Even as it’s anticipated that state-based revenues with increase a bit, the drop in federal funds will be about a billion bucks courtesy of the changing of the Medicaid disbursement formula. Jindal is looking at a roughly 4 percent reduction. Naturally, the two areas seeing the most dramatic changes are those whose funding makes up the vast majority of discretionary general fund spending, health care and higher education – but in very different ways.
Higher education sees a stunning over 70 percent drop in general fund revenue, although when all means of financing are included it’s only about 7 percent (year-to-year; most of that already has been cut). Still, this represents a tectonic movement in the philosophy behind funding, for it represents the first overall drop in years – at $2.7 billion total funding is about the same as it was in the last year of Gov. Kathleen Blanco’s administration – with a massive shift in state sources. In Blanco’s last year, the general fund contributed $1 billion more than now, and self-generated funding (mainly tuition) and statutory dedication (some revenue from funds dedicated to higher education but mostly fund sweeps from funds unrelated to higher education) have added back in half of that each. From general fund money comprising nearly half of all spending on higher education six years ago, it’s now only about a tenth. As a point of reference, this means using as an example my home institution, Louisiana State University-Shreveport will be asked to derive about 70 percent of its revenue from tuition and fees.
One procedural change bears noting. The entire table of organization for higher education, which used to be apportioned out to each of the four systems and then on to each school, on a budgetary basis has been moved to the Board of Regents. This centralizes fiscal powers under the Regents and is a way of increasing their coordination and power over spending decisions at the expense of the systems and schools. That is a substitute for combining all the higher education systems – something Jindal has wanted to do but has been fought by the state’s higher ed establishment – into one. Also notable is that of the two state hospitals now providing health care education that will stay state-run, one, Lallie Kemp, is being tabbed to pick up much prisoner health care, leaving the other, Louisiana State University Health Sciences Center – Shreveport, in the position of what appears to be the centerpiece of state medical education.
The reduction that has come about will be at the cost of some 846 jobs, or about 4 percent of all that had existed in higher education (all currently unfilled). While these represent over 8 percent of a total of over 10,000 expected to be eliminated, that is dwarfed by the elimination of over 95 percent of all jobs in health care (including those that had been classified in higher education) as eight charity hospitals expect to be under nongovernment management by the beginning of the fiscal year (although apparently 90 percent of jobs rolling off will reappear under the new management). But because of ever-escalating demands, state-sourced spending in the area will be up about $570 million, so even with the slightly-higher federal funds drop overall spending barely is down. Some minor programmatic reductions were needed to achieve this balance, and provides still more confirmation to the wisdom of Jindal’s refusal to expand Medicaid enrollment and its initial costs and paying to have its own health care exchange.
This is a fiscal-only session, though, and by the budget’s appearance Jindal is holding back on some major changes that could provide large cost savings. The budget gives no indication of reform efforts to reduce the gravy train of compensation the typical state employee receives by asking them to pay their fair share for generous retirement benefits. As a result, the unfunded accrued liability marches higher, now estimated to mean an extra $772 million of funds paid out to cover it this year (and could have been considerably higher without the large positional cuts). Nor does make any attempt to privatize more prison operations, even as other indications are state prison populations will continue to decline with a greater effort, reflected in the budget, to use alternatives to incarceration. Those trends lead to closures instead, but the budget doesn’t foresee any of this on tap while recognizing considerable savings from the closures.
Some less savory tactics remain. Apparently, $47 million in asset sales will be used as well as $4.6 million from a settlement, all of which are nonrecurring, to pay for recurring expenditures. Some overdue tactics got employed, such as ratcheting down Department of Economic Development spending some 28 percent by further reducing and shedding some low-priority programs that served as little more than as corporate welfare or bribery to get businesses to locate and expand in the state.
But in the abbreviated session on the way, the Jindal Administration’s success in putting this forward anywhere close to its present appearance will hinge on three things. One is that a major component of the budget assumptions is the change in philosophy of state direct provision of indigent health care, yet only five of the administrative arrangements have been negotiated. The Administration must ensure that, at least by the end of April, the other three have been announced or it becomes politically difficult to defend a budget built on the basis where in just two months nongovernment administrators take over completely.
Another is a funds sweep needed in the neighborhood of $425 million to fund higher education, which may run into objections from the Louisiana Budget Reform Campaign. While it has many good and practical ideas to bring sanity to the budgeting process, the group has an odd fixation on wiping out for budgetary use the portion of what is colloquially called “one-time money” that comes from recurring and predictable sources, instead of reforming the process that creates these idle funds and thus would make them available for priority budget planning. If that idea gains traction, then serious shortfalls could result unless cuts that are not particularly politically painful get made.
Finally, the budget has no connection to the Jindal plan to swap income taxes for sales tax rate hikes and broadening, including associated changes in tax exceptions. While the stated revenue-neutral goal does mean no revenue changes, what gets presented, and certainly no later than the early part of the session, must be convincing enough to demonstrate this neutrality. Otherwise, more cutting may have to occur.
With the moves in health care administration and greater reliance on own resources for higher education, it’s clear the Jindal response to budgetary pressure continues and increasingly to be dealing with declining revenues by having the state to pay for less things directly. That represents a challenge to Louisiana’s populist political culture that as a result with this budget he either will continue transforming it or suffer a setback to that effort if he must change dramatically his submitted spending plans.