Feeds:
Posts
Comments

Archive for the ‘Budget’ Category

OGB privatization in Jindal’s budget will mean massive layoffs but it’s really important that he pleases ALEC

Posted in Budget, Governor's Office, Layoffs, OGB, Office of Group Benefits, Teague, Transparency on February 7, 2012| 4 Comments »

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.

Read Full Post »

OGB sale proposal included in Executive Budget to be presented to joint legislative committee next Thursday

Posted in ALEC, American Legislative Exchange Council, Budget, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Politicians, Transparency on February 3, 2012| 8 Comments »

Don’t say we didn’t warn you.

As recently as Jan. 31—less than a week ago—we told you that Gov. Bobby Jindal is following the playbook of the American Legislative Exchange Council (ALEC) almost to the letter.

That playbook 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.

Each of these has already been done or is in the process of being done.

Next Thursday, the administration will present the governor’s Executive Budget for Fiscal Year 2012-2013. Included in the budget will be the proposed sale of the Office of Group Benefits (OGB) for $189 million, to become effective Jan. 1, 2013.

The committee meeting is scheduled to be held at 9:30 a.m. in House Committee Room 5.

The $189 million apparently is the price tag derived by Morgan Keegan, the Memphis banking firm that stands to reap a $750,000 bonus over and above the $150,000 for assessing OGB’s value if it is successful in negotiating the OGB sale at the $189 million price.

Morgan Keegan was itself only recently sold after being fined $210 million nearly two years ago by the Securities and Exchange Commission for misrepresenting critical information to investors.

Whoever ultimately purchases OGB will take with them the $500 million surplus now carried on the OGB books which the new operators will use to pay claims.

LouisianaVoice has also learned that once the sale of OGB is successfully negotiated and the agency is taken over by private industry, premiums will rise by approximately 10 percent.

There are other proposed changes coming that we can tell you about next week.

We can tell you this much, though: It ain’t gonna be pretty.

Read Full Post »

Jindal economic strategy: consultant shows up for $150,000, privatizes a viable state agency and collects $750,000 bonus

Posted in Budget, Ethics, Governor's Office, Health Care, OGB, Office of Group Benefits, Privatization, Transparency on February 2, 2012| 1 Comment »

Here’s a can’t-miss formula for success that Gov. Bobby Jindal is asking us to accept with no questions asked:

First, hire a consultant who was hit with a major fine for misleading clients—we’ll call him Shady—to find employment for a second consultant—we’ll call him Sneaky—who was also fined for misrepresentation.

Then a third party enters the picture to contract with Sneaky to broker the sale of a major asset even as Shady continues to negotiate for full time employment for Sneaky.

Set the contract at $150,000 just for Sneaky to show up to make a determination of the asset’s financial worth.

Then, if the asset sells, well, let’s give Sneaky a nice fat bonus of say, $750,000 for providing “unbiased advice” on the bidding process and contract negotiations.

We will repeat that last part: Sneaky is expected to give “unbiased advice” in its efforts to collect an additional $750,000.

Remember, too, that Sneaky has already been fined $210 million for misrepresenting critical information “exactly when investors needed it most.”

That is precisely the scenario that currently exists with the contract between Morgan Keegan brokerage and the Louisiana Division of Administration regarding the proposed sale of the Office of Group Benefits (OGB) and its $500 million surplus.

After the state’s attempt to engage Goldman Sachs at a cost of $6 million to market OGB to private investors—you may remember that Goldman Sachs helped write the request for proposals (RFP) for the OGB sale and then submitted the only proposal—fell through over demands by Goldman Sachs that it be indemnified from any potential litigation.

A new RFP was then issued and Morgan Keegan was the low bidder last July.

But Morgan Keegan had recently agreed to pay $210 million to settle allegations that it had fraudulently marketed mutual funds filled with subprime mortgages and artificially inflated the funds’ prices.

So Regions Financial Corp., Morgan Keegan’s parent company, decided to divest itself of the troublesome brokerage firm.

So, who did Regions retain to explore “strategic alternatives” for Morgan Keegan?

