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Archive for February, 2012

More of Jindal’s smoke and mirrors: this time it’s fuzzy math on state’s retirement package from High Potentate Piyush

Posted in Governor's Office, House, Senate, Legislature, Legislators, Retirement on February 16, 2012| 14 Comments »

With so many retirement bills filed in both the House and Senate, it’s difficult to make heads or tails of them all.

For example, Sen. Elbert Guillory (D-Opelousas), chairman of the Senate Retirement Committee has personally pre-filed 37 retirement bills for the upcoming session which begins at noon on March 12.

His counterpart, House Retirement Committee Chairman Kevin Pearson (R-Slidell), has pre-filed 15 such bills. They run the gamut in addressing retirement issues for municipal employees, registrars of voters, clerks of courts, teachers, school employees, sheriffs and, of course, state employees.

And those do not even include any retirement bills authored by the other 142 legislators.

And while the main thrust is to placate Gov. Bobby Jindal in his efforts to reduce retirement benefits, increase employee contributions, and to tighten retirement qualifications, nothing has been said by the administration to address problems inherent with attempts at pension reform: namely the Louisiana State Constitution.

One person who has not been shy in criticizing Jindal’s plan is Cindy Rougeou, executive director of the Louisiana State Employees’ System (LASERS).

Rougeou says Jindal is seeking to impose an additional payroll tax on state workers in the form of a 3 percent increase in employee contributions—money that will not even be used to retire the state retirement system’s $6.3 billion debt.

She also says that Jindal is:

• Targeting workers who are barred from lobbying on their own behalf, those least able to speak up in opposition to his plan;

• Attempting to force state employees to work longer for reduced benefits;

• Giving legislators false information as to the percentage that employees contribute to the cost of their retirement as compared to the state’s share;

• Ignoring the fact that the current unfunded accrued liability (UAL) came about in the first place because the state reneged for decades on paying its required contribution;

• Attempting to violate both the State and U.S. Constitutions in proposing sweeping changes to the retirement system.

Those are some pretty serious charges, coming as they do from a state employee when the governor has shown himself to be more than capable of retribution against recalcitrant underlings.

Rougeou, however, is said to be beyond the reach of Jindal’s wrath. She is hired by a LASERS board that is elected, not appointed by the governor, thus her unrestrained defense of state employees and her criticism of the governor’s retirement package.

But if Jindal is really looking for a scapegoat, he need look no further than the first floor of the State Capitol where the House and Senate chambers are located.

In 1987 the legislature passed a bill calling for a constitutional amendment that would require all the state’s retirement systems to be actuarially sound with UALs being paid off by the year 2029. Voters approved the amendment but as usual, there was a fatal flaw in the wording of the bill that allowed legislators to begin tinkering with the repayment schedule.

And tinker they did, passing Act 497 in 2009—on Jindal’s watch, by the way—that created a new payment schedule so that the state could reap a savings of $500 million. It is the state’s failure to make the necessary payments to bring the systems into manageable shape that created the current crisis in the retirement funds.

Each year between 1959 and 1969 and from 1983 to 1991, the state failed to pay its required contribution to LASERS. Not once. In 1963, for example, the 6 percent paid by the state was less than half the required 12.26 percent and in 1960, the state’s 6 percent was barely more than half the 11.81 percent required contribution. In 1990, the 7.8 percent paid by the state was far short of the 14.09 percent requirement.

Commissioner of Administration Paul Rainwater, in presenting Jindal’s executive budget for Fiscal Year 20120-13, told members of the Joint Legislative Committee on the Budget that the employees’ share amounts to less than 27 percent of total retirement contributions while the state’s share exceeds 73 percent.

Not so fast, says Rougeou. The administration’s accounting, she said, “apparently formed the basis for the justification that employees should now pay an addition 3 percent of salary toward their retirement.”

