Commentary

New at Reason: Louisiana Provides Model for Closing Budget Deficit

Our friends at the Goldwater Institute published a new article of mine today pointing to Louisiana’s government reform and streamlining efforts as a model for Arizona policymakers to emulate as they grapple with billions in projected deficits over the next several years. Of course, the same lessons would translate to the dozens of other states also facing severe fiscal crises:

Arizona policymakers need to accept the reality that there’s no way to avoid government downsizing. The state is now second to only California in the severity of its fiscal crisis and faces over $5 billion in additional budget deficits through 2011. Yet, our officials remain distracted by Sacramento-style accounting gimmicks and a proposed sales tax hike that wouldn’t come close to closing the gap. Worse, many policymakers seem more concerned with preserving agency largesse than trying to eliminate it.

Contrast this with Louisiana, the state taking the most thoughtful approach to solving its fiscal crisis. Pelican State policymakers, led by Governor Bobby Jindal, have embarked on a wide-ranging set of government reforms designed to reduce the size and cost of government.

They created a Commission on Streamlining Government this year to identify over $1.5 billion in cost savings through streamlining, consolidation, and elimination. They passed legislation granting more flexibility in cutting spending in protected “silos.” Gov. Jindal has eliminated thousands of positions from the state budget and over 70 unnecessary or inactive state boards and commissions. The Louisiana Division of Administration is developing a range of privatization proposals within each of its departments, and it’s also piloting a new budgeting approach designed to fund priorities and drive performance. And this is all just a start.

It’s already paying off. Ratings agency Fitch upgraded Louisiana’s bond rating last month, specifically citing the state’s focus on spending control and streamlining as influencing factors. This alone will save taxpayers millions in avoided interest costs over time.

Arizona policymakers face a simple choice: remain lost in the fiscal forest with California or follow the lead of Louisiana, which is blazing a trail out.

Similar thoughts here and here.

Ã?” Reason Foundation’s Privatization Research and Commentary

Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.