21 November 2006

The Budget Surplus Fiasco

Our Governor is worried about only one thing - her political future. You can see her declining interest in doing what is best for New Orleans from the shedding of her responsibility in the Road to Nowhere Program (formerly Governor Blanco's Road Home Program) to the giant handout for all as a result of the state's one time budge surplus (estimated to be $827 million).

I have ranted about the Road to Nowhere Program. I also predicted (not that it was really all that insightful) on October 20 when the budget surplus was announced that Blanco would use it to win votes. Now I am going to rave about her announcement yesterday as to how she intends to spend OUR money.

Before I begin, point by point, remember that this is a one time budget surplus. If the state commits monies from a one-time budget surplus to renewable annual spending, the state will eventually have to cut the budget when the surplus is no longer available and revenues from taxes and other sources decline. The state spending money on items that require a long-term funding commitment is analogous to you getting a one-time end of the year bonus of $5k from your boss and going out and buying a new Mercedes Benz with $800/month payments for the next 5 years, even though your annual income did not change. You wouldn't base a long-term monetary commitment with large payments on a one-time cash bonus - but Governor Blanco will.

1. Governor Blanco proposes to raise schoolteacher salaries to the regional average with the budget surplus. Of course teachers in the state deserve a raise, and they realistically deserve even a larger raise then the Governor is proposing, but this is not the correct source of revenue for the raise. This will never fly and she knows it. She is going to use this against the legislators that refuse to commit to this budgeting mistake during her future reelection campaign (as in, "I demanded teacher raises but the legislature refused to fund it"). Instead, if the money is to be spent on education, it should be spent on facilities that need repair, or materials needed for operation. These are one-time costs and there is no better place in the state to spend the money on facilities and materials then in New Orleans.

2. Governor Blanco is going to ask for a tax cut in the form of a child tax credit. A tax cut? How can this state with its ever deteriorating infrastructure, lack of decent public services, eroding coast, and its largest city in shambles handle a tax cut? How can you get teacher raises and tax cuts at the same time? Sure we have a nice budget surplus now, but we will need every dime of revenue we can get several years from now when the rebuilding dollars quit flowing into the state. This is absolute nonsense and is no more than a reelection ploy. Instead of a tax cut use the a portion of the budget surplus to fund road and transit projects in south Louisiana to improve connectivity for business purposes as well as for future evacuation needs.

3. Governor Blanco proposes to speed two business tax cuts that are currently being phased out. One tax cut reduces the sales tax on business machinery and equipment and the other eliminates the state franchise tax on corporate debt. These taxes are already being phased out; what is the point to expediting this? Businesses are capable of planning on the changing tax structure and are aware of the current program to reduce this tax burden. All speeding it up does is reduce the state's near-term revenue, which is needed for rebuilding, and give Blanco a chance to tout her skills in tax reduction. This is political nonsense.

4. Governor Blanco proposes to give all homeowners an insurance rebate check to offset the higher costs of homeowners insurance primarily due to the Louisiana Citizens Property Corporation's 15 percent surcharge. Yes, if you have homeowners insurance, Governor Blanco wants to send you a check in the mail. How can you not vote for a Governor that sends you a check? We all love to get checks in the mail! But again, this does not resolve the real problem in all of Louisiana: insurance reform. The problem with insurance rates is not due only to Hurricanes Katrina and Rita, or the massive debt incurred by Citizens Property Corp. Instead the problem for all of us is living and working in a state that has been in an insurance crisis for 15 years. Insurance rates are amongst the highest in the Nation, including homeowners, business and auto; multiple insurance commissioners have been in prison, and it is becoming more and more difficult to get a policy in this state. The insurance crisis is not just due to flooding in New Orleans - flooding has nothing to do with homeowners policies (they do not cover flood) - but is due to a lack of competition and adequate control of the insurance industry. Basically, nobody wants to do business with us. So knowing all of that, how is sending me a check going to solve this real long-term problem with insurance in the state? How will we, as homeowners, have a choice in insurers instead of being forced to use Citizens Property Corp.? How can people make decisions about returning home if they can't figure out how they will insure their assets in the long run?

