Louisiana Voice

The Jindal administration has made last-minute changes in the executive budget to be submitted to the Joint Legislative Committee on the Budget on Thursday that could, if passed, result in “massive layoffs” in the Office of Group Benefits (OGB), LouisianaVoice has learned.

Under the revised budget, OGB will not be sold outright as originally advanced in an earlier version of the budget but instead OGB’s Preferred Provider Organization (PPO) will be taken over by a third party administrator (TPA) to be run in the same manner as the state’s HMO plan that is currently administered by Blue Cross/Blue Shield of Louisiana.

The original executive budget included a provision for the outright sale of OGB. Had that remained on the table and a buyer found, Morgan Keegan financial advisors of Memphis, Tennessee, stood to reap a $750,000 bonus for finding a buyer for OGB.

It was not immediately clear if the bonus for the legally-troubled firm—Morgan Keegan was fined $210 million by the Securities and Exchange Commission nearly two years ago for misrepresenting critical information to investors—would still be an option.

What is clear, however, is that there would be massive layoffs of OGB employees who currently run the state’s self-insured PPO which presently has a surplus of some $500 million.

Commissioner of Administration Paul Rainwater testified to the legislature last year that it was necessary to reduce the work force at OGB by 149 persons. Ostensibly, those would be the employees who now handle claims for state employees, retirees and their dependents.

The good news is there will be no premium increase to state employees and retirees in Fy-2013.

While the plan to sell OGB has been altered, the contracting of a TPA will nevertheless be tantamount to privatization of an agency that is generally well-received by state employees. The agency has established a record of rapid turnarounds on claims and under former administrator Tommy Teague, amassed the $500 million surplus.

Teague was fired by when he didn’t fall into line quickly enough to suit Rainwater over last spring’s efforts to privatize the agency. In his testimony, Rainwater flip-flopped several times as to whether the governor’s intent was to sell OGB or contract with a TPA. He used both terms almost interchangeably during questioning by legislators.

OGB is only one of several state operations Jindal is attempting to privatize. He succeeded with the Office of Risk Management (ORM), but only partially. The state paid F.A. Richard & Associates (FARA) $68 million in 2010 to take over ORM only to have FARA return eight months later for a contract amendment of $6.8 million, bring the total price to nearly $75 million. A scant two weeks later, FARA was sold to an Ohio company and last fall, that company was in turn sold to a firm out of New York. Neither transfer of ORM to the second or third firm was given advance written approval as was required of the state’s contract with FARA.

Jindal’s efforts to sell two state prisons were thwarted last year but it is expected that those efforts will be renewed.

The governor also is moving ahead full-throttle with his efforts to create for-profit charter schools to replace so-called failing public schools. There are some non-profit charter schools scattered throughout the state but the emphasis has been on for-profit schools as well as vouchers to enable children to move from failing schools to charter schools.

Jindal recently fired a shot across the bow of public school teachers when he unveiled his ambitious education program not before teachers but at the annual meeting of the Louisiana Association of Business and Industry, a virtual slap in the teachers’ faces by the proponent of virtual schools.

Jindal elevated—or lowered, if you prefer—the debate be suggesting that the executive director of the Louisiana Association of Educators should resign for his remark that poor, uneducated families might not have the wherewithal or the expertise needed to navigate the bureaucracy to transfer their children to better schools under Jindal’s proposed voucher system.

The governor, not content with simply promoting his program, suggested that teachers are given pay raises for the simple act of breathing and that they could only be fired for selling drugs in the workplace (schools).

Parts of the state’s Medicaid program have also been privatized by Jindal but his efforts to contract out the Department of Health and Hospital’s information technology services met stiff resistance from the state Civil Service Commission last week.

That confrontation, won for the moment by the Civil Service Commission, could serve as the impetus for Jindal to renew his unsuccessful 2010 efforts to abolish civil service and the Civil Service Commission.

State Rep. John Schroder (R-Abita Springs) introduced a handful of bills that year dealing with merit pay raises for state classified workers, and civil service in general, none of which were passed.

All of Jindal’s privatization proposals appear to be ripped directly from the pages of the playbook of the American Legislative Exchange Council (ALEC).

That playbook, an actual internet web page, includes a section entitled “Tools to Control Costs and Improve Government Efficiency. Among the “tools” it recommended were:

• Adopt a state hiring freeze;

• Reform state pensions;

• Delay automatic pay increases (we wondered where legislators came up with the term “automatic” in freezing merit increases a couple of years back;

• Embrace the expanded use of privatization and competitive contracting;

• Restructure state retiree health care plans.

Jindal only recently unveiled his plan for restructuring the state retirement system, a plan that includes tighter retirement qualifications, increased employee contributions, a revised formula for calculating benefits, defined contributions as opposed to the present defined benefits plan (similar to 401K plans found in the private sector, and a proposed lump-sum payout upon retirement.

The one issue that has remained unaddressed in the retirement discussion is if the state does go to a defined contribution plan such as those found in 401K plans, will the state then be required to pay the usual employer share to Social Security?

Some state employees currently do not pay into Social Security and thus are not qualified for Social Security benefits or Medicare upon retirement unless they worked in the private sector prior to their state employment.

If Jindal should revamp state retirement, it could mean that the state could be required to pay the customary employer percentage into those programs which could mean any savings achieved by privatization could be negated.