There’s nothing left to be said other than to say Bobby Jindal is bat guano crazy.
The Louisiana Office of Group Benefits (OGB) was cruising along in 2011, providing virtually complaint-free quick turnarounds on medical claims for state employees, retirees and their dependents.
But then Bobby Jindal saw a way to undercut premiums in his privatization scheme which allowed the state to be obligated for less in its share of matching premiums so that Jindal could rake in some extra cash to cover his backside, aka budget deficit.
The result, as just about everyone who follows this sham of an administration knows, was that the $500 million reserve fund was all but wiped out.
Bobby Jindal, after having first jerked $40 million in funding for state colleges and universities, reversed himself again by taking $30 million from a federal hurricane recovery fund.
Bobby Jindal has shrunk the state’s rainy day fund from $730 million when he took office to $460 million and a $450 million fund to subsidize companies for investing in the state has evaporated as is the $800 million balance in the Medicaid Trust Fund for the Elderly.
And after giving away billions of dollars in tax breaks, incentives, rebates and exemptions for business and industry in an effort to spur economic development, we learned today (March 18) that Louisiana’s unemployment rate was third highest in the nation. http://www.politico.com/magazine/story/2015/02/bobby-jindal-campaigning-114948_Page2.html#.VQoeJ005Ccw
The one constant in all this is the Louisiana State Lottery, which since a 2004 Constitutional amendment has dedicated proceeds to the Minimum Foundation Formula (MFP) for public education.
Since the lottery’s approval by voters in 1990 and its implementation in 1991, the lottery, which is mandated to transfer 35 percent of proceeds to the state treasury, has contributed $2.8 billion to the state.
In 2014, sales were $450 million and $161 million of that was transferred to the state.
Also, 2014 marked the 13th consecutive year that the lottery has transferred more than $100 million to the state.
Why do we tell you all this?
Well, only because the administration of Bobby Jindal is currently entertaining the notion of selling bonds that guarantee future State Lottery profits in order to raise some $467.7 million in one-time money to help plug a $1.6 billion hole in the state budget.
Wait. What? Sell the State Lottery?
Yup.
State Treasurer John Kennedy tells LouisianaVoice that the administration is “seriously considering” two separate proposals to take over the lottery and to pay the state one time money.
The two proposals were from Wall Street banking firms Goldman Sachs and Citigroup. While Citigroup did not specify an amount, Goldman Sachs said, “Based on lottery revenue growth of at least 1.5 percent annually, the state could raise approximately $428 million and preserve a minimum contribution to the MFP of $160.2 million.” Goldman Sachs Presentation – March 2015
Citigroup Presentation – March 2015
With 13 consecutive years of receipts of more than $100 million and total receipts of $2.8 billion since 1992, $428 million in quick cash appears to be a terrible deal for the state—not that Bobby Jindal gives—or ever gave—a flying fig about this state.
Let’s first take a look back at the history of lotteries in Louisiana.
In 1868, the Louisiana Lottery Co. was authorized and granted a 25-year charter after a carpetbagger criminal syndicate from New York bribed the Legislature into approving the lottery and establishing the syndicate as the sole lottery provider.
Because it was an interstate venture, 90 percent of the syndicate’s revenue came from outside Louisiana. Because it was so profitable, when efforts were made to repeal the charger, bribes to legislators ensured the effort’s failure.
Ten years after it was approved, Louisiana had the only legal lottery remaining in the company. When Congress passed a prohibition against operating lotteries across state lines, the Louisiana Lottery was finally abolished in 1895. When it was disbanded, reports of ill-gotten gains and bribery surfaced. http://www.library.ca.gov/crb/97/03/chapt2.html
But even more worrisome are the histories of the two Wall Street banking firms who submitted proposals for taking over the Louisiana Lottery.
And even though Kennedy said Commissioner of Administration Kristy Nichols has said the lottery won’t be sold, the mere fact that two proposals for just that scenario have been simultaneously submitted by Goldman Sachs and Citigroup cannot be considered as coincidence. Both investment banking firms pointed that similar actions have been taken by Oregon, Florida, Arizona and West Virginia.
And what about the integrity and professional ethics of the two companies?
That’s a fair question, so let’s look at the records.
