Governor Jindal's Remarks On The FY 2009-2010 Executive Budget
Below are Governor Jindal's prepared remarks from this morning's press conference to outline the FY 2009-2010 Executive Budget.
Strategic Reductions in the FY 09-10 Executive Budget
Streamlining Government While Protecting Core Services
I am going to layout an overview of our FY 10 Executive Budget. This is only an overview. Angele Davis will be presenting the budget in just a few minutes for several hours - so I know you will have plenty more time today to hear about the details of what we are presenting.
There are two major pillars that provide the framework for how to view this budget.
first - There are the immediate challenges facing our state, which must be addressed in this FY 10 budget in order for us to present the legislature with a balanced budget today.
The second pillar is the long term reforms we must make in order to downsize state government so we can live within our means and meet the much more severe budget challenges that await us just down the road.
These are the two major pillars that provide the framework for this budget we are announcing today. Of course, much attention has been paid to the federal stimulus legislation and how that affects the budget we are about to present.
It is very important to understand, especially while looking at our proposed FY 10 budget, that federal stimulus funds are temporary funds. As such, they cannot be thought of as a permanent part of our state's budget.
Indeed, it is accurate to think of these temporary federal stimulus funds as a bridge connecting the two pillars I just laid out. These temporary federal funds give us time to transition from where we are today - meeting our immediate budget challenges - to a more sustainable size of government that is prepared to meet our more severe budget challenges in FY12.
Federal stimulus funds give us time to reform how the state runs so we can cut spending, ensure we are spending efficiently, and live within our means.
First Pillar: Facing Immediate Budget Challenges In FY 10 Budget
Our proposed FY 10 budget includes some important reforms and consolidations that are imperative to meeting the immediate challenges facing our state and balancing our budget.
As you know, even as Louisiana's economy continues to out-perform the national economy and the South, we are not immune to the current national economic downturn.
National economic forces, combined with significant declines in the prices of oil and natural gas and the leveling off of the post-hurricane economic boom, have contributed to significantly lower revenues to state government - requiring meaningful reductions in the proposed FY 09-10 budget.
We know we are not alone in our budget challenges this year and into the future.
The Center on Budget and Policy Priorities (CBPP) reports that 43 states are facing deficits for the next fiscal year.
Thus far, at least 22 states have approved or are proposing cuts to programs for seniors and the disabled.
In higher education, at least 32 states have implemented or proposed cuts to public colleges and universities.
Furthermore, at least 26 states have cut or are proposing cuts to K-12 and early education.
In health care, at least 28 states have proposed or implemented cuts for public health programs.
All together, 14 states have already passed measures to increase taxes and six governors are considering a tax hike to make up for these budget deficits.
Here in Louisiana we are not immune to the effects of this uncertain national economy and our FY 10 budget reflects this reality.
In short, our proposed FY 10 budget includes serious reforms that make government do more with less.
It includes targeted cost savings across state government that, in many cases, came as a result of reforming policy, consolidating offices and functions, and downsizing or eliminating programs and halting the expansion or creation of new programs.
While protecting critical services to make the best use of taxpayer dollars, the FY 10 Executive Budget reflects reductions in all means of finance.
This budget proposes General Fund Direct funding of $8.094 billion, a decrease of $1.390 billion, or 14.7 percent, compared to $9.475 billion in General Fund Direct funding in the FY 09 existing operating budget.
This budget proposes Total State funding of $12.810 billion, a decrease of $1.857 billion, or 12.7 percent, compared to Total State funding of $14.667 billion in FY 09.
This budget includes $13.909 billion in Federal Funds, a decrease of $1.034 billion, or 6.9 percent, compared to Federal Funding of $14.944 billion in FY 09.
Last, this budget proposes total funding of $26.719 billion, a decrease of $2.891 billion, or 9.8 percent, compared to the FY 09 Total budget of $29.611 billion.
In total, $1.753 billion in savings needed to be achieved to balance the FY 2010 budget.
To identify these cost savings, we implemented an Activity Performance Review (APR) to provide a programmatic review of agencies' base budgets and evaluate an agency's budget activities based the outcomes of their programs in relation to their costs.
This review process informed a decision to eliminate Louisiana Economic Development's "traditional" Workforce Development and Training Program, at a cost savings of $2.5 million in Statutory Dedications, which ultimately resulted in general fund savings. With the creation of the new Fast Start Program, this traditional activity was determined to be duplicative.
The performance review also informed actions that serve to streamline government.
For instance, the Division of Administration proposes the elimination of the Office of Electronic Services within the Executive Administration program and merging OES with the Office of Information Technology and the Office of the Chief Information Officer, as well consolidating the State Grants Management Office (SGMO) within the CDBG program. These actions will produce savings of $965,378 in General Fund.
The Department of Agriculture and Forestry will eliminate its facilities maintenance function under the Administration Program, and reallocate the activity to the Louisiana Agriculture Finance Authority. Savings through this consolidation could be as much as $1.6 million.
DOTD will eliminate the LaSwift program, which was designed to provide temporary transportation assistance after the 2005 hurricanes, and transfer the $5.8 million for utilization within the Highway Priority Program.
