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First, help us with the RFP, then you can bid on the project

March 17, 2011 by tomaswell

A major global investment banking firm that spent several weeks with state officials assisting in the writing of a request for proposals (RFP) from “qualified financial advisors” to assess the market value of the Office of Group Benefits (OGB) preparatory to privatizing the agency turned out to be the only one to submit a proposal, according to sources within the Louisiana Division of Administration (DOA).

Goldman Sachs, which helped write the specifications of the RFP, submitted the lone proposal that calls for the Wall Street firm to assess the market value of all tangible and intangible assets of OGB and to seek a buyer for the agency that oversees benefits for 78,000 people, including state employees and their dependants.

Under terms of its proposal, presented on Monday, Goldman Sachs would receive $6 million for its services whether or not it is successful in securing a buyer for the agency, one source said. “Even if they are unable to find a buyer, they still get the $6 million,” he said.

In another development that could raise eyebrows among members of the Joint Legislative Committee on the Budget, the Division of Administration, realizing it was short of time, retained the services of a New Orleans firm to work up an evaluation in time for Gov. Bobby Jindal to submit his proposed budget last Friday.

The firm, Chaffe and Associates of New Orleans, was awarded a contract for $49,999–one dollar less than the $50,000 amount that would have required the approval of the Office of Contractual Review. Moreover, when the contract was initially drafted, it was for $44,000 but was quickly amended to $49,999.

It is considered unusual, if not illegal, for a firm to assist in drawing up specifications for a bid proposal and subsequently bidding on—and winning—the contract for the work.

Gov. Jindal has indicated he feels he can use $150 million to $200 million of OGB’s current surplus of more than $500 million to help plug the state’s looming $1.6 billion budget deficit.

The way it would work, said the DOA source who asked not to be identified, the purchaser would discount OGB’s assets, giving the state $150 million to $200 million with the remaining $300 million to $350 million being passed on to the purchaser.

Jindal, in his budget proposal last week, called for the elimination of 149 positions at OGB, saying the layoffs would save the state $10.3 million, a figure disputed by Capitol News Service’s DOA source.

“The privatization of Group Benefits, if it goes through, will destroy health benefits for state employees,” he said.

Those sentiments have been echoed by State Sen. Butch Gautreaux of Morgan City.

“I am very concerned about the governor’s efforts to sell off OGB,” said Gautreaux, a member of the OGB board, in a recent email. “I sit on the board and attend the meetings. We’ve developed a reserve of over $500 million and again, the governor is looking at raiding those funds for short term and recurring expenses.”

He said OGB, with administrative costs of only 4 percent, is financially stable. Privatization, he said, “will be a catastrophic move.”

“The governor is getting some very bad advice,” said the DOA source. “He’s listening to people who have no insurance background whatsoever.”

Posted in Governor's Office, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Privatization, RFP, Request for Proposals | 3 Comments »

What is LED hiding from state auditors?

March 16, 2011 by tomaswell

It’s one thing when a news reporter encounters resistance from a state agency in obtaining public records. It’s quite another when the legislative auditor’s office cannot get its hands on crucial documents when conducting an audit of that agency.

Yet, that’s precisely what happened with the “most ethical, most transparent administration” when state auditors tried to examine the Discretionary Incentive Programs of the Louisiana Department of Economic Development (LED).

The audit report focused on three discretionary incentive programs of LED: Mega Project Development (Mega Fund), Rapid Response Fund (RRF), and the Economic Development Award Program (EDAP)/Economic Development Loan Program (EDLOP).

The Mega Fund is a special fund created to fund large-scale economic development projects to secure the creation or retention of jobs.

The RRF is also a special fund created within the State Treasury for the immediate funding of economic development projects that may be necessary to secure the creation or retention of jobs. RRF project funding requires the approval of the governor and the LED.

EDAP’s purpose is to finance publicly-owned infrastructure for business development projects that require state assistance. EDLOP is a program that provides loans for site and/or infrastructure improvements for projects. Its purpose is to assist in financing privately-owned property and improvements to promote economic development.

The audit report did not cite any financial irregularities, but five pages into the report the problem of obtaining needed documents from LED was addressed.

