Calling Governor Bobby Jindal on the carpet: Where did Louisiana’s new jobs come from?

The Lousiana State budget gets over half its operating budget from grants from the Federal government. Though unlcear, this budget does not appear to include the additional continued acceptance of Federal aid which is managed by the Lousiana Recovery Authority, LRA.

President Barack Obama gave his first unofficial state of the union speech last night, inspiring hope and optimism among the citizens of the United States of America amidst the largest economic crisis since the Great Depression of the 1930’s. The speech was moving and I felt proud to be an American and proud to have elected such an intelligent leader who I am confident will help us recover from eight years of poor government management.

The Republican party chose Louisiana Governor Bobby Jindal to deliver the Republican response. The entire speech can be found on his official website.

The following morning, Governor Jindal boasted on NBC’s Today show that while the rest of the country is in an economic meltdown, his fine state of Louisiana does not need help from the federal government and that he plans to refuse millions in stimulus money intended for his state. “We are the only state last month that added jobs in this country," says Jindal. "We’ve continued to outperform the national economy. We’ve done it in part because we’ve cut taxes. We’re going to continue to do that.”

Wait a second! Let’s back up a minute.

LOUSIANA STATE GOVERNMENT GETS OVER HALF ITS REGULAR BUDGET FROM THE FEDERAL GOVERNMENT

Jindal claims that Louisiana was able to cut business taxes six times since he’s become governor. So, where is the money coming from to run the state government?

Currently, Lousiana now gets most of their operating money from the federal government.

The government for the state of Louisiana currently receives over half of its operating budget, $15,820,733,731 to be exact, of its nearly 30 billion dollar budget per year from federal grants. This amount is disclosed on the official Louisiana Treasury website.

MORE THAN KATRINA?

One of Governor Jindal’s criticisms of President Barack Obama’s stimulus package is that it costs more than the relief money spent after Hurricane Katrina. 

About $116 billion in hurricane relief had been spent by mid 2007 to aid those affected, the majority spent the first few months after the storm and $35 billion set aside for long term rebuilding projects. Although a small amount was spent in other states, the majority was spent in Louisiana. (Blueprint for Gulf Renewal, The Institute for Southern Studies report)

According to infoplease.com, the population of Louisiana is 4,468,976 and the pre-hurricane population of New Orleans was estimated at 454,863. At $116 billion, this amounts to $26,000 in relief money per every man, woman and child in the state of Louisiana.

The United States of America boasts a population of 303,824,640 as of July, 2008 according to the CIA website. This makes Obama’s stimulus plan of $787 billion seem like a bargain, costing only $2,590 per every man, woman and child in the United States of America, less than 10% of what was spent per person on Katrina relief.

LOUISIANA, A PERFECT EXAMPLE OF HOW WELL FEDERAL STIMULUS AID CAN HELP

Is Governor Bobby Jindal really claiming that Louisiana’s exponential employment growth has had nothing to do with help from the federal government? 

Not true! If anything, Louisiana is the perfect example of how the federal government can help create jobs and stimulate the economy after a crisis. Rather than pretend his state has had no help from the feds, Governor Jindal should boast about how well his state has managed stimulus money in the form of Federal disaster relief. Most of the hard work occurred before Governor Jindal took office only a year ago in January 2008.

On August 29, 2005, Hurricane Katrina plowed into the state of Louisiana. Homes and businesses were destroyed and flooded. Residents evacuated in a mass exodus. FEMA, the Federal Emergency Management Agency, swooped in to help where they could. Granted, FEMA could have done a better job. However, the State of Louisiana would now be in ruins if federal tax dollars hadn’t rescued it.

Hurricane Katrina caused a total of $89.5 billion in damage. However, by early 2006, the Bush administration had already funneled about twenty percent more than that, $105 billion in federal dollars, primarily into the state of Louisiana to rebuild (April 1, 2006 article Boston Globe) and $11 billion more for an estimated total of $116 billion since 2007 (Blueprint for Gulf Renewal report). (I was unable to find figures for money allocated after that date, but money is still coming in according to the Louisiana Recovery Authority, LRA website.) Federal money wasn’t just given to the local government. Louisiana based charities, private businesses, residents, and property owners were also given a helping hand by the government.

