LMR_August2018

Treasury Notes
LEGISLATIVE SESSION ENDS AND NOW HARD WORK MUST BEGIN
BY STATE TREASURER JOHN M. SCHRODER
The legislative sessions are finally
over. At the end of the day, whether
everyone agreed on how we got
there, we do have a budget. Higher
education and other critical needs
were spared from cuts, and the Legislature and the Administration
together backed us off the fiscal cliff.
This is all good news, for now. We may have solved today’s
problems, but we’re still ignoring tomorrow’s. We’ve
done nothing to make lasting, structural changes to our
budget and how we operate state government.
Before becoming State Treasurer I was a legislator for 10
years and have gotten quite familiar with the spending
habits of various administrations. Over the past two years,
Louisiana’s expenditures have grown quite a bit. I believe
government is on an unaffordable track, and I’m afraid we
will outgrow any new cash faster than you can blink.
One of the reasons government growth is unsustainable is
because your income isn’t keeping up. Over the last two
years, state government expenditures have grown by over
24 percent, while income for Louisiana residents who go
to work every day has grown by less than 1 percent. This
is an unsustainable pace!
One thing that is growing along with government spending
is Louisiana’s individual per capita debt. It was $1,615
in 2017 compared to $1,138 in neighboring states. We’re
almost $500 a person higher than Alabama, Arkansas,
Georgia, Kentucky, Mississippi and Tennessee.
We’ve got an unreformed tax structure; a state employee
pension system that needs to be fixed; a Medicaid program
that needs accountability; a capital outlay process
that is broken; and our state savings account known as
the “Rainy Day Fund” is grossly underfunded. In fact, last
year $99 million was moved from the account to shore
up a projected shortfall, only to have a surplus at the end
of the year and not need the money. Instead of returning
“ALL” of the money back to the account, most was spent
on pet projects around the state.
We know what’s broken, but how do we fix it? We have to
improve our Rainy Day savings account, and I will continue
to strongly push for this. We must also make structural
changes to the way we budget. I encourage the Governor
and the Legislature to consider reforms that bring our
spending in line with what the taxpayers can afford. As
revenues improve, we need to look at ways to spend less
than what the Revenue Estimating Conference recognizes.
This will create a savings every year and ensure we do not
have mid-year budget cuts.
There are some things Louisiana is doing right. The new
state government transparency website is up and running.
We’ve had very productive calls with the national Rating
Agencies. Moody’s Investor’s Service has already upgraded
the outlook on the state’s credit rating from negative
to stable. Our cash position has improved greatly, and
we’re hopeful for other improvements in our bond rating.
We also continue to have a strong asset in the state’s
Bond Security and Redemption Fund, which guarantees
the state’s debt will be paid first. It’s one of the best in the
nation, and few states have one.
We may not all agree on how we got there, but now that
the budget is done, we need to move on. One of the
biggest questions moving forward will be to see where we
can get everyone to agree. I just hope the same passion
and effort that was used to raise your taxes will be dedicated
to finding structural fixes to the state’s budget.
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LMR | August 2018