Goldman Sachs:
- Goldman Sachs received some $12.9 billion in federal bailout money from American taxpayers in 2008 and promptly fired 1,000 U.S. workers and shifted their jobs to the cheaper Singapore market. http://thinkprogress.org/economy/2011/06/28/255724/goldman-sachs-outsource-1000-jobs-singapore/
- After receiving that $12.9 billion as a reward for helping wreck the U.S. economy and plunging the nation into a deep recession, Goldman Sachs doled out $111 million in bonuses to top executives. http://www.dailymail.co.uk/news/article-1339220/Goldman-Sachs-pay-111million-bonuses-despite-taking-billions-bailout-money.html
- Six years after the bailout, in 2014, Goldman Sachs agreed to pay $1.2 billion for its failure to disclose risks on the mortgage bonds it sold before the financial crash. http://www.wsj.com/articles/goldman-sachs-close-to-settling-fhfa-lawsuit-for-more-than-1-billion-1408737438
Citigroup:
- CitiGroup received two emergency infusions from taxpayers—$20 billion and $25 billion—to help prop up the reckless bank. http://www.bloomberg.com/news/articles/2011-01-13/citigroup-45-billion-rescue-based-on-fear-of-the-unknown-barofsky-says
- But there was an untold story behind the Citigroup bailout. http://wallstreetonparade.com/2012/08/the-untold-story-of-the-bailout-of-citigroup/
- The Financial Industry Regulatory Authority fined Citigroup $15 million for its failure to adequately supervise its research analysts’ interactions with bank clients. http://dealbook.nytimes.com/2014/11/24/citigroup-fined-15-million-for-failing-to-properly-supervise-analysts/?_r=0
- Citigroup last year agreed to pay $7 billion as part of a Department of Justice settlement for the bank’s role in the sale of risky, mortgage-based securities. http://www.usatoday.com/story/money/business/2014/07/14/justice-citi-7-billion-dollar-settlement/12616741/
So now the administration suddenly receives “unsolicited” proposals for the sale of the Louisiana State Lottery from two Wall Street banking firms with checkered backgrounds. (But admittedly, it would be difficult to find a Wall Street bank—or banker—these days that is not under a similar cloud.)
A Division of Administration (DOA) source said Bobby Jindal feels that, unlike his desire to sell the remainder of the tobacco settlement in yet another desperate effort to raise one-time revenue, he would not need legislative approval to sell the State Lottery. “We feel legislative approval would be required, but the governor apparently feels otherwise,” Kennedy said.
The State Treasurer added that he felt if Bobby Jindal does intend to sell the State Lottery, “he will wait until after the legislative session has adjourned and then direct the Lottery Corporation to take the action.”
The nine lottery corporation members are appointed to staggered terms by the governor. Kennedy serves as an ex-officio member. Three members, Christopher Carver ($2,000), Heather Doss ($1,000), and Lawrence Katz, combined to contribute $8,000 to various Jindal campaigns since 2003.
Louisiana Voice 
Incredible.
Let’s hope someone (hello legislators?) would take it to the courts and let a court decide whether Jindal has the authority to do this or not.
There are several mechanisms for valuing a business operation when contemplating its sale. As an FDIC examiner, I always felt the most useful one was using a multiple of 8 to 12 times annual after-tax cash flow. If the lottery kicked off $161 million last year to the state (which is a net figure because 10% of gross sales fund the lottery’s operations), that should infer a purchase price (i.e. net up-front payment to the state) of between $1.3 billion and $1.9 billion. No wonder Nichols and crew balked at a mere $468 million. Can anyone update me on new valuation computations or formulas that render my purchase price range inapplicable? I’ve been “out of the game” for a while, but it’s hard for me to believe things have changed that substantially. Maybe GS and Citigroup both figured we’re all just a bunch of dumb country hicks (or REALLY, REALLY desperate).
The next governor might be working out of a portable trailer. I can envision a for sale sign in the near future on the Governor’s Mansion.
No, Tom. You’re supposed to wait until April 1 for April Fool’s jokes. That’s funny, though. Just a couple of weeks early.
I sincerely question the legality of this in addition to the obvious stupidity of using another gimmick rather than making any effort to simply fix the budget. Both G.S. and Citigroup recommended other possibilities also and all are gimmicks designed to NOT solve our structural budget problem, but rather to continue to punt it down the road.