Instead of these stupid, politically-motivated uses for our one time budget surplus, how about we fill some real needs. Schools, parks, roads, and mass transit throughout New Orleans need funding for rebuilding. Dump $300 million into these needs. LSU currently lacks state funds to match Federal funding that would help to rebuild the medical center in New Orleans. This is a critical economic need for New Orleans and the state, and a morally-responsible funding opportunity. Fund it and fund it now and figure another $300 million. Lastly, take the remaining surplus and fund coastal restoration projects. $227 million may be just a small piece of the needed funding, but in order for any of us to have a future in south Louisiana, we must get serious about paying for this work.

TAGS: Katrina, New Orleans, NOLA, Blanco, Road Home Program, Louisiana


At November 21, 2006 9:54 PM, Blogger Zihuatanejo said...

We should take about 10 million and buy ourselves some of those fancy Washington Lobbyists. Let's get them working on getting us some of those federal dollars!

I agree that the whole insurance thing is completely screwed up. Unfortunately that is Partly because of those Damn lobbyists. But we need them and everybody else has them.

I can not believe the lack of aid that went to home owners and small businesses that need to rebuild. With all those people who can not move home there is going to be a lack of money put back into our local economies. We would be a lot better off (in more ways than the just the obvious, , that is another chapter) to start by rebuilding our local communities at the family home and small business levels. Instead Big businesses and Industries both with their own state and federal lobbyists are getting the lions share.

Just take a look at unemployment insurance. Small business owners get worse rates than large employers, and (I have read, though don't have a citation handy) in aggregate small business owners pay to insure more employees total. This works like a regressive tax that shifts more of the burden of supporting the recently out-of-work on to the backs of those businesses that are least able to pay for it, and at a higher cost.

I don't really think an insurance model is the right way to pay for unemployment benefits — it makes sense for employers to pay part of the costs, but the burden shouldn't be disproportionately shifted onto small businesses.

A better model would be to combine the risks across a geographic region, an industry, etc.. That way each employer would pay the same per employee, and the overhead associated with multiple insurance policies could be eliminated, thus saving everyone money. But alas small guys seem to always get the shaft.

At November 22, 2006 10:19 AM, Anonymous F P said...

If you guys got serious enough you could host a real campaing to host the DNC for 2008. This would bring your issues needed national attention and boost the local economies.

Solutions like having a cruise ship(s) brought in to help house delegates could be put into place.

At November 22, 2006 6:31 PM, Blogger I. D. Reilly said...

That is a great idea, but I believe that New Orleans pulled out of the running for the 2008 Democratic National Convention. New Orleans was one of the finalists for the DNC.

I don't know the exact number of hotel rooms currently available, but almost all of the hotels available in New Orleans pre-Katrina are back up and running. Only a very few hotels, like the Hyatt by the Superdome, are still down and out. The city is open and ready for visitors and conventions, and I know numerous conventions are booked in the future. Really, the majority of the tourist destinations in New Orleans suffered little physical damage from Katrina. The challenge for businesses in staying open for tourists is to find service workers, housing, and affordable insurance.

At November 24, 2006 10:10 AM, Blogger dillyberto said...

Happy Thanksgiving to the entire staff and family at the Third Battle.

At November 24, 2006 11:08 PM, Blogger bayoustjohndavid said...

I agree with most of you say, but there's a major problem with what you said about the money being spent on teacher pay raises being better spent in New Orleans -- Ray Nagin and the city council.

At the press conference where Nagin proposed across the board pay raises he actually said that we need to make sure that we get our fair share from the state. He'd had to have known that the pay raises, followed by the garbage contracts were all the ammo legislators from other parts of the state needed to demand money that should go to New Orleans.

I can't her defend her budget proposals, but the actions of our own officials would have made it almost impossible for her direct much to N.O., even if had she the inclination. BTW, if I had had the time, I would have made this comment yesterday , before the article about the federal audit came out in today's paper.

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