She went on to say, “The cost of the accruing benefit in 1988 was 12.8 percent of payroll, which we refer to as the normal cost. Of that amount the employee paid 7 percent and the state paid 5.8 percent. As such, in 1988 the employee contributed about 54.69 percent (of the total) toward retirement. Though somewhat less today, current rank and file employees “are still paying about 54 percent of the cost of their accruing benefit,” she said–double Rainwater’s claim.

So now Jindal is calling on state employees to kick in an additional 3 percent to the retirement fund. That wouldn’t be so bad if the extra 3 percent went to their retirement or even to pay down the UAL, but it doesn’t. The money will go straight into the state general fund so that Jindal can smooth over an anticipated $900 million budget shortfall this year.

Even that would be more palatable if Jindal was doing that across the board, but he isn’t. He promised the state’s college and university presidents that if they’d keep their mouths shut and not oppose his retirement package, they could share in the $100 million savings from university and college employees’ additional 3 percent.

While that comes to less than $5 million for each of the state’s 23 public colleges and universities, it hardly seems fair that they keep their 3 percent in-house while the remaining state employees must pony up their additional 3 percent to keep Jindal’s budgetary boat afloat.

Nor is it fair to tell a 42-year-old state employee with 20 years’ experience that he can scrap his plans to retire at 30 years, that he must continue working until he is 67. And when that employee purchased four years’ “air time” a few years back to enhance his retirement, it cost him $18,000.

If he works until age 67, he will have 45 years as a state employee. State employees currently can retire at 100 percent of their salaries with 40 years’ service. Will he be required to continue paying into the system past his 40 years? What about that $18,000? Will he get that back? He bought the time in good faith and in the belief that the state would honor its commitment to him just as the woman in the state agency next door paid $60,000 for 13 years’ air time. What’s to become of their investments?

Louisiana employees do not pay into social security, which makes any comparison with other systems invalid. Apples and oranges. A lifetime state worker will never qualify for social security benefits as do workers in the private sector.

The governor’s retirement package also contains a provision that retirement benefits for currently active employees be based on the formula of 2.5 percent times an average of five years’ highest income times years of service. That is a change from the current formula that computes retirement based on three years’ average earnings.

As things now stand, that would have negligible impact; employees are going into their fourth straight year without merit raises but extending the work years to age 67 could be devastating to certain employees. Depending on their dates of birth, some employees who retire after 30 years could see their benefits cut by more than half than if he/she had been born one day earlier.

Jindal, while attempting to force state employees to work longer and pay more into their retirement, is also trying to revamp their retirement from a defined benefit to a defined contribution, similar to 401(k) investment account with no guarantee of return.

Former House Speaker Jim Tucker (R-Terrytown) said last year the 3 percent increase in employee contributions was a tax and would require a two-thirds vote of both the House and Senate. Jindal has vowed throughout his term that he will veto any new taxes that appear on his desk and so obviously does not see the 3 percent increase as a new tax any more than he saw college tuition increases last year as a new tax.

But the bigger question is one of constitutionality, both state and federal.

“Many of those employees already have ‘vested’ rights in their retirement benefits,” Rougeou said. “To change provisions such as those targeted would violate the (U.S.) constitutional restriction against impairing existing benefits. She cited Article X, Section 29(B) of the State Constitution which says “…membership in any retirement system of the state…shall be a contractual relationship between employee and employer.”

“And of course the U.S. Constitution in Article 1, Section 10, Clause 1, states, ‘No state shall…pass any…ex post facto law, or law impairing the obligation of contracts…’” she said.

“Proposing changes that are unconstitutional attains only protracted litigation and doesn’t result in a sound pension system,” she said.

She said Jindal should not count on using any of the anticipated $450 million in taxpayer savings resulting from his pension reform to help balance the budget because there will be court challenges if the administration is successful in getting the bills passed.

One must be starting to wonder by now just how many more shell games Jindal will introduce to cover his budgetary backside. Retirement and the privatization of the Office of Group Benefits, state prisons and Medicaid are all on the table this year, so what financial wizardry will he conjure up for the next three years?

