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Archive for January, 2012

“We encourage you to use this opportunity to recognize your employees and educate the public about the work state employees are doing to keep our citizens safe, protect our drinking water, provide medical care to the indigent, help abused children, maintain our roads and bridges, and so much more.”

Gov. Bobby Jindal in last spring’s General Circular No. 2011-008 in which he proclaims May 4, 2011, as “State Employee Recognition Day in Louisiana.”

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State employees who were blindsided by Gov. Jindal’s announcement last week of proposed sweeping changes to the state’s retirement system have only themselves to blame; they simply haven’t been paying attention.

It’s been a long time coming and while the jury is still out on what will and what won’t be approved in the upcoming legislative session or what is or is not fair to longtime state employees is irrelevant at this point. There is a much larger problem to be addressed: a problem of nearly $6.5 billion in unfunded liabilities for the state employee retirement system, to be precise.

This is an issue that has been punted repeatedly by legislators past and present who were unwilling to make a hard decision and now change is no longer on the far horizon: it is upon us and it is inevitable.

As far back as 1989 a constitutional amendment was passed by the legislature and approved by voters to amortize the state’s unfunded accrued liability (UAL) payoff over 40 years on a level payment plan (adjusted for inflation and payroll growth projections).

That amendment, however, had one fatal flaw: it allowed the legislature to change the payment schedule by statute. One may as well have turned a fox loose in the henhouse or a child in a candy store.

The latter may be more appropriate since the legislature has a greater propensity to act like the adolescent when the state coffers are rife with revenue. Lawmakers wasted no time in tinkering with the schedule in order that they might fund local projects in the annual budget. The folks back home, after all, don’t care about what’s going in Baton Rouge as long as they get their community centers and golf courses funded.

Now, as we approach the 2029 deadline imposed by that amendment, the state is staring down the barrel of huge balloon payments.

Whether one likes Jindal or not, the problem with the state’s UAL for the various pensions for employees, teachers, school employees and police is no more his doing than the state’s next governor, whoever that may be.

But neither was the problem caused by state workers who now are being called upon to change their retirement plans in mid-stream to accommodate those legislators who in past years shirked their fiscal responsibilities in order to more easily facilitate their own political careers. It is patently unfair to ask rank and file state employees to pay the penalty for past legislative moral malfeasance.

That’s not to say that Jindal has the right solutions in his proposals; we have no way of knowing that at this point. It’s just that it is now his problem to wrestle with in the upcoming legislative session.

It is not likely that Jindal or his staff conceived of these reforms independently.

The American Legislative Exchange Council (ALEC), a conservative coalition of state legislatures, includes the reform of state pensions as one of its “Tools to Control Costs and Improve Government Efficiency” on its state budget reform web page: http://www.alec.org/publications/state-budget-reform-toolkit/.

Other tools specifically recommended by ALEC include the restructuring of state retiree health care plans, delaying “automatic” pay increases, adopting a state hiring freeze, embracing the expanded use of privatization and competitive contracting, establishing a state privatization and efficiency council and selling state assets.

Any of those sound vaguely familiar?

Several corporate members of ALEC have been identified as major contributors to Jindal’s political campaigns.

Of the 126 bills already pre-filed in the House and Senate as of Tuesday, 84, or fully two-thirds deal in some fashion or another with retirement. The breakdown shows that 36 retirement bills have been filed in the House and 48 in the Senate.

Some of the bills in both chambers are different versions of the same proposals, so some of the duplicate bills will be withdrawn before consideration.

Many of those deal with local clerks of court, assessors, sheriffs and municipal employees but just as many—or more—deal specifically with state employees.

Jindal said for now he is addressing only state employees and not teachers, school employees or state police.

Many of his proposals break long-standing promises made to state employees relative to retirement benefits and eligibility.

HB 53 by Rep. Kevin Pearson (R-Slidell), for example, stipulates that employees hired prior to June 30, 2006 may retire after 10 years and upon attaining age 67. Those hired after June 30, 2006 may retire after five years and attaining age 67.

The present law allows a state worker to retire after 10 years at age 60.

HB 56, also by Pearson, chairman of the House Retirement Committee, would increase employees’ retirement contributions from 7.5 percent to 10.5 percent for those employed on or before June 30, 2006 and from 8 percent to 11 percent for those employed on or after July 1, 2006.

But perhaps the bill that would sting the worst is SB 17 and SB 26, both by freshman Sen. Barrow Peacock (R-Bossier City). Each of those bills would change state pensions from a defined benefit to a defined contribution.

That means that instead of employees being guaranteed a set pension based on the current formula of three-year average salary times 2.5 percent times years of service, employees would contribute a predetermined amount to retirement with no guarantee of benefits. Such a program, which would react to market conditions, is similar to the 401K plan common in the private sector.

