IS THE COST WORTH THE CURE?

It would be funny if it weren't so serious. Henry Waxman (D-
Ca.) proclaimed that his powerful committee in Congress will
rush "climate change" legislation to the House floor before
the Memorial Day recess. This was announced concurrently with
the coldest temperatures to hit the heartland of the country
in over a decade.

The President-elect and the Democratic majorities in Congress
are about to launch legislation that will hit every pocketbook
in America and could cost thousands of jobs as well. Their
goal: To reduce carbon emissions that some claim is creating
rising global temperatures that threaten life as we know it.

But what if they are wrong? There is certainly a body of
scientific evidence that indicates that the earth has never
been in the complete balance of heat energy entering and
leaving the atmosphere in equal proportions as "climate
change" adherents believe is now being altered by man-made
carbon emissions. Reputable scientists have strong evidence to
show that global warming and cooling cycles have persisted in
regular intervals throughout most of geologic time long before
the first carbon emission emanated from cavemen.

Unfortunately, the scientists who have sound theories that
stray from the orthodoxy of the man-made climate change
"religion" are ignored by most of the media as well as the
agencies that fund scientific research. Indeed, some have
their careers threatened by the "case closed" true believers
of the carbon induced climate change theory.

The legislation that will be proposed in Congress will
significantly drive up the cost for both the producers and
consumers of carbon-based energy sources. The higher costs
will lead to significant economic impacts immediately. The
vehicle of choice-"cap and trade" legislation-will require a
huge bureaucracy to administer a complicated system that would
penalize some companies, reward others, and have consumers in
some regions pay substantially higher energy costs than others
due to the type of energy sources available to them. Of
course, the element that puts gleams in the eyes of some in
Congress is that the federal government could reap huge
windfall revenues from such a system.

But where would the money come from? That's easy: From you and
me and millions like us. From businesses and industries
already having a hard time making a profit for the goods and
services they produce. Who will benefit most from the system
(besides the revenue-hungry federal government)? Smatterings
of companies whose lobbyists help influence the laws and rules
to put them at an advantage over others. Who will come out the
worst? The poor, the group that always seems to come out
worst, the individuals who can ill afford to pay more for
basic energy needs.

Yes, Congress seems to be in a mad rush to push through
legislation that can have a huge impact on the job security
and livelihood of American workers. "Change" is the mantra in
Washington, but change is a two-sided coin. Before
dramatically altering the economic landscape of the nation, if
I were a member of Congress, I would want to make darn sure
that:

- The "crisis" I was attempting to fix was real;

- That my "cure" for it was definitely going to work; and

- That the sacrifices that I was asking Americans to make
was unquestionably worth the price they would have to pay.

With all due respect, I don't think our elected representatives in Washington can give us those assurances.

Unfortunately, that probably won't stop them from pushing
through the biggest boondoggle since their "reforms" of Fannie
Mae and Freddie Mac.

ANATOMY OF A DEFICIT

The Revenue Estimating Conference (REC) met on December 15 to do its constitutionally required task of giving the official estimate for state revenues for both the current budget and the one for the fiscal year beginning next July 1. According to the economist for the Legislative Fiscal Office, the news was “bad and badder.” The REC adopted estimates that result in a revenue shortfall of $341 million in the current budget and $1.1 billion for the 2009/2010 fiscal year.

The Joint Legislative Committee on the Budget officially adopted the revenue forecasts and authorized that a letter be sent to the governor notifying him of a deficit for the current budget. That notification triggers a constitutional requirement that the budget be balanced within 30 days. State law allows the governor to cut up to 3 percent of each budgetary unit and the Joint Budget Committee to cut up to 2 percent more, without the Legislature being in session.

The media reports of the REC meeting mentioned a $2 billion estimated deficit for the 2009/2010 fiscal year. That led to some confusion since the revenue shortfall for that budget year is only estimated to be $1.1 billion. One might reasonably ask how a $1.1 billion drop in revenue triggers a $2 billion deficit. Here is some information to shed some light on that difference:

Part of the difference comes from the use of “continuation” budgeting. What “continuation” in a budget means to ordinary folks doesn’t necessarily carry the same meaning in government. In government, “continuation” doesn’t mean “carry on with what you have.” It means carry on with an automatic increase in spending. Not many households or businesses are going to fashion budgets with automatic increases next year. State government won’t have that luxury either.

Another practice that is a potential cause for the deficit exceeding the revenue loss has to do with the use of “special funds” in budgeting. When revenues were surging, the Legislature—in conjunction with sitting governors—often stuffed money into funds they created in order to prevent the money from rolling over into surpluses. (Our state constitution restricts the use of surpluses to one-time expenditures in limited areas. State officials don’t like to have their hands tied when it comes to spending.) This was especially true when state spending was bumping up against the expenditure cap. Recent budgets utilized a considerable number of these “special funds.” To the extent they were used for truly one-time expenditures, they shouldn’t have an impact on the 2009/2010 budget. If they were used to fund appropriations that were recurring in nature (or if there is no money left in the funds), it adds to the projected deficit.

To balance the current budget, state officials must cut more than the $341 million projected revenue shortfall. Half the budget year is over, so to balance the books, $600-$700 million must be reduced on an annualized basis. If Governor Jindal and the Legislature bite that bullet now (as required by the Constitution), they greatly reduce the potential $2 billion deficit for the 2009/2010 budget. If the actual 2008/2009 budget—adjusted for the cuts that must now be made—is used as a baseline instead of a “continuation” budget, the problem becomes manageable.

If those steps are taken and more still needs to be done, state officials should go back and look at what items were added to the 2008/2009 budget. The state general fund increased by approximately $1 billion in the current budget. Certainly some of those spending increases could be adjusted downward without ending critical services in Louisiana.