Bobby Jindal's Fiscal Mess

In last night's undercard GOP debate, CNBC's John Harwood challenged Louisiana Governor's Bobby Jindal about his handling of his state's budget, especially this past year. You weren't paying attention because Bobby Jindal won't be president and also because CNBC required a cable subscription. But Jindal really badly wants to be president, and that's part of the reason the Louisiana budget was such a mess.

The budget debate centered largely around whether funding for Louisiana State University system would get cut, so as a result I was closely following the process for my article on President of the LSU system F. King Alexander.* Unfortunately, I wasn't able to get into just how crazy this entire process was for the article, but given the hook, I thought it worthwhile to explain now.

At the beginning of this year's legislative session, the state faced a $1.6 billion budget deficit they needed to close. Lower oil prices contributed to the crisis, since Louisiana relies on tax revenue on oil drilling, but a lot of it was the result of years of bad budgeting and kicking the can down the road. So, because states actually need to keep their budgets balanced, Jindal need to either raise taxes, cut spending, or both.

Unfortunately, Jindal couldn't raise taxes because he had signed Grover Norquist's pledge to never raise taxes. Norquist is a Washington, D.C. insider that run a nonprofit that attempts to get elected officials (or those running) to make this pledge, and presumably punish them if they do not. Jindal was worried that if he crossed Norquist, that could hurt his chances in the 2016 primary, being subject to attack on having raised taxes, so Jindal threatened to veto any new taxes the legislature came up with.

The gymnastics required to avoid the Norquist/Jindal veto pen were bizarre. The Republican legislature raised a significant amount of new taxes, but in order to avoid a veto by the governor, they had to create a new tax credit to pay for a student fee that doesn’t exist. According to the state’s accounting, this maneuver has no effect on the budget, but according to Norquist’s accounting, the bill is a $350 million tax cut, because a fee is not a tax. So, just to be clear, no student will ever pay that fee, and no one will ever receive a tax credit, no revenue will either be raised or lost, but because the tax credit is in the tax code, Norquist considers it a $350 million cut. 

That made exactly zero people happy. A group of conservative state legislators who had signed the pledge wrote a letter to Norquist asking him to clarify whether this gimmick would actually count as a tax cut. They were concerned it would set a "precedent" so that future lawmakers could "raise taxes on a nearly unlimited basis, and then claim revenue neutrality solely based on the creation of a purely fictional, procedural, phantom, paper, tax credit." Norquist carefully replied that the proposal did not violate the pledge, thereby blessing the budget.

The Republican state treasurer was quoted as calling that proposal “nonsense on a stick,” which is the quote Harwood was referring to last night. Even the lawmaker sponsoring the bill in the Senate acknowledged the absurdity when he told a Louisiana newspaper that “it's a way we can go about getting a budget the governor might sign.”

Even then the Republican House, until the last minute, refused to include the measure on the grounds that it was dumb and an embarrassment to the state. Finally, it passed, Jindal signed, and got on a plane the next day to go to a prayer rally in South Carolina. Many speculate that a special session will revoke the credit once Jindal’s term ends in January. In any case, I confirmed with LSU that even if the law stays on the books, no money will ever change hands—it’s a phantom fee.

Jindal’s insistence on keeping that pledge has helped to bring his approval rating down to 32 percent (Obama’s is 42 percent in the deeply red state). Democrats and Republicans alike bemoan the influence of Norquist and his DC interest group. That's Jindal. 

*A couple of phrases in this post are taken from that original article.