None other than Goldman Sachs which, less than an year earlier, was fined $587 million over claims that it had misled investors in collateralized debt obligations linked to subprime mortgages.

Morgan Keegan eventually sold, but at a price that was less than the value it had recorded on its financial books.

Now comes word that if Morgan Keegan, which is being paid $150,000 to determine the financial value of OGB, will rake in a bonus of up to $750,000 more if OGB is subsequently privatized.

Commissioner of Administration Paul Rainwater promised that Morgan Keegan, which contributed $1,000 to Jindal’s 2007 election campaign, will provide “unbiased advice” in its efforts to help market OGB.

In what is becoming an all-too-familiar refrain, OGB board Chairman James H. Lee attempted to obtain a copy of the Morgan Keegan contract from the administration in November but was told it was not finalized.

The contract, however, was signed by Morgan Keegan’s managing director on Oct. 31 and an OGB representative on Nov. 2.

Something’s a little rotten here. It’s a lot like efforts to obtain the infamous Chaffe & Associates report last year. Jindal hired Chaffe to make a quickie determination of OGB’s book value but then Rainwater refused to make copies of the report available to legislators and the media.

When a copy of the report was finally “leaked,” it had dates that were inconsistent with receipt dates provided LouisianaVoice by Rainwater and the contract was not date-stamped as are all documents received by the Division of Administration (DOA).

Lee said he has been trying since August to obtain a quorum of the OGB board of directors but at least one of the governor’s three appointed members is absent for each meeting. Normally, there are five members appointed by the governor, but two of the appointive positions are currently vacant.

“It is my opinion that they (the Jindal administration) have the full intention of selling off OGB as quietly as possible before anyone realizes what is going on,” Lee said. “Should this happen, the active and retired employees of the state will see reduced benefits and the taxpayers will see increased costs,” he added.

Former State Sen. Butch Gautreaux (D-Morgan City), a former member of the OGB board, said he is unclear as to why Jindal insists on privatizing a state agency that saves the state money. He opined that the governor may want to dismantle OGB and its $500 million surplus in order to more easily criticize President Barack Obama’s national health-care program.

“He needs to destroy it (OGB) for his personal ambitions,” Gautreaux said.

That should come as no surprise to anyone who has watched this governor.

His first agency to privatize was the Office of Risk Management (ORM). The state paid F.A. Richard & Associates (FARA) of Mandeville $68 million to take over ORM. In less than a year, the FARA contract was amended by $6.8 million. Two weeks later, the contract was transferred—without the prior written consent of the state, as required by the contract—to a second firm and months later it was transferred to a third firm, again without the legally required written consent.

ORM was the first of a succession of agencies that Jindal has either tried to privatized or announced intentions to do so. They include state prisons, the state’s Medicaid program, OGB, and education.

The one thing that Jindal has never once explained to the voters of Louisiana is this:

If things are so badly run in this state, if things are so screwed up, if state employees are so stupid and lazy and teachers so pitifully inept and impossible to fire “short of selling drugs in the workplace,” (Jindal’s words, by the way) how did we ever make it this far?

How is it that one day we woke up as a state and realized that only one man had been anointed with the answers to all our ills, just one man who could solve the problems of state retirement, prison costs, Medicaid administration, public education, higher education, employee health benefits, and state agency risk exposure?

How is it that one man is so incredibly blessed with such vision, such gifts of perception, insight, understanding and infinite wisdom? How indeed?

We will probably never know the source of all his wonderful attributes. After all, as the Shreveport Times recently observed, Jindal has spent four years “limiting or avoiding extended interviews about his programs with journalists outside Baton Rouge, not to mention fighting efforts to open his administration’s records to public view.”

Considering the fact that the Times has consistently carried the water for the Republican ideology, those critical words are especially surprising—and harsh. The paper further observed that Jindal made dozens of trips to northwest Louisiana but most of those were controlled settings, so access was limited. “Fortunate is the hometown journalist who can ask a follow-up question before a governor’s aide whisks away his boss,” the paper said.

Earlier this week, the Baton Rouge Advocate noted that the Zachary and West Feliciana Parish school systems, two of the better performing systems in the state, are facing financial disaster because of Jindal’s refusal to increase funding through the Minimum Foundation Program for public education. It’s no secret that public education is subordinate to his obsession with funding charter schools, vouchers and virtual schools.

