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Archive for the ‘Contract, Contracts’ Category

Notable Quotables (In their own words)

Posted in Auditor, Contract, Contracts, Governor's Office, Notable Quotables, Retirement on March 30, 2012| 1 Comment »

“The former notion that pension benefits were a voluntary gift from the employer (and thus subject to revision or termination at the employer’s sole discretion) has since yielded to an understanding that pension benefits comprise an essential component of public employee compensation and that public employees have a significant contractual interest in these benefits.”

–Legal analysis of pending retirement bills by the Dallas law firm Strasburger & Price commissioned by the Legislative Auditor’s office, citing a Louisiana court case (Bowen v. Board of Trustees Police Pension fund) which contradicts the philosophy of the administration that it has carte blanche to trifle with state employee pensions without regard to the resultant devastation inflicted upon thousands of lives.

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Legal cases in Ariz., N.H. encouraging for Louisiana state workers in looming battle over Jindal’s reverse gang rape

Posted in Civil Service, Contract, Contracts, Education, Governor's Office, Retirement on March 9, 2012| 8 Comments »

Gov. Bobby Jindal’s legal advisors, if they have not already done so, certainly should be obtaining copies of legal rulings by judges in New Hampshire and Arizona before moving forward with the governor’s radical state civil service employee retirement reform package.

If, on the other hand, the administration has not been paying attention, it could be in for a surprise if the governor’s retirement bills are signed into law and subsequently challenged in court. And it’s all but certain the issue will end up in the hands of lawyers if the legislature accepts Jindal’s recommendations to tax state employees while reducing benefits.

Leading the charge against Jindal’s reverse gang rape of some 47,000 active rank-and-file state employees is perhaps the one person in state government who is immune from being Teagued by the governor—Cindy Rougeou.

Rougeou is executive director of the Louisiana State Employees Retirement System, commonly known as LASERS. She lost no time in taking the governor to task for his plan that would require employees to work longer, contribute more (but not for their retirements), and accept less in retirement benefits.

Calling Jindal’s plan “a rush to judgment,” Rougeou says that like a mortgage, the state owes a debt to the four state retirement systems and in decades past, the state failed to meet its full obligation to pay the employer share of the benefits offered.

Despite that, she says, “The assertion that under current law, the UAL (unfunded accrued liability) could be expected to grow by $3 billion in 10 years is false.”

Jindal’s reform package does not address the teachers, school employees or state police retirement systems, she noted, adding that LASERS accounts for only about a third of the $18.5 billion total UAL of all four retirement systems. “A recent Pew report pointed out that Louisiana is one of the top 10 states for paying the actuarially-required rate,” she said.

Perhaps the most important observation by Rougeou was when she said, “The proposals are being touted as measures to attain and maintain the actuarial soundness of the pension systems. Yet funds that would be raised, for example the increase in employee contributions, are not being used to reduce pension debt, but are instead being funneled into the state general fund.”

She noted correctly that the proposed employee contribution increase of 3 percent, which also would not be applied toward greater retirement benefits, is tantamount to a tax increase assessed only against state employees.

Remember, too, that Jindal claims to have held fast to his promise of no new taxes—even in the face of this proposed tax to be imposed on state employees. But then, neither did he consider tuition increases for college and university students a “new tax.” Something to be said about consistency there.

To recap, Jindal’s retirement package, besides requiring an additional 3 percent contribution by employees, also would change retirement benefits in mid-stream from a defined benefit to a defined contribution plan and would require employees to work to age 67 before qualifying for retirement.

Rougeou said it would be unfair to compare Jindal’s proposals to changes in corporate plans because LASERS members have neither corporate plans nor social security. “They have only their LASERS defined benefit plan,” she said.

In fact, she said, LASERS members, in addition to the percentage paid by the state, pay contributions of 7.5 percent or 8 percent, depending on their date of hire whereas Social Security benefits require contributions of 6.2 percent from both employees and employers.

“The retirement benefits of current employees are part of the package of compensation they (state workers) were promised when hired; any change to that package is breaking the promise made to those employees,” she said. “Saying that promises are being kept, and keeping promises are two different things.”

