Thank goodness for late-inning rallies Thursday and Friday nights by LSU’s No. 1-ranked baseball team to beat No. 2 Texas A&M 4-3 and 9-6, respectively. Otherwise, the news just keeps getting worse for Louisiana.
That’s right; we had to flip all the way back to the sports section to find anything good to write.
That’s because even as the legislature grapples with that $1.6 billion budgetary shortfall, things were becoming unraveled elsewhere as the administration was hit this week not with a double- but a triple-whammy that could end up costing the state hundreds of millions of dollars and could conceivably end up costing another LSU president his job.
We will try to take the events in chronological order.
On Tuesday, the administration received word from the Center for Medicare & Medicaid Services that CMS AGAIN REJECTS the administration’s Cooperative Endeavor Agreements (CEAs) in connection with the controversial state hospital privatization plan pushed by Bobby Jindal “because the state has not met its burden of documenting the allowability of its claims for Federal Financial Participation (FFP).”
The decision apparently will cost the state $190 million, according to a letter to State Medicaid Director Ruth Kennedy from Acting CMS Director Nikki Wachino.
On the heels of that letter, Commissioner of Administration Kristy Nichols received notification from Attorney General Buddy Caldwell on Thursday that the state had been OVERPAID BY $17 MILLION in tobacco settlement money and would have to repay that amount to the tobacco companies who then will redistribute it to states that were underpaid.
And on Friday, State Treasurer John Kennedy announced that national investors had pulled out of a large portion of a major bond deal for LSU after concerns were raised on Wall Street by LSU President F. King Alexander who announced on Thursday that he was preparing paperwork for the state’s flagship university to file for financial exigency, or academic bankruptcy. http://www.nola.com/politics/index.ssf/2015/04/lsu_academic_bankruptcy.html
Kennedy, in a Friday news release, said his office was “trying to sort out the facts,” but essentially, a $114 million bond issue that was in the works appeared to fall flat when investors pulled out on about $80 million in commitments. The bond sale was to have funded a Family Housing Complex, residence halls and a Student Health Center and also would have saved interest on existing debt. http://campaign.r20.constantcontact.com/render?ca=e9da20fd-7c07-4e6d-9d75-82afa4fb05a9&c=cdce75a0-62fb-11e3-959d-d4ae52a459cd&ch=ce38f740-62fb-11e3-95d9-d4ae52a459cd
A BloombergBusiness report said that while investors who bought the $114 million of debt sold by LSU they were not told the school was considering filing for exigency. http://www.bloomberg.com/news/articles/2015-04-23/louisiana-state-bond-buyers-greeted-by-insolvency-plan-next-day
A declaration of exigency by LSU and other colleges and universities across the state would open the way for the schools to fire tenured professors. http://www.bloomberg.com/politics/articles/2015-04-23/louisiana-state-to-draft-insolvency-plan-as-jindal-plans-cuts
One state official confided in LouisianaVoice that Alexander, in his attempts to underscore the severity of the financial crisis in Louisiana higher education, currently facing still more deep budgetary cuts, may have overplayed his hand in making a “premature” announcement of such magnitude.
Meanwhile, word leaked out of a Board of Regents committee meeting Friday afternoon that as many as one-half to 75 percent of Louisiana colleges and universities may be unable to meet payroll by June unless some solution is found quickly to the fiscal crisis that has spread a mood of imminent doom across state campuses. That source said he does not believe a solution will be found until the last week of the session—if then.
With a vengeful governor like Bobby Jindal, anything perceived by him to place him in a bad light is met with severe repercussions, namely teaguing, and Alexander’s pronouncements have certainly reflected poorly on the administration.
For new readers who may not be familiar with the term, teaguing refers to Jindal’s firing of Melody Teague because of her testimony before the state government streamlining committee and the similar firing of her husband, Tommy Teague, only six months later from his job as Director of the Office of Group Benefits (OGB) when he failed to go along with the ill-fated privatization of that agency. Dozens of other state employees and legislators have been either fired or demoted from committee assignments by Jindal for lesser sins. LouisianaVoice learned today that Melody Teague, who was suffering from ALS, died in March. http://www.legacy.com/obituaries/theadvocate/obituary.aspx?pid=174404543
For his part, Jindal, after more than seven years in office, has finally admitted there is a problem with “corporate welfare” in Louisiana, i.e. corporations that do not pay any taxes to the state.
One classic example cited by Steve Spires of the Louisiana Budget Project was Wal-Mart, which is a Delaware-based corporation. Spires, speaking at a State of (Dis)Repair conference in Hammond on Thursday, noted that Louisiana Wal-Mart stores are leased by local entities who pay exorbitant rent to the corporate parent in Delaware, a state with no state income tax, thus avoiding income tax in Louisiana while reaping the benefits of other incentives such as Enterprise Zone designation and 10-year property tax exemptions.
Jindal has only in the past couple of weeks so much as acknowledged the state has a problem with its generous tax breaks for corporations which cost the state billions of dollars per year.
Thus, as the budget crisis grows progressively worse with each passing year, Jindal has resorted to more and more sleight of hand in patching over budget holes with one-money.
Caldwell, in his letter to Nichols and Kennedy, said a number of states had been underpaid in tobacco fund settlement money by the tobacco companies because of accounting errors, and that a corresponding number, including Louisiana, had been overpaid.
Louisiana, he said, was overpaid by about $17 million which will have to be repaid so the money can be redistributed to the proper states.
The CMS rejection has been a problem for the administration since the privatization deals with several private hospitals were signed, though DHH Secretary Kathy Kleibert has attempted to see the world through rose-colored glasses, always expressing optimism that the state’s plan would be approved.
In her three-page letter to Ruth Kennedy, Wachino said, “After careful consideration, CMS cannot accept the arguments advanced by the State in its Request for Reconsideration. While CMS recognizes the State’s efforts at corrective action, such measures do not address the State’s noncompliance for the period in question (Jan. 1, 2013 through May 23, 2014). For the reasons stated above, as well as in CMS’s Dec. 23, 2014, disallowance letter, the…disallowance is affirmed.”
All in all, the state has seen better weeks.
Go LSU! We need a sweep badly!