One bill, HB 55 by Pearson, would alter the formula for computing retirement from a three-year average salary to a five-year average, thus reducing in theory, at least, the employee’s monthly retirement check.

HB 61, also by Pearson, would require a one-time, lump-sum payment to employees with five or more years’ credit upon retirement. The employee may opt to take the lump sum or leave his account balance with the system and draw an annuity.

Because state employees do not contribute to, nor do they qualify for, social security, their retirement income would hinge solely on the uncertainty of their state retirement.

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“The two largest prison companies, Corrections Corporation of America (CCA) and GEO Group (formerly Wackenhut), are poised to strike, in what Judith Greene, director of Justice Strategies calls, ‘an unprecedented’ expansion of the use of private prisons that no other state has undertaken.”

–Donald Cohen, founder and executive director of In the Public Interest, a national resource center on privatization and responsible contracting.

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So far Gov. Bobby Jindal, flush from his re-election last fall, has chosen two pro-business groups to announce sweeping reform efforts for his second term, unveiling his education reform at the annual meeting of the Louisiana Association of Business and Industry and proposed state employee pension plan changes to the Baton Rouge Rotary Club.

Selecting friendly venues for major announcements seems to be the preferred method for Jindal who wisely eschewed teachers groups and state employee gatherings to unveil his agenda. Louisiana Public Service Commission (PCS) Chairman Foster Campbell observed that had he revealed his proposed pension program to state employees, “they’d have booed him out of the room.”

And while he has yet to address state corrections, you can be certain he has state prison privatization squarely in his crosshairs. All those private prison companies did not contribute to his election campaign just for the fun of it.

Only last Wednesday, the Florida Senate Budget Committee, at the urging of Jindal’s fellow Republican Gov. Rick Scott, passed a bill to privatize 29 South Florida prisons—to turn them over to for-profit companies that would be required to produce cost cuts of 7 percent below the cost of state-run facilities.

But there’s a more ominous undercurrent to that bill that gives the Florida governor far-reaching powers to expand privatization to other agencies. Under the latest proposals, an agency would not have to report its privatization of a program until after a contract is signed. The bill also will eliminate the legal requirement to perform a cost-benefit analysis before privatizing any governmental function.

Doing away with the cost-benefit analysis reveals in no uncertain terms just how little concern Scott and his allies have about real savings. Don’t for a minute think that Jindal is not in constant contact with Scott on that particular nuance. After all, Jindal did travel to Florida to campaign for Scott’s election. And don’t for one minute think that Jindal is concerned about savings or of the welfare of state employees. It’s all about money—campaign money.

Jindal’s second effort at privatization is a certainty but it is nevertheless worthwhile to take a look at the dollars and cents of privatizing prisons.

Of the 50 states, Louisiana sits alone at the top with the highest prison incarceration rate in the nation at 858 per 100,000. Mississippi is second at 749 per 100,000.

In absolute numbers, Louisiana ranked 11th in the nation in actual prison population in 2007 (37,341) even though the state was 25th in population. Those numbers likely have only increased in the past five years. From 1990 to 2004, Louisiana’s prison population nearly doubled, increasing by 98.6 percent, from 18,600 to 36,900, federal records show.

The U.S., with more than two million prisoners, ranks highest in the world, nearly half-a-million more than number-two China. The U.S. also has the highest per capita number of prisoners with 715 per 100,000. Russia is a distant second with 584 prisoners per 100,000 population.

So, if the U.S. has the highest rate of imprisonment in the world and Louisiana has the highest rate in the U.S. that gives Louisiana the highest rate of imprisonment in the world.

So, what does all this mean in the terms of costs to house, feed and care for all these prisoners? That, after all, would appear on the surface to be the consideration uppermost in Jindal’s mind: saving the state beaucoup money.

In August of 2011, the Vera Institute of Justice, with offices in Washington, D.C., New Orleans and New York City, conducted a survey to determine the total cost of prisons in fiscal year 2010. Thirty-nine of the 50 states responded to the survey which provided some rather interesting figures. That cost is computed on the basis of what the state spends over and above the amounts budgeted for prisons. The additional costs include, but are not limited to, pension liabilities, medical care, inmate education and training, capital construction, legal and administrative costs.

Louisiana had a per prisoner cost of $17,486 in 2010 ($47.91 per day), fourth lowest of the 39 responding states. By comparison, Kentucky’s annual cost per prisoner was $14,603 and Alabama’s was $17,285.

Louisiana’s annual cost per prisoner paled in comparison to several other states. Florida ($20,553), Georgia ($21,039), Texas ($21,390, Missouri ($22,350), Arkansas ($24,391), Arizona ($24,895), Ohio ($25,814), and North Carolina ($29,965) all had higher annual per-prisoner costs.

