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Archive for the ‘Legislature, Legislators’ Category

State can’t wean itself of golf course involvement

Posted in Budget, House, Senate, Legislature, Legislators, Public Records, Taxes, tagged , , , , on February 1, 2011| Leave a Comment »

The State of Louisiana just can’t seem to wean itself of its involvement in the golf course business.

Even though several golf courses in Louisiana have gone under in recent months, the state continues to invest its resources into the construction and management of several facilities across the state.

Most recently, the Office of State Purchasing received proposals for the management of the Black Bear Stay and Play Lodge at the Poverty Point Reservoir State Park near Delhi.

While the proposed bid opening was on Jan. 4, no contract has been awarded, nor has any information been forthcoming as to the bidders’ identities or if the bid opening was even held on schedule.

The 7,100-yard, 300-acre course was designed by Bechtol Russell Golf of Austin, Texas, and constructed by Weitz Golf International. It is operated under the administration of the Department of Culture, Recreation, and Tourism (DCRT).

The request for proposals (RFP) stipulates that lodge personnel shall include a “first-class” hotel manager, meaning that he or she must be knowledgeable, experienced, and effective, and that the contractor shall submit a detailed monthly accounting of all transactions.

The lodge includes 17 guest rooms, a swimming pool and fenced tennis court and maintains a 61 percent occupancy rate, according to the RFP, which also said the DCRT “intends to work diligently with the successful proposer to ensure the profitability of a Stay and Play Lodge operation at Black Bear Golf Course. The economic, professional, social, and recreational elements critical to the success and image of a quality golf environment are foremost in consideration.”

The RFP also said the State Legislative auditor, federal and internal auditors of the Division of Administration “shall have the option to audit all accounts directly pertaining to the contract for a period of five years” after the contract goes into effect. “Records shall be made available during normal working hours for this purpose,” it added.

A check of the Legislative Auditor’s web page could find no instance of an audit ever having been conducted of either the Black Bear Golf Course or Poverty Point Reservoir State Park.

The Louisiana Legislature last year appropriated $301,000 for the Black Bear Golf Club and since 1997 the state has poured more than $141 million into golf courses all over the state.

The Black Bear course was constructed on private property owned by the Poverty Point Development Corp. under the auspices of the Louisiana Department of Transportation and Development as part of a retirement community developed by State Sen. Francis Thompson and his brother, Mike Thompson. Once completed, the golf course was donated to DCRT with the proviso that a “professional manager” be appointed to administer the day to day operations of Black Bear.

The manager who was initially appointed was Mike Thompson. Thompson was convicted in federal court in January 2010 for violation of the Hobbs Act and in July, he was sentenced to 18 months in the federal correctional facility in Pollock. Specifically, Thompson was charged with having an employee of the Poverty Point Reservoir District perform work on Thompson’s private property during the time the employee was on the clock at the district.

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Former Louisiana Budget Director says little has changed: politics still wins out over pragmatism

Posted in Budget, Contract, Contracts, Education, Exemptions, Incentives, Governor's Office, Higher Education, House, Senate, Legislature, Legislators, Politicians, Taxes, Transparency on January 27, 2011| 1 Comment »

The former state budget director says little has changed in the Louisiana Legislature’s spending mentality in the decade since he retired.

Stephen R. Winham, who served as the state’s budget director from 1988 to 2000 and as a budget analyst for the Department of Corrections budget, is also a vocal critic of the proliferation of professional service contracts.

“Back when the State Budget Office actually had some clout, budget analysts did a common sense review of professional services contracts,” he said. “But then Governor (Dave) Treen decided that the budget office had too much power and that no one should be questioning things his cabinet appointees did.”

Winham said after that, central oversight of state agency expenditures began to decline “and now nobody routinely second-guesses the need for professional services contracts above the agency level.”

The State of Louisiana Annual Report for 2008-2009, the latest report available, shows that the state issued more than $5 billion in contracts, fully 20 percent of the state budget. That figure is somewhat misleading because 1,083 contracts for $2.9 billion, nearly 60 percent, were in the form of cooperative endeavor agreements with other public agencies; $213.4 million was for interagency contracts, and $79.4 million was for intergovernmental contracts.

Still, the report showed there were 1,275 consulting contracts in the amount of $1.4 billion; 1,292 professional contracts totaled $178 million, 160 personal contracts came to another $7.4 million, and 1,531 contracts for social services came to $288.9 million.

Winham said during his tenure, his office presented an annual budget to the Legislature that cut funding to programs “below the line” of available funds. He said that list was a best effort at a fair representation of what people want and need from state government. “Every year the program ranked dead last on our list was funded,” he said. The program consistently ranked last by his office was an appropriation of about $3,000 for CODOSPAN (the Council for the Development of Spanish). It was the Spanish equivalent of CODOFIL (the Council for the Development of French in Louisiana),” he said. “Always last on our priority list and always funded.”