A quick look at the official State of Louisiana Treasury Department website is all it takes to find out how much federal government money is funneled into the formerly hurricane ravaged state. Click on Bond Commission and you will see a list of federal stimulus projects already set in place during the Bush administration.

There are the $7.9 billion “Tax-exempt private activity bonds (Gulf Opportunity Zone Bonds, or GOZA, of 2005),” which award low interest loans to qualified businesses “in order to rebuild.” GOZA allows private businesses to borrow money at cheap, tax-exempt rates of interest.”

According to a treasury report, $400 million in federally backed bonds were sold to the private sector to help cash strapped city governments and agencies in Louisiana raise capital to continue operations after hurricanes Katrina and Rita.

Federal money has also funded business grant programs headed by the State.

The Lousiana Recovery Athority, or LRA, formed in October 2005 after Hurricanes Katrina and Rita struck the state, is a government agency designed to manage Federal money intended for rebuilding after the storm. On their website, the LRA lists projects they have funded and Federal monies they have received to pay for these projects. Under “Frequently Asked Questions,” the LRA lists about $15.1 billion in Federally funded projects to rebuild or repair roads, housing, infrastructure, schools, and levees; plus debris removal and hazard mitigation.

However, the lists of projects also includes $10 billion for community development (CDBG), which in part funds economic development programs.

$350 million was given in grants and loaned to small business owners.

$27 million was given to fishermen to help the ravaged fishing industry.

In this list, only $10 million in aid has come from private donations. The rest has come from the federal government.

One of the LRA’s task forces is the “economic and workforce development” committee. The website states: In the months after Hurricane Katrina, the state saw a 766 percent increase in initial unemployment claims and paid out more than $1 billion in unemployment insurance and disaster unemployment assistance benefits to 300,000 applicants. By February 2006, the committee and LRA had developed long-term priorities to provide financial assistance for businesses by attracting qualified workers, revamping the state’s tax structure, helping to start or grow companies, and create high paying jobs.

The LRA and Economic Workforce Development committee also strives to “develop new industries that take advantage of rebuilding efforts and regional resources and create high quality jobs.”

The LRA boasts that due to their efforts, within two years of the storm, Louisiana had climbed back to within 3 percent of it’s pre-storm employment. Where did this money come from to create jobs? It didn’t fall off a truck. It came from and still comes from the federal government. Even the operating budget for the LRA appears to come from the federal government for it does not appear on the Louisiana state treasury budget.

Why, after Louisiana claims so much success, does the state of Louisiana still need to get over half their operating budget money from the federal government? Why do they need the additional funds for rebuilding funneled through the LRA? Perhaps it’s time to cut the “hurricane recovery aid” off completely.

But, is Jindal speaking out of both sides of his mouth?

From Jindal’s own speech:

“We are grateful for the support we have received from across the nation for the ongoing recovery efforts.”

Housing Stimulus Package Treats Symptoms, Not Cure

Although not completely unreasonable, Obama’s housing stimulus package won’t really solve the foreclosure crisis because it addresses the symptoms, not the root of the problem, which is continued predatory lending.

Last summer, my husband and I easily qualified for a loan in order to purchase a home in Florida. We were approved in part because houses are cheap here, and the monthly mortgage payments with insurance and taxes were estimated to be about one quarter of our combined income.

However, due to the large number of foreclosures in Florida, we also had to put up our other house as collateral. We had just moved from Washington State, and were keeping our old home in case things didn't work out and we wanted to move back.

