In its second installment of a new research series dedicated to the state budget, the Louisiana Association of Business and Industry focuses on the roughly 62% of the state’s $25.1 billion budget for fiscal year 2016 that is “locked-up.”
“Budget Basics No. 2—A Closer Look at ‘Locked-Up’ Spending” follows on LABI’s “Budget Basics No. 1—Understanding the State Budget Deficit,” released in October. The 16-page report dives into the roughly $15.5 billion in the budget that is considered off limits to annual review or reductions.
The “locked-up” funds fall into three categories: non-discretionary funding outlined in the Louisiana Constitution, self-generated revenues charged by state agencies, and nearly 400 dedications of state tax revenue known as “stat deds,” short for statutory dedications. LABI says Louisiana lawmakers need to review the spending for cuts or reductions as part of a larger fiscal reform push.
“Jargon like ‘non-discretionary’ funding, ‘self-generated’ revenue and ‘stat deds’ make for an overly complex budget picture that guarantees spending for specific functions, whether it is a statewide priority or not,” writes LABI President Stephen Waguespack in a column accompanying the report. “In short, Louisiana has too many lock boxes and dedicated funds in the state budget that annually spend billions of taxpayer dollars on cruise control without sufficient oversight and accountability.”
LABI says similarities exist between the origins and short-term solutions to the state’s current budget challenges and those of the late 1980s.
“In fact, the comparisons to the crisis in the 1980s are almost eerily similar,” reads the report. “Reports from the Public Affairs Research Council—then and now—point to similar budget challenges, similar short-term fixes, and similar tendencies to raise revenue rather than address ‘sacred cows’ in state and local spending.”
The report notes that after former Gov. Buddy Roemer’s administration took office in 1988, it and the Legislature passed significant fiscal reform during a special session in order to address a multiyear deficit.
“Perhaps most relevant today for our elected officials, the 1988 plan abolished most statutory dedications in a single bill,” reads the report. “The number of special funds dropped from 197 to 78, freeing up an estimated $589 million (the total budget was $6.9 billion).”
Waguespack says raising new tax revenue will not solve the current budget mess, in which officials have estimated the state is facing a possible $1.2 billion deficit in 2016 if everything that’s currently funded stays as it is and is adjusted for inflation and growth.
“All spending must be brought into the daylight and removed from the shadows of the budget,” he says. “Every spending program at the state and local level deserves equal attention and how we prioritize going forward is key.”