JR Ball: Blame the lawyers for Louisiana’s fiscal health

    Louisiana’s financial health is … not good. No secret there. Anyone paying anything resembling an iota of attention knows the state’s budget and how we annually get there is one $30 billion malady.

    It’s a fiscal affliction that began to spread right about the time the federal government cut off the spigot of cash known as post-Katrina recovery money. Since then, most of us have been quick to blame the head-scratching antics of our most recent former governor, our current governor and two administration’s worth of bickering state legislators for doing everything in their power to give the appearance of addressing the problem without actually solving it. This—coupled with corporate and human taxpayer demand for lots of stuff and entitlements without actually paying for it—has led to a decade-plus of budget hacks, gimmicky money maneuvers, temporary band-aid taxes and some beaucoup booting of that empty Abita Amber down N. Fourth Street.

    Yet, all of these buffooneries, say the folks at Truth in Accounting, a state debt transparency organization, are merely symptoms of an even more sinister underlying problem: too many lawyers.

    In what’s surprising to no one who either drives by the bajillion billboards that visually pollute almost every road and highway in this town or turns on a television, Louisiana is numero uno in America when it comes to lawyers per capita, with 41 practicing JDs for every 10,000 residents.

    That many lawyers needing to make ends meet, say people who know such things, not only leads to lots of lawsuits but also lots of lobbyists and special interest groups fighting quite effectively to 1) maximize a state’s legal liability, 2) expand government services and 3) wrangle better and better state pension and retiree health-care benefits.

    All of which, suggests Truth in Accounting, leads to greater spending demands and, with a tax-hating public, greater state debt.

    And this debt hurts economic growth, argues researcher William Bergman, a former financial market analyst for the Federal Reserve Bank of Chicago and presently the director of research for Truth in Accounting. “You see more often the tendencies to borrow for these special interest groups as opposed to raising taxes,” he tells Governing. “They’re kicking the can down the road and thus putting the burden on taxpayers.”

    Sound familiar?

    lawyers kicking the canWhich is why Truth in Accounting gives Louisiana a fiscal health grade of D in its latest State of the States report card, writing every man, woman and child living in Louisiana would need to pony up $15,500 to cover the difference between the state’s assets and its liabilities.

    With apologies to Warren Zevon, lawyers, guns and money isn’t the only reason for the crap of fiscal debt hitting the fan.

    Another factor, according to Truth in Accounting, is how long a state has been in the Union. Louisiana, for the record, became a red, white and blue card-carrying member in 1812.

    That matters, we’re told, because the older the state the more entrenched the political shenanigans, with the easiest to spot byproduct being gerrymandered districts, which, of course, is something lawyers tend to heavily involve themselves—either creating them or defending them.

    So, it should come as no surprise that Louisiana is the third-most gerrymandered state in America, with three of our congressional districts owning the distinction of being among this country’s most gerrymandered. Keep in mind, Louisiana only has six.

    Just for good measure, research from S&P Global Ratings warns an aging state population also hampers a state’s economic growth. Why? Because our Tom Brokaw-dubbed Greatest Generation tends to take way more from government than it gives back in its golden years. Keep that in mind the next time you want to dismiss the nonstop outmigration of young, educated professionals from this state.

    As recently as last week, Gov. John Bel Edwards spoke as if the job of restoring fiscal sanity was complete, bragging Louisiana has made progress “since overcoming the state’s fiscal challenges.” We won’t debate whatever progress the state has supposedly made, but it’s simply not true to say Louisiana has overcome its budgetary woes. Unless, of course, “overcoming” means replacing expiring temporary sales taxes with new temporary sales taxes that mostly kicks the problem to whoever resides in the governor’s mansion in the mid-2020s.

    To be fair, the primary cause of Louisiana’s failing financial grade in the State of the States rankings is tied to debt with the state’s pension systems. In a wonderfully typical Louisiana move, state legislators—in the zeal to win reelection—created the first of the state’s retirement systems in 1936 without approving a single penny to pay for it. Several other retirement programs were created over the next decade, also entering the world with a deficit. The unfunded liability of these systems only got worse over the years as lawmakers routinely approved benefit increases without actually having the money to cover the tab.

    More recently, facing a looming doomsday scenario, state government has gotten serious about paying down an unfunded liability nightmare that had grown to some $17 billion. Factor in bond payments and other liabilities and Louisiana has $35.6 billion in bills on the books.

    As you might expect, the Edwards administration has a litany of problems with Truth in Accounting’s analysis. Boiling it down, the administration agrees the state owes major money but argues not all those bills are due today.

    It goes on to brag about how much money the state has sent to retirement systems to pay down unfunded liabilities—$12 million in fiscal year 2018 and a projected $30 million this fiscal year. What they fail to acknowledge, however, is if Louisiana hadn’t gotten itself into such a fiscal mess that collective $32 million could have gone to teacher pay raises or helping reduce the state’s $13 billion backlog of road projects. Or ask state workers what it’s like seeing more and more of their paychecks diverted to their future retirement.

    In short, we’re spending today’s money to address yesterday’s problems. That’s not Edwards’ fault, but it is what’s happening. And that, counters Truth in Accounting, is a problem because Louisiana, per its constitution, has a mandate to produce an actually balanced budget. Which, if you support their position, is something we have not done since at least 1936.

    Finally, the administration delights in pointing out that Louisiana’s taxpayer burden of $15,500 “is the lowest that it has been in a decade.” What they fail to mention is a year earlier, when I believe Edwards was also governor, it was—at $18,300—the highest it has been in a decade.

    Here’s the good news: Apparently, we don’t need a constitutional convention or an overhaul of Louisiana’s convoluted tax code to fix the financial ails of the state.

    We only need to get rid of the lawyers.