Finance

For Louisiana's Governor, Jolts from Washington

No one really thinks of Bobby Jindal and Barack Obama as personal or even political rivals these days. But it seems like at every turn,...
by | September 30, 2009

No one really thinks of Bobby Jindal and Barack Obama as personal or even political rivals these days. But it seems like at every turn, Louisiana's governor is finding himself foiled by federal policies.

Jindal had been talked up as a Republican contender against Obama in 2012, but then he bombed in his response to the president's congressional address in February. Since then, Jindal has been tending the home fires, visiting parishes throughout the state on a near-daily basis.

Political opinion about the governor remains sharply divided along partisan lines, with Democrats finding any excuse to attack him--such as criticizing his use of state helicopters to attend church on Sundays. But Jindal remains a hero to Louisiana Republicans, who applaud him for having gotten through a tough budget session without raising taxes.

That victory may not be easy to sustain, for reasons that have more to do with Washington than Baton Rouge. The Obama administration has proposed raising taxes on the oil and gas industry by $31 billion, including a new $5 billion excise tax on production in the Gulf of Mexico. The mere threat of the tax increase has slowed production nationwide, but especially in Louisiana, where the number of working rigs has dropped by about 25 percent this year alone. That caused the state's oil severance tax receipts to fall to $38 million in July, down from $84 million in the same month a year earlier.

But the decline in severance tax revenue is small change compared to the hit Louisiana is about to take in its Medicaid accounts. The federal share of Medicaid dollars is determined through the use of a per-capita income formula, on a three-year rolling average. Soon, that formula will take into account the flood of federal dollars that came into the state following hurricanes Katrina and Rita. The result is that the federal share of Medicaid, which is normally about 72 percent in Louisiana and currently stands at 80 percent because of stimulus funds, will fall to 63 percent on January 1, 2011. "No state has ever faced that kind of reduction," says Alan Levine, Louisiana's health secretary. "No state in history."

The Medicaid change is going to cost Louisiana $700 million, out of a Medicaid budget of $6 billion. Changing the formula will require an act of Congress, and Jindal and Louisiana's congressional delegation are trying to get other Gulf states to help push for such changes, since the hurricane dollars will drag down their Medicaid budgets as well. But in the meantime, Louisiana will be hurt the worst.

Energy tax policy and Medicaid rules would seem unrelated to any animosity between the president and the governor. Even so, one can't help wonder whether, if Jindal were a Democrat, he might not be able to catch a break a little more often in Washington.

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