The current budget disaster, is, in part, due to poor management by the past Louisiana governor, Bobby Jindal and an enabling legislature, coupled with a deepening oil price crises, causing reduced revenues for the state. As a result, the state is careening from crises to crises, trying to balance the budget while at the same time, grow the economy.
On Thursday evening, Moller and I discussed the just-completed and notably-panicky Louisiana legislative fiscal session and the upcoming regular session, now only days away from its commencement.
After first discussing the his background and that of the Louisiana Budget Project, we started talking about the successes, if any, of the past three-week session and obstacles the state faces as a divided government attempts to live within its means, while being competitive economically yet serving the most needy of us all.
Here is the transcript to part I of the interview with Jan Moller. Part II will follow tomorrow. Also, you can watch the video along with the closed captions.
MOLLER: The Louisiana Budget Project has been around since 2006, I've been in the position of Director since 2011, we do public policy research and advocacy on public policy issues in Louisiana and how they affect low and moderate income families, in particular.
SABLUDOWSKY: Before that, you were actually reporting for the Times Picayune and your focus was the legislature, am i correct, so you have a lot of experience in this area
MOLLER: From 2003 to 2011, covered the state capital, covered the state budget, a lot of health policy issues and of course, governor's races, US Senate races, that kind of thing.
SABLUDOWSKY: So, with that background, why don't you, if you don't mind, give us an idea in terms, now that the special session is over, how would you describe it, how would you rate it?
MOLLER: I think it was a very disappointing end to the session. The legislature had three distinct jobs they had to get done, difficult jobs, but distinct jobs, that they had to do in 25 days. The first was to solve the midyear shortfall, there was a 900 million-dollar-gap between revenues and expenses in the current fiscal year and they had to find either the cuts or the tax revenues to fill that gap; Second, was a $2 billion shortfall next year, this is the budget they're going to be working on this spring, there was a two-billion-dollar gap and the third, and most important, is to fix the long-term structural deficits that have been plaguing Louisiana for years and years, now. Out of those three things they barely accomplished the first and they certainly did not accomplish this second and third objectives. We find out today that they were anywhere from $30-$50 million short of filling the current year budget shortfall so they did not accomplish that job there's at least $800 million short next year so there's going to be more budget cuts to higher education that are going have to contemplate during the regular session that starts on Monday, and they did absolutely nothing or extremely little to fix this structural deficit. Most of the tax increases they did pass have expiration dates, have sunsets dates on them, so that means that these long-term structural issues are completely unresolved. We're going to be back here next year, the year after that, and the year after that--talking about ways to fix the structural deficits, so the legislature did, frankly, the absolute bare minimum that was required of them, they barely even did that and they have a lot of work to do, to fix this.
SABLUDOWSKY: Obviously, we have a political chasm, we had a great divide and obviously with the Republicans controlling the legislature, the governor controlling the administration and with your experience, of course, you know how all that works, can we really anticipate trying to fix the problem, the long-term problem? The problem--let's say, the problem for this upcoming fiscal session, I mean, this upcoming session, which is not a fiscal session, as you mentioned, $800 million, I don't see a solution, I see the polarities just being too great--your thoughts?
MOLLER: Well, they don't have a lot of choices in the session coming up, because, again, it's not a fiscal session because even if they wanted to raise revenues the Constitution won't allow it. So they have two choices, they can either make $800M worth of cuts or they can find one-time revenues to all kind of tricks and slush funds or whatever means they can find--I'm not sure that there's even, anywhere close to $800 million in one-time revenues available, even if they wanted to find it, so I think what we're going to see is, maybe in a couple days, as early as tomorrow, Gov. Edwards is going to present a new version of the executive budget. He released the executive budget in February, like the law requires him to, and that was a budget with $2 billion less than the state needed. And it was a draconic budget and everybody knew that that was the budget that neither the governor, nor the legislature, wanted to pass, now we're going to see what the budget looks like with $800 million less and so there's going to be severe cuts, it's going to affect colleges, it's going to affect healthcare services, it's going to affect a lot of basic services that people care about and we're gonna see what the legislature does with that--there's not as we learned during the session, there aren't a lot of easy places to cut. Don't forget, that Bobby Jindal spent seven years, the last seven years of his administration cutting this budget, so the easy cuts were made long ago, the slightly difficult cuts were also made long ago, we're cut down to the bone and I think that legislators that they learned one thing during the session, is that cutting the state budget isn't as easy as it sounds and it looks during a campaign.
SABLUDOWSKY: Now there are some people, I mean, Treasurer Kennedy, for example, and I've been very critical of Treasurer Kennedy lately, number one--he totally underestimated what the budget shortfall was by 40 to 50% and he also said we did not need to raise taxes--the Republicans raised taxes, I mean they control the legislature, they raised taxes, so I guess, do they have a conflict with Treasurer Kennedy? Kennedy is saying, "hey you don't need to raise taxes", they did.
