Tuesday, April 6, 2010

Democratic Louisiana: "It Started With Jindal's Stelly Flip"

This article is "The Big Blue One" from Volume 1, Number 1, of Democratic Louisiana, a Louisiana d2d project.

Repealing the income tax portion of The Stelly Plan was not on Bobby Jindal’s agenda when he became governor in 2008, but as sentiment in the House grew for repeal, the new governor moved to leap in front of the parade that championed the repeal.

Under the Stelly Plan, which was approved by state voters in 2002 while Mike Foster was governor, the state sales tax on food for home consumption and the sales tax on natural gas, electricity, and water for residential use was lowered on January 1, 2003, from 3.9 cents to 2 cents per dollar. Taxes on those items were then eliminated on July 1, 2003. To replace revenue lost through Stelly, individual income tax brackets were adjusted upward.

The plan was not popular with those in the top two state income tax brackets where individuals paid up to $500 more in taxes each year.

In the 2007 statewide elections, Jindal romped to a primary win over a fragmented gubernatorial field and Republicans picked up significant representation in both the state House and Senate.

During the 2008 regular session of the Legislature, Jindal first opposed the repeal of the income tax provisions of the Stelly plan because of the loss of revenue would be too steep (about $358 million per year). Sensing the political momentum and not wanting to disappoint his conservative backers, Jindal flipped on the issue and endorsed the repeal. With the new governor’s backing, repeal passed easily. And Louisiana was sent careening down the road towards a financial crisis.

It did not take long for trouble to appear.

In December of 2008, the state discovered that it had a projected budget deficit for the 2008-09 fiscal year that nearly matched the cost of the Stelly repeal, dollar for dollar: $341 million.

The repeal of the income tax portion of the Stelly Plan is a mistake that keeps on giving as it deprives the state of significant revenue each year. Viewed another way, counting the budget proposed by Jindal and now being considered by the Louisiana Legislature, the repeal of the income tax portion of the Stelly plan has cost state government more than $1 billion dollars in revenue it otherwise would have had to meet rising need.

The Jindal Way: Afflicting the Afflicted

What rising need? The Louisiana Budget Project (LBP), a non-partisan arm of the Louisiana Association of Nonprofit Organizations, monitors and reports on state government spending and how it affects the Louisiana’s low- to moderate-income families. In LBP's review of Jindal’s 2011 Executive Budget ("Louisiana's Fiscal Crisis"), the organization notes,
between January 2005 and January 2010, families using food stamps increased 20 percent. Medicaid enrollments increased 13 percent from pre-Katrina levels. The number of enrolled students at four-year institutions increased 3 percent between 2004 and 2009, from 214,144 to 220,381. At community colleges, enrollment increased 37 percent during the same time period, from 50,920 to 69,940. The state’s unemployment rate increased from 5.4 percent in December of 2004 to 7.3 percent in December of 2009."
Yet, confronted with these growing demands, Jindal has steadfastly refused to take any step to increase state revenues. Why? Because agreeing to increase taxes or fees would damage his national prospects among conservative Republicans whom he has courted assiduously since his election.

Jindal’s resistance to raising taxes or seeking other ways to raise revenue combined with the fact that healthcare and higher education are the only areas of the state budget not constitutionally protected from cuts has produced a budget balancing approach best summed up as “comforting the comfortable and afflicting the afflicted.”

Jindal’s calculation appears to be that he can build campaign for president (“The Louisiana Way” branding of his budget approach and the upcoming book some one wrote for him) on the backs of Medicaid recipients and providers and those in higher education.

Had the status quo held that might have been possible. But, as everyone knows, Louisiana’s economy has been floating on a sea of federal disaster dollars since the storms of 2005 (with more injected after the storms of 2008). That money is beginning to taper off. The LBP says federal dollars accounted for more than half of the state’s budget in 2009-10, and that will drop to 45% in the current budget.

And, with Jindal’s Republican colleagues in the Congress fighting to stop even the extension of unemployment benefits, the likelihood of additional federal economic recovery dollars is uncertain at best. The potential loss of those dollars is what sparks the talk of Louisiana’s budget going “over a cliff” next year.

That has forced Jindal to try to deny the undeniable (the state needs more revenue) by attempting shift program costs onto local governments, particularly local public school systems.

Jindal’s Blind Spot: Services Are Delivered By and Go To People

But, behind every number in a state budget is a human story. Dating back to his days when he was wrecking the public health network as Mike Foster’s secretary of the Department of Health and Hospitals, the evidence is that Bobby Jindal has never understood this basic fact.

And here is where Jindal’s anti-tax fanaticism is inflicting its greatest toll on the state.

Jindal’s budget cuts, particularly in Medicaid, reduce access to care for the poorest among us. Medicaid provides access to care for children, pregnant women and the disabled. Medicaid is a huge program in our state and Jindal and legislators have found making cuts there relatively easy because of the size of the program. Medicaid is an insurance program. It does not give money to patients, it pays for patient care by paying providers — doctors, nurses, hospitals — for that care. The reason providers are turning away Medicaid patients is that the state of Louisiana keeps cutting the amount of money they will pay those providers to give that care.

So, Medicaid budget cuts impact not just the poor and the disabled, they also impact the healthcare provider community. The Louisiana Hospital Association (LHA) said Jindal’s proposed budget 2009 cuts would have cost nearly 2,000 healthcare jobs in our state. The final budget last year lessened those cuts, but subsequent deficit projections and cuts have brought additional compensation cuts, which are driving cutbacks in clinics and hospitals across the state.

Jindal’s budget cuts are wiping out good paying jobs across Louisiana. Yes, he is reducing the number of state employees, but Medicaid cuts are costing the state thousands of healthcare jobs each year and the cuts in higher education are shutting down programs, costing hundreds of instruction and support jobs, and sending research dollars out of the state that otherwise would have come here. At the K-12 level, Jindal is trying to push costs down to local school systems and eliminating programs intended to improve the performance of students in the critical early grades.

Compounding the error are recent revelations that outsourcing of state services particularly in the areas of health and social services will actually drive up the cost of operating those programs, and it is clear that Louisiana is merely a prop for Jindal’s political posturing on the national political stage.

Louisiana is historically a low-wage state. The jobs that Jindal’s cuts are forcing in healthcare, higher education and K-12 are not jobs that will make people rich, but they are good jobs that support middle class families and that have a high probability of including benefits packages for the people holding them.

And while Jindal saved 1,300 or so low-wage jobs in Union Parish by subsidizing the purchase of a bankrupt chicken plant, his cuts are forcing far larger losses of better paying jobs in the public and private sectors.

Bobby Jindal is sacrificing those good Louisiana jobs at the altar of his national political ambition.

Coming Friday: “Jindal’s Way: Economic Carnage”


E.J. said...

Insightful analysis. As a mental health provider, I can tell you that the system is imploding and the suffering is already being felt because of the short sightedness of Jindal and Levine. They talk of privatization of services, but there's no way for the private sector to absorb the number of people in need so quickly.

Mike Stagg said...

Thank you for your comment. The self-inflicted budget crisis is a ruse to justify the move to privatization which will not save money, but will drive up the cost of providing the services. The only savings will come in the elimination of state jobs. Fred Cerise of LSU made this clear in a Times-Picayune article on privatization that ran in the Times-Picayune last Sunday. There is a link to the story in my article. Cerise, who ran DHH and now runs LSU's hospitals, knows the system inside and out. His comments are a powerful indictment of Jindal and Levine.

Subscribe Now: Feed Icon

D2D Archive

Louisiana Democrat2Democrat