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Notable Quotables (in their own words)

Posted in Civil Service, Notable Quotables, Transparency on February 15, 2012| 1 Comment »

“Would attending a rally be considered lobbying?”
“No it would not. A rally is a gathering of people to inspire enthusiasm for a cause.”

“Can I go to public rallies on issues and carry a sign, cheer and boo?”
“Yes you can.”

–Louisiana Department of Civil Service General Cicular Number 2012-004 of February 9, 2012.

“I have had discussion with our attorneys concerning a citizen organizating a rally outside of the hospital. I am directing all employees and physicians not to attend this event either on or off the clock. There are potential serious legal issues with our participating in such an event. Violation of this directive may result in discipline (sic) action against you.”

–Larry Dorsey, administrator of University Medical Center in Lafayette, in a February 1 email to UMC employees directing them to not attend a public rally protesting the elimination of 130 positions at the hospital by the Jindal administration.

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State hospital administrator suspends employees’ First Amendment rights by prohibiting attendance at rally

Posted in Civil Service, Governor's Office, Layoffs, Teague, Transparency on February 15, 2012| 2 Comments »

The administrator of a state hospital may have overstepped his authority and placed his office in violation of state civil service rules when he sent a short email to hospital employees two weeks ago.

His email actually pre-dated by eight days the email of LSU Systems President John Lombardi that we wrote about last week. It seems to be the trend these days that the administration of Gov. Bobby Jindal will tolerate no outward signs of resistance from state employees.

This, of course, is the governor who touts his openness, his transparency, his accountability while attempting to suspend the First Amendment to the U.S. Constitution: that pesky little guarantee of free speech and free assembly.

Not that he would ever dirty his hands with issuing a direct order; he’s far smarter than that. That’s what his subordinates are for. People like Lombardi who last week sent out an email admonishing his LSU troops to be thankful they still have jobs and not to be critical of Jindal’s budget cuts.

Now we’ve learned that on Feb. 1, Larry Dorsey, administrator of University Medical Center (UMC) in Lafayette issued an even sterner memorandum to the employees of his facility which is facing the elimination of 130 positions.

Word of the impending layoffs at UMC went out in mid-January in the form of an email from Dr. Roxane Townsend, CEO of the Health Care Services Division of the LSU Health System.

In all, seven facilities will be affected by the layoffs, Dr. Townsend said. Those include, besides UMC, Bogalusa Medical Center, Earl K. Long Medical Center in Baton Rouge, Lallie Kemp Regional Medical Center in Independence, Leonard J. Chabert Medical Center in Houma, Interim LSU Public Hospital in New Orleans, and W.O. Moss Regional Medical Center in Lake Charles.

Dorsey was quick to point out to Capitol News Service that there will not be 130 employees who will lose their jobs because some of the eliminated jobs are vacant positions that will be abolished and that some employees would be allowed to “bump” those with less seniority in order to save their jobs. He did not say how many would actually lose their jobs or how many unfortunate souls would be bumped.

The layoffs at the seven facilities, scheduled to take effect on March 5 once they have been approved by the Director of Civil Service is being proposed due to the inability of the Health Care Services Division to realize $29 million in additional federal funding for care delivered to the uninsured and Medicaid population during the current 2011-12 fiscal year, Dr. Townsend’s memo said.

But back to that Feb. 1 memorandum, issued as an email to all UMC employees. Here it is in its entirety:

“I have had discussions with our attorneys concerning a citizen organizing a rally outside of the hospital. I am directing all employees and physicians not to attend this event either on or off the clock. There are potential serious legal issues with our participating in such an event. Violation of this directive may result in discipline (sic) action against you.” (Boldface emphasis Dorsey’s.)

The rally, organized by private citizens who use the hospital, was held on Feb. 2, the day after Dorsey’s email.

Dorsey told Capitol News Service that he issued the directive on advice of his legal staff.

