Lawmakers Prove the Need for Budget Reform
The recent meeting of Louisiana’s Revenue Estimating Conference (REC) illustrates why the state so desperately needs to change its budgetary practices. Only comprehensive reform can end the state’s seemingly endless cycle of self-imposed fiscal crises.
At the REC meeting, a controversy arose about whether to increase estimated revenues for the fiscal year that began July 1. The REC members who wanted to increase the revenue forecast less than halfway through the fiscal year didn’t do so primarily for the sake of accuracy — they wanted to recognize that revenue so the Legislature could turn around and spend it.
Intent on spending binge
No responsible family, upon receiving a bonus check or other unexpected windfall, would turn around and book a luxury cruise when it had only $100 in savings in the bank. But that’s exactly what some lawmakers want to do — spend more money, even though the state’s “rainy day” fund has a balance of only about one percent of the state budget.
In fact, lawmakers so desperately want a spending binge that in June they passed a list of projects to be funded if any “extra” revenue materialized.
Rather than spending every penny of the state’s budget — and then some — lawmakers should adopt a contingency budgeting approach. Other states, including Mississippi, require lawmakers to spend only 95 to 99 percent of revenue estimates, in case all the tax dollars projected don’t materialize.
Ideally, lawmakers would authorize a constitutional convention to incorporate this change, along with other fiscal reforms, into the state’s foundation governing document.
Need for reform
To reform the budget process, the Legislature should also reform the Revenue Estimating Conference itself — and the impending retirement of one of its members provides a good opportunity to do just that. Professor James Richardson announced he will soon leave his post after three decades of serving on REC.
Lawmakers should take the opportunity to consider changes to the REC process. First, they should ask for an updated analysis determining the accuracy of REC forecasts — the extent to which actual revenue met or exceeded projections. Legislative auditors last completed such an analysis in 2011, making a review of REC’s estimates long overdue.
Second, the Legislature should consider term limits for REC’s economist. Currently, Louisiana law includes no limit on the economist’s tenure — and provides for his removal only in the case of medical incapacity. While the economist’s position should not become politicized, it should not become a job-for-life either. Lawmakers should consider a defined duration for the position — perhaps two four-year terms, with an independent review process considering reappointment.
A Need for Transparency
Third, the Legislature should ensure that disclosure and transparency requirements apply to all REC officials. While news articles have claimed that REC functions with an “independent economist,” the current occupant published a study touting the benefits of Medicaid expansion — one with material factual inaccuracies — underwritten by the Louisiana Department of Health.
Because these types of studies present perceived or actual conflicts of interest, Louisiana law requires all “public officials” — including those serving in unpaid roles — to disclose any government contracts prior to publication. Despite this fact, the Louisiana Ethics Commission has no such disclosure relating to the REC member’s work on Medicaid paper.
The Legislature, or the Louisiana Ethics Commission, should at minimum ensure that all REC members must disclose any financial interests and potential conflicts. Better yet, lawmakers should prohibit all REC members from undertaking outside consulting work — whether funded by government agencies or the public. That way, taxpayers can rest assured that they are acting solely for the public good — and not trying to trade on their powerful posts supervising the state’s budget process.
The controversies surrounding REC demonstrate how far Louisiana must go to change its dysfunctional budgetary culture. However, a path to fiscal responsibility and sustainability lies within reach — if only lawmakers dare to follow it.
This post was originally published in the Daily Advertiser.