Posted in Governor's Office, Health Care, Higher Education, Notable Quotables, Retirement, Transparency on March 30, 2012| 7 Comments »
“We must act now in order to keep our promise to workers, protect critical services like higher education and healthcare and protect future generations from more debt and higher taxes.”
–Gov. Bobby Jindal, in his response to a study by Dallas law firm Strasburger & Price which said virtually all the provisions of Jindal’s proposed state employee retirement reforms are unconstitutional.
Posted in Auditor, Governor's Office, Retirement on March 30, 2012| 4 Comments »
Gov. Bobby Jindal appears to be whistling past the graveyard.
Until Friday, precious little in the way of any explanation of the plethora of retirement bills introduced during this legislative session has emanated from the fourth floor. Instead, the governor, as is his wont, has allowed his lackeys in the House and Senate to carry the water for him.
Not even protestations from Cindy Rougeou, executive director of the Louisiana State Employees’ Retirement System (LASERS) or from Frank Jobert, executive director of the Retired State Employees Association of Louisiana (RSEAL) could evoke a response from Jindal.
The mood throughout the administration appeared to be “Let them eat cake.”
But now a prestigious Dallas law firm has weighed in on the retirement bills that would have state employees work longer, pay more in contributions and get less in retirement benefits, saying, in effect, that virtually all the proposals are unconstitutional and most likely would not stand up in court.
Suddenly, the governor is squealing like the proverbial stuck pig.
And who does he squeal to? None other than the one publication in Louisiana that can be counted on to blithely endorse any utterance from Piyush Jindal: The Baton Rouge Business Report.
Why the Business Report? That’s easy. Publisher Rolfe McCollister, Jr., has poured $17,000 into Jindal’s campaign coffers since 1973. Julio Melara, president of Louisiana Business, Inc., under whose application the Business Report was incorporated, has chipped in another $7,500 since 2007. Stephen McCollister, the registered agent for Louisiana Business, was good for another $1,000 since 2007.
“Opponents to reform threaten lots of lawsuits,” sniffed the governor in his official response through his PR firm,…er, the Business Report.
“Every time the status quo knows reform is on the horizon, they sue or threaten a lawsuit,” he continued. “The report is filled with errors and bases their conclusions on cases from other states which are completely unrelated to Louisiana case law.”
Okay, let’s break these paragraphs down. First of all, the Legislative Auditor’s office went out of state to retain a law firm that does not have a dog in this hunt. Strasburger & Price, a Dallas law firm with offices in Austin, Houston, San Antonio, New York and Washington, D.C., certainly has no axe to grind in the Louisiana retirement issue.
Second, Jindal says the Strasburger report bases its conclusions on cases from other states. We respectfully refer the govern to Rachal, Regan v. State (2009), Hare v. Hodgins (1991), Parochial Employees’ Retirement System v. Caddo Parish Commission (1996), Segura v. Frank (1994), Board of Commissioners of Orleans Levee District v. Department of Natural Resources and Bourgeois v A.P. Green Indus, Inc. (2001), all Louisiana cases specifically cited in the Strasburger report.
Insofar as the 18 cases cited from other states, almost without exception, those cases turned on the U.S. Constitution, so it would be difficult to claim they are unrelated to Louisiana case law since the Strasburger report cited both the state and U.S. constitutions as the basis of its conclusions.
Of course, Jindal, as might be expected, claims the proposed reforms are constitutional because the legislature “has a constitutional mandate to maintain a sustainable retirement system—an obligation which exists both to protect the retirement system and taxpayers.”
No argument there. But tell us, Governor, what became of that constitutional mandate for the legislature to maintain a sustainable retirement system? The record, we believe, shows clearly that it was the legislature, not state employees that played a major role in digging this financial hole.
This is the same constitutional expert governor whose “most ethical administration in the state’s history” stumbled out of the starting gate and was tagged for an ethics violation fine early in his first term.