Perhaps his in-house counsel should have sought legal counsel of her own.

The directive, it turns out, is in direct contravention of the provisions of General Circular 2012-004, issued on Feb. 9 of this year by the Louisiana Department of Civil Service and drawn directly from the state lobbying act: R.S. 24:56. That date, by the way, just happens to coincide with the issuance of the Lombardi email.

The circular, re-issued in anticipation of the 2012 legislative session in order to clarify state classified employees’ rights and restrictions, says that classified employees “are prohibited from engaging in efforts to support or oppose a candidate, party or faction in an election.”

But in the very next sentence, the circular says, “These constitutional restrictions do not prohibit a classified employee from expressing themselves either privately or publicly on issues that may be pending before the legislature or other body.”

The circular cautions employees than when speaking publicly on an issue, “make sure you are addressing matters that are of public concern and not personal to your particular work environment.” The elimination of positions at a state hospital would appear to come under the banner of public concern.

The circular also poses several questions, one of which asked if a classified employees attends a public rally, would it be permissible for the employee to “carry a sign, cheer and boo?”

The circular answered that rhetorical question by saying it is permissible for employees to carry signs, cheer and boo so long as the same standard of public concern is observed.

The circular said a classified employee is allowed to be a member of an organization that lobbies before the legislature but that the employee cannot personally lobby legislators.

Active classified employees are allowed to attend rallies conducted by the Retired State Employees Association, even “on the steps of the Capitol so long as the employee is a member of the association and provided the employee is on approved annual leave if the rally is held during normal duty hours.”

To the question, “Would attending a rally be considered lobbying?” the circular said, “No, it would not. A rally is a gathering of people to inspire enthusiasm for a cause.”

The circular also said that classified employees are allowed to place signs in their yards in opposition to or in support of proposed legislation.

The legal counsel at UMC could well be up for special recognition and perhaps even a merit raise from the Jindal administration for doing such an effective job of stifling employees’ First Amendment rights.

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Former Sen. Butch Gautreaux: a voice in the wilderness speaks out against Jindal’s proposed OGB privatization

Posted in Governor's Office, House, Senate, Legislature, Legislators, tagged , on February 10, 2012| 10 Comments »

Editor’s note: Former State Sen. Butch Gautreaux addressed the Joint Legislative Committee on the Budget following the presentation of Gov. Bobby Jindal’s executive budget and the ensuing queston and answer session between legislators and members of the Division of Administration. Unfortunately, when the last legislator’s question was asked and answered, reporters exited the committee room, unaware that Gautreaux would testify against the controversial proposal to privatize the Office of Group Benefits, meaning his words got little play in the media.

Following is an exclusive reprint of his comments:

Although Governor Jindal has strived to bring transparency to the office of the Governor, the Office of Group Benefits (OGB) sale or its placement in the hands of a third party administrator is a case that denies the public, or for that matter even the legislature, the opportunity to see or understand what is being considered.

When news first came to light last year of an effort to capitalize on the large cash reserve, I called meetings of the Senate Retirement Committee to try to learn the rationale of the sale. I invited all parties including the governor, the commissioner of administration and others involved. Mr. Rainwater did attend the first two meetings but little was learned. When repeatedly asked by panel members why the sale was being considered, Mr. Rainwater was pat on his answer, never swaying from his statement: “the State should not be in the insurance business.”

Remember, the state set up a workers’ compensation company, LWCC in the early nineties that still exists today and seems to function well. The state set up Citizens in response to coastal residents not being able to acquire homeowners insurance. It’s had its problems but is still doing the job. Does Mr. Rainwater advocate getting rid of those two insurance companies?

We just learned last week that the Governor contracted with Morgan-Keegan to do an analysis on the feasibility of selling out or placing in the hands of a third party administrator the PPO for the Office of Group Benefits. As a member of the board of OGB I have not had an opportunity to see the final Morgan-Keegan document or anything else. I can only tell you a little history of a health insurance system that is the envy of the other 49 states. Louisiana has the only self-administered and self-funded health insurance for state workers and retirees. The plan provides competitive rates to members and to the state. Remember, the taxpayers pick up most of the cost. And unlike some other departments OGB has for the last seven years grown in becoming a model of what other states should emulate.

