Carter Peterson's idea of a 50-cent tax on cigarettes to help alleviate cuts in health care. Together, these proposals would generate enough to cover most of the proposed cuts in higher education and health care — while Senate Bills 1 and 2 would allow broader-based cuts everywhere else. As PAR noted, "Louisiana cannot afford to ignore either side of the budget equation."