Jindal then proceeds to roll out a laundry list of supposed errors contained in the report, accusing the report’s authors of relying on a “vague conceptual understanding of the proposals, without an actual analysis of the bill text.”
Really? How would he know there was no “actual analysis” of the bill?
Jindal claims benefits are not retroactively changed, that the proposed 3 percent additional employee contribution is not being directed into the state general fund and that the additional 3 percent contribution is not a tax (though former House Speaker Jim Tucker said otherwise last year).
Those claims have been circulating all over the state for weeks from internet bloggers to legislators opposed to the bills. It seems strange that only now does the governor’s office make any effort, albeit a feeble effort, to refute the Strasburger study and to explain the bill.
Would someone from Jindal’s office now step forward and prevail upon the governor to explain why the administration has allowed these so-called “misconceptions” proliferate for so long with no effort to be “transparent and accountable?”
And would you please do that through some medium other than the governor’s personal PR firm, aka the Baton Rouge Business Report?
Or he can just continue whistling past the graveyard.
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.
Posted in Auditor, Governor's Office, House, Senate, Legislature, Legislators, Retirement, Teague on March 30, 2012| 16 Comments »
A comprehensive legal analysis commissioned by Legislative Auditor Daryl Purpera concludes there is substantial legal precedent for successful litigation against the state should Gov. Bobby Jindal’s sweeping retirement bills be passed by the legislature and subsequently signed into law.
That, of course, raises yet another issue altogether: will Purpera be “Teagued” for having the audacity to order such a study that takes issue with the governor who has already demonstrated in no uncertain terms that dissent will not be tolerated.
Purpera works for the legislature, which would normally indicate that he is protected from the wrath of the governor but in light of Jindal’s curiously dominating stranglehold on a weak-willed, spineless and compliant legislature, who knows?
The report also said that any litigation “would likely ensue in state as opposed to federal court due to Eleventh Amendment restrictions upon suing states in federal court.” It did, however, note that exceptions to the Eleventh Amendment restrictions could allow plaintiffs to bring suit in federal court “under certain circumstances.”
The analysis was performed by the Strasburger & Price law firm of Dallas and which also has offices in Houston, San Antonio, Austin, New York and Washington, D.C.
It cites case law in no fewer than 18 other states where courts overturned legislative efforts to alter state retirement programs in mid-stream.
It also cited the Louisiana Constitution, which says, “Membership in any retirement system of the state or of a political subdivision thereof shall be a contractual relationship between employee and employers, and the state shall guarantee benefits payable to a member of a state retirement system or retiree or to his lawful beneficiary upon his death.”
It also said that Louisiana courts employ a four-part test in determining whether a contract violates the state and U.S. constitutional prohibitions on impairing the obligations of contracts:
• The reviewing court must determine whether the state law would, in fact, impair a contractual relationship;
• If the court finds impairment, it must determine whether the impairment is of constitutional dimensions;
• If the state regulation constitutes a substantial impairment, the court must determine whether a significant and legitimate public purpose justifies the regulation, and
• If a significant and legitimate public purpose exists, the court then determines whether the adjustment to the rights and responsibilities of the contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation’s adoption.
Courts, the report said, generally defer to the legislature when dealing with economic regulation between private parties but “such complete deference is not appropriate when the state is a party to a contract because its own self-interest is at stake” as is the case of contracts with state employees.
The U.S. Supreme Court ruled that the state “must overcome a significant burden to justify drastic changes in contractual pension benefits. Simple presumptions of reasonableness or necessity, which are at the core of legislative deference, cannot stand.”
It also has held that if contract rights are taken for some public benefit, “there must be just compensation.” That ruling would seem to apply to the bill to increase employee contributions by 3 percent, the proceeds of which would go into the general fund and not to help erase the pension’s unfunded accrued liability or to increase retirement benefits.
That same U.S. Supreme Court ruling said, “A state may not refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors.”
