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Archive for January, 2013

The Public Affairs Research Council (PAR) and a member of the Louisiana Revenue Estimating Conference (REC), in separate news releases, have raised questions that cast serious doubts on the wisdom of Gov. Piyush Jindal’s proposed state tax reforms.

PAR released its Tax Advisory Group’s Tax Policy Guidance that cautioned that the impact of Jindal’s proposed tax changes should be “accurately estimated and firmly understood with fact-based evidence and confidence.” It also said taxes should be broad-based with “low rates and few exemptions.”

It also said the proposed elimination of the state income tax could “destabilize” the state’s revenue base and even set the stage for increased taxes in the future.

Almost simultaneously, LSU E.J. Ourso School of Business economist Jim Richardson, in an interview with Baton Rouge public radio station WRKF, warned that if the state income tax is replaced by a state sales tax increase, exemptions for items like food and prescription drugs would also have to be eliminated to offset the income tax revenue loss.

Richardson is a member of the state Revenue Estimating Conference which meets at least four times per year to adjust revenue forecasts for the state. The legislature is mandated to rely on REC projections in formulating the state general fund budget each year.

In addition to being a member of REC, Richardson was also a member of the PAR Advisory Group which drafted the organization’s Tax Policy Guidance.

Richardson said eliminating personal and corporate income taxes would create a gap of nearly $3.5 billion in state revenue. “If you make it up with purely sales taxes, you’re talking about doubling the rate.

Richardson—and PAR—calls the sales tax proposal a “regressive tax,” meaning a tax in which the burden falls more heavily on low income taxpayers. “That means a larger part of their income will be subject to tax,” he said. He said because a sales tax is flat, meaning everyone pays the same amount, no matter what their income, those with low incomes will end up paying a higher proportion of their income for taxes.

He said that while other states, such as Texas, do not have personal income taxes, Texas homeowners, for example, pay much higher property taxes. He said there is no valid model for eliminating the corporate income tax because “other state governments work differently.”

He also said that while shoppers may not notice an increase sales tax on low price items such as toiletries, an increased sales tax may well place luxury items out of reach for some. “Go buy a new car, a new refrigerator. Go buy something that has relatively high prices attached to it,” he said. Then you’ll notice it”

He said there aren’t many alternatives to a state income tax for raising revenue. “If there were, we would have already done it,” he said.

The PAR report took the potential of increased sales taxes a bit further by pointing out that with higher sales tax rates, Louisiana businesses would be at a competitive disadvantage to sellers in other states and, to an even greater extent, to untaxed online sales—especially for high-cost items.

“After having obtained the highest sales tax rate in the country,” the PAR report said, “Louisiana would be in unchartered territory as far as estimating how much revenue would be produced.”

The report pointed out that Louisiana already is a relatively low-tax state for individuals and cited the Tax Foundation which says that only three other states impose a lower overall tax burden on their citizens.

Louisiana’s property taxes, which provide a key source of revenue for local governments, are among the lowest in the nation, it says. By contrast, the state’s combined state-local sales tax rate is the third highest in the nation.

Corporate taxes, it said, are subject to many exemptions. “Based on profits, and therefore vulnerable to recessions, the corporate income tax provides a widely fluctuating source of state revenue that is hard to predict from year to year.”

The PAR report said that the corporate franchise tax should be eliminated and ways found to replace the annual revenue loss of about $74 million. “The franchise tax is a complicated administrative burden on business and is often difficult to calculate, which leads to time-consuming regulatory problems and litigation. The current tax is a deterrent to capital investments and a disincentive to companies considering a headquarters operation in Louisiana,” it said. “To offset the revenue loss partially, the state could consider a standard capped annual tax for corporations and/or other registered business entities.”
The report, in responding to Jindal’s proposals, said, “The individual income tax tends to grow with the economy and therefore is an important component of Louisiana’s overall balanced and stable tax structure and revenue base.

“A repeal of the individual income tax could create a more attractive perception of the state’s tax climate but such a move runs the risk of destabilizing the state’s revenue base and would likely set the state for increased taxes in the future.”

The report said that eliminating the individual income tax would result in an annual revenue loss of $2.6 billion based on current-year collections. “It should be noted that in future years the state’s annual individual income tax revenue is expected to grow at a higher rate than that of its sales tax revenues,” it said. “Estimates of the amount of money needed to offset an elimination of the income taxes should not be based solely on the revenue experience of past years.

