Money and philosophy clash in Baton Rouge

The only scenario that leads to more heated debates at the Legislature than rapidly falling state revenues is one of rapidly rising revenues.

When state revenues are falling, legislators fight to minimize cuts to their favorite items in the budget. When revenues rise rapidly, as they have for the last few years, there is a stampede in multitudinous directions to spend it all. That has been the scenario recently.

The Revenue Estimating Conference (REC) met May 9 and certified over $460 million more in new revenue available for the current budget, as well as an additional $360 million for the one beginning July 1. These estimates come on top of literally billions of additional surpluses and excess revenues that the REC has certified over the last two years.

The newly available dollars will undoubtedly make the simmering fiscal debate rise to a full boil soon.

Prior to the REC meeting, Gov. Jindal said he wanted any recurring excess revenues certified for next year’s budget to be used to plug the remaining $400 million hole caused by the last administration using $800 million in one-time revenues to balance the 2007-08 budget. Jindal eliminated half of that total in the budget proposal he submitted to the Legislature, and the $360 million in additional excess revenues recognized would fill almost the entire remaining hole. The governor claims it is the fiscally responsible thing to do.

That $360 million is also coveted by those who would like to substantially reduce the personal income tax.

A bill by Sen. Buddy Shaw, in its original form, would eliminate $300 million of that tax. The governor’s proposed use of the $360 million to eliminate the one-time revenues funding in the proposed budget would force the tax cut proponents to cut spending significantly in order to fund their tax cut.

He claims the fiscal conservative mantle by saying he is eliminating a serious budget problem left by the Blanco administration and, having solved the problem, wants any tax cut to be offset by budget cuts. He knows it is not easy to get a consensus in the Legislature to cut $300 million.

Where Gov. Jindal runs the risk of being anything but a fiscal conservative is in how he proposes to handle the $1.3 billion in excess revenues that remain available in the current fiscal year. Many in the Legislature – especially those who don’t serve on committees that spend money – will want those funds to roll over as surplus to be safely spent on the non-recurring items set forth in the state constitution. Those excess revenues cannot be spent in the current or new budget without a two-thirds vote to raise the expenditure limit.

However, the Fiscal Year 2010 cap is expected to grow by almost the same amount as the $1.3 billion in excess revenues. True fiscal conservatives should be concerned about swelling an already bloated state budget by that amount.

Gov. Jindal may win his contest with the tax cut supporters with his strategy of using the newly certified recurring excess revenues to remove the one-time money currently funding part of the proposed budget. But, if he circumvents the expenditure limit by shoving the $1.3 billion in current excess revenues into “special funds” and drawing them out in later years to greatly expand state spending, his fiscal purity arguments will evaporate.

If you are interested in politics and fiscal responsibility, pull up a chair and watch the fireworks down at the Legislature for the next few weeks.