Economy

Bobby Jindal’s Anti-Tax Fervor May Have Destroyed Louisiana

CREDIT: AP Photo/Nati Harnik

Former Louisiana Gov. Bobby Jindal (R)

Louisiana’s new leaders made headlines last month for mentioning that a budget crisis may jeopardize the elite Louisiana State University football program. But the flood of red ink that former Gov. Bobby Jindal (R) left behind is so all-consuming that Louisiana may soon cease to function as a state in far more fundamental ways.

The basic services a government provides — watchdogs to guard abused and abandoned children, emergency rooms and hospitals, scholarships and safety-net stipends to lift families out of poverty — will barely be able to keep the lights on unless politicians can find $3 billion in new revenue in the coming days.

Gov. John Bel Edwards (D) called the legislature into a special session to resolve the $940 million shortfall for the current fiscal year and projected $2 billion gap in the next. But that session is scheduled to close at 6:00 Wednesday evening.

If lawmakers can’t resolve the crisis, many Louisiana state agencies will see budget cuts of 60 percent — “Doomsday,” as the state’s head of Children and Family Services (DCFS) Marketa Garner Walters put it to the Washington Post — atop years of significant resource cuts already imposed under Jindal.

Neglect Looms For Child Abuse, Higher Education, And Health Care

You can’t just not investigate child abuse,” she told legislators at a recent hearing, underscoring the stakes of their present discussions. The state DCFS staff is already down to 3,400 total employees, or one third fewer people than Louisiana paid in 2008 to respond to abuse reports and navigate the foster-care system.

Similarly, higher education funding statewide is already down 44 percent compared to eight years ago before lawmakers move a penny in response to the present crisis. The cost burden for a post-secondary education has flipped, with students now shouldering the majority of the costs in a state that used to cover 70 percent of the price of a degree. The schools have already laid off staffers and delayed badly-needed physical repairs to cope with the near-halving of state higher ed funding. Further cuts in response to the present crisis could force some schools to close and mean that students who qualified for a state scholarship program can’t get their money.

Hospitals in the state are in line for a massive hit too. Administrators say that the best-case scenario they anticipate from the current crisis is a $64 million drop in state health care spending. Such a cut would trigger reductions in federal matching funds, leaving the state’s medical providers to make do with $169 million fewer than they were supposed to get for the fiscal year that ends in June. Some hospitals may simply close down rather than fighting to stay afloat amid such cuts, a Department of Health and Hospitals official told The Advocate.

Jindal’s Legacy

Jindal’s exact role in generating the crisis is complicated but inarguable. After Hurricane Katrina, federal relief dollars swamped the state. Spending ballooned from $16 billion per year before the storm to nearly $30 billion annually after it.

That glut helped derail a tax deal Louisiana voters had narrowly approved in a 2002 referendum. Jindal’s democratic predecessor restored a tax break for itemized deductions that the referendum had repealed, but left its sales tax cuts for the poor and boosted income tax rates for the well-off intact.

But once Jindal was elected, he set about dismantling the income tax system. Rates for wealthy people returned to their pre-referendum levels. Shielding the state’s haves left Louisiana with about $800 million less each year to fund services for its have-nots. The surpluses Jindal walked into turned quickly into deficits.

Undissuaded, Jindal doubled down. Like Gov. Sam Brownback (R) in Kansas, Jindal argued that more tax cuts would solve the tax cut-induced deficits. He tried to fully repeal the state’s income tax in 2013, proposing to cover part of the cost through increased sales taxes. The plan only fell apart after independent analysts pointed out he was suggesting a $25,423 annual tax break for the state’s richest people and a tax hike for the bottom 80 percent of Louisiana’s income spectrum.

Corporate Kickbacks

While Jindal’s no-income-tax fever dream fell apart, a number of other expensive giveaways to well-heeled economic actors continued or expanded. By the end of his reign, the state’s tax incentives to businesses were so generous that they looked less like subsidies and more like bribes. The state has spent $200 million more on tax breaks to business than its collecting in business taxes so far this fiscal year — the public policy equivalent of an actor paying his entourage to hang out with him.

For a time, revenues and economic activity from the oil industry masked the full price of Jindal’s policies. But oil prices dipped, and then slid, and then plummeted, dragging a key source of Louisiana tax revenue down by tens of millions of dollars. Jindal drew down rainy-day funds and sold off state properties to patch the growing budget holes, then left office with those last-resort resources exhausted before Bel Edwards was sworn in.

Faced with such inflexibility and crisis, Louisiana lawmakers don’t have many un-dramatic options. They are reportedly considering cuts to programs that are supposed to be protected by the state Constitution even in emergencies, as well as the doomsday across-the-board slashing of state agencies that aren’t protected. Some in the legislature want to reverse Jindal’s income tax cuts and restore the Stelly Plan rates or something close to them. But the state is also being urged to up the sales tax rate and apply it to many transactions that are currently exempt.