Gov. Bobby Jindal has released his operating budget to the Legislature for the coming fiscal year, in which he proposes streamlining targeted government services and departments in combination with projected savings in reform initiatives to balance Louisiana’s books.
At $25.5 billion, the FY 13 Executive Budget is $61 million smaller than this year’s budget, yet Jindal once more is promising no cuts to higher education or healthcare.
The budget proposes total state funding of $14.2 billion, a decrease of $235 million compared to total state funding of $14.4 billion in FY 12.
Given that the governor isn’t going to be trying to raise taxes, the budget closes Louisiana’s $895 million spending gap with higher retirement cost for state employees, the elimination of 6,400 state jobs and carryover one time funding.
In case you don’t have time to mull through the thing as I did, this is how it breaks down in what I believe to be the most salient parts:
- Healthcare: Thirty-eight percent of the budget goes to fund heath care and social services. The healthcare budget for FY13 is $8.96 billion – up from the FY 12 budgeted amount of $8.28 billion. It’s hard to predict what new federal healthcare laws–which don’t come into full effect until 2014– are going to do to the state budget in the long term, but Louisiana is responding to growing healthcare cost with the Bayou Health system. Bayou Health is a Coordinated Care Network (CCN) in which private insurers manage healthcare for many who currently rely on the government to pay for medical services. It concentrates on preventative measures to get people to lead healthier life styles and is projected to produce $140 million in Medicaid savings. The Behavioral Health Partnership, which includes the CCN, hopes to streamline services for more Louisianians not covered under Bayou Health. Louisiana is also privatizing or consolidating some state hospitals and using $1.4 million to phase in rural health clinics to keep people from packing community hospital emergency rooms, which can be costly.
- Education: The governor is going to have his biggest fight in the coming this year with his K-12 education reform plans. Reforms includes making it easier to fire and eliminating tenure for bad teachers, diverts money from public school to private school with vouchers and expands the state’s charter school system and online schooling. The new budget continues expansion of the Minimum Foundation Program–the primary source for public school funding–with an increase from $3.39 billion in FY12 to $3.41 billion. The hike includes an increase of $27.9 million in money from the general fund in compliance with the annualized formula increase from the student count. Jindal hopes the state will be able to save money by giving parishes more control over funding and personnel. The Department of Education, under the leadership of Superintendent John White, would continue implementing its 2010 reorganization plan. It is projected that continued reorganization would result in the reduction of 58 departmental positions, saving an additional $8.9 million. The budget has no change in funding for higher education, with expected savings of $100 million to higher education in retirement expenditures in Jindal’s pension reform plan.
- Pension Reform: Jindal is hoping to save the state money and reinvest it in other areas as he tackles Louisiana’s $18.5 billion Unfunded Accrued Liability (UAL) —the gap between what the state has on hand and promised benefits. Reforms include eliminating the defined benefit model for new hires in favor of a 401K style contribution plan, changing the formula for calculating benefits to one that uses the salary average of the last five years of employment instead of the last three years, raising retirement age to 67 for those under 55 and increasing employee contributions from 8 percent to 11 percent. Reforms are projected to save $450 million in the first year. The reforms will not impact retirement for employees in K-12 schools, employees in law enforcement and other hazardous duty positions, nor benefits retirees are currently receiving.
- Correctional Facilities: In the new budget, some correctional facilities would be consolidated–J. Levy Dabadie in Pineville would be absorbed into Avoyelles Correctional in Cottonport before being sold for privatization. Other facilities would lose programs, like substance abuse centers that are deemed to be inefficient. All this is supposed to save $4.2 million in FY 2013 and $15.8 million by FY 2014.
- More Streamlining: layoffs and other expense reductions would come in the Department of Children and Family Services, Department of Transportation and Development, Office of Group Benefits, Student Financial Assistance, Governor’s Office of Homeland Security and Emergency Preparedness, Department if Public Safety and the Department of Revenue. This is supposed to initially save the state about $20 million.
So, this is what we are looking at for the coming budget. Jindal is also working on his economic agenda with bills to be introduced in the legislator to eventually augment the flow of cash into Louisiana’s coffers.
Louisiana’s debt is about $63 billion when you add up the budget gap, outstanding official debt, pension and other post-employment benefits (OPEB) liabilities and unemployment trust fund loans.