The past week has brought good news from both Governor Jindal and Mayor Landrieu regarding cutbacks in the number of employee take-home cars. As noted in a Times-Picayune editorial, when Governor Jindal took office, Louisiana’s fleet of employee cars was 10th largest in the nation. This is ludicrous, particularly when one considers the relative size of our state.
Bobby Jindal
Posted by Jamison Beuerman
on September 01, 2010
Budget, Spending, Transparency, Transportation / View Comments
Budget, Spending, Transparency, Transportation / View Comments
Lately, “draconian” appears to be the mot juste for Governor Jindal’s widely-contested budget cuts. In his weekly Gambit column, for example, Clancy Dubos writes, “Consider, for example, the governor’s draconian cuts to higher education…,” and then lists a litany of budget cuts to academic and cultural programs. Dubos goes on to impugn Jindal as “one of the biggest destroyers of all,” alongside BP.
Despite Gov. Jindal’s spending cut in late December, Jan Moller reports in the Times Picayune on a possible “mid-year budget deficit that could be as high as $400 million.” According to the state Department of Revenue, lower income and sales tax revenues are to blame. In February, the state collected $209 million but paid $230 million in tax refunds.
As Moller reports, Louisiana law allows Jindal to “cut 3 percent from each budget unit without legislative approval.” Even if the state is collecting insufficient income and sales tax revenues, Jindal should engage in further cuts and avoid tax increases.
Advocates of tax increases argue that further cuts threaten essential state services (i.e. health care and education) and damage the economy by reducing demand. But Chris Edwards of the Cato Institute correctly points out that cuts in state spending can force a restructuring of programs and finances that would be otherwise impossible. Edwards notes: “Just as recessions weed out the least successful businesses in the economy, policy makers should use the recession as an opportunity to weed out their least successful programs.”
If Governor Jindal judiciously cuts spending it can have a positive impact on the state’s future economy. Louisiana should take advantage of this situation and phase out unsuccessful and failing state programs. This will lead to a more sustainable budget and the efficient use of taxpayer money.
A feasibility study by Burk-Kleinpeter Inc. and HDR Engineering emphasizes the economic and social benefits of the proposed high-speed rail linking New Orleans to Baton Rouge. Currently under revision, the final report is due March 16.
With an estimated 78% probability of having a positive return on investment, the study claims that the value creation offsets the project’s costs. However, a Baton Rouge news site reports that Louisiana would bear the burden of $11 million to $14 million in annual subsidies. These costs are too high for a state already facing large deficits.
The BR-NO rail has been debated for years, but the controversy heated up when the state turned down stimulus money that would have funded its creation. While Bobby Jindal rejects the plan due to its high costs, Cato Institute scholar Randal O’Toole concentrates on the project’s hidden negative impacts.
In a Pelican Institute publication, O’Toole argues that the new high-speed rails will be “an expensive slippery slope” leading to higher costs for Louisiana taxpayers. The project would not relieve overall traffic congestion, and only few Louisiana residents will use the new trains. In other words, the possible economic benefits from new rails line will be greatly offset by high maintenance costs and low customer usage.
O’Toole believes that Louisiana should not build new rail lines; it should instead spend the federal stimulus money on safety measures by improving signaling and crossing gates on existing lines.
Gov. Bobby Jindal is expected to unveil the Louisiana GRAD Act, a proposal that will allow public universities and colleges to increase tuition without legislative interference. In turn, institutions will have to meet defined performance goals and improve their graduation rates.
Currently Louisiana’s institutions cannot raise tuition without a two-thirds approval by the Legislature. This policy distorts the market by putting an effective price ceiling on a product that a growing number of people wish to purchase.
The GRAD Act seems to be a step towards a more market-based pricing system, but it has limitations. In a market system, higher prices discourage marginal buyers. In the case of higher education, this would impact those who are less fully committed to pursuing higher education.
But our higher ed system features extensive federal intervention, which distorts the market. Higher tuition leads to more federal aid. Federal aid shifts the burden of education costs to taxpayers. The buyer is insulated from the higher cost of and the demand for education is artificially inflated.
In a true market economy, higher tuition costs will cause fewer people to apply to college. While we may initially view this as a problem, the Cato Institute argues that there are too many college students:
“While college attendance is up, overall adult literacy has barely budged. A federal assessment found that in 2003 only 13 percent of Americans 16 years old or older were ‘‘proficient’’ in reading prose, understanding written directions, or performing quantitative tasks. This dismal score was down from 1992, when 15 percent of Americans were proficient in prose and document literacy. To a significant extent, it seems a college degree may just be replacing a high school diploma as a sign of minimum competence.”
It appears that our current system of government subsidization has made education more affordable but less valuable. The GRAD Act can only have a limited impact on the market for higher education while government artificially inflates demand.
Effective policy changes would include cutting administrative spending in public institutions, reducing federal aid, and relying more on private lenders. With less government intervention tuition costs would stop skyrocketing, and might even come down. Further, reducing federal aid would not prevent dedicated students from pursuing higher education. Private lenders would have strong incentives to lend to students due to the higher value of the degree.
While higher education plays an essential role in our state and nation, the federal government should play a less prominent role it its funding.