“R.S. 24:513(I) states that the legislative auditor’s authority to audit extends to all documents, records, and files, whether confidential or otherwise,” the report said. “However, throughout the audit, LED resisted fulfilling some of our document requests and never gave us complete, unfettered access to all documentation. For example, LED reviewed files for all three programs before allowing us to see them. For RRF and Mega Fund files, LED would not provide some of its internal analyses used in decision-making processes concerning whether to offer awards to specific businesses.”

Auditors said two meetings were held with LED Secretary Stephen Moret. In addition, the legislative auditor sent two letters requesting unfettered access to records. “However, LED cited workload issues and legal concerns in not wanting to provide us with documents,” the report said. While unfettered access to records was never granted, LED eventually provided auditors with specific documents but only in response to specific questions on each objective, a practice auditors said limited the effectiveness of their audit. “For example, problems with programs may exist at LED that we were not able to identify because of lack of access to information in files. Also, we cannot know to what extent documentation furnished us may have been compromised or is incomplete,” auditors said in their report. “In addition, these access problems also affect the efficiency of our work as the audit took longer than planned.

“According to state law (R.S. 24:513), LED should furnish all documents and files requested by the legislative auditor. LED officials should work to ensure that LED provides requested information in a timely manner when requested by the legislative auditor,” the report said.

Moret, the $320,000-a-year LED secretary, said in his response to the report that requested information should be provided but he did so with a caveat: “LED agrees that it should provide requested information, including documents and files, in a timely manner when requested by the legislative auditor in accordance with state law, including…constitutional separation of powers, and lawful privileges, as recognized in Kyle v. Louisiana Public Service Commission (LPSC).”

In that case the Public Service Commission withheld documents from state auditors in 2003 until documents could be reviewed “to determine whether or not they contained privileged communications,” Moret said. “This action taken by the commission’s counsel was reasonable, and probably required. Our review of the cases leaves no doubt that the LPSC has the right to assert both the attorney-client and the deliberative process privileges to prevent access to its records.”

Moret added that LED “acted per state law in providing requested information to the legislative auditor for this audit, and made it a priority to provide information to the legislative auditor as quickly as possible. Specifically, LED worked diligently to provide the legislative auditor with files on over 40 EDAP/EDLOP, Mega Fund, and Rapid Response projects identified as part of the audit.

“In summary,” Moret said, “the legislative auditor had access to all pertinent LED documents and a detailed body of publicly available information for the projects included in its audit. LED worked to ensure that the files were made available to the audit team in a timely manner,” he said.

The furor might well mean little were it not for Gov. Bobby Jindal’s repeated insistence at fundraisers throughout the U.S. that he has created the most transparent administration in the nation and that he has strengthened the state’s ethics laws.

The otherwise obscure controversy might give one pause to wonder what it is the administration does not want the legislative auditor—or the public—to know. How sensitive can economic development efforts really be, after all?

In fact, the LED web page touts what it considers to be three major reasons for an industry or business to relocate to Louisiana and one of those is that the state is “First in ethics disclosure laws.”

Posted in Auditor, Economy, Governor's Office, Public Records, Transparency | 1 Comment »

Money and politics: old song, different verse

March 12, 2011 by tomaswell

He insists he has the job he wants.

He insists he does not plan to run for president in 2012, though he has not mentioned the vice presidency or even the U.S. Senate.

There is no Democratic opposition anywhere on the horizon to his re-election to the governor’s office next fall. Republican State Treasurer John Kennedy, though, is sounding more and more like a candidate with each passing day.

Part of the reason for the lack of opposition is the massive war chest Jindal has at his disposal. To date, he has $9 million and counting.

Running for governor of Louisiana is not cheap. In 2007, some $26 million was spent by three candidates with Jindal accounting for $11 million of that.

So perhaps that is the reason that Jindal has been traveling all over the country to attend fundraisers instead of staying in Baton Rouge and focusing his attention to the looming $1.6 billion deficit facing the state.

Campaign expenses, as any political observer knows, long ago removed government policy decisions from the best interests of the rank and file citizenry to the New York corporate boardrooms of oil and pharmaceutical companies and Wall Street bankers.