Can’t you just see the legislature buying into enough of these schemes to push the problem forward (at a cost, don’t forget. G.S. or whoever does the deals will make a pretty penny and debt isn’t free anyhow) I can just see our state “leaders” at sine die slapping themselves on the back for “solving” another big problem in the belief the public is too stupid to see they have done nothing of the sort.
Look at our history. For at least the past 16 years we have used windfalls to close budget gaps rather than addressing the structural imbalance between recurring expenses and recurring revenues. Had we done so, think of all the good things we could have done with those windfalls – our infrastructure is absolutely crumbling, for example. If you were a major industry wishing to take advantage of what Louisiana has to offer, wouldn’t a good transportation system be nearly as important as a bribe? We bitch and moan about the retirement systems UALs – think of how much we could have pumped into that.
Don’t get me started…This is truly ridiculous and the joke will be on us if we let this happen – and it won’t be a funny joke, it will be a sick one.
Would you please send this to Fox News? They love dear Bobby.
We have a STRUCTURAL DEFICIT. This conclusion has become indisputable – even the Administration has quit denying it since the national ratings publicly declared it so.
We have a STRUCTURAL DEFICIT after seven years of this Administration, and they have made it worse instead of trying to resolve it.
Simply, it means we cannot (and have not been) pay(ing) for what we spend – despite constitution prohibitions to the contrary.
Yet, again, there is nothing in the Governor’s Executive Budget that even tries to address this continuing, serious problem. To the contrary, this Budget and other ideas, such as the one discussed in this Blog and the sale of the rest of the Tobacco Settlement revenue stream, will MAKE THIS PROBLEM LARGER, MORE SUSTAINED AND MUCH MORE DIFFICULT TO FIX.
This is a legacy the Governor is trying to leave us, as he eyes the door on his way out – an INTRACTABLE, LARGER STRUCTURAL DEFICIT.
Legislators and citizens, please speak up and out against this – it will cripple us for years to come.
He’s got less than a year left in office, so he’s in a hurry to get all of his bad ideas in place.
Every day it’s something worse.
First Bobby sells real property assets (buildings, etc), then he sells state services (hospitals, Group Benefits, etc), now he wants to sell long term financial assets (Tobacco, Lottery)…what next the Legislature ?!?
No, wait…
I for one Louisiana voter,can hardly wait for his xxx to get out here.GW gave him a taste of DC, now he wants to try his hand at screwing up the entire United States.
He will be POTUS in his dreams and delusions. I think that he will probably try to get him a pulpit somewhere to speak out, and at that point will slowly drift into irrelevancy. Don’t be overly surprised if at some point he tries to work his way into LABI if he stays in Louisiana.
I do believe this little bast$$d would sell his own mother if the price was right. He has already sold his own soul, and has put our collective souls up for sale on a number of occasions. What happened with OGB was just wrong.
Hello Legislature, you had better find your balls real fast. The little bast$$d is not up for re-election this fall (and I doubt he could win even if he was). However, a number of you guys and gals are. If you don’t start standing up to him and taking care of your constituents, a number of your constituents are going to take care of you come election time. The state’s watching. Enough is enough when it comes to this damned foolishness and destruction of our quality of life.
Folks need to tie him up with enough lawsuits to keep him distracted through January 2016.
I’m completely flabbergasted. Maybe he should simply sell the entire state of LA to Texas.
Why do these Republicans get elected and re-elected?
Jindal needs to go exorcise himself.
Good one! He’s definitely possessed.
I recognize Jindal’s economic plans for Louisiana. It’s a plan used on some third world colonies, where untaxed outside corporations suck natural resources out of the ground (and pollute), while residents are made poor, as they try to survive on what’s left after paying the entire tax burden. Meanwhile, social services get cut to the bone.
Apart from the morally bankrupt nature of this system, it makes no economic sense for the state because corporations have to come here to get at our resources, and they will pay taxes for that privilege. Shifting their tax burdens onto poor citizens doesn’t create an economic boom for the state; it just increases outside corporate profits. So, the winners are outside interests and politicans like Jindal who accumulate donations and favors.
Look what happened in NJ when they privatized the state lottery
http://news.yahoo.com/christie-private-lottery-deal-helped-friends-missed-targets-224654071–politics.html