Waste not, want not

Louisiana state and local governments wasted or missed out on a combined $642 million in 2019, according to the state legislative auditor’s year-end report released the week of Feb. 17. Put another way, 60 percent of that sum, almost exclusively the result of state departmental noncompliance with transparent fiscal rules, would have constituted enough to fund a teacher pay raise up to the Southern average – Gov. John Bel Edwards’ most cherished goal. Or to eliminate the .45 percent in regressive state sales tax five years before its scheduled expiration, without causing a deficit.

The staggering loss comes simply, according to the report, because multiple agencies chose not to play by our government’s own fiscal rules. The study comes on the heels of another analysis the week prior from the Legislative Fiscal Office. When it comes to government spending, Louisiana generally ranks pretty close to the middle of the pack among states, yet we consistently are scored in the bottom ten in social, educational and economic outcomes. It’s hard not to conclude that the two results are not somehow connected.

Admittedly, mainly due to the size of the homestead exemption, many responsibilities, funded in other states by property taxes at the county level, end up administered by the La. State Budget here instead. Underwritten by income taxes, one could argue such a system is even more equitable, and the population of the entire state of Louisiana would be dwarfed by the residents of metropolitan Houston.

To conceptualize the “size” of Louisiana’s state government compared to others across the country, Greg Albrecht, Louisiana’s fiscal office’s chief economist, examined more than the total dollars spent. States with larger economies and populations tend to spend more than smaller states, of course.

“Since state effort expenditures are financed by extracting revenue from the state economy, the more interesting metric is the ratio of state effort expenditures to the size of the economy,” he wrote.

In 2018, the most recent year examined, Louisiana’s spending of state dollars was the equivalent of 6.6 percent of its gross domestic product, which measures the total value of goods produced and services provided. That puts us below the national average and 16th-lowest in the country, (yet far higher than our educational and social justice rankings). However, when both state and federal dollars are included, the ratio rises to 11.9 percent, which was the 19th-highest. The ranking change reflects the state’s disproportionate share of federal dollars, especially for the years after hurricanes Katrina and Rita in 2005, Albrecht said.

As a whole, states spend about seven percent of their economies’ size when only counting state effort, and about 10 percent when federal dollars are included. Louisiana’s state effort over the past several years likewise amounts to about seven percent on average but around 11 to 12 percent overall, Albrecht explained, so even at our lowest spending years, Louisiana’s public budget per capita is comparable to other highly ranked states.

So while there are variations as conditions change in Louisiana and other states, Albrecht says Louisiana tends to rank in the bottom third to middle third of states on a state-funded basis, and in the middle third of states on a state-plus-federally-funded basis. “None of the discussion above suggests what the correct or optimum size of government should be,” he maintained.

Nevertheless, the performance of our government should constitute such a metric and if governmental departments waste enough to deny our teachers a living wage, that alone would constitute a reasonable metric impact on educational outcomes. In other words, “you get what you choose to pay for.”

This article originally published in the February 24, 2020 print edition of The Louisiana Weekly newspaper.