Only weeks after it was announced last March that ORM would be privatized, an ORM employee was in a restaurant in downtown Baton Rouge around 4:30 p.m. when Jindal aides strode in and informed her that she would have to leave because Jindal had a fund raiser scheduled at the restaurant at 5 p.m.

“I paid for my food and my drink and I’m going to stay right here until I finish,” the defiant employee said.

She did, and on her way out, she met Jindal as he was entering the establishment. Jindal approached her with his hand extended and asked, “How are you today?”

“Not well at all,” was her curt reply. “You just privatized my agency and put some good people out of work.”

Jindal blinked and mumbled, “I’m sorry” before moving past her.

Sorry, Guv, we aren’t buying it. To be truly sorry, one must first be compassionate and one must be sincere. It also helps to have a little class.

Read Full Post »

Notable Quotables (in their own words)

Posted in Budget, Governor's Office, House, Senate, Legislature, Legislators, Notable Quotables, Prison, Privatization, Transparency on May 18, 2011| 4 Comments »

“It seems to me like we’re selling prisons to cover a hole this year but we haven’t addressed covering the hole next year.”

—Rep. Page Cortez (R-Lafayette) on Gov. Bobby Jindal’s proposal to sell state prisons.

“Until the day I was arrested, I never knew there were ‘for-profit’ prisons.”

—Unidentified writer commenting on nola.com story on prison privatization.

“If the sheriffs don’t want to participate, we’ll go back to the original plan, go back to the private sector.”

—Gov. Bobby Jindal, reacting to Avoyelles and Rapides sheriffs Doug Anderson and Charles Wagner, Jr. who denied Jindal’s announcement that they had agreed to purchase state prisons in their parishes.

Read Full Post »

Gov. Jindal’s Land of Smoke & Mirror Budgeting

Posted in Budget, Civil Service, Education, Governor's Office, Higher Education, Layoffs, Retirement, Revenue, Taxes, Transparency on March 18, 2011| 2 Comments »

Editor’s note: Periodically, LouisianaVoice invites guest columnists to contribute to our blog. The following essay was written by Don Whittinghill, consultant to the Louisiana School Board Association.

It is also posted on the association’s website at http://www.lsba.com/.

Last week, Gov. Bobby Jindal released a budget proposal for the 2011-2012 fiscal year.

Legislators reacted swiftly. Some of them accused Gov. Jindal of balancing the state’s operating budget on the backs of college students, state workers, and the poor.

Demonstrations were staged on the Capitol steps.

The proposal was designed in the face of a financial chaos that might well be a politically orchestrated stage on which to carry out an ultra conservative agenda.

First, state universities were told by the governor that they would have to endure another 35% in cuts. Then, Superintendent Paul Pastorek told newly elected K-12 school board members that it would be likely only a 10% cut. Two days later the governor proclaimed it would be less than 10%.

Secondly, the official revenue estimates (made March 7) were for revenues to amount to $7.8 billion. The actual revenue collections for 2010 amounted to $7.1 billion.

It should be recognized that revenue estimates are made several times each year for the past 17 years. Over the 19 years for which estimates are recorded the Legislative Fiscal Office calculates that it has underestimated revenues in 16 of those years. The March estimate is that used for casting the state budget. Over those 19 years the fiscal authorities calculated an error rate, on the low side, averaged 7.7%. For each percent of underestimating revenue the fiscal office reports $96 million for each percent underestimated. That suggests the current pre-legislative estimate of revenue could be $739 million below actual when all is said and done.

When one looks into the presented budget one finds that vouchers for fewer than 2,000 New Orleans school children will increase to $10 million. These vouchers went, last year, to slightly more than 1,600 and the size of the average voucher was around $4,400. Current MFP budget letter shows the average per pupil contribution of state funds is less than $3,500.

