Winston Churchill said that "for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."
It's no secret that many parts of Louisiana's economy are sluggish right now, especially the oil patch.
Times are tough, and there is talk about making them even tougher by raising revenue through tax increases. Yes, the state, as usual, is strapped for cash. Yes, we're facing, as usual, a large shortfall in the state budget. But do you think the average oil industry worker is washing down his caviar with the finest magnum of champagne right now? If you do, let me introduce you to "George."
George is a hard-working landman with a wife and a mortgage. He's got a roof that needs replacing, a truck that rattles instead of purrs and a baby on the way.
As a landman, George works in the oil and gas industry, which is experiencing more twists and turns right now than a "Game of Thrones" episode. The industry is bleeding jobs. Businesses are closing. More workers are joining the unemployment line every day. They just hope they don't have to join the bread line.
George devoted more than a decade to a company that folded last year. He found another job, but it pays less. So he mows lawns on the weekends to keep groceries in the house and the foreclosure man at bay.
The tide will turn for the oil industry, but we're going to have to be patient. Esteemed economists Loren Scott and Jim Richardson recently released their "Louisiana Outlook: 2016 and 2017."
I'll give you the summarized forecast by area. You might want to reach for the aspirin.
The year 2016 is expected to mean meager growth for New Orleans, flat growth for Monroe, modest growth for Alexandria and an altogether bad year for Shreveport-Bossier City, Lafayette and Houma. The bright spots are Baton Rouge and Lake Charles.
The truth is the state budget has been mismanaged for many years. I don't envy any public official who walks into office with a $1.9 billion budget hole to fill, but they had better be careful trying to fill it by burdening our citizens with higher taxes. Many of our people are living at the margins right now. It could also tank an already shaky economy.
Oil recently slid below $30 a barrel. Prices could go lower. Yes, we've diversified our state budget so we're not as dependent on the oil and gas industry - and that's a good thing.
However, that industry still buys a lot of homes, kids' braces and minivans in Louisiana. Maybe you just worked offshore one summer before college. More likely, you know someone still working offshore or selling oil field equipment. Those folks are hurting right now. And we want to charge them more for the government services they receive. We are not one tax increase away from prosperity.
Now I know what you're thinking. It's easy to criticize, but it's difficult to offer an alternative solution. So I'll offer you a few ideas.
We have 19,000 consulting contracts. Does anyone really believe we need all of them? Does anyone believe these consultants wouldn't give the Governor and the Legislature a 5% discount if they asked?
Twenty-two percent of all of the managers in the state's classified service manage one employee. The average manager manages four employees. We have too many generals and not enough foot soldiers.
Each year, taxpayers pay for 900,000 visits to expensive emergency rooms for nonemergencies, such as acne, mild sunburns, obesity counseling and pregnancy tests. Imagine how much money we could save if we reduced that by 20%.
According to the Federal Centers for Medicare and Medicaid Services, 10% of the $8.3 billion the state is spending on Medicaid is fraud. That's $830 million of fraudulent payments every year.
We need to be very careful how we fix our state budget. Burdensome taxes will be like throwing gas on an already out-of-control fire. Let's give the Georges of Louisiana time to recover from this downturn in the economy. I have a multitude of ideas on how we can right this ship. I'm eager to hear other people's ideas.
It's the spending, stupid!
Posted on Tue, January 26, 2016
by John Kennedy, State Treasurer