More Than A Fiscal Cliff: An Economic Hurricane

Perhaps the inaction toward a solution for Louisiana’s imminent decline in revenue are the words we’ve all adopted to describe it: “the fiscal cliff.” Certainly, it’s a precipitous drop, but that imagery also brings with it an underlying message of solidity. A cliff is, after all, a geological formation of earth or rock. With that in mind, House leadership can logically say we’ll just put up barricades. We’ll end – cut — the road here. But listening to the words used to describe the effects of such inaction – “devastating” and “catastrophic” were both used frequently during Sunday’s Senate Finance Committee meeting on the upcoming budget – we might have be better to call it an “economic hurricane,” as we’ve watched its slow motion development and approach. “Inaction risks the health and lives of too many of our citizens,” Gov. John Bel Edwards said, using words reminiscent of hurricane evacuation orders. This particular hurricane season began with the 2007 and 2008 legislative repeals of the revenue growth measures that were part of the Stelly Plan. “The imbalance of expenses versus revenue has been an on-going problem since then,” Commissioner of Administration Jay Dardenne reminded the committee. And as budget storms formed repeatedly, lawmakers found ways to wait them out as they deflected away – mostly through use of one-time money. It was a lot like using cardboard to barricade the windows: inexpensive, temporary, and not very effective, but postponing the need to invest in solid boards or storm shutters. Meanwhile, the economic storm gathered force. Unemployment in Louisiana surged, the growing fiscal crisis was further fueled by downward pressures on the oil and gas industry. By the time Gov. John Bel Edwards and the current legislature took office, it had reached hurricane status. We acknowledged the predictions and made some half-hearted preparations – slimming down some tax credits and increasing sales taxes “temporarily”. And we prepared our game plan – our “to-do list” of comprehensive tax reforms needed — but we kept arguing over whether each item on the list was absolutely necessary. We ended up making no actual preparation. And now landfall is near. “The simple fact of the matter is the clock is running out,” Gov. Edwards told Senate Finance Sunday. “The solutions do not change, but the time to make needed changes is dwindling down quickly. “The entire economic stability of our state is at risk. This is not a scare tactic. It is reality.” Impacts of the hurricane are already being felt. “We are losing our best and brightest students,” the governor said. “They and their families are already committing to attend out-of-state universities – not just because of the uncertainty over TOPS, but because of our chronic cutting of overall higher education funding.” The public-private hospital partners in Lafayette and New Orleans have served the state with contract termination notices. Once all the other partners follow suit, that means, according to a Senate budget analysis, the state will have an additional $168-million hole blown in the next budget, due to the loss of lease payments. Layoff notices for those hospital employees will be going out soon, the governor reminded. “It’s not optional,” he said. “Federal law requires these notices.” And when those folks are not working, they’re not paying income taxes. That’s another revenue hole. Those same unemployed workers will be needing to access more governmental services to help keep their families afloat. That’s additional fiscal pressure on the system. The intersection of looming cuts to higher education and health care services is already affecting LSU’s medical schools in Shreveport and New Orleans. “We’ve already lost a handful of faculty over these funding uncertainties,” said LSUHSC dean Steve Nelson. “They took $42-million in research grants with them.” The storm surge, like any flooding event, won’t be selective in its inundation. It’s not only impacting the public university medical schools. Closure of University Hospital in New Orleans will also affect Tulane’s medical education program.” “If UMC in New Orleans is not funded, we have no backup plan for training our doctors,” Tulane Medical School dean, Dr. Lee Hamm, stated. Balancing the state budget through a cuts-only approach will also disproportionately affect health care coverage for the elderly and disabled, the governor reminded. “Forty-six thousand seniors will lose services, while the elderly and disabled in nursing homes will be forced to find new places to live. Do we really want to make our elderly and disabled homeless?” he asked. “It’s relatively easy to talk about cutting spending, until you realize it means cutting services our people depend upon. And there continues to be a reluctance on the part of too many in the House, particularly in leadership, to recognize or deal with the budget at all.” House leadership does seem to be embracing the few computer models predicting a deviant hurricane track, while the majority expert consensus shows the storm’s path headed directly our way. “What you’ve been hearing for many months now from Gov. Edwards is that the budget is terrible, we have a massive budget deficit and the only way to fix this deficit is to raise your taxes. I’m here to tell you that is completely false,” Appropriations Chairman Cameron Henry (R-Metairie) says in a recent video. It’s not coming here. “Despite what you may hear or read, we do not have a billion dollar budget deficit. That’s a fact,” House GOP Caucus Chairman Lance Harris (R-Alexandria) says in another video. “I believe we can get the budget deficit down to $380-million,” Henry says. In other words, the economic hurricane – at worst – is only going to give us a glancing blow, if it hits us at all, so let’s just hunker down and wait it out. Meanwhile, there’s surplus money left over from the prior fiscal year, and House Republican leaders are saying that should be used to cover a portion of the projected revenue shortfall. Let’s use the supplies we’ve brought in to throw a hurricane party! Never mind that this is one-time money, and that the state constitution prohibits using a surplus this way. And never mind that the governor has warned, “These tactics from some in House leadership take us back to irresponsibility and gimmickry. And I promise I will veto any budget that tries to use those tactics.” The hurricane is coming straight at us. What will the body count be?