This was my third home loan with Countrywide Home Loans. But, this time, I left the closing table feeling I’d been ripped off. My mortgage payment would be about $200 more per month than what I was quoted when I put the offer in to buy this particular house. The closing costs were also about $7,000 higher than originally quoted several months before when I was first looking into buying a home, in part because the required percentage of down payment was higher. The interest rate had also gone up over the three months I’d been looking.

“Walk away,” some might say. “Find a new lender.”

Too late. I’d lose the chance to buy the perfect house that had taken me months to find as well all my earnest money which I’d put down as a deposit on the house a month earlier.

One of the clever ways Countrywide was able to justify their miscalculation of my monthly payment was to blame it on property tax. It is true that it is difficult to calculate tax since it’s all up to the property appraiser to decide how much your home is worth after you buy your home. New tax levies are also hard to pin down. The mortgage company was off their property tax estimate by about $100 per month, $1200 per year.

The first time you buy a house in Florida, whether you’re a long term resident or have just moved from out of state, can be a real shocker. Property tax on “non-homesteaded” homes is extraordinarily high. A $250,000 home will cost a “virgin” home buyer about $6,000 in taxes per year depending on the county and city where you buy your home. That adds another $500 per month onto your mortgage payment. This can be particularly upsetting when you learn that other homeowners in your neighborhood are only paying $500 a year, not $500 a month, for basically the same house, but that’s another story.

Second, I was told at the 12th hour, literally while signing on the dotted line, that I would have to pay PMI, private mortgage insurance. Unlike home insurance, PMI does me absolutely no good. It basically gives the lender back their money I borrowed if I default on my loan. At an extra $130 per month, this greatly increased my monthly payments. I haven’t had to pay PMI since I bought my first house, many years ago, at a young age and with only a small down payment. This particular extra charge annoyed me because I chose to go with Countrywide over Wachovia because I was given the impression that I would not have to pay PMI if I got my loan through Countrywide. The representative explained that it was in the fine print.

Once again, I felt I’d been ripped off. However, what was done was done. I would move on and move into my new home, choosing to cut my losses rather than start over the house hunting process from scratch.

Last fall, a few months after buying my new Florida home, I decided to consolidate my two home loans into one to lower my payment and remove the PMI. Once again, I talked to several lenders. Once again, I picked Countrywide over another because my quoted monthly payments would be lower. However, after receiving the paperwork, I discovered that I had been misquoted my mortgage payment by about $200 per month. Once again, Countrywide blamed it on property tax. However, this time, there was no excuse. The respresentative had all the numbers in front of him: principal, interest, property tax rolls, and insurance bills. A fifth grader could have done better math.

In addition, while reviewing the cryptic paperwork, I discovered that I had been charged points to lower my interest rate from an ungodly 9% down to 7.5%. (The rates on the two loans I was consolidating were between 5% and 6%.) As a former reporter, I’m pretty good at taking accurate notes, and the Countrywide representative used the term “you qualify for a discount,” not “you are buying points.” I had no interest in “buying” down my interest rate. I feel I should qualify for a very low interest rate based on excellent credit and equity alone.

In addition, $10,000 in fees were added to the home loan. Before you assume that I must be borrowing some enormous amount of money or have low equity to be charged 9% interest and $10,000 in fees, I must explain. The amount I would be borrowing was actually LESS than the amount of the original loan on the Washington State house. Plus, I now had MORE equity because I had wisely paid down the WA State loan early.

Only because I had the misquoted payments in writing, was I able to back out of the loan with no penalty. The representative, who’s demeanor had seemed as rosy and pleasant as a sunny day in Florida, turned nasty and defensive when I called him on the carpet. I expected an apology and discounted fees. Instead, he was insulting. I guess he was upset that he would lose his hefty commission.

I told my story to a lawyer friend who’s currently representing a city government in Florida in litigation with a mortgage company. He explained that after Bush deregulated everything, there currently isn’t an agency who oversees lenders to make sure they don’t underestimate monthly mortgage payments. "Unfortunately, in your case," he said, "there’s no one to complain to who will be able to do anything."

