TRUTH OR CONSEQUENCES

The U.S. Commerce Department has now released the missing number for personal income growth in Louisiana for the fourth quarter of 2006. This number is important, because it is the key to determining what the true figure should be for the cap on state spending for the 2007-08 state budget. According to the federal government, the total personal income for the quarter in question is $135.5 billion.

According to our state constitution, the spending cap is determined by averaging the prior three years of personal income growth in Louisiana and applying that percentage to the base of the previous year.

With the complete hard data now available, the accurate calculation shows that the cap for the next budget should increase by $547 million.

Those facts don’t square with what the Blanco administration plans to use for the 2007-08 spending cap. Instead of using the totally accurate $135 billion figure for the fourth quarter of 2006, the Department of Administration (DOA) Commissioner Jerry Luke LeBlanc plugged $228 billion into the formula.

Please understand that the Blanco administration had to know that the $228 billion figure would be nowhere near what the real number turned out to be. For it to be correct, there would have been a 70 percent increase in total personal income between the third and fourth quarters of 2006 — an impossibility in the real world. Though Blanco’s administration knew the number being used was erroneous — and was challenged on its use — the DOA used it regardless.

Why?

Because the administration wanted to have the largest increase possible in the spending cap.

Why?

Because Gov. Blanco wants to spend a lot of additional money in the next budget.

Using the Blanco administration’s formula (with the outrageously erroneous fourth quarter 2006 number), the spending cap increase is a whopping $1.3 billion. Using the real numbers, the increase would be $547 million — a difference of approximately $750 million. By using a mathematical sleight of hand, the administration is proposing a huge increase in spending that flies in the face of what our state constitution tells us should be allowed in the next budget.

That fact should concern the taxpayers of Louisiana. If a billion dollars or more of new spending is incorporated into the 2007-08 budget, it could lead†to a fiscal meltdown in a few years if the current revenue estimates prove wrong. If that happens, the Legislature will either have to cut spending (something that rarely happens in Baton Rouge) or raise taxes (a more likely course).

If the Blanco team — and their allies in the Legislature — want to be honest with the taxpayers and the constitution, they will support a spending cap that accurately reflects the true three-year growth in personal income in Louisiana. They could then use the $547 million to fund recurring expenditures, including the pay raises proposed by the governor.

Other key non-recurring investments such as highway construction, deferred maintenance, and debt reduction could be accomplished by temporarily raising the cap to make those expenditures, but then returning the cap to the $547 million level. There is no justification for permanently raising the cap further†in order to facilitate non-recurring†expenditures.

The data needed to establish an accurate spending cap for 2007-08 is now available. The data used by the Blanco administration to set the cap is erroneous.

If the administration doesn’t correct the number, the Legislature should take it upon itself to do so.