He said there were other local subsidies (now called Non Governmental Organizations, or NGOs) that were always funded, like basketball tournaments and festivals.

He said his worst experience was coming to realization that “when it comes down to a choice of politics and what makes the most sense, politics always wins. In a political environment, you can’t avoid that but when politics always supersedes everything else, it’s always frustrating.” His best accomplishment, he said, was getting the budgetary process automated and available on line. “We made the budget more accessible to the citizens.”

Given a choice, he said he would make a different career choice. “I felt I was spinning my wheels,” he said. “I would not do it over. I felt I was accomplishing things early on but I became less and less effective. The Joint Legislative Committee on Appropriations just started ignoring my presentations. Everything was just a formality,” he said.

“They say all politics are local, and they’re right,” he said. “That’s why (Gov. Bobby) Jindal goes all over the state handing out those little checks to local governments. It’s the same reason legislators want to protect their turf with those local appropriations and it’s also the reason Jindal won’t veto any of those appropriations.

“Jindal is always thinking about the next thing,” Winham said. “We need a governor who will think about the now.”

He said government is not a business. “When a candidate says he is going to make government operate like business, it’s just rhetoric. Government and business do not exist for the same purpose; government exists to serve the people and business exists to make a profit.”

Still, he expressed concerned about the Legislature’s apparent inability to rein in pork spending. He said he agrees with State Treasurer John Kennedy’s assessment that until individual legislators, working together in large numbers, begin to take their responsibility seriously, funding decisions will remain irrational, irresponsible, and reckless.

Winham said former Gov. Buddy Roemer was a strong fiscal conservative but where he cut in some areas, he added in others, so he never got credit for any cuts.

“I was surprised once when I did an analysis and found the least budget growth occurred during one of Edwin Edwards’s terms, his third term, I believe,” he said.

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Appropriations chairman opposed to selling state buildings

Posted in Budget, Contract, Contracts, Education, Governor's Office, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Prison, Privatization on January 26, 2011| 1 Comment »

State Rep. James R. “Jim” Fannin (D-Jonesboro) says he is opposed to Gov. Bobby Jindal’s proposal to sell state buildings as a means of raising needed one-time revenue in an attempt to offset a projected $1.6 billion state budget deficit this year.

At the same time, Fannin, chairman of the House Appropriations Committee said he is not averse to some other plans floated by Jindal, among them the sale of two state prison facilities in Winn and Allen parishes. Both facilities are state-owned but are privately managed by Corrections Corp. of America (CCA) of Nashville, TN., and the GEO Group of Boca Raton, Florida, respectively.

“I am willing to discuss the selling of the two prisons because they have been operating of a cost of $8 million to $9 million less than what it would cost the state to run them,” Fannin said. He added that if similar cost savings could be duplicated, he would be willing to consider similar actions with other state prison facilities.

He said selling state buildings would amount to the state’s having to pay for them twice. “We would have to pay off the bonded indebtedness on the buildings and the tenants, state agencies, would have to continue paying rent to the new owners,” he said. “That would put the state in the position of paying for the buildings twice for the benefit of receiving one-time money.”

Jindal has estimated the sale of the buildings, all built during former Gov. Mike Foster’s administration, would bring the stat approximately $400 million in one-time revenue.

Fannin also serves as Chairman of the Joint Legislative Committee on the Budget and is a member of the House Executive Committee, the Joint Legislative Committee on Capital Outlay, the Legislative Budgetary Control Council, and the State Bond Commission.

A resident of Jonesboro, his district includes all or parts of the parishes of Jackson, Bienville, Winn, and Ouachita.

Other proposals that he said he is willing to consider include privatizing the state’s PPO health care plan and borrowing from future proceeds (securitization) of the state lottery. He said news accounts that quoted him as saying he would support the use of $100 million of one-time money to help plug the anticipated budget deficit were inaccurate. “I am willing to use as much one-time revenue as the Revenue Estimating Committee sees in growth for Fiscal Year 2012-13,” he said.

“The state is projected to have $400 million in growth this year,” he said. “Even with a budget deficit, there is projected growth but that’s a far cry from making up a $1.6 billion deficit. The state has just come through what we call in business a flat year. But in business, when you have a flat year, you don’t simply close the business, you adjust. I wish we didn’t have to be where we are but the process (economy) has brought us to this point. I hope there will continue to be future growth so that we won’t have to keep kicking this can down the road.”

Fannin said Louisiana has been compared to Alabama because of the similarity in population. “Alabama has far fewer state employees than Louisiana,” he said. While acknowledging that Louisiana has a state-run charity hospital system and Alabama does not and many of Louisiana’s state workers are employed by that system, he said, “Maybe Alabama has managed to address its health-care needs without the necessity of a charity hospital system.”