Obama’s stimulus package includes financial help for individuals who may lose their homes because they can’t afford to pay their monthly mortgage payments. The plan allows them to refinance their homes at a lower value than what their homes were originally valued at, which results in lower payments. So, if you bought a $300,000 home and still owe $280,000 on it, but it’s now only worth $200,000, you can refinance your loan at $200,000, which results in lower payments. Taxpayers pay the difference, the $80,000 back to the bank. (Update on 2/26/09: Details of how this will actually work are unclear. One local Orlando banker predicts that banks would only receive $6,000 per loan, no matter how much is owed. This has not been confirmed by any reliable news source.)

Other than the obvious, that this plan is unfair to people who are scraping by, taking second jobs, and doing whatever they have to do to make payments on time, it also makes no sense to me. The root of the problem is that the buyer was approved for this loan in the first place. I have to assume that the buyer isn't in trouble because they were out buying a new car, clothes, vacations, and electronics or sending their kids to private schools instead of making loan payments. I also have to assume that the buyer didn't take out a home equity loan which artificially raised the value of their home. And, I have to assume that the banks approved a loan with payments higher than the buyer could realistically afford. Why were banks allowed to do this in the first place?

Who’s watching the lenders to make sure they don’t continue to take advantage of customers by roping them in with the promise of lower costs by misquoting their payments and fees, then surprising them when it comes time to close? Why aren’t fees standardized so that the costs will be about the same between lenders? Who’s watching the fine print? Who even understands the fine print?

To fix the mortgage industry, we must fix mortgage lending practices. Mortgage companies shouldn’t be able to boost interest rates in order to make a profit. If one person can get a 5% interest rate for a primary home loan, shouldn’t everyone?

Fees should be standardized so that a borrower can not only understand what they are paying, but also so that they are the same from lender to lender.

A higher fee for a person with poor credit, or a higher fee for making a “no-to-low” down payment, should also be standardized across the industry.

Rates and fees should also be locked in for one year at no extra charge, about the time it takes to find that perfect house to buy.

“This will ruin the free market economy. This is socialism!” banks will cry.

No, this is no different than any other major purchase in life. Car dealers have to list fees and prices on the sticker and can woo customers with free oil changes for life. It’s easy to back out of what looks like a bad deal: You don’t have to make a deposit before signing for the car; you aren't locked into a loan for 30 years; and you can easily go to a different dealer to find the same exact silver Chevrolet Cavalier since cars are mass produced. Even utility companies and insurance companies must go before the Florida Legislature to justify price hikes. Credit card lending terms are written on every statement. Why can't mortgage costs be standardized?

Rather than winning over home buying customers by promising lower interest rates, fees, or payments, home mortgage lenders can promise better customer service. Your bank where you have your checking account can offer you convenience in transferring payments between accounts. Independent lenders, such as Countrywide, can offer flexible payment schedules or lower late fees for late payments to woo customers, or maybe throw in a free gift card to Haynes furniture.

There should be no surprises.

Banks are not only to blame. Florida counties and cities need to commit to listing anticipated property tax on homes for sale so you know exactly how much you will have to pay, even before you put an offer in to buy a home.

PMI? What’s the point? What good did PMI do amidst all the foreclosures. That’s one extra fee that should be eliminated entirely.

In addition, the current structure of loans sets borrowers up for failure by amortizing payments. What does that mean? The first few payments you make don't pay off your loan. Instead, they are attributed to interest. In fact, over half of your mortgage payments pay interest for the first 18-1/2 years of a 30 year loan. Crazy? Huh? No wonder so many people owe more than their homes are worth. The only way to pay less interest is to make extra payments earlier than scheduled. Wouldn't it be great if instead of paying $900 towards interest and $100 towards the loan, you paid $300 towards interest and $700 towards the loan each month from day one? After one year, you'd already have paid off $8400!

Obama wants to give an $8,000 tax credit to first time home buyers to help with the cost of buying a home to offset these costs. Too bad it's too late for the rest of us. We were all first time home buyers at one time.

