Throughout life, we often find ourselves on a quest for that one silver bullet to solve our problems.
The problem with that simple approach is that most of life’s challenges are complex and multi-faceted, demanding a similarly complex solution. They are not usually structured in a way susceptible to an easy answer, though that rarely stops us from pursuing one.
Wish you had more money? Rather than paying your dues and focusing on hard work, why not buy a Powerball ticket? Want to stop the cycle of poverty in our state? Instead of focusing on the difficult task of improving the educational system, offering effective job training or combating the culture of government dependency, government is prone to simply propose a new wage or hiring mandate on the private sector.
We rarely roll up our sleeves and take the thoughtful, substantive approach to patch together a solution for life’s most vexing problems; instead, we just search for that one silver bullet that seems easy to design and implement.
The debate over how best to solve the state’s budget crisis seems to be falling into this same trap.
Louisiana’s chronic state budget deficit is a significant challenge that, without question, must be addressed. Its cause can be traced to a number of factors, including a broken budget process, excessive spending, runaway entitlement costs and a tax code that fails to meet the needs of the public and private sectors. The reasons for these deficits are complex, and our only hope to solve the issues once and for all is to develop a multi-faceted and comprehensive approach. However, rather than doggedly pursuing that type of effort, the search for that elusive silver bullet seems to be preoccupying all of our time.
The reality is this: There is no one silver bullet, not even new revenues, that will magically solve this problem.
Barring a major surprise and regardless of whether it is the best approach, it appears clear that tax increases are on the table this legislative session. The only remaining questions appear to be how high, in what way, and in addition to what other fiscal reforms.
Some have argued that raising taxes by $2 billion is the only silver bullet we need. However, we know Louisiana’s economy is fragile and that the $700 million generated in new taxes last year did little to stabilize the government budget.
Low oil prices hurt state collections and put thousands of Louisiana jobs in jeopardy. The tax increases passed last year that incentivized companies and individuals to scale back investment and quickly cash in their credits before the deadline depressed state collections even further.
“The reasons for [state budget] deficits are complex, and our only hope to solve the issues once and for all is to develop a multi-faceted and comprehensive approach.”
Over the last 10 years, spending has increased by 44%, while the economy has grown by 25%. This spending growth is dominated by a more than $1 billion increase in Medicaid and hundreds of millions of dollars in increased costs to pay for the state’s 13 public retirement systems. We subsidize local government by nearly $5 billion annually and have roughly 400 dedications in the budget locking away spending flexibility for lawmakers. We have more four-year universities than Florida, despite being 20% the population, and we have five higher education governing boards compared to North Carolina’s two.
Over the years, we have shot the new taxes silver bullet time and time again and the endless cycle of state budget uncertainty remains the same. We must try a more comprehensive approach.
• Cut spending on state boards, commissions and agencies.
• Identify overlapping bureaucracies and demand efficiencies, while partnering with the private sector to deliver governmental services more economically.
• Eliminate as many statutory dedications as feasible in one bill to give legislators more flexibility to invest current dollars on priorities.
• Pass reforms to Medicaid to better control the costs of that program.
• Improve the legacy pension systems to reflect today’s reality and stop ignoring the true costs to taxpayers now and for future generations.
• Reduce subsidies to local government and create a culture of self-determination in that sector.
• Scale back those ineffective exemptions and credits that do not help grow the economy.
• Demand more efficiency and effectiveness from our educational system, kindergarten through college, so that our students get the relevant training they deserve while taxpayers get the best bang for their buck.
• Pass “smart on crime” legislation to end the cycle of incarceration that has been an expensive and ineffective stain on Louisiana for generations, fueling the high poverty and crime rates we have battled for so long.
Resolving the state’s deficits once and for all will require a comprehensive approach that will be time-consuming, multi-faceted and likely controversial. The silver bullet is a myth and the search for it must end. Relying solely on new revenue to solve our budget challenges is a time-honored tradition in Louisiana. We know this singular approach hasn’t worked in the past and we can safely assume it will not do so going forward either.
A comprehensive approach must be taken to finally end this cycle. Some form of new revenue may be a part of this arsenal, but it is going to take a whole lot more ammunition than that to finally finish the job.
Stephen Waguespack is president of the Louisiana Association of Business and Industry.
Originally published in the first quarter 2016 edition of 10/12 Industry Report. Read more from this issue at 1012industryreport.com.