Treasurer: Budget no longer blessed by Katrina

By Vershal Hogan (Contact) | The Natchez Democrat

Published Friday, September 11, 2009

FERRIDAY — In recent years, the state budget has become bloated with money that flowed in following major storm events, but the false stimulus created by those funds is waning, State Treasurer John Kennedy said.

Kennedy was the guest speaker at the Ferriday Rotary Club’s meeting Thursday.

Economists have studied the phenomenon, and have noted that after a state experiences a high intensity storm, billions of dollars flow into the state in from the federal government, insurance companies and even charities, Kennedy said.

“After the hurricanes, sales went up, income taxes went up, corporate franchise taxes went up, even gambling taxes went up,” Kennedy said.

The problem is the post-storm economy never lasts, he said.

“At some point, those (tax) revenues seek their natural level,” he said. “We peaked last year, and next year there will be less, and the year after that there will be less.”

This year’s state budget was $29 billion, and Kennedy said he expects revenues to be approximately $26 billion next year.

The good thing is the Louisiana constitution requires the legislature to balance the budget every year, Kennedy said.

But that means that the state will either have to raise taxes or downsize government, he said.

Kennedy said he believes the state can downsize government without affecting services.

“We will have $26 billion, but it will still be $7 billion more than we had four years ago,” he said.

Using California as an example, Kennedy noted that it has the highest income taxes in the nation, but that it also has serious debt problems.

“Raising taxes won’t matter if you can’t get the spending under control,” he said.

The way to trim government is by attrition — not filling vacancies when they come open.

Based on the turnover rate of state employees, that move could save the state between $600 million and $1 billion, he said.

Government also needs to restructure, he said.

“The Department of Social Services has one manager for every five employees,” he said. “You would never see that in the real world.”

Next, the state government should collect the $1.7 billion owed it, whether in taxes, fines or fees, Kennedy said.

Approximately 65 percent of that money is more than 101 days overdue, and the last information detailing the state’s receivables accounts is dated June 30, 2008, he said.

“No business could stay in business if they ignored their receivables,” he said.