I would prefer that the housing stimulus money be spent on a government regulatory agency that will standardize home loan costs for everyone. That’s the only fair way to spend tax payer money. We are one country. We are one people. We all pay taxes in one way or another. Let’s all reap the benefits of “club membership” of this United States of America.

Government Should Bail Itself Out First, Before Anyone Else

The new Obama Presidential administration would like to allocate $825,000,000,000.00 to help rescue the United States economy. On the receiving end are new government spending programs and tax cuts. In addition, Obama will put his new Secretary of the Treasury to work examining the list of banks requesting bailout funds and decide who will get a handout as a continuation of TARP (the Troubled Asset Relief Program) initiated by Bush.

Before the government attempts to bail anyone else out or hand out tax cuts, it should take care of its own needs, first, by making up deficits in state budgets and investing in state-sponsored government projects.

Remember the wise words of the airline attendant: “Be sure to put on your own oxygen mask first before assisting others.” Otherwise, you might suffocate while attempting to tighten the yellow rubber strap on your squirming child’s mask and then you’ll both die.

Dozens of states have already stripped their budgets to the bare bones. Despite valiant efforts, states need money NOW to continue operation of schools, law enforcement, road maintenance, pensions, and countless important and essential programs. If our local governments cannot afford to operate, they are in danger of collapse. If this happens, we are all done for.

Fortunately, the Obama administration does intend to spend some money helping to bail out state governments. According to a January 25, 2009 article in the The Christian Science Monitor, roughly $241 billion of Obama’s stimulus package will be allocated to states to help them rescue their budgets by funding $87 billion in Medicaid programs, $120 billion in education, $4 billion in law enforcement, and $30 billion in roads and infrastructure.

However, state budget deficits are predicted to total at least $350 billion over the course of 2009 to 2011, according to the Center on Budget and Policy Priorities (CBPP). And that’s with all the cuts to “non-essential” services.

Why are state governments in trouble? They haven’t been able to collect as much revenue as expected, either from taxes, sales of lottery tickets, fees, other sources big and small and, SURPRISE!... low to zero dividends on investments. Yes, even local governments invest in the risky stock market.

Whenever a local government faces a deficit, we all hear about the cuts in education. “No instruments for the band,” or “We’ll have to cut the wrestling team.” Such dire predictions always garner sympathy at election time so that governments can get their local tax levies passed.

However, there is much more at stake this time than just new uniforms for the football team. A lot of private companies depend on the guarantee of local government spending for their own survival when times are lean.

For instance, when a state must cut a building program, someone on the other end is suffering. There’s the engineering firm in Texas and the architecture firm in New York who was counting on the job and now must lay off their own workers. There’s the local contractor who must tell their masons that they’re sorry, the job was cancelled, but, “You won’t get unemployment because you weren’t an employee.” There’s the supplier who already put in the order for steel I-beams from Pittsburg and limestone from Idaho. Cancelled. Then, there’s the manufacturer who won’t be moving to your state after all. “We’ll just keep outsourcing to China where the government has built all the necessary buildings, roads and docks we need, not to mention the cheap labor.”

When a state must cut funds to museums and parks, they are in danger of falling into disrepair, or worse, closing down completely. The seasonal employee who counted on the summer job cleaning cabins might not be able to afford tuition at Ohio University next year. The hotels and restaurants who depend on tourism to Yosemite will lose customers. The gift shops at Cape Hatteras will lose sales and stop ordering cutesy molded light houses from the artist who makes them in Seattle.

When a state must cut funds, the effects are far reaching. Jobs are lost far and wide across the nation. You may not care that Montana needs new rest areas built on I-90 because you never plan to go there. However, perhaps the door manufacturer in your local state of Utah was counting on getting the supply contract.

Other countries invest in their citizens in infrastructure and free education. Other countries now have the jobs which used to belong to our own citizens.

It’s time we invested at home. Let’s heal ourselves first before trying to heal anyone else.