Rougeou noted that in 1991, West Virginia instituted a defined contribution plan but switched back to a defined benefit plan four years later when it was found to be less expensive.

A Bloomberg National Poll released on March 9 reveals that 63 percent of respondents do not feel that states should be able to break their promises to retirees. The poll showed that using public employees as political pawns has failed to attract widespread support from a public far more concerned about unemployment than government deficits—deficits that one respondent said are a result of the economy and years of tax cuts and not the actions of public employees.

Another issue that has never been addressed by the administration is that of air time purchased by individuals. The purchase of credit, or air time, was approved by the legislature only a couple of years ago, giving employees the option of purchasing, at considerable expense to them, time that could be applied to their retirement. One individual spent $18,000 to buy four years and other $60,000 for 13 years. What will become of those investments if Jindal’s proposals become law? Will these individuals be reimbursed? Would they get interest in addition to their initial investments?

The same question holds for those who transferred military time to the state retirement system.

One man who worked for the state for 25 years before entering the private sector noted that his wife also has 25 years in LASERS, “but she is only 48.” Currently, a state employee may retire at 100 percent of his or her salary after 40 years of service. If his wife is required to work to age 67—another 19 years—she will have 44 years’ service. The question then arises, would she—and the state—be required to continue making contributions to LASERS during her final four years of employment?

As it now stands, she would be able to retire at 75 percent of her income in five years, at age 53. Under Jindal’s package, she would be required to work an additional 14 years.

“We have planned our retirement based on what we were told that retirement would be,” he said. “Now to change the rules in the middle of the game puts us way, way behind in our retirement preparations…and we are facing a nightmare.”

Echoing the sentiments of the Bloomberg poll respondent, he said, “None of this retirement mess was the fault of any state employee.” He said it was obvious “that no one in the administration has even looked at this from an unbiased viewpoint. If they did, they could be fired (Teagued).”

State Civil Service employees are eligible for retirement after 30 years of service at any age, after 25 years of service at age 55, and after 10 years of service at age 60.

LASERS provided LouisianaVoice with information that shows there are about 3,000 LASERS rank-and-file members under the age of 55 with 25 or more years of service. There are an additional 1,100 who are 55 or older with 25 or more years of service.

Of the 47,000 rank-and-file LASERS members, approximately 9,900, or 21 percent of the total, are eligible for immediate retirement.

A radical retirement reform package such as that being promoted by Jindal would, in all probability, result in massive retirements before next July should his package pass legislative muster. Such an en masse exodus could conceivably wreak havoc on the ability of state government to function.

“Many of those employees already have vested rights in their retirement benefits,” Rougeou said. “To change provisions, such as those targeted, would violate the constitutional restriction against impairing existing benefits.

“Employees who are not yet vested have contractual rights to their benefits,” she added. “The Louisiana Constitution provides that membership in the retirement system is a contractual relationship between the employee and the employer.

“More basically, the retirements of current employees are part of the package of compensation they were promised when hired; any change to that package is breaking the promise made to those employees,” she said.

“We also recognize the federal constitution’s prohibition against the impairment of contractual obligations and the passage of ex post facto laws.”

Lest one think Rougeou’s statements are the rants of some malcontent with an axe to grind or someone with a personal vendetta, let us consider those two state court cases we mentioned at the outset.

Plans similar to those being put forward by Jindal did not pass the judicial smell tests in those states.

Judges in Phoenix, Arizona, and Concord, New Hampshire, said requirements by those state that employees pay higher contributions were unconstitutional because they broke the contract between employees and the states which guaranteed workers that they would not be asked to pay additional amounts after being hired unless they received improved benefits in return (emphasis ours).

The legal precept for the rulings harkens back to the U.S. Constitution, which prohibits lawmakers from diminishing or impairing a contract.

“The state has impaired its own contract,” said Superior Court Judge Eileen Willett in Maricopa County (Phoenix), Arizona. “By paying a higher proportionate share for their pension benefits than they had been required to pay when hired, [state workers] are forced to pay additional consideration for a benefit which has remained the same.”

