Jindal Embarks On High-Stakes Structural Gamble

It’s often said here on the Hayride and in other sources covering state government that when budget cuts come in Louisiana, the state’s constitution all but dictates them to come in health care and higher education. In today’s Times-Picayune John Maginnis shows why in an excellent column dealing with Jindal’s attempts to rein in the somewhat-autonomous spending by the state Board of Elementary and Secondary Education and the Civil Service Commission.

Maginnis calls those two entities, alternatively, the “real” state government and “the trunk” of Louisiana’s governmental tree, as opposed to the branches, “setting the course of growth that the administration and the Legislature have little choice but to follow”…

Under the Constitution, BESE sends the Legislature a spending proposal, the Minimum Foundation Plan, now approaching $4 billion, which lawmakers cannot amend but must either accept or reject. If it’s rejected, the previous year’s plan takes effect.

The governor and Legislature have less say over salaries for state employees, as Civil Service rules require that practically all of 60,000 classified workers get 4 percent annual pay raises, unless an agency makes a case for no raises for all to avoid layoffs.

Between the MFP and salaries for classified workers, BESE and Civil Service, largely unknown to the public, control the lion’s share of state spending. Given the unprecedented fiscal shortfall in the next two years and his own ambition to reshape government, this governor wants more flexibility — some say control — in dealing with both groups. The trunk has yet to bend his way.

Instead, both panels have defied the governor’s austerity edict with proposals that would send more money to local school districts and that would continue to tie his and his Cabinet’s hands on compensating state employees.

The MFP budget, as Maginnis notes, is around $4 billion at present (the Jindal administration marks MFP at $3.3 billion in its FY2011 budget), contributing to an average public-school teacher salary of some $47,000 per year. Of the 61,000 classified employees in the Civil Service system, the budget of which in FY2008-09 was some $4.4 billion, the average salary is $41,000 or so, with unclassified employees (about 31,000 of them statewide) earning an average salary of about $61,000. The growth in salaries within Civil Service over the past five years has been a pretty impressive one; in FY2004-05 classified employees averaged $33,540 and unclassified employees $50,323; while the money flowing through the state’s coffers in the aftermath of Katrina made for a nice gravy train to raise state employees, now that it’s over and budget cuts must come nobody seems to be suggesting that salary cuts might have to be absorbed.

To compare the $8 billion or so in the combined MFP and Civil Service budgets, in FY09 the state’s higher education budget was $4.5 billion and the Department of Health and Hospitals budget was $8.4 billion (it’s dropping to $7.73 billion as proposed for the coming year). So when Jindal is faced with a billion-dollar budget shortfall and he can’t address the state’s payroll costs on K-12 teachers and Civil Service employees, colleges and hospitals get creamed.

This is why Jindal keeps rejecting the incremental plans to change how Civil Service pay raises work. Better than 95 percent of Civil Service employees get 4 percent pay increases every year; the governor wants to give department heads the ability to allocate what will be scarce financial resources toward compensating the best employees with an eye toward retaining them; the state employees who are average or below can often be replaced with new hires at smaller salaries and given the current healthy private-sector trend away from employees working for the same employer throughout their careers, state government would likely benefit from the new ideas and fresh blood such turnover might engender.

Maginnis describes Jindal’s challenge:

Last week, Jindal rejected the commission’s alternative offer for a pay-raise range between 3 percent and 5 percent, so the blanket 4-percent-or-nothing remains in effect.

The governor wants his department heads to be able to grant raises from 0 to 3 percent for workers doing satisfactory jobs and a few points more for those judged to be outstanding. The key is the ability, in budget years like this, to withhold raises for most employees, but to pay more to best performers in order to keep them.

It would take a constitutional amendment, which conservative legislators will propose, to give the governor more latitude in dealing with the commission on pay-raise policy.

Civil Service commissioners warn such executive discretion would cause a return to the spoils system of politicians playing favorites with the state payroll. Start down that path, they say, and you might as well dust off the Deduct Box, for state jobs would be for sale.

Despite the horror stories, the core value of Civil Service and its role in a well-run government are not threatened by a more realistic pay-for-performance model. Nor should be the contributions of the vast majority of talented, conscientious state employees.

Blogger Jeff Sadow goes further in describing Jindal’s Civil Service gambit:

In essence, Jindal rejected the certainty of a good plan for the probability of a great plan. This is despite the fact that for the upcoming fiscal year the two would have been indistinguishable in most cases as huge projected budget deficits would mean layoffs again for most if not all agencies in state government. Thus, Jindal intends any change not only for short-term convenience for him, but also that which will last over the long term.

As for the MFP spending, Jindal had proposed a freeze in funding for it as a means of dealing with the current shortfall – which put him at loggerheads with the school superintendents around the state. The BESE board sided with the latter, and forwarded a request to the legislature for a 2.75 percent budget increase – which comes to $100 million the state doesn’t have. A state of war now more or less exists between the governor and BESE – he appoints three members to that 11-member board, and recently had to remove Tammie McDaniel, an appointee from Oak Ridge, for voting against Jindal and state schools head Paul Pastorek.

Meanwhile, elected BESE member Chas Roemer has made headlines for suggesting that Louisiana close the Department of Education altogether and reopen it with an entirely new business model as part of the streamlining effort Jindal had asked for; Roemer’s suggestion generated some buzz but little movement to date, and it appears that the establishment will resist heartily any effort to alter a program of grinding out raises and budget increases year by year regardless of economic or fiscal conditions within state government.

It should also be mentioned that any substantive changes to how the MFP or Civil Service system work would require constitutional amendments. There are proposals for those being made by Republican legislators this year, and the debates on them will likely constitute some of the loudest fireworks at the upcoming legislative session.

Also for reference, the average per capita income in Louisiana in 2008 was about $36,000, meaning the average teacher or state employee in the Sportsman’s Paradise not only has better job security, a pension program, copious health benefits and virtually guaranteed raises to date – he or she also makes at least 15 percent more per year than a typical private-sector worker. So when the state begins to run a budget shortage and Jindal looks to spread the pain around in an effort to avoid devastating cuts to certain areas, this is what he’s talking about.

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