He said one of his biggest concerns is in the area of professional contracts awarded by the state, particularly by the Department of Education. “It’s absurd to have so many professional service contracts out there,” he said. “Kennedy (Treasury Secretary John Kennedy) has been raising this as an issue. Many agencies get around the requirement to obtain approval of contracts of $50,000 or more by awarding a lot of contracts for just under the required reporting level. There’s a tremendous amount of waste in those contracts. I understand (Sen. Ben) Nevers (D-Bogalusa) has been critical of state contracts, too,” he said.

The Department of Education, meanwhile, has responded to recent articles about contracts awarded by that agency.

Education Department spokesperson Rene’ Greer said the printout of department contracts provided by Kennedy was misleading because many of the contracts were multi-year contracts. One, for example was a five-year contract for $193,000 for a warehouse lease but when listed it appeared to be the amount for a single year instead of being spread over five years.

Moreover, she explained, many of the contracts were federal dollars and were contracts required by the federal government. Others were paid with moneys that went to local school districts and were not direct expenditures of the department. Still others, she said, were inter-agency transfers. “By the time you calculate salaries, expenditures for the Recovery School District, and other mandated expenditures, there was really very little left in the way of discretionary funds for the department to spend,” she said.

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A layman’s simplistic approach to taxation (Installment One)

Posted in Budget, Economy, Golf Courses, Governor's Office, House, Senate, Legislature, Legislators, Revenue, Taxes on January 1, 2011| 2 Comments »

During the 1988 presidential race, Vice President George H.W. Bush proclaimed, “Read my lips: no new taxes!”

That famous line helped him defeat Michael Dukakis but when he was forced to back-track on that promise, it was his eventual undoing. Bill Clinton’s own pithy campaign slogan “It’s the economy, stupid” swept the Arkansas governor into the White House in 1992.

Now, 19 years later, Louisiana’s Governor seems determined not to repeat Bush’s mistake. Bobby Jindal doggedly clings to his stated refusal to consider new taxes—or even to reinstate repealed taxes—to help lift the state out of its current financial morass.

Ironically, his stubbornness to keep that promise could conceivably cause him problems in his own re-election bid if he and the legislature cannot work together find some alternate means of achieving financial solvency for the state.

The state will be facing a budgetary shortfall estimated at $1.6 billion when legislators convene at noon on April 25. They will have less than two months to come up with a way to keep the state afloat.

The crux of the problem is lawmakers’ propensity to spend one-time revenue on recurring expenses with no long-term plan for addressing future needs. Jindal has tossed out a plan to sell off state assets, including state buildings and two state-run prisons, but that would be a temporary Band-Aid at best. Likewise, his tentative proposal to draw against future State Lottery revenues would seem to be a desperation ploy that would do nothing to address fiscal problems in ensuing years.

Jindal’s reluctance to use the line-item veto to kill more than $500 million in spending on local projects like golf courses, councils on aging, baseball parks, tennis courts, court houses, and community centers, has done little to assuage the situation and in fact, makes him complicit in perpertrating the state’s current dilemma.

So, just where does that leave the state?

In a word, broke.

So, what are the alternatives?

How about hefty increases in the state’s tobacco tax?

How about comparable increases in alcohol taxes?

Together, they’re commonly referred to as sin taxes.

Louisiana currently taxes cigarettes at a rate of 36 cents per pack, which ranks 48th among the 50 states and 51st overall, when Guam ($3 per pack), District of Columbia ($2.50 per pack), and Puerto Rico ($2.23 per pack) are factored into the equation.

The national average is 99 cents per pack.

Only Virginia, a tobacco state, and Missouri tax cigarettes at a lower rate at 30 and 17 cents per pack, respectively. Even North Carolina, another tobacco producing state, taxes cigarettes at 45 cents per pack. South Carolina, likewise a big tobacco producer, held its cigarette tax down to a paltry 7 cents per pack until July 1, 2010, when it was raised to 57 cents.

New York, which until July 1, 2010, taxed cigarettes at $2.75 per pack, now has the highest rate in the nation at $4.35 per pack. But over-taxing any commodity can have adverse effects. Enterprising bootleggers need only go across the state line to Connecticut ($3 per pack) New Jersey ($2.70), New Hampshire ($1.78), or Pennsylvania ($1.60), return to New York, and sell them on the black market, thus depriving the state of untold millions of dollars.

Likewise, if Louisiana gets too greedy, a new, prohibitive tax of say, $1.50 per pack, might well drive Louisianians into Mississippi where the current tax is 68 cents per pack. But a tax of that amount would put the state on virtual equal footing with Texas, which imposes a tax of $1.41 per pack.