“If higher sales taxes are implemented, the pressure for new exemptions for sales taxes will be intense,” the report said. “Each new or revived exemption will erode the sales tax base upon which the state would have become more independent. The reform policy should therefore include tougher standards for the adoption of sales tax exemptions.”

Echoing Richardson, the PAR report said low-income individuals and families pay little or no state income tax and therefore will be adversely affected with an overall tax increase if higher sales taxes replace the personal income tax. “The state should find ways to lessen the negative impact on people in these categories if the proposal is adopted,” it said.

“There are some categories of people who have an exemption from (state) income taxes and could also be paying higher taxes overall under the proposal,” the PAR report said. “These include public employee retirees, military retirees and those on disability. Also, Social Security retirement benefits are exempt from Louisiana income tax.”

While saying that such exemptions may be debatable as good policy, the report said, the impact on those people nevertheless “should be noted.”

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Attorney General James “Buddy” Caldwell punted, Gov. Piyush Jindal wouldn’t listen and State Treasurer John Kennedy…well, he is, after all the state treasurer.

The three statewide Republican officeholders were named defendants in a lawsuit filed by two Republican state representatives on Tuesday. One of those was Cameron Henry of Metairie who Jindal had bounced from his vice-chairmanship of the powerful House Appropriations Committee in November after Henry voted for a motion by Rep. Katrina Jackson (D-Monroe) that the administration opposed.

Rep. Joe Harrison also was removed from the Appropriations Committee in the showdown vote in which the administration came perilously close to losing its move to award the third party administration contract for the Office of Group Benefits.

The other plaintiff in Tuesday’s lawsuit was Rep. Kirk Talbot of River Ridge.

Reached for comment, Talbot said the suit simply seeks a declaratory judgment on three major issues with which he, Henry and other legislators disagree with Piyush.

“We are not seeking an injunction,” he said. “We’re not trying to shut state government down. We are simply seeking a ruling on the constitutionality of the governor’s submitting an executive budget with contingency revenue and the spending of one-time money on recurring expenses.”

He said last year’s budget contained contingency expenditures. “That would be, for example, the inclusion of anticipated revenue for the sale of prisons or state hospitals. If the sales don’t materialize (they didn’t in the 2011 session), then we have a problem, a financial shortfall.”

Likewise, he said the suit is also seeking a decision on the requirement under state law that the governor’s executive budget “shall not exceed the official of the Revenue Estimating Conference (REC)” estimates and also per state law, appropriations from the state general fund and dedicated funds in the final, enacted bills comprising the state budget “shall not exceed the official forecast in effect at the time the appropriations are made.”

The official revenue forecast for fiscal year 2012-2013 at the time House Bill 1 was passed, as issued by the REC on April 24, 2012, reflected just over $8.1 billion in state general fund revenue available for appropriation.

Instead, the amount actually appropriated in HB1 was $8.34 billion, thus exceeding the REC estimate and the constitutionally-mandated appropriation limit by $240 million, the suit says.

The REC is required by law to meet at least four times per year—by Oct. 15, Jan. 1, the third Monday in March and Aug. 15 subsequent to final adjournment of the regular session. State law requires the REC to establish, by Oct. 15 of each year, an official revenue forecast for the ensuing fiscal year, that runs from July 1 to the following June 30.

State law requires that legislative enactment of the state budget must conform with a subsequent revised forecast issued by the REC by the third Monday in March.

“The REC did not meet by Oct. 15, 2011, by the third Monday of 2012, by Aug. 15, 2012 after adjournment of the 2012 regular session, or by Oct. 15, 2012, as required by law,” the petition says.

The Jindal budget also included $35 million in contingency revenue from the anticipated sale of New Orleans Adolescent Hospital and HB 822 directed State Treasurer John Kennedy to transfer $35 million of the proceeds from the sale or lease of the facility to the Overcollections Fund.

After numerous delays, the Jindal administration finally released the appraisals on the hospital property in November. That appraisal showed the property worth, at most, $20.9 million.

Rep. Neil Abramson (D-New Orleans) has questioned how the Jindal administration arrived at a $35 million estimate. “I was surprised to see the money in the budget at all because that property’s in my district and no one had ever said anything to me,” he said.