The 38-page report, released Wednesday by Purpera’s office, says the proposed legislation “poses issues under both the United States and Louisiana Constitutions” which protects public pension benefits from impairment caused by diminished benefits, from depriving employees of property rights without due process, from the divesting of public employee benefits without just compensation and against public officials for enforcing unconstitutional laws.
It also said the state “must overcome a significant burden to justify drastic changes in contractual pension benefits. Simple presumptions of reasonableness or necessity, which are at the core of legislative deference, cannot stand.
“The pending public pension bills are most vulnerable to both U.S. and Louisiana constitutional Contract Clause scrutiny, though the other potential challengers have significant merit, as well,” the report’s executive summary said.
HB 56 and SB 52, which would increase employee contributions by 3 percent, “face an initial potential state constitutional challenge as tax bills,” the report said, in that the State Constitution prohibits the legislature from enacting tax bills during a regular session convened in even-numbered years. “These bills seeking to increase employee contribution rates may be characterized as ‘tax’ bills—a ‘tax’ being defined as a monetary charge imposed by government on persons and others to yield public revenue.
“If the state deposits funds from increased employee contributions into the state general fund, a stronger argument exists that they yield public revenue and thus that the legislation constitutes a ‘tax’ bill prohibited in the 2012 session (and) may also violate IRS rules for qualified benefit plans,” the report said. “Any legislative attempt to increase employee contribution rates faces almost certain litigation and a reasonable likelihood of being held unconstitutional.”
While the Strasburger paper did not say so, the imposition of the additional 3 percent contribution as a condition of continued employment doesn’t seem too far removed from the nasty words kickback and extortion: “I’ll pay you X dollars, but you gotta give back Y dollars to go into the company bank account, or we’ll just hire someone else.”
“As currently drafted, each bill, except the one merging two pension systems (The Louisiana Teachers Retirement System, LTRS, and the Louisiana School Employees’ Retirement System, LSERS), retroactively impairs or diminishes accrued pension benefits contrary to the guarantees” contained in the U.S. Constitution.
The bills addressed by the Strasburger study include those which would:
• Increase the minimum retirement age;
• Increase employee contributions;
• Iincrease the number of years used to calculate final employee average compensation, and,
• Merge the two independent public retirement systems.
The executive summary said challenges would most likely allege violations under Article X, Paragraph 29 of the Louisiana Constitution which protects public pension benefits, the Contract Clause within both the Louisiana and U.S. Constitutions (which prohibits contract impairment due to diminished benefits), the Taking Clause of both the state and U.S. constitutions (prohibiting the reduction of public employee benefits without just compensation), and the Due Process clauses of both documents for depriving employees of property rights without due process.
The report said that while the bills proposing to merge LTRS and LSERS appear benign on the surface in that they seek “only a merger of administrative functions,” they also “contain a directive to study a future merger of plan assets, suggesting the legislature’s intent to merge the funding aspects of the two systems in the not too distant future.
“Any such merger attempt could, in contrast, raise the likelihood of being challenged as unconstitutional,” it said. “This would have a negative effect on the actuarial soundness of the disparately-funded system,” which, it said, is constitutionally “guaranteed.”
Specifically cited in the report were, other than in Louisiana, cases in Alaska, Arizona, Colorado, Delaware, Florida, Hawaii, Illinois, Kansas, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, Pennsylvania, Rhode Island, Tennessee, Washington and West Virginia. In each state, courts overturned attempts to alter state employee retirement benefits, deeming them to be contracts that could not legally or constitutionally be impaired.
“Therefore, we conclude that House Bills 53, 55 and 56 and Senate Bills 51, 52, 42 and 47, in their current form, face a likelihood of being challenged in the courts,” the executive summary said.
“If such challenges occur, we think it more likely than not that a court will rule each then-adopted bill as unconstitutional to the degree such bills affect the accrued benefits of current members and retirees.”
Posted in Civil Service, Governor's Office, Layoffs, Privatization on March 28, 2012| 6 Comments »
Gov. Bobby Jindal’s Privatization Express continues to roll on at the expense of 47 employees of the Louisiana Office of student Financial Assistance (LOSFA) scheduled to lose their jobs next June.