The office of the governor of Louisiana, sadly, is no exception. It’s for sale just like any other political office.

For proof of that, one need only look at the correlation between contributions to the Supriya Jindal Foundation for Louisiana’s Children and fat state contracts.

While the motives of Jindal’s wife may well be above reproach, any corporate CEO worth his bonus can readily see the advantage of making a generous contribution to the foundation. Take Northrop Grumman, for example. Northrop Grumman made a generous contribution of $10,000 to the foundation. Was it coincidence that Northrop Grumman soon received a three-year, $11.4 million contract with the Department of Social Services to provide support services for the statewide software network.

Blue Cross/Blue Shield of Louisiana got an even better return on its investment of $100,000. Blue Cross/Blue Shield subsequently was awarded a $400 million contract to provide health coverage for state employees and retirees in a bidding process that attracted the attention of a Baton Rouge judge.

Humana had held the contract and promptly filed suit, saying that the contract awarded Blue Cross/Blue Shield was not what was bid on. Mike Caldwell, a judge in the 19th Judicial District, agreed and ordered the state re-bid the contract.

AT&T also reaped benefits from its contribution, getting several contracts for providing cellular phone service for state-issued cell phones and for telecommunication services for the state’s land line system.

All these factors make campaigning for office a high-stakes game and leaves politicians beholden to their benefactors. And that runs up the costs of running for office. That, in turn, leaves small contributors out of the loop when it comes to policy making. It certainly gives credence to the old but bitter joke about having the best government money can buy.

Just last week, Jindal was out of state once more to attend yet more fundraisers.

Attempts by Louisiana Voice to obtain travel records for Jindal during 2010 were at first ignored for nearly two months. Emails to Jindal spokesman Kyle Plotkin went unanswered. Finally, earlier this month, the governor’s office responded that it did not keep records on campaign travel costs. Those records are kept by Jindal’s campaign, his office said.

The only problem with that response is financial records were never a part of the request–not that they won’t be at some point in the future. But this time, the only thing being sought was the number of days the governor spent on travel. Those records have yet to be made available.

So much for his claims of having the most-open, most-ethical administration in Louisiana history. So much for his claims of strengthening the state’s political ethics.

The latest fundraisers, in Dallas and Houston, are part of a continuing trend of out-of-state fundraising by the governor that has left some clearly dissatisfied with Jindal’s repeated absences from the state. It might even appear that some of the luster has faded from the Jindal image of boy wunderkind.

One person, responding to the latest soiree into another state to raise campaign funds, said, “I can’t wait to learn who is running against him so I know who I am voting for.”

Said another: “So nice that Texans care so much about Louisiana to donate.”

A third asked the rhetorical question, “Who knew Texans cared who is our governor? Here’s an idea: they can have him.”

Posted in Campaign Contributions, Governor's Office, OGB, Office of Group Benefits, Public Records, Supriya Jinda Foundation, Transparency | Leave a Comment »

Socialism’s economic effects depend on your perspective

March 11, 2011 by tomaswell

By John Sachs
Guest Columnist

Is socialism good or bad? Let me give you something to think about. My answer to that question is this: it depends on who benefits from it.

There are those folks who say that socialism in any form is always bad because it is communism in its infancy.

Next, they say that almost all government programs should be privatized and administered by and for the benefit of a capitalistic, free enterprise system rather than for the general population.

Next, they say that any government regulation of free markets serves only to advance communism and that it restricts the effectiveness of any benefits to be derived from unfettered capitalism. Now hold on to that thought as I’m coming back to it.

Do you think that these folks really mean that all socialism is bad and even evil? Do you think that they really want government totally out of the free market system? The answer is a resounding NO. Then when do these same pure free enterprise advocates find themselves solidly in favor of socialism? When do they cry out FOR rather than against “socialist” programs?

We only have to look back to 2008 and the $700 billion dollar bailout of Wall Street to see a perfect example of free enterprise advocates praising socialism. When we 300 million middle-class American citizens bailed out the greedy, incompetent, scions of Wall Street, none of them complained of socialism. Certainly not! When the masses of taxpayers were rescuing the financial industry from crushing losses created by the free enterprise system, that was just fine and dandy. Socialism, for that purpose worked perfectly—for the super wealthy.