Welcome to the real world, Mr. Abramson. That the way the Jindalistas do business.

“…There is no reasonable basis for expecting the New Orleans Adolescent Hospital to, in fact, sell or lease for $35 million during the 2012-2013 fiscal year,” the lawsuit said. “As such, appropriations of those funds are, in fact, prohibited contingent appropriations.”

Henry, reminded that Piyush had already demoted him once, jokingly feigned innocence at first. “This is all Talbot’s fault,” he said. “I thought I was signing up to buy Girl Scout cookies. Next thing I know, I’m a plaintiff in a lawsuit.”

He quickly turned serious, however.

“We first sought a legal opinion from the attorney general and he told us he would not render an opinion on the constitutionality because that was a matter for the courts.

Gov. Jindal forced us to do this. He thinks he is right and we think we’re right. If we are ultimately found to be right, we can avoid a repeat of the practices that have put us in such a fiscal dilemma,” he said.

The lawsuit has been assigned to 19th Judicial District Court Judge Tim Kelley who is married to Jindal’s one-time commissioner of administration Angéle Davis.

Kelley, in another lawsuit, ruled in December that Jindal’s school voucher program unconstitutionally diverted public funds to private and parochial schools. That ruling is presently under appeal.

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A wrongful arrest lawsuit filed in 8th Judicial District Court in Winnfield names as defendants a former Louisiana Wildlife Commission chairman and a Department of Louisiana Wildlife and Fisheries agent but the litigation is only the latest in an ongoing dispute whose roots go far deeper into the lush pine forests of Winn, Caldwell and LaSalle parishes.

Wyndel Earl Gough (pronounced “Goff”) and Gary L. Hatten filed the lawsuit on Jan. 10, naming William “Bill” Busbice of Broussard, former chairman of the Louisiana Wildlife and Fisheries Commission during the administration of former Gov. Mike Foster, as one of the defendants.

Also named were Terry Carr, identified as an overseer or manager of Busbice’s Deer Management Assistance Program (DMAP) land, and wildlife agent Rusty Perry after Gough and Hatten were arrested by Perry in December of 2010 for illegally hunting deer on DMAP land without Busbice’s permission.

It was not until April of 2012, however, that a bill of information was issued by the district attorney charging the two with one count each. On Oct. 24, those charges were formally dismissed by the district attorney’s office.

Both Gough and Hatten deny ever having hunted on DMAP property.

Busbice began purchasing some 55,000 acres in the three parishes, mostly in Winn, after Louisiana-Pacific shut down its operations at Urania in 2002. Louisiana-Pacific initially sold the forest land to Barrs & Glawson Investments of Atlanta, GA, to Roy O. Martin Lumber Co. and to Martin-Urania Corp. for $74 million. Barrs & Glawson re-sold tracts totaling 50,383 acres in Winn, 6,068 acres in LaSalle and 4,800 in Caldwell to Six-C Properties, headed by Busbice.

Since purchasing the land, Busbice has erected eight-foot fencing around the property and constructed a hunting lodge on the land that caters to high rollers who don’t mind ponying up a few thousand dollars for the privilege to hunt deer.

Six-C subsequently donated 1,500 acres of the land to Make A Wish Foundation, a nonprofit organization dedicated to granting wishes to children with life-threatening medical conditions.

Additional property owners in the area, including other members of the Gough family, claim that Busbice’s fencing in 55,000 acres in the three parishes, mostly in Winn, has deprived them of their hunting rights.

One of those, Michael Atkins, sued Busbice and his company, Six-C Properties, after Busbice erected a fence completely surrounding 10 acres of land owned by Atkins. His lawsuit, which he won at the trial court level but which was overturned in part on appeal, contended that the fence not only prevented him from hunting but also blocked access to his property.

The latest lawsuit, however, goes back more than a decade and involves principals other than Busbice and the two plaintiffs.

Names that have surfaced in what has become a conspiracy-laden story include imprisoned former Winn Parish Tax Assessor A.D. “Bodie” Little, former Gov. Mike Foster and former Vice President Dick Cheney.

Landowners, including the Goughs, maintain that Foster hosted Cheney on a hunting trip in 2002 and shortly afterwards a federal grant came through Foster’s administration which was used to purchase the land which eventually came under the control of Busbice and Six-C.