The administration declares that it is protecting Pre-K-12 education. But, there is no adjustment of inflation, retirement system contributions rise more than 5%, health insurance coverage increases, school bus fuel costs have grown more than 20% in the last month and are projected higher. The legislature decreed that local school districts must pay for private school bus transportation that had formerly been paid by the state. The $5,000 per year stipend granted by the state for Nationally Certified Teachers has now gravitated to the local school boards to pay. Now, the administration proposes to fund TOPS scholarships by raiding a state trust fund that generates money for K-12 education.

As more and more public schools are taken over by the state and converted to charter schools that divert money from local public schools, Gov. Jindal presents as part of his budget cutting the selling of prisons to private firms. In the case of prison or privatized management of charter schools state money is diverted to the profit line. It is unclear how such diversion of funds can make for better service or lower costs.

Most folks would consider such a series of budgetary moves to be CUTS to Pre-K-12 education!

The administration declares it will not grant state employees, including teachers, a pay increase. But its budget calls for raising retirement contributions by 37%. This governor seems to think that raising college tuition is not the same as a tax paid by students and their parents.

The shock and awe doctrine that the administration has established in the media is, it seems, calculated to bring popular acceptance of policy that would not be accepted under more normal circumstance. In the game of craps such a move is known as a “come bet.”

The proposition that half of the dollars needed to fund the TOPS program would come when voters approve another Constitutional Amendment that has not even been introduced to the legislature would certainly raise an eyebrow or two if the average business did so.

The administration says it will cut over 4,000 state jobs to save money. The fact that over half of them were jobs not filled during the 2010-2011 fiscal year suggests a misunderstanding of the term cash flow.

An important ingredient in the state’s revenue stream is derived from the oil and gas industry. Many headlines, over the past year, have signaled huge shortfalls in mineral income to the state. However, a look at current official reports reveals some interesting facts:

The Revenue Estimate underlying the budget calls for an average price for crude oil pegged at $84.65 per barrel. Oil and gas industry estimates for the coming year average $101.77 per barrel. Each dollar per barrel difference amounts to $12 million in state revenue. That means if business forecasts are correct, the Revenue Estimating Committee is underestimating by over $200 million.

In 2010, Louisiana’s production of oil on state lands and waters increased over that of 2009 by 626,243 barrels. State natural gas production also significantly increased by 2.2 billion cubic feet. Much has been made of oil producers’ tax relief creating a shortfall in severance tax revenue. According to the state revenue department 2010’s severance tax increased $73 million or 10.7% over the prior year. It should also be recalled that severance taxes are dwarfed by other state revenues that flow from oil and gas production. Well over $1.1 billion was paid out to land owners (including the state) in royalties on production from their lands and in other expenses subject to sales taxes. The income collected by Louisiana’s folks is subject to income tax (lessened by depletion allowance deductions) which is substantially more productive for the state treasury. In the Haynesville Shale gas field, more than 4,000 acres of state-owned land is leased for production.

One might also consider the administration/legislative attitude toward the “Rainy Day Fund.” The Center on Budget and Policy Priorities, a Washington, D.C-based think tank says they are designed to be used when times are bad. In Louisiana, the debate over just what constitutes a fiscal “rainy day” has fixated budget planners for more than a year. About $644 million remains in the Budget Stabilization Fund. One might question whether or not these times are sufficiently bad to justify tapping those funds. While there are restriction that revolve on repayment into the fund, that law can be changed about as easily as the administration-proposed raid on trust funds to fund TOPS.

It appears as if there is a real need to evaluate administration shock-doctrine financial claims. If the administration is right, that leaves another option to be considered other than that proposed.

Moody’s Investors Service, in January, reported that Louisiana’s debt per capita was $4,799 with by far the majority being unfunded pension liability.

Still another D.C.-based think tank, The Tax Foundation, ranks states on a per capita tax basis. Louisiana, in the most current ranking, is 42nd lowest taxed in the nation. One might ask: does Louisiana face a spending problem or is it short of revenue to meet real needs?

When the smoke enveloping the newly proposed budget clears, and the mirrors start to reflect reality, perhaps the chaos being manufactured will be clearer. The priority of state spending then might be seen less on enhancing the Governor’s national image and more on meeting public needs.

Read Full Post »

« Newer Posts - Older Posts »