Skip forward only one year to 2009 when Wall Street had been restored to comparatively good health by the massive infusion of government capital. What did Wall Street say and do then? They said for the government to get out of their way and let them manage their industry as they saw fit. In addition, (are you ready for this?) they paid themselves billions in bonuses with the taxpayer rescue funds as though they had done something to deserve it. That defies not only logic, but also defies understanding how the American public —Republicans, Democrats, and Independents alike– could stand aside and allow this to happen.

How could 99% of American taxpayers accept this? How could our elected representatives be allowed to do this to us so they can get personal re-election donations from the super wealthy? Why haven’t we en mass recalled or impeached or better yet imprisoned (in one of their own privatized hellhole prisons) each and every official responsible for allowing this to happen? It just defies logic and understanding. Yet the unthinking American public buys into the lies we are fed as to why we should absorb capitalism’s losses and applaud those officials who caused it. To socialize Wall Street’s losses but privatize their gains just won’t cut it with me. Does it with you?

If Wall Street is too far away for you to relate to, look at Farmerville. $50 million rightfully belonging to Louisiana taxpayers went to bail out the private enterprise poultry plant there. And another $11 million in federal aid bailed out the chicken production folks. If this isn’t socialism, what is it?

The next time you hear or mistakenly think that socialism or socialistic programs or government-run programs are bad, remember the examples mentioned above. Your view of socialism as to whether it’s good or evil really depends on who benefits. That sword cuts both ways. Both the goose and the gander must be allowed or denied its benefits equally.

Do you think this topic is important? If not, then you had better ask yourself why the people of Tunisia, Libya , Egypt, Yemen, Bahrain, Iran, etc. are demanding back what is rightfully theirs but was stolen by their respective dictators and their top1% super-wealthy supporters. If by the use of purchased political favoritism and deceit, the super-wealthy top 1% of Americans continue to gain ownership of the assets rightfully belonging to the other 99% of us, then we in America are heading down the path that Egypt took.

In case you are wondering how close you are from being included in the top 1% super-wealthy in our country, understand If you don’t earn an average $2,700 per hour or $5.4 million per year, you aren’t there yet. Thus, when the federal government or a state governor and legislature sell national or state assets or privatize almost all public services, you are being robbed while at the same time you are paying for the “privilege.”

Join in demanding a stop to the privatizing of those assets that belong to you and the others of us in the 99% category.

Hurry! Congress is now in session and the Louisiana legislature convenes April 25.

So are you against socialism? Is it inherently evil? Funny thing isn’t it, that the answer is not a resounding YES. Your answer must depend upon whether or not YOU benefit. If your government gives you special benefits denied to the rest of us, then stop calling the government programs that help the rest of us “socialistic” or you are a hypocrite. The only solution is for you to refuse to accept any assistance of any kind from your local, state and federal governments. In my book, you’ll be an okay kind of guy. But a hypocrite? Not acceptable. Not at all.

Posted in Economy, Taxes, Transparency | 2 Comments »

Education MFP funding is elaborate legislative shell game

March 8, 2011 by tomaswell

Public school teachers at the bottom of the seniority ladder are being called in by their principals in parish school systems across the state to hear the bad news: because of budgetary cutbacks, their contracts will not be renewed next school year.

It’s bad enough when State Superintendent of Education Paul Pastorek insists that poor grades are the fault of the teachers and schools, not poverty or the lack of public support of education. The mindset in Pastorek’s office is not more funding, but more charter schools.

Teacher layoffs are something that should never happen in any society that pretends to make education a priority. But it is happening right now so perhaps we should take a quick refresher course in Louisiana history or civics or what some might prefer to call the Big Lie.

Think back for a moment to a campaign that took place 21 years ago. It was 1990 and Louisianans were being told that legalized gaming (that’s gaming, not gambling; gaming was the nice way to say gambling which, of course, was illegal and carried bad connotations) was the panacea for all the state’s fiscal problems.