Efforts by LouisianaVoice to confirm that allegation have been unsuccessful, though an entry of more than $87.86 million was included on page 29 in Foster’s fiscal year 2003-2004 executive budget under the column heading of Federal Funds.

Marty Milner, fiscal officer for the Office of Facility Planning and Control, said in a 2008 email to investigator Art Walker that he had found the $87.86 million but some projects were funded through the Department of the Military and the Department of Transportation and Development but his office did not handle the accounting for those departments. Accordingly, he said, he was unable to determine the disposition of the money.

Michael Gough, one of the landowners in the area, likened the Six-C hunting camp to the state’s arrangement with the White Lake Preservation in Vermilion Parish. In that case, BP donated the 71,000-acre preserve to the state but retained mineral rights on the property—and received millions of dollars in tax breaks.

Foster, governor at the time, negotiated the deal with BP and subsequently appointed a board comprised of private citizens to manage the property.

Another controversy surrounding the Six-C property arose in 2008 when a group of Winn Parish taxpayers filed suit against then-assessor Bodie, claiming that the increase in their taxes was a direct result of their opposition to Bodie’s election as sheriff.

Bodie was sentenced to a 13-year federal prison term last August for drug possession with intent to distribute.

An Alexandria Town Talk investigation revealed that several of Bodie’s friends benefitted from under-assessments. Among those was Six-C, which was the beneficiary of an assessment that was $351,800 low, according to one local resident.

Under the $20 per acre forestland value, Six-C was billed $98,601 on its Winn Parish properties, then consisting of 31,600 acres. Winn Parish resident Grady McFarland, however, said Six-C should have paid taxes based on an $88.90 per acre value, or $450,410.

Almost as an afterthought to the whole affair, Glenn Austin, district conservationist for the Natural Resources Conservation Service, accompanied Michael Gough on a tour of several locations around the boundary of Six-C property to inspect where “flood flaps,” made from old conveyor belts, were stretched across the bottom of the fence where it crossed streams and creeks in the area.

The flaps, installed to prevent wildlife from escaping, impeded the water flow, causing flooding and erosion. “There was sediment deposited within the channel banks at almost every location,” Austin said. “This increase in sediment load and increased turbidity in the water channels could be degrading the water quality” within the streams, he added.

Austin told Gough that if the area was deemed to be a wetland, then the U.S. Army Corps of Engineers would have regulatory authority over the area.

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It’s 87 pages long and typical of last year’s education reform package rushed through the legislature by Gov. Piyush Jindal, the proposed changes to Bulletin 741, otherwise known as the Louisiana Handbook for School Administrators, was first introduced to the Board of Elementary and Secondary Education (BESE) at the Dec. 4 meeting of the Academic Goals and Instructional Improvement Committee.

BESE member Holly Boffy of Baton Rouge offered a substitute motion at the time to defer committee action until January because, she said, she was hungry. The committee report, however, was approved and on Tuesday, Jan. 15 (tomorrow) the full board will take up the proposed changes that, among other things, will:

• Not require school systems to participate in a school accreditation program every five years and receive a certification classification (The proposals, in fact, call for the scrapping of Section 311 of the bulletin, which deals with accreditation, in its entirety.);

• No longer require certification of teachers;

• Strip Section 2313 for Elementary Program of Studies of its suggested outline of content areas, meaning any school can design any curricula it deems appropriate (so much for uniformity);

• Gut summer schools of their requirements, including minimum instructional hours and class size limits;

• Allow a single person with no valid teaching certificate to teach hundreds of students in one class taught for one week;

• Allow local educational agencies to use state money to purchase textbooks not approved by BESE;

• Do away with the requirement of taking roll for virtual (course choice) classes, thereby eliminating any assurance of a student’s attending the course;

• Allow for the elimination of the positions of school counselors, physical education teachers and school librarians.

Allow for the elimination of the positions of school counselors, physical education teachers and school librarians.

Board member Lottie Beebe of Breaux Bridge said there will be no public hearing per se on the proposed changes. Instead, if the proposals are adopted by BESE the legislative auditor must attach a family impact statement (statement of family values) and fiscal note (cost). Following that, the proposed changes are uploaded in the State Register which then triggers a 90-day public notice. Citizens beginning at that point, have 30 days for public (online) comment before the new rule becomes final after 90 days.

