Cuts should prompt reflection on ways to prevent them

Another round of mid-year budget cuts must be endured by Louisiana, but more interesting than its causes and dealing with those solutions chosen is the reaction of one policy-maker in particular.

Given the overwhelming number of protections placed upon most spending in the state, the brunt of these reductions must fall on the two large areas of state government that rely for much of their funding on the state’s general fund, health care and higher education. The latter essentially was spared, by eliminating some unfilled jobs and by factoring increased, and higher-than-expected aggregate collected, tuition. Thus, health care took most of it, in ways to displease a number of policy-makers.

Those presumed concerned over the use of nonrecurring revenues for recurring purposes should note a lawsuit settlement was included in making up part of the $166 million the state was forecast to be short at the regular Revenue Estimating Conference meeting, plus the deficit in the Minimum Foundation Program because of increased school enrollments. Medical providers took another small haircut in reimbursement rates, but after several of these they do add up and may force cost-shifting or retrenchment of services. Some Medicaid optional programs that provided small savings will be terminated.

Subversion of popular rule raises anti-democratic worries

A troublesome development concerning Louisiana’s State Civil Service Commission points to the potential for future mischief and subversion of democracy, perhaps requiring constitutional amending to mend.

Yesterday, the SCSC considered the layoff plan for the Southeast Louisiana Hospital, which has been deemed by the state as too inefficient to continue under direct state operation. With local governing authorities, it has worked out a deal to reopen the space to be closed (some continues to stay open under a previous contracting agreement from a couple of years ago) with a bed count of about half its recent size contracted to a private operator. This deal better fits market demands, costs taxpayers less, and promises continued quality care. However, it means that all current state employees must be discharged, and probably less than half would be rehired under the new arrangement.

Part of the Commission’s constitutional duties is to promulgate rules related to layoff, found in Chapter 17 of its rules. Essentially, the Commission must study each proposed layoff plan to see that it comports to procedure, where the plan must show it carries savings and that all necessary information and procedural steps were followed. This is to demonstrate that the action is not one where layoffs are being used to coerce employees into supporting electorally a particular political faction.

Reform needed to stop annual $1 billion taxpayer drain

At least someone’s trying with serious ideas. State Sen. Elbert Guillory announced his intent to file several pieces of legislation for next year to overhaul the state’s ailing pension funds, aimed that the two that have the large majority of members, the Louisiana State Employees Retirement System and the Teachers Retirement System of Louisiana, and they are needed.

Last year, Guillory helped to spearhead efforts at reform, designed to rein in the lucrative retirement benefits regime promised by the state disproportionately generous to what employees contribute. The problem has created a situation where each fund could pay off only a little more than half of its future obligations with present funding mechanisms and predicted investment performance. This has created increasingly massive unfunded accrued liabilities that the state constitutionally must pay off by 2029.

In order to do so, since 1989 the state has had continually to increase its extra portion paid in beyond what the system was designed to do. For example, for fiscal year 2012 TRSL paid in an additional 17.73 percent for employees under its largest of four plans, above its 5.97 rate while employees paid in 8 percent. Assuming this figure across all state plans (it varies and TRSL’s regular plan’s is lower than most; for some of the smaller ones, the figure was in the 30-40 percent range), and using average salaries and fulltime equivalent employment numbers and estimated full-time equivalent number of teachers and their salaries, this means an estimate of the extra that taxpayers had to contribute to meet the generous payouts was $1.045 billion in that year, or four percent of the entire budget and enough to have restored funding for health care and higher education to 2008 levels.

End begins for charity model with crumbled resistance

In the relative scheme of things, perhaps early December, 2012 will be viewed in Louisiana political history as the health care policy equivalent of the peaceful breaching of the Berlin Wall. The ending of the era of a state-operated charity hospital system has begun peaceably, and both clients and taxpayers are better off for it.

Yesterday, the Louisiana State University System that runs the state’s 10 charity hospitals announced agreements to begin the transformation of at least three of the facilities to have their operations leased to nongovernment entities. Other deals appear to be in the works. These initial agreements come in front of the LSU Board of Supervisors for ratification later in the week.

The state will receive a payment upfront, then periodically over terms to last several years, limiting its involvement to ownership of the property and overseeing executing of the contracts. Even though it will reimburse the operators at a higher rate than for others for Medicaid – the state sets rates subject to federal oversight as a large portion of the money used comes from the federal government – apparently given the lease payments, the federal matching funds that may be drawn from them, and eliminating most of the expenses associated with running a hospital, this still will result in substantial savings to the state.

Coming college crisis should spur reevaluation of spending

It has become fashionable in some quarters to lament the departure – some by retirement, most by taking jobs elsewhere – of higher education leaders in Louisiana, often blamed on a tough budgetary climate of reductions in the neighborhood of $425 million since 2008 (but a far lower amount compared to 2006). But not only are these concerns largely misplaced, they in fact present an excellent opportunity to improve higher education delivery.

For the salient fact, derived from an admixture of both (my 26-year employed career in higher education) experience and common sense, is that on the academic side most university administrators (those above the department level) earn in excess, sometimes far more, of what abilities they actually bring to the table, or of needs of the job, or even if the job is one that actually contributes meaningfully. Thus, people leaving these positions provide the chance for fresh faces to assume their duties, and usually at a salary level more commensurate with what the job requires.

That’s more important than ever these days in Louisiana higher education, where the beginnings of a fundamental transformation are in place, away from an input-oriented model to one focused on outputs. Some of these officials had come in under the past paradigm, or risen through the ranks under that paradigm, that is part and parcel of the higher education bubble that will force major changes and retrenchment in public higher education that, to some minor extent, Louisiana policy-makers already have recognized. The newer leaders hopefully understand this while a number of the departed undoubtedly do not and will find themselves unprepared for a contracting environment.