The State Civil Service Commission is scheduled to consider the layoff plan of LOSFA Executive Director Melanie Amrhein when it meets Tuesday and Wednesday of next week.
The Civil Service Commission in January rejected a plan to lay off about 60 information technology employees at the Department of Health and Hospitals (DHH) because of questions about a proposed privatization contract for those services.
Similar action by the commission could throw the LOSFA schedule off just as it did with DHH.
Certain administrative positions are scheduled to be retained but Amrhein said her agency does not yet have a complete list of those who will be retained.
The cover letter to Civil Service Director Shannon Templet, however, did say that two unidentified student financial aid administrators have been exempted from the layoffs and will remain on a temporary basis.
“Because we are moving all operations under a contracted vendor, the experience and guidance of these employees, who have combined 40 years of experience, will be essential to the smooth and successful transition of these operations,” Amrhein said in her letter.
LOSFA administers several programs, including the state’s Taylor Opportunity Program for Students (TOPS), TOPS Teacher, Go Grants, State Matching Funds Grants and the Guaranty Agency which handles the Federal Family Education Loan Program (FFELP), among others.
Nineteen employees in the FFELP Outstanding Loan Portfolio, which administers loans totaling more than $1.6 billion, are among the 47 who will lose their jobs. The remaining 26 to be laid off work with the FFELP’s Outstanding Default Portfolio which has more than $251 million in defaulted loans.
New originations of FFELP ceased on June 30, 2010 and all new federal Stafford and PLUS loans have been originated under the federal William D. Ford Direct Loan Program since July 1, 2010.
The proposal to be considered by Civil Service says that loan processing and issuance fees paid on new loans have resulted in a $1.4 million per year loss.
Following the invitation to bid that went out in February, bid submissions for a new privatizing contract are scheduled to be reviewed in April and the contract awarded sometime after that with layoffs scheduled for June 30.
“We have a contract with Sallie Mae Guarantor Services for utilization of software to operate the loan program in compliance with federal laws,” Amrhein said. “This contract will be terminated once the transition to the successful bidding contract is complete.”
The proposal that will be submitted to Civil Service next week notes that the agency has “finite revenues” because no new loans are being originated.
In attempting to justify the privatization contract, the proposal said that:
• a reduction of overhead was necessary to maintain support to state programs;
• an attrition of staff leads to ineffective administration and further strain on generating revenue;
• contracting services will potentially result in higher performance on portfolio while allowing the agency to retain a higher net income with reduced overhead;
• the timeline provides an orderly conversion from in-house functions to managed contractor operation;
• adversely affected employees will be given time to fine new employment.
Just as with the Office of Risk Management—the only state agency to actually be privatized thus far—and the Office of Group Benefits, none of the justifications given for privatization provided any specifics as to how contracting services will benefit anyone other than the contractor.
In the case of Risk Management, the state paid F.A. Richard and Associates (FARA) more than $68 million to take over that office. About seven months into its contract, FARA sought and was approved for a $6.8 million contract amendment, bringing its fee to just under $75 million.
Two weeks later, it was learned that FARA had been sold to an Ohio company. Last fall, a third company took over the contract in apparent violation of the state contract that specifically prohibited any transfer of contractual services without “prior written consent” from the Division of Administration (DOA).
A public records request by Capital News Service for a copy of written approval on either transfer resulted in an email from DOA saying that no such document existed.
Following Civil Service’s rejection of the proposed contract calling for the University of New Orleans to take over information technology services from DHH, UNO President Peter Fos said he was disinclined to sign the proposed contract until his concerns “are addressed and resolved to my satisfaction.”
The IT workers were informed in a December meeting that their jobs would be gone in January. Upon returning to their work stations, they found they had been locked out of their computers. Access to the computers was restored after the Civil Service Commission’s actions but the IT employees then found that their requests for leave were receiving blanket denials by supervisors.
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Louisiana Voice 