Across the country, Merrimack County (Concord, N.H.) Superior Court Judge Richard McNamara said the 2 percent to 2.5 percent increase in employee contributions would substantially impair the contract with employees “because it requires employees to pay additional amounts without receiving (any) additional benefit(s).”

Next door, the State of Vermont negotiated an agreement whereby state employees would be required to both work longer and pay more for benefits, but would be given more generous pensions in return.

Jindal has never once offered to negotiate with state employees or even to listen to employee concerns.

There are other cases elsewhere, as well. A New Jersey court overturned increased contributions imposed on New Jersey’s judges, saying the increases amounted to a pay cut. Judges are not very keen on pay cuts for themselves.

In California, Gov. Jerry Brown proposed higher contributions from state workers but both legal and legislative analysts have warned him to abandon that idea in favor of limiting the increase to new hires.

In the cases of Arizona and New Hampshire, district court rulings in those states certainly do not bind a court in another state like, say, Louisiana. But the arguments of the courts in those states could easily apply to similar pending litigation filed by Louisiana employees.

Robert Klausner, a Florida attorney who specializes in public pension law, is certainly paying attention even if Jindal’s Chief of Staff Stephen Waguespack and Executive Counsel Elizabeth Murrill may not be.

“Given the tenacity of the fights going on nationwide,” Klausner said, “those who are looking for support of the contract theory will seize upon these cases as examples of overreaching by government.”

Is anyone paying attention on the fourth floor of the State Capitol?

Anyone? Anyone? Bueller? Bueller? Anyone?

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Toledo Bend water sale proposal just gets curiouser and curiouser; common thread is Jindal campaign donations

Posted in Campaign Contributions, Contract, Contracts, Governor's Office, House, Senate, Legislature, Legislators, Toledo Bend, Water Sale on March 5, 2012| 4 Comments »

Much like Alice’s observation in Lewis Carroll’s Alice in Wonderland, details surfacing about the proposed sale of 600,000 acre-feet (196 billion gallons) of water from the Toledo Bend Reservoir just gets curiouser and curiouser.

In attempting to follow the time line leading up to the issuance of a request for proposals (RFP) by the Sabine River Authority (SRA) and the sudden shelving of the water sale plan to private investors, events appear to be grotesquely out of sequence.

Sufficient questions exist to raise concerns over whether the SRA, at best, may have gotten the proverbial cart ahead of the horse and, at worst, the possibility that backroom deals may have been cut in anticipation of a financial windfall for investors and the SRA alike.

Toledo Bend Partners (TBP) initially approached SRA more than a year ago about purchasing the water for resale to Texas municipalities and at the SRA’s Water Sales Committee meeting on Jan. 19, 2011, SRA Executive Director Jim Pratt informed the committee that he had received a proposal for “an out-of-state water sales agreement from the Toledo Bend Partners, LLC.”

Pratt told the committee that TBP was offering to pay $3 million up front to reserve the water rights using a graduated pay scale over four years until the project was on online to actually take water. He added that TBP’s proposal was seeking to reserve 600,000 acre-feet of water from the reservoir and that the partnership would pay a $50,000 non-refundable application fee to help defray SRA legal costs.

Pratt also informed the committee that he had already spoken with attorney Marjorie McKeithen of the New Orleans law firm of Jones Walker about representing SRA during the sale negotiations with TBP.

TBP is a Delaware-chartered entity comprised of trusts and entities owned by Billy Joe “Red” McCombs of San Antonio, Donald T. “Boysie” Bollinger of Lockport and Aubrey Temple of Coushatta and their respective families. The principals and their families and business interests have combined to contribute more than $75,000 to the political campaign of Gov. Bobby Jindal.

Jones Walker, a firm with hundreds of attorneys in at least 14 offices in eight states and Washington, D.C., is also a big supporter of Jindal. The firm itself had eight contributions totaling $22,000 and Paul Cabon of Washington, D.C., the firm’s Director of Government Relations, and wife Susan had 12 more contributions to the Jindal campaign that totaled $28,300. Various other law firm partners also contributed between $500 and $1,000 each.

