Bobby Jindal, the Rhode Scholar who rode into town on the crest of a billion-dollar surplus nine years ago this month, rode out 12 months ago leaving the state wallowing in red ink and now it is learned that he inflicted even more fiscal carnage on his way out the door.
And knowing the way in which he and his final Commissioner of Administration, Kristy Nichols, juggled the books, it’s not at all unreasonable to think that Jindal’s final example of fiscal irresponsibility may well have been an intentional act of political chicanery carried out to buy him time so that his successor would be left with the mess to clean up. (Of course, Kristy didn’t become commissioner until Paul Rainwater left in 2012, but that does not change the fact that a lot of dollars were moved around—swept—before and after she was promoted.)
Hey! It’s not that far-fetched. He did it with the Office of Group Benefits. He did it with higher education. He did it with the LSU Hospital System. Boy, did he do it with the hospital system—with a contract containing 50 blank pages, yet!
By the time Jindal left office, virtually the only state agency left with a shred of credibility and integrity was the office of the Legislative Auditor—and that’s largely because the office has complete autonomy and is independent from outside political pressure, particularly from the governor’s office.
And now, coincidentally, it is that same Legislative Auditor who has issued a damning AUDIT REPORT that reveals a major SNAFU (if that’s truly what it was) in which the Jindal administration “misclassified” a $34.6 million default payment made by Northrop Grumman Ship Systems made in 2011.
The payment was made to Louisiana Economic Development after the shipyard failed to meet required hiring quotas but instead of using the money to pay off equipment the state had financed for Northrop Grumman, the audit says the Division of Administration “swept” the money when it was balancing the budget. As a result, the state has already paid some $2 million in interest and administrative costs on the equipment, and is potentially on the hook for some $6.2 million more.
Bobby and Kristy loved the process of “sweeping” agencies of excess funds lying around in order to try and plug gaping holes in the state budget that dogged Jindal every single year he was governor. “Sweeping” for funds is something like picking up crumbs off the floor in an attempt to gather enough to make a bundt cake.
“Since the debt could not be immediately defeased (a provision that voids a bond or loan) because of the limited prepayment options, the funds should have been segregated into a sinking account for defeasement of the debt, not a statutorily dedicated fund account that could be swept by legislative action,” the audit report says.
But the Louisiana Office of Economic Development (LED), then headed by $300,000-a-year Director Stephen Moret, failed to do that and, presto! The funds got swept by the Jindal Housecleaning Service and as a result, the state “will continue to incur additional interest and administrative costs until the debt (on the equipment) is defeased,” the audit reads. “If not defeased before the Oct. 2022 … the state will incur more than $6.2 million in additional interest and administrative costs.”
LED entered into a Cooperative Endeavor Agreement with Northrop Grumman in the early 2000s. The company had acquired Avondale Shipyard in Jefferson Parish and Northrop Grumman, under the terms of the deal, agreed to maintain employment levels of some 3,500 jobs a year with an economic impact of $1 billion. In return, the state agreed, among other things, to issue bonds to finance more than $34 million worth of cranes and equipment that would modernize the shipyard.
But dreams and schemes are made of fragile things. Northrop Grumman fell short of its job requirements and LED notified the company in early 2011 that it wasn’t living up to its employment obligations. Northrop Grumman agreed to settle with the state for $34.6 million, which represented the acquisition cost of the equipment. It wired the money to LED in March 2011, the report says.
But the state didn’t use the money to pay off the debt on the equipment, nor did it set the funds aside in an escrow account to pay it off in the future. Instead, it “swept” the money into the Louisiana Medical Assistance Trust Fund, was enacted during the 2011 session to help supplement the state’s Medicaid program.
But don’t worry, folks. It’s just another example of the superb financial management of the state’s resources about which Jindal would boast—in Iowa, certainly not Louisiana—during his comical quest for the Republican presidential nomination in 2015, his final year I office.
And now the state finds itself hanging out to dry while trying to come up with that long gone $34.6 million, plus about $2 million in interest and administrative costs.
In a written response to the audit’s findings, Commissioner of Administration Jay Dardenne pointed out that Jindal’s actions, while ill-advised, were nonetheless legal. “The (Jindal) administration’s decision to use the funds for other purposes was not prohibited by the terms of the (agreement) with Northrop Grumman,” he says, noting that the Legislature approved of the financial maneuver.
Perhaps, but we all know the definitions of the legal thing and the right thing are sometimes poles apart. In this case, those responsible knew what that $34.6 million was for and they chose to do what was legal but not what was right.
The question now is does the Office of Risk Management carry excess coverage that would allow the State to make a claim for recovery of the money on the basis of stupidity? Should Jindal, Nichols, and Moret be asked to dig deep into their pockets to come up with the money?
Nah. It’ll never happen.