MOLLER: Well I think Treasurer Kennedy, frankly, he's been talking about these issues for years and years. We have to remember that Treasurer Kennedy is running for U.S. Senate and Treasurer Kennedy doesn't have to vote on taxes or budgets, so I think it's easy, frankly, for people who don't have to vote and who have to make these trade-offs--to tell the legislature what to do—you and I are in the same role--we're always telling the legislature what they should do--it's the legislature who got elected who represent constituents who really have a difficult choice. I think what we learned this session, because the state isn't the federal government, they've have to have a balanced budget. That there's some really difficult trade-offs. This would have been a difficult budget for Gov. Edwards to manage even if there hadn't been a decline in oil prices. We have to remember that since July 1 of last year until February 10 of this year, the state shaved more than $1 billion off its revenue forecast. The price of oil has really helped plunged the state into a recession, so we have $1 billion last in the general fund. It was $9 billion now it's less than $8 billion. That's the tax revenue we have coming in state government, that's one of the reasons why we have to make difficult cuts. You're right the legislature in the end did raise taxes. They raised them frankly, in the most regressive way possible, on the sales tax, a tax where Louisiana is already extremely high. I believe that right now as of April 1 we have the highest sales tax of any state in the country--that's when you count state and local, what they didn't do is look at the structure of the state income tax, they didn't take a look at tax exemptions and tax breaks and again they made these they made these things temporary. We're going to be back here next year and the year after that, looking at these issues once again, hopefully with a different result.
SABLUDOWSKY: We might be back, obviously, in a special session--so the upcoming session ends in the first part of June, the budget begins, the budget year is July 1, so we're assuming that we have to cut 800 million dollars, if not more, so the governor actually talked about that three-week window-why don't you take us through that--the different departments, agencies, the Regents, everybody needs to figure out what their budgets are going to be, starting July 1 of this year.
MOLLER: Yeah well the legislature comes in on Monday for the regular session and the main job doing year is to pass a budget and have to do it with this $800 million shortfall. Now, the governor last night, I had no idea what is going to do, and again we don't know what's going to happen during the session, but he said he wouldn't rule out having a special session, a second special session, presumably only dealing with taxes, sometime during the latter part of June, so one scenario, and again, it's just something that people are talking about right now, the legislature to meet in a regular session, adjourn that in the early part of June, then come back in a week or 10 days later, for the last two weeks of June and try again, to pass some revenue to keep next year's budget from having to endure deep and serious cuts. Again what we learn during the session, university leaders, F King Alexander from LSU, Emory Belton, a lot of these colleges presidents were up in the legislature every single day because the situation for those campuses are so serious and they were talking, I know, a lot was made, well, we're going to shut down football program--that was probably not going to happen, but I think they were deadly serious that when they said, if we can't pay for summer school, that student athletes are not going to be eligible and we may not be able to field a football team. So I think there were some very serious issues from higher education. We have to remember, Louisiana has cut state support for higher education, farther and faster than any state in the country going back to 2008.
SABLUDOWSKY: Which raises the question, if you can't raise revenues and if you have to have begin the process of cutting and if the schools such as LSU need to start cutting, and need to start projecting the hiring or not hiring--is--and, I'm just throwing it out, is LSU football, completely on the table for the fall? If you're going to have to cut--half-- let's just say--might come out of higher education?
MOLLER: Stephen I would be beyond shocked if LSU doesn't take the field in late August or early September, i mean, let's be honest, this going to be a college football season, it's not going to come to that, but the damage that were talking about here, is more long-term. How many faculty members are deciding that they're not going to come to LSU because they're worried about the future of the University, or the future of the program? How many faculty members are leaving LSU and other schools and saying--I don't want to come to LSU and take my talents there? How many students are looking at this and deciding--you know what--if I can afford it, I want to go to school out of state because the situation in Louisiana is too troublesome right now and I worry about what my degree is going to be worth 10 or 20 years now. These are the kind of things, and that does long term economic damage to the state. Remember, the reason why we have a university system is because when people have college degrees, when people get educated, most of them stay in the state and create businesses, create value--the way that you move and economy forward, is to have an educated well-trained population that is able to perform the jobs that we have, but also create the jobs of the future and if you're not doing good job educating the people, you're doing long-term damage to your economy.
SABLUDOWSKY: So if we're looking at possibly $800 million in the hole starting in July, and let's just assume that we have a special session, what would the Louisiana Budget Project--how would y'all recommend that we deal with a budget shortfall of, say, eight hundred million dollars?
MOLLER: Well I think that one place that you absolutely have to look--is on the personal income tax side. That's the side that didn't get any attention during this fiscal session. The state gets revenue from a lot of areas, but by far the two largest sources revenue for state government are the sales tax and the individual income tax. And we're right now we are maxed out on the sales tax, with the highest in the country, we're nowhere close to the highest on individual income tax and one of the reasons why we've had these budget problems is because in 2007, and 2008 when Louisiana a billion dollar surpluses, we passed more than $800 million in income tax cuts for middle and upper income tax payers. So I think one of the reasons, one of the things we have to do and legislators need to be willing to do, is to look at personal income taxes and frankly, make some very tough decisions. If you're not willing to raise income taxes on middle and upper income taxpayers--on people making 75,000, to a hundred, 500,000 a year, if you’re not willing to ask those families to pay a little bit more, then you're going to have to ask the other side of the economic spectrum, I'm sorry we can't afford to have a hospital when you get sick, we can't afford to have a college for your kids to go to. You're going to have to make some real trade-offs because that's where we've come to, we're out of tricks, there aren't any more rabbits to pull out of a hat and frankly, there are some things, there's a lot of ideas that were put out on the personal income tax side, there were some deductions you can eliminate, for example Louisiana is only one of the three states in the country that allows 100% deductibility of federal income taxes. That one reduction, alone is over $950 million. If you eliminate that deduction, then you have enough money to lower everybody's income tax rate and you still come out with more revenue. That's one of the things that not only the Budget Project had suggested but Jim Richardson from LSU has talked about doing that, even the Tax Foundation has brought that up as a possible solution, there were bills to that effect, they just couldn't gain any support in the legislature especially in the House