The committee voted unanimously to accept the $50,000 from TBP and to enter into a professional services contract “not to exceed $50,000” with Jones Walker “for legal counsel for the out-of-state water sales project.

Eight days later, at the Jan. 27, 2011 meeting of the full SRA Board of Commissioners, the Water Sale Committee’s actions were ratified, again unanimously and without discussion.

The board on Feb. 24, 2011, unanimously approved paying out-of-town travel expenses for commission Chairman Robert Conyer and Water Sale Committee Chairman Larry Kelly to attend negotiations for the out-of-state water sale.

That was six months before a letter from Jindal Chief of Staff Stephen Waguespack informing SRA that the governor’s signature would be required for the sale of water “outside the boundaries of the state of Louisiana.” Waguespack added that any sale would not be considered “unless it is, at a minimum, the product of a competitive RFP.”

Waguespack’s letter was dated Aug. 25, the same date that the SRA board voted unanimously to approve the water sale contract with TBP and to forward the signed contract to Jindal for his signature.

Those two documents apparently crossed in the mail because a month later, on Sept. 22, the SRA board, in a sudden reversal, unanimously authorized Water Sale Committee Chairman Larry Kelly, Pratt and SRA staff to prepare and issue the RFP—a month after first agreeing to and signing a contract to sell the water to TBP.

Several individuals and firms expressed an interest in purchasing the water and each was provided a copy of the RFP by mail except for TBP which had a representative pick up a copy of the RFP at SRA offices.

Despite the expressed interest of other entities, TBP subsequently was the lone bidder on the purchase of the water at a price of 28 cents per thousand gallons or $91.24 per acre-foot. That price is substantially lower than other localities where water sale prices range from $5.20 per thousand gallons ($1,700 per acre-foot) to $8.88 per thousand gallons ($2,903 per acre-foot).

Such a spread in the purchase price by TBP and market prices elsewhere would seem to set TBP principals up for substantial profits as middlemen, leaving unanswered the question of why the SRA could not issue an RFP and negotiate directly with the end users in order to enhance its financial bottom line.

If all this is not confusing enough, there is the business of a $10 million bond issue approved by the SRA in which the time line also appears to be out of sync.

The SRA ran the requisite legal advertisement on its intent to issue $10 million in revenue bonds on Sept. 7, 2011 even though the State Bond Commission had already approved the measure at its June 16 meeting in Baton Rouge—nearly three months before.

The legal advertisement said that the $10 million in revenue bonds to finance the acquisition of “any property or facilities which the Authority is authorized to acquire,” would be secured by the sale of water to industrial customers by the Sabine River Diversion System. The Diversion System sales water to the petrochemical industry in Southwest Louisiana and those sales are separate from the proposed purchase by TBP, according to SRA management consultant Carl Chance.

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Is the bloom fading from the rose that is Bobby Jindal? Perhaps so. Let’s take a look at a few recent developments

Posted in Campaign Contributions, Contract, Contracts, Governor's Office, Health Care, ORM, Office of Risk Management, Privatization on January 17, 2012| 2 Comments »

BATON ROUGE (CNS)—Gov. Bobby Jindal’s façade of invulnerability appears to be, if not crumbling, then at least in dire need of some major touch-up work.

Barely past steamrolling an opponent who had only about $39 in campaign funds and who yet somehow still managed 17 percent of the vote, Jindal finds himself:

• at odds with the state’s attorney general;

• joined at the hip with a loser in the presidential primaries;

• linked to a firm with contracts in Louisiana that is under scrutiny for cost overruns on a contract with the State of Texas;

• seeing his Medicaid privatization program, being run by several campaign contributors, get off to a less than auspicious start.

All that without re-hashing the ongoing shell game of just who is administering his first privatization project—the Office of Risk Management—at any given time. ORM has been handed off to the third company in just over a year since initially being taken over by F.A. Richard and Associates (FARA).

Nor have we, or anyone else, for that matter, bothered to mention the undercurrent of resentment between Jindal and Lt. Gov. Jay Dardenne.