But five other states’ annual costs per prisoner really soared. Illinois had an annual per-prisoner cost of $38,268, followed by Pennsylvania ($42,339), California ($47,421), New Jersey ($54,865) and New York ($60,076), nearly three-and-one-half higher than Louisiana’s.

The one statistic that Jindal is almost certain to roll out when he makes his inevitable push to privatize Louisiana’s prisons will be the cost per taxpayer. So, let’s take a look at those numbers as well.

Of the 39 responding states, 21 did in fact have lower costs than Louisiana’s per-taxpayer cost of $698.40 per annum, putting the state almost squarely in the middle of the pack. In North Dakota, for example, the per-taxpayer cost was a paltry $58.10. Others, like Oklahoma ($453.40), Alabama ($462.50) and Missouri ($680.50) were closer to Louisiana’s figures.

But then there are states like Arizona ($1,003.60), Georgia ($1,129.90), North Carolina ($1,204.70), Michigan ($1,268), Ohio ($1,315.50), New Jersey ($1,416.70), Illinois ($1,743.20), Pennsylvania ($2,044.30), Florida ($2,082.50), Texas ($3,306.40), New York ($3,558.70), and California ($7,932.40).

Let those last few numbers sink in: Florida’s annual per-taxpayer cost of housing and caring for prisoners is three times Louisiana’s cost. The yearly per-taxpayer rate for Texas is 4.7 times Louisiana’s rate and New York’s rate is five times Louisiana’s per-taxpayer rate. And then there is California where the per-taxpayer rate of $7,932.40 per year is a whopping 11.3 times that of Louisiana.

So, just how will Jindal sell his economic plan for prisons when so many states have both higher per-prisoner and per-taxpayer costs associated with housing, feeding and caring for prisoners?

That should be the number-one question for anyone to ask of Jindal who by now is so caught up in his own brilliance as to think himself infallible. How do you propose to save money when the state’s costs are already a mere fraction of many other states? It’s a question that demands an answer.

The answer, of course, is for the private companies to cut costs by slashing salaries and benefits, reducing the number of guards and taking a page from the charter school playbook: take only the best of the crop (best being a relative term).

A betting man could make a few bucks by making a wager that sick prisoners requiring expensive medical care and violent prisoners requiring tighter security (read: more guards) will not be taken by the private operators. Those will be left to the state’s care. Bet on it.

Below are the rankings in terms of per-prisoner cost and per-taxpayer cost for the 39 responding states:

ANNUAL PER PRISONER COST (BY STATE)
Kentucky $14,603
Indiana $14,823
Alabama $17,285
Louisiana $17,486
Kansas $18,207
Oklahoma $18,467
Idaho $19,545
Florida $20,553
Nevada $20,656
Georgia $21,039
Texas $21,390
Missouri $22,350
Arkansas $24,391
Arizona $24,895
Virginia $25,129
Ohio $25,814
West Virginia $26,498
Michigan $28,117
Utah $29,349
North Carolina $29,965
Montana $30,227
Iowa $32,925
Delaware $32,967
New Hampshire $34,080
Nebraska $35,950
Wisconsin $37,994
Illinois $38,268
Maryland $38,383
North Dakota $39,271
Minnesota $41,364
Pennsylvania $42,339
California $47,421
Rhode Island $49,133
Vermont $49,502
Connecticut $50,262
Washington State $51,775
New Jersey $54,865
Maine $56,269
New York $60,076

ANNUAL PER TAXPAYER COST (BY STATE)

North Dakota $56.20
Montana $76.00
New Hampshire $80.30
Vermont $111.30
Maine $132.90
Idaho $144.70
Kansas $158.20
Nebraska $163.30
West Virginia $169.20
Rhode Island $172.10
Utah $186.00
Delaware $215.20
Iowa $276.00
Nevada $282.90
Kentucky $311.70
Arkansas $326.10
Minnesota $395.30
Oklahoma $453.40
Alabama $462.50
Indiana $569.50
Missouri $680.50
Louisiana $698.40
Virginia $748.60
Maryland $836.20
Washington State $838.40
Wisconsin $874.40
Connecticut $929.40
Arizona $1,003.60
Georgia $1,129.90
North Carolina $1,204.70
Michigan $1,268.00
Ohio $1,315.50
New Jersey $1,416.70
Illinois $1,743.20
Pennsylvania $2,055.30
Florida $2,082.50
Texas $3,306.40
New York $3,558.70
California $7,932.40

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“The idea that creating ‘competition’ for low performing schools (that in fact are serving high poverty communities) will somehow force improvement is wrong. It has not been shown to work anywhere in this country. Such a scheme is based on the assumption that low performance is caused by lazy or incompetent teachers and administrators. The reason for low performance is, to paraphrase Carville; It’s the poverty, stupid!”

–Michael Deshotels, executive director of the Louisiana Association of Educators, commenting on Gov. Jindal’s education reform proposals.

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