Mr. Rainwater likes to state that we have twice the number of employees in our health insurance department. Of course we do. We are the only state to administer its plan, and at a cost that is a lot cheaper than it can contract for.

Eight years ago OGB was in trouble for an assortment of reasons and something had to be done if the system was to survive. Governor Kathleen Blanco hired Tommy Teague to take over as the director and through his excellent management practices and leadership we saw a system that was wrought with problems and inefficiencies go from a $33 Million deficit to a $550 Million cash reserve. Let me say that I served on the board of directors during this transition from something very troubling to what has become a shining star. And then when Tommy resisted taking actions that would undermine the system, Governor Jindal summarily fired him.

We now have a premier public health insurance department for state workers that offers affordable premiums and industry-acceptable reimbursements to health care providers. This took a lot of talent. Mr. Teague negotiated with providers who previously were not interested in doing business with OGB. He promised them big changes in service and negotiated better discounts from them at the same time.

While at its worst, most hospitals and doctors did not want to accept the plan. But, at the last board meeting back in September it was reported that every hospital in Louisiana except one now accepts the plan as do most doctors and other providers.

Better discounts and other efficiencies of scale were building increased cash balances. At the final meeting of the last fiscal year the board had a motion on the table to reduce premiums which would have helped with the cost to the state during this fiscal crisis. That motion was met with a substitute motion to maintain rates until we knew how things would shake out with efforts by the administration to take the fund balance to fill a gaping hole in the state budget. The OGB monies are constitutionally protected from being raided as so many other department budgets were being raided at the time.

In the face of the board action, Governor Jindal announced a 5.6% increase in premiums effective July 1st of last year. This action was not only unnecessary but put an additional strain on the already stressed state general fund as the state pays on average 75 percent of the premium cost.

At the same time, it was announced that deductibles would hold over until January 1, 2012, with the effect of drawing down the balance of the cash reserves, placating the complaints of members who could ill-afford more deductions coming from their diminishing pay checks. But this was all part of the governor’s overall plan.

Again for January 1, 2012, the Governor announced and implemented another premium increase of 5.5 percent. Remember, we were in a position to reduce premiums when the plan to raid OGB was put together.

Speaking of transparency, it was indeed very clear what the plan was. By implementing the unnecessary increases in premiums, further increases would be less of a shock to the members and you who must somehow balance the state budget. Experts are telling us that the private insurance company will have to ease in another increase of roughly 10 percent to meet the needs of executive compensation, marketing, stockholder dividends, profit, taxes and other expenses we don’t currently have at the not-for-profit OGB.

Our own actuary gave a figure of $97 million in additional costs to the taxpayer for the July 1 premium increase, coupled with the member deductible holiday through the calendar year. Since that time, there has been another unnecessary premium increase to the taxpayer and the members.

This privatization will be very costly to the taxpayers of Louisiana, but then we get to fire 177 rank-and-file state workers to counter the hiring of former chief of staff Teepell’s family members and all of the politically-connected, deposed elected officials over the last four weeks, most at six figure salaries.

You only need to follow the dollars to understand why the Governor wants this to happen. Thank you for your attention.

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Notable Quotables (in their own words)

Posted in Budget, Governor's Office, Higher Education, Notable Quotables, Transparency on February 10, 2012| 2 Comments »

The administration preferrs “coordinated responses from our (public relations) offices so that all units of higher education respond in the same generally positive and supportive way to the administration’s efforts to avoid significant loss of funding…”

–From an email memorandum from LSU Systems President John Lombardi to system administrators just hours before the Joint Legislative Committee on the Budget received Gov. Bobby Jindal’s executive budget for FY-2012-2013.

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