Beebe said many of the proposed changes are rationalized by State Superintendent John White and department staff as offering flexibility to school systems.

But at a time of increased focus on school bullying (both physical and electronic) and concerns about student mental health and safety, “cutting counselors and replacing them with untested teams is contrary to good public policy and a danger to our kids,” Beebe said.

She said because counselors are needed for college preparation, cutting those positions is also contrary to White’s stated goals of promoting college readiness.

“I have never before received so many emails,” Beebe said. “The LDOE is proposing the elimination of many of the structures we have had in place in traditional systems. Some will say this is good because it gives districts autonomy. I disagree,” she said. “I believe in having a framework, or structure.

“It appears (that) traditional systems have been given a lethal injection and will slowly expire unless our legislators derail this train. If you want to see what the state takeover of schools looks like, visit the Recovery School District in New Orleans and interview parents and students.

“I attended a meeting in New Orleans in November where students appealed to BESE for assistance. Students voiced concerns relative to the lack of certified teachers, lack of textbooks, etc. If you visit the DOE website to check on the RSD school report cards, you get a diagnostic comment: ‘This page is not available for display.’”

Mike Desehotels, a retired teacher and retired executive director of the Louisiana Association of Educators, said he has several concerns about the proposed changes to Bulletin 741 but that he is most concerned with the potential for abuse and fraud in the Course Choice program.

Course Choice is a new program whereby students are allowed to take online courses from providers approved by BESE. The Course Choice allows operators to set their own tuition and to provide their own curricula but are not required to take roll to ensure that students are attending the virtual course.

Moreover, Desehotels said, Course Choice providers are allowed under Act 2 of 2012 to be paid 50 percent of their tuition upon a student’s registering for a course and the remaining 50 percent upon the student’s completion of the course.

“Since there is no provision for taking roll, I wanted to know what safeguards were in place to assure…that the proper instruction had been provided,” Desehotels said. “The answers I got from DOE can be summarized as follows: the provider can confirm that the student has completed the course by just stating that either the student has passed or has completed the required portfolio of work.

“Apparently the discretion for awarding course credit is totally in the hands of the providers and they have every incentive to do so because they get paid in full as soon as they say the student has completed the course. So the provider can be paid and the student can get credit for a course when he may not have received adequate instruction.

“I believe this is fraud and a waste of taxpayer dollars,” he said.

Desehotels said he posed that question to White several months ago. “He promised to review the matter and get back to me. He never did.

That should not be too surprising given the mindset of this administration.

BESE President Penny Dastugue of Mandeville instructed St. Tammany teacher Mercedes Schneider to cease emailing her with concerns about BESE policy and BESE member James Garvey of Metairie emailed White relative to a public records request from a Louisiana citizen, “…try to find some way to charge her for the cost of responding.”

Garvey attempted to explain his email which was inadvertently sent to the individual requesting the public documents by saying he had been informed that DOE has not been recovering the costs of documents. “I was focusing on the part of the job that they have not been doing well.”

It’s generally outside the scope of BESE members to micromanage day-to-day department operations by counting paper clips and making sure citizens are charged for information—even information transmitted electronically by a simple keystroke of a computer.

Had he simply been watching out for the fiscal well-being of DOE, he might well have said something along the lines of “Be sure that the costs of responding are recouped” instead of “Try to find some way to charge her.”

Garvey tried again to say he had heard complaints about the large “chunks of time” dedicated to responding to public records requests.

With John White and DOE, however, the biggest “chunks of time” are dedicated to denying information and withholding records from the public under the guise of “deliberative process” or by simply ignoring the requests.

Apparently there is no charge for those services.

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Undaunted by an earlier revelation that a somewhat suspect national study that gave Louisiana high marks for its education policies was less than candid, State Education Superintendent John White continues trying to change his frog—otherwise known as Americal Legislative Exchange Council (ALEC)-inspired and Teach for America (TFA)-executed education reform—into a prince by touting yet another national ranking that appears at first blush to show that Louisiana’s overall ranking leapt from 23rd to 15th over the last year.

What White conveniently neglected to report via his Department of Education propaganda arm Louisiana Believes is that same study, done by Quality Counts for Education Week magazine, gave Louisiana an F for public education achievement for the third consecutive year.

