Is it possible to do less with more?

Now that the "Rescue Plan" bill has passed, it's time to pick around in it and see what we've won.  Of particular interest now will be keeping an eye on state and local politicians to see if they continue pushing for austerity budget cuts even though the stimulus specifically provides funds intended to prevent that from happening. This morning the LA Budget Project calls attention to one provision of the bill meant to head some of this off. 

The law also contains an important provision for states receiving the aid: for every dollar that a state government spends on net tax cuts, it will lose a dollar of federal support. As lawmakers gavel into session next month, they will have an opportunity to make long overdue investments in Louisiana’s people, families and communities instead of providing tax cuts to businesses and the wealthy. This provision provides an incentive to do just that.  Nicholas Johnson of the Center on Budget and Policy Priorities has the details: 

Cutting state taxes now would repeat a mistake many states made in the wake of the Great Recession: they cut taxes, which harmed families, undermined economic growth, and exacerbated economic inequality and racial injustice. Instead, states should address critical health and economic needs by making investments that can help build antiracist, equitable states. To help them do so, the American Rescue Plan Act includes $195 billion in fiscal aid for state governments (and more for schools and for local, tribal, and territorial governments).

They can't use the one time stimulus payments to create new "fiscal cliffs" made out of tax cuts for rich people.  Republicans in some states are already complaining, of course.  But the truth is there will plenty opportunities in the new law for them to steal whatever they want.  This line, in particular, seems like a just such an opportunity. 

(3) TRANSFER AUTHORITY.—A metropolitan city, nonentitlement unit of local government, or county receiving a payment from funds made available under this section may transfer funds to a private nonprofit organization (as that term is defined in paragraph (17) of section 401 of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11360(17)), a public benefit corporation involved in the transportation of passengers or cargo, or a special-purpose unit of State or local government.

Which suggests that the city of New Orleans, still beset with serious infrastructure challenges, and which has spent the past year threatening layoffs, furloughing workers, and dropping cryptic hints about "shared sacrifice," could still move ahead with its plans to do all of those things while shoveling the federal stimulus funds out the back door to non-profits controlled by the NOLA Business Alliance or Leslie Jacobs, or even Stephen Perry with very little accountability for any of it. Especially interesting thing to watch for just ahead of an election season when people will need paying off.

You can build it back better later

The Governor's budget proposal is due out this week. It looks like they are going to plan for cuts now that they expect to undo once the stimulus comes in. 

Jay Dardenne, the commissioner of administration for Gov. John Bel Edwards, plans to kick off the negotiations on February 26 by presenting a budget proposal to the Legislature that includes spending cuts based on current revenue projections.

But the potential for more federal aid is on the horizon. President Joe Biden’s push for a $1.9 trillion stimulus package, which would be the third federal aid bill since the pandemic started, could ease the state’s losses, and put Louisiana in a stronger position for fiscal 2022, which starts July 1.

“It's anticipated that we get a federal stimulus. If that's the case, then we'll be in better shape,” said state Rep. Jerome Zeringue, R-Houma, the chairman of House Appropriations Committee. “Because the economy is in such bad shape right now, we’re hoping we'll have a similar situation to what we had last fiscal year, and we won't know that until the federal stimulus package comes in. We're anticipating it, but there's no guarantee until it comes. That's kind of what we need and are depending upon to continue to get us through this crisis.”

A month ago, the Revenue Estimating Conference deliberately chose a more conservative projection than was really necessary, not only because they didn't know the size of the stimulus, but also because they chose to lowball projected tax collections.  So there should be ample opportunity to add back later whatever cuts show up in the proposal now.

Of course, the last time this legislature had to figure out what to do with federal stimulus funds, they carved out $300 million for John Schroder to dispense on his own.  So we'll have to see what they come up with this time.