It’s a poorly-kept secret that Jindal wanted ally Billy Nungesser as the lieutenant governor so that Jindal could privatize the Office of Culture, Recreation and Tourism in order to get his hands on that agency’s $30 million in statutory dedications. Jindal, in fact, hosted a $5,000-a-pop fundraiser on Tuesday to help Nungesser pay off his $1 million campaign debt. It was one of the few fundraisers Jindal attended in-state.

Which brings up another bone of contention between Jindal and Dardenne: Jindal over the past two years has spent an extraordinary amount of time out of state—and continues to do so—attending fundraisers for himself, for other candidates, and to hawk his book.

Yet, not once has he extended the courtesy to Dardenne the second in line for the governor’s office should something happen to Jindal, of informing the lieutenant governor on those occasions when he was out of the state.

His endorsement of Texas Gov. Rick Perry for the Republican presidential nomination—along with the candidate—is in the tank. After a contentious round of debates, caucuses, primaries and millions of dollars spent by PACs by nearly all the GOP hopefuls, it appears that the nomination, barring a major misstep, is Mitt Romney’s to lose.

Speaking of Texas, the Texas General Land Office has placed tighter controls on Kansas City engineering firm HNTB which encountered cost overrun problems with its contract to manage federal grants to Texas communities hit by hurricanes Ike and Dolly.

Gary Hagood, deputy commissioner for financial management at the Texas General Land Office, last week testified before the Texas Senate Committee on Intergovernmental Affairs that HNTB’s no-bid contract may have been improperly procured and that an amendment more than doubling the contract from its original $69 million to $144 million may also have been improper.

The land office assumed responsibility for the contract after the former agency in charge, the Department of Rural Affairs, was dissolved. If an audit determines that funds were improperly spent, the state could be required to repay millions of dollars to the Department of Housing and Urban Development (HUD).

HNTB was also was the lead consultant for Perry’s proposed Trans-Texas toll road system. Since 2007, the firm was paid $112 million by the Texas Department of Transportation for various projects, including $38 million for the toll road project, which was scrapped in 2009.

Ray Sullivan, Perry’s former chief of staff who now works with his presidential campaign, is a former lobbyist for HNTB, which has made nearly $35,000 in political campaigns to Perry since 2007.

The company has at least three contracts totaling $4 million with the State of Louisiana and while it has made several political contributions under its corporate name—$10,000 to the Republican Party of Louisiana, $1,900 to Jindal, and $2,500 to Nungesser, among others—it appears to prefer making its contributions through corporate officers:

• Paul Yarossi, a director in HNTB’s New York corporate offices—$5,000 to Jindal in February of 2011;

• Michael McGaugh of Baton Rouge, a manager for a HNTB-ABMB joint venture—$2,500 to Jindal in June of 2007 and $5,000 in November of 2010;

• John Basilica of Baton Rouge, a manager for a HNTB-CPE joint venture—$2,500 to Jindal in February of 2011;

• Mary D. Hinkebein of Carmel, Indiana—$1,000 to Jindal in February of 2011. Mary Hinkebein is the wife of Keith Hinkebein, a director with HNTB Holdings, Ltd.

HNTB contracts with Louisiana include one for $750,000 with the Department of Natural Resources to provide geotechnical assistance for coastal restoration projects on an as-needed basis; $300,000 with the Department of Transportation and Development to serve as an expert witness “with specialized knowledge of professional engineering fields,” and $3 million with the Office of Coastal Protection and Restoration “to provide the means for engineering assistance for coastal restoration projects on an as-needed basis.”

The $3 million contract is a joint venture with CPE, Inc.

As if that were not enough, barely a month after being hailed as a “hallmark moment,” the first phase of the rollout of the state’s new “Bayou Health” privatized health care system for the state’s poor and uninsured has been plagued by delays, technical difficulties and unanswered questions.

On Dec. 12, Department of Health and Hospitals (DHH) Secretary Bruce Greenstein said all five health plans contracted to manage care under the Bayou Health program were ready to begin operations in nine southeast Louisiana parishes. By mid-2012, he said, the plan would cover two-thirds of the state’s 1.2 million Medicaid recipients.

“This is a hallmark moment in our state’s journey toward improved health outcomes,” Greenstein said.