We once thought the same thing about oil and gas but that myth was exploded in the eighties when the oil patches dried up with six-dollar-a-barrel oil (remember those days?). So legislators began looking around for other sources of revenue. Never mind computer technology, Fortune 500 businesses, or some other livelihoods with an emphasis on education and some modicum of intelligence. No, it had to be something that could be fed to the masses, something that would be in keeping with Louisiana’s third-world, banana republic image.

Presto! The idea of legalized gambling, er, gaming was born and the politicians nurtured the concept and they were oh, so slick in the way they did it. Casino gambling was too much to throw at their constituents from the get-go, so first came the Louisiana Lottery, approved in 1990 with the first scratch-off games going on sale in 1991. Skeptics immediately dubbed the Lottery as a tax for those who were not good at math.

The legislature passed riverboat gambling in 1991 once the Lottery was up and running and the following year approved a bill to allow New Orleans to build a land-based casino.

And just how did lawmakers sell the hard-nosed Baptists of north Louisiana on gambling? Why, education, of course. In December of 1986, The Louisiana Association of Educators agreed to support and work for the lottery, provided at least 75 percent of the proceeds are dedicated to education, a stipulation to which Gov. Edwin Edwards quickly agreed. That number now hovers somewhere around 35 percent, less than half of what was originally sought.

Politicians from the governor all the way down to local school board members were busy touting the financial windfall for education that was sure to come from gaming revenue. After all, hadn’t the Support Education in Louisiana First Fund been a good thing for state education?

The Support Education in Louisiana First Fund had its origins in September 1986 with a proposed amendment that would dedicate about $540 million from oil and gas leasing production in the outer continental shelf lands in the Gulf of Mexico. Known as the 8(g) fund, it has pumped more than $500 million into the state’s general fund for education since 1986. Or has it? In 2010, the Louisiana Legislature allocated $109.1 million in 8(g) funds to the Minimum Foundation Program (MFP) to fund public education in Louisiana. Or did it?

Since its inception, the Louisiana Lottery has transferred almost $2.3 billion to the state treasury but it wasn’t until 2003 that the legislature got around to passing a bill calling for a constitutional amendment dedicating lottery proceeds to the MFP. That law became effective on July 1, 2004. Last year, the legislature allocated $137.4 million in State Lottery proceeds to the MFP. Or did it?

And then there’s the $10 billion Education Jobs Fund passed by Congress last year. Also known as EduJobs, Louisiana’s share was $147 million and was supposed to be added to the MFP. But was it? Remember, this is Louisiana.

Even as many of the state’s local school boards had already factored their share of that $147 million into their budgets, Gov. Bobby Jindal on Nov. 11 announced plans to redirect the money. Just that quickly, at the whim of a “reform” politician, it was gone.

It turns out that the Support Education in Louisiana First Fund, the State Lottery proceeds allocated to education in Louisiana, and the EduJobs fund are nothing but part of an elaborate shell game and skullduggery, the political equivalent of a stage magician’s misdirection tactic. Smoke and mirrors.

Instead of allocating the full $3.3 billion to the MFP from the state’s General Fund as it had before the existence of 8(g), the State Lottery, or EduJobs funds and then adding those allocations to produce the education windfall Louisiana voters had expected, they were first subtracted from the General Fund. Only then were the combined $393.5 million in 8(g) funds, State Lottery proceeds, and EduJobs funding added back to the legislative appropriation which by that time, had shrunk to less than $3.1 billion.

The net gain to education from 8(g), EduJobs, and the lottery?

Zero. It was all a big con. Mission accomplished. Politicians 3, Louisiana 0.

So now, after the 2010 legislature gave top priority to pet projects, appropriating more than $500 million on non-governmental organizations (NGOs) such as councils on aging, golf courses, tennis courts, and community centers, and projects that should have been financed by local governments, the state has run out of money and teachers are being laid off.

And instead of budget cuts, Superintendent of Education Paul Pastorek sees the problem as bad teachers and failing schools. The more things change, the more they stay the same.

Posted in BESE, Education, House, Senate, Layoffs, Legislature, Legislators, Politicians, Revenue, Taxes, Transparency | 1 Comment »

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