White may have neglected to report that little tidbit, but Baton Rouge Advocate reporter Will Sentell was inquisitive enough to look past Piyush’s burnished version of the report’s contents.

That may have been because only a week before a report was issued by StudentsFirst, an organization founded by Michelle Rhee, whose professional reputation has come under a cloud of controversy for suspicious scoring gains at Washington, D.C. schools during her tenure as chancellor, which ranked Louisiana first in the nation in educational policies that prioritize the interest of children.

The StudentsFirst study was debunked almost immediately when the New York Times pointed out that it focused purely on state laws and policies and “did not take into account student test scores.” Test scores are tantamount to the educational Bible for Piyush, White, et al. Test scores make up the centerpiece of the entire Piyush education reform package.

The StudentsFirst report may have been tempered both by the cheating scandal and by an almost simultaneous report by the U.S. Department of Education that shows Louisiana ranked sixth from the bottom in its public high school graduation rate—even despite White’s apparent efforts to color those statistics pretty (see Mercedes Schneider’s blog post of Jan. 12 on LouisianaVoice).

StudentsFirst has poured money into the campaigns of four of Jindal’s hand-picked Board of Elementary and Secondary Education (BESE) members—$5,000 each to Holly Boffy, James Garvey, Kira Orange Jones and Roemer.

When LouisianaVoice reported other campaign contributions in an earlier post, Boffy bristled at the perceived suggestion that campaign contributions influenced her December vote to approve Course Choice applicants when in fact we never once intimated that her vote was bought—or even rented, for that matter.

The fact remains, however, that each of five board members, including Boffy, just happened to vote to approve applications from two applicants who combined to contribute $41,000 to the BESE members: Jay Guillot of Ruston ($5,000), James Garvey of Metairie ($5,000), Boffy of Youngsville ($6,000), Chas Roemer of Baton Rouge ($10,000) and Kira Orange Jones of New Orleans ($15,000).

We’re just sayin’…

It is certainly interesting to see how Gov. Piyush Jindal and White cherry-pick the categories on which the state scored well while ignoring the F for public education achievement.

But never let it be said that LouisianaVoice is not fair (objective? Certainly not. Fair? emphatically yes). So here are the areas on which Louisiana scored well:

• Transitions and Alignment (We’re still not sure what “Alignment” is; we’re assuming it has nothing to do with automobiles. For that matter, we aren’t too sure what “Transitions” means, though we do know what a transmission is): 92.9, up from 82.1 for an A;

• School Finance Analysis: 75.3, up from 74.7 for a C.

At this point, the Louisiana Believes “news” release says (drum roll, please), “The scores in remaining categories—Standards, Assessments and Accountability and The Teaching Profession—are based on the state’s score from the 2012 report.

Wait. What? Remaining categories? But what about that public education achievement category? Did you forget that? Oh well, never mind. Here are the scores for the “remaining categories”:

• Standards, Assessment and Accountability: 97.2, for a B;

• The Teaching Profession: 72.5 (11th in the nation), for a C.

Of course, the teaching profession, in case you haven’t been paying attention, is the one area that Piyush and White have in their crosshairs. It’s the teaching profession they have consistently demonized from Day One of their so-called “education reform” efforts and yet Louisiana’s teachers, according to the very report that Jindal and White are now waving about, are ranked 11th in the nation.

Piyush said in a prepared statement (remember, the man does NOT sit for interviews in his home state; those are reserved for Fox News, CNN, the Washington Post and the New York Times as he rehearses for the national stage by throwing the National Republican Party under the bus) that the Quality Counts report illustrates that Louisiana’s education system “has gone from almost rock-bottom to number 15 in the country.”

Well, Piyush, we’re not sure in which parallel universe you reside, but if that truly is the case, you must realize that it all took place before your frilly, designed-to-benefit-your-contributors reform measures actually were implemented.

Could it be that the New Living Word School in Ruston, for example, with its lack of teachers, desks, books and classrooms, managed to pull off this dramatic surge in the natonal rankings in the past four months with its 150 vouchers approved by the Department of Education?

Or could this be just another bogus study to which the administration is clinging for some semblance of vindication in the weeks leading up to the 2013 legislative session?

After all the Piyush administration’s hyperbole over the StudentsFirst report, we are now loath to accept anything at face value that he or White distributes at Press Release Central, otherwise known as the Capitol press corps.

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