Instead, callers have complained of long wait times, incorrect information and technical difficulties in dealing with DHH and health-care providers have bombarded DHH with so many questions about how the new privatized system works that DHH has begun holding daily conference calls to address concerns.

The five companies participating in the Bayou Health system include Amerigroup, LaCare, Louisiana Health Connections, Community Health Solutions and United Healthcare.

All five have made campaign contributions to Jindal either directly or indirectly:

• United Healthcare made seven contributions totaling $25,000 to Jindal between November 2003 and December 2009 and $5,000 to the Republican Party of Louisiana in December of 2010;

• Louisiana Healthcare Connections Vice-President Jesse Hunter of St. Louis, MO., contributed $1,500 to Jindal in October of 2008 and McGlinchey Stafford law firm, Louisiana Healthcare’s agent of record, made six contributions totaling $22,000 between September 2003 and March 2011;

• Amerigroup made three contributions totaling $5,500 to Jindal in November of 2003 and in February and September of 2011;

• Community Health Solutions contributed $5,000 to Jindal in January of 2011 and John Fortunato, Jr., vice-president of the corporation’s agent of record, contributed $1,000 to Jindal in May of 2007;

• Neither LaCare nor any of its officers were found to have made any direct contributions to Jindal but the company’s agent of record, Adams and Reese law firm of New Orleans, made five contributions totaling more than $19,000 to Jindal between September of 2003 and December 2008.

Both Adams and Reese and McGlinchey Stafford law firms, it should be noted, also served as registered agents for other corporations, making it impossible to tie their contributions directly to the Bayou Health participating companies.

Recently, when LouisianaVoice made a formal request of the Division of Administration (DOA) for copies of the state contract report provided the Louisiana Civil Service Commission at its monthly meeting, DOA legal counsel David Boggs replied that no such report existed.

The same request was then made to Civil Service and that agency complied immediately.

The report from Civil Service shows that the contracts with LaCare (through its parent company, Amerihealth Mercy of LA., Inc.), Louisiana Health Connections and Amerigroup are for $985.8 million each while Community Health Solutions and United Healthcare have contracts for $68 million each.

The combined amount of the five contracts is almost $3.1 billion.

Finally, there is the simmering rift between Jindal and the state’s elected legal representative, Attorney General Buddy Caldwell, over procedural differences in the ongoing litigation over the BP Gulf oil spill.

Caldwell accuses Jindal of interfering with his handling of the case while Jindal’s chief of staff Stephen Waguespack, himself an attorney, claims the governor has every right to involve himself as the state’s chief executive officer.

At issue is the method in which each prefers to pay attorneys representing the state. Caldwell wants to pay the lawyers a set rate as work is performed while Jindal wants to pay a percentage of the final judgment.

The difference could mean millions of dollars to the state.

Federal Judge Carl Barbier of New Orleans has ordered plaintiff states, of which Louisiana is one, to set aside 4 percent of what could be billions of dollars in settlement money.

Jindal, to the outrage of Caldwell, signed off on a legal document in which he agreed not to appeal any awards made for legal fees.

It is rare, if not virtually unheard of, for one to sign away rights to appeal a verdict. Such action locks the party in on whatever unpredictable decision might come down.

Caldwell said that by agreeing to the 4 percent set-aside for lawyers, Jindal is in violation of both state law and the state constitution to direct money away from the state treasury to private lawyers.

He said his attempts to settle the dispute met with accusations by Jindal’s aides that Caldwell was trying to intimidate the governor.

Waguespack countered that Jindal is not afraid to meet Caldwell.

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Notable Quotables (in their own words)

Posted in Civil Service, Contract, Contracts, Notable Quotables, Privatization, Transparency on January 11, 2012| Leave a Comment »

“We recognize that there is a delicate balance to be reached between the (civil service) commission’s duty to protect against the spoils system, either by privatization or otherwise, and the…power and authority to operate…in a fiscally responsible manner and to enter into contracts to fulfill that duty.”

–Louisiana Supreme Court ruling of Sept. 9, 2003 on City of New Orleans efforts to privatize operations of the New Orleans Cultural Center.

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