But just for the sake of argument, let’s say the legislature does man-up in this, an election year, and increase the tobacco tax to $1 per pack. What would that mean in terms of revenue, assuming the increase would not cause a corresponding decrease in the number of smokers and that citizens would not traverse the state line into Mississippi in search of cheaper smokes?

During the fiscal year 2008-2009, the last year for which figures are available, Louisiana collected almost $147.2 million in tobacco taxes, the third straight year of increases. At $1 per pack, the state would conceivably reap $407.2 million, a 176.6 percent increase. A tax of $1.50 per pack would kick that amount up to $613.3 million, barring a reduction in sales.

The Institute on Taxation and Economic Policy calls tobacco taxes both “regressive” and “declining”—regressive in that low-income smokers are the most adversely impacted, and declining because, it says, cigarette taxes are among the slowest-growing revenue sources available.

In 2006, the institute said in its 2007 policy brief, the state’s poorest smokers spent .6 percent of their income on cigarette taxes, 10 times the .06 percent spent by the wealthiest Louisiana smokers. Moreover, low-income Louisianans are more likely to smoke than higher-income taxpayers, the report said.

The same report said the state’s 36-cent-per-pack tax income will be static because the tax is not based on the retail price of cigarettes where tax revenues increase with price increases. Oddly, all 50 states have flat-rate cigarette taxes as opposed to basing them on a percentage of retail prices.

Another factor in the declining tax theory is the decrease in sales when cigarette taxes are increased. In fact, cigarette consumption by Louisianans has declined steadily over the past quarter-century, the report shows.

From a high of more than 600 million packs sold (about 132 packs per person) in 1982, sales plummeted to 410 million packs (91 packs per person) by 2005.

An increase in tobacco taxes, then, could serve as a double-edged sword: on the one hand, it might not produce a significant increase in revenue, but if it resulted in fewer people lighting up, the health benefits derived from the tax increase could be immeasurable with a lessening of the financial strain on the state’s charity hospitals.

Alcohol could be quite another story. Of the 50 states, Guam, Puerto Rico, and Washington D.C. only 12 have higher taxes on beer than Louisiana. On the other hand, only five of the 53 have lower taxes on liquor. Like tobacco, however, alcohol is taxed on the amount sold as opposed to basing the tax on a percentage of the retail price.

The Louisiana Department of Revenue reports that for Fiscal Year 2008-09, the state collected nearly $56.9 million in alcohol tax. The breakdown was $37.3 million on low-alcohol content (beer) and almost $19.6 million on high-alcohol (liquor) sales. Should the legislature decide to raise Louisiana’s liquor tax to the national average of $6.25 per gallon, it could mean an income of $49 million—more than double the present amount.

The solution, then, insofar as the state’s sin taxes are concerned, could be found not so much in an increase (though a modest increase in both tobacco and liquor taxes might well be in order) as a change to a rate based on the retail cost.

More simplistic revenue-producing suggestions from a non-CPA, non-financial analyst, layman perspective will follow in subsequent posts.

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Legislator told he can’t do business with State (but at least he asked)

Posted in Contract, Contracts, Ethics, House, Senate, Legislature, Legislators, Recovery School District, RSD on December 29, 2010| 3 Comments »

Sometimes the answer is so obvious it would seem absurd to even ask.

But ask he did.

Sen. Conrad Appel (R-Metairie), he of the $345 per month Pentagon Barracks apartment (Nov. 29 post), has been thwarted by the Louisiana Ethics Board in his effort to bid on contract work with the Louisiana Recovery School District.

Appel requested a determination as to whether his company may bid on work with the Recovery School District.

The Recovery School District was established by R.S. 17:1990 “to provide an appropriate education for children attending any public elementary or secondary school.” The district is funded with state and federal funds and is administered by the Louisiana Department of Education, subject to approval of the State Board of Elementary and Secondary Education (BESE).

The Louisiana Legislature, of which Appel is a member, passed R.S. 17:1990 and also appropriates funding for the Department of Education, BESE, and the Recovery School District.

In A Dec. 20 opinion, ethics board attorney Tracy Barker informed Appel that “the Code of Governmental Ethics would prohibit your company, if you own an interest greater than five percent, from bidding on or entering into a contract with the Louisiana Recovery School District.”

Barker added that state statute “prohibits a legislator and any person who has been certified by the secretary of state as elected to the legislature or the spouse of such person (or) any legal entity of (such) person from entering into any contract with state government.” (Emphasis ours.)

State government, Barker said, is defined as any branch, agency, department, or institution of state government. “The Louisiana Recovery School District was created by the legislature under the administration of the Department of Education, subject to the approval of BESE,” she said. “As such, the Louisiana Recovery School District is an agency of the Department of Education.”

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