The Department of Education will relocate the Louisiana School for the Visually Impaired (LSVI) from its current location in downtown Baton Rouge to the campus of the Louisiana School for the Deaf (LSD) on Brightside Drive. The Department of Education can achieve a net recurring savings of more than $4.6 million and a net savings of more than $4 million for fiscal year 2010 from this move.
DHH proposes the merger of all mental health units into programs under the Office of Mental Health state office to allow the department to increase efficiencies for budget flexibility, resource and staff sharing, and cash flow management.
The Department of Environmental Quality will realize state general fund savings from the privatization or consolidation of their lab activity. Additionally, they will not replace any vehicles in FY10, at a cost savings of approximately $707,000 for the state.
DHH will expand their Medicaid "Work at Home" telecommuting program, which creates a fully functional worksite from the employee's home, by 160 participants in FY10 to reduce administrative costs and boost productivity. This innovative cost-reducing measure will allow for the closure of 21 offices, at a savings of $569,000.
The Louisiana Tax Commission will eliminate the Legal Section of the agency and outsource its legal work, for estimated savings of $338,000.
The Department of Revenue will close its Thibodeaux Office and institute telecommuting for its remaining employees to continue to provide services to citizens while working from home, resulting in an estimated savings of $258,000.
Indeed: two departments will eliminate general fund dollars in their budgets entirely in FY 10.
The Louisiana Workforce Commission, which reduced general funds by $1 million in its mid-year budget reduction plan, will eliminate the remainder of its $3.6 million general funds for the upcoming fiscal year.
The Department of Wildlife and Fisheries will also cut its entire general fund of $90,000.
Additionally: the FY 10 Executive Budget proposes the net reduction of 1,421 fulltime authorized positions - or TOs - across state government.
Combined with 971 eliminations associated with the FY 09 mid-year budget reductions, and 1,019 eliminations previously implemented through budgetary action, this brings the total to 3,411 eliminations of fulltime authorized positions since the beginning of this administration.
The FY 10 Executive Budget does not incorporate the use of state Budget Stabilization funds ("Rainy Day funds") because they would ultimately have to be replaced, and using them would run counter to the goal of preparing for an expected precipitous drop-off in funding in FY 12.
It's important to point out that the FY 10 budget reflects our work to make strategic, targeted reductions, like the ones I just listed, while mitigating the impact on Health Care and Higher Education - which are often the most vulnerable areas of the budget.
As you know - in the years following Hurricanes Katrina and Rita, Louisiana's economy experienced a sizable boost from the influx of federal recovery and insurance dollars as well as economic activity associated with rebuilding - a boost that many economists rightly predicted would eventually level off.
Corresponding to that economic activity, state government revenues surged as well, and were reflected in extraordinary increases in state budget support for health care, higher education, and K-12 education. The FY 10 Executive Budget begins to transition state investments in these areas back to normal, sustainable levels, before this influx in spending.
The total budget proposed for the Department of Health and Hospitals in the FY 10 Executive Budget is $7.76 billion, a reduction of $413 million, or 5.1 percent, from the $8.17 billion budgeted in FY 09, but still $1.16 billion more than the FY 06 funding level of $6.6 billion.
The total recommended budget for Higher Education in the FY 10 Executive Budget is $2.638 billion, a reduction of $219 million, or 7.7 percent, from the $2.857 billion budgeted in FY 09, but still $186.5 million more than the FY 06 funding level of $2.451 billion.
The total recommended budget for K-12 Education in the FY 10 Executive Budget is $4.94 billion, a reduction of $141 million, or 2.8 percent, from the $5.09 billion budgeted in FY 09, but still $998 million more than the FY 06 funding level of $3.95 billion.
Health Care Funding in FY 10 Budget
I'm going to briefly drill down into the areas of health care and education in the budget for a minute.
The largest portion of DHH's budget - Medicaid - faces enormous challenges for FY10, and importantly, for the years that follow. While the stimulus funding is helping to mitigate these challenges temporarily, the stimulus funds will expire by FY12.
The organic growth of Medicaid will continue, despite efforts to contain costs. This growth, combined with the stimulus "cliff" the state faces in FY12, the implementation of the federal DSH "Audit Rule" applicable beginning in FY11, and the decreased federal match resulting from increased per-capita income generated by the hurricane recovery, will create serious sustainability issues for the financing of Medicaid if we do not act.
The Total DHH funding for FY10 is $7.76 billion. This includes proposed state general fund expenditures of $1.475 billion and the utilization of $568.8 million in federal stimulus dollars. $205.9 million of this stimulus replaces federal Medicaid matching dollars that would have been lost in the next fiscal year as the state's FMAP is decreased from 71.6 percent to 67.6 percent effective October 2009.
Because the federal match for DSH is not enhanced under the stimulus bill, an additional $35.8 million of the stimulus dollars are utilized to replace the lost federal FMAP funds due to the DSH match decreasing to 67.6 percent effective October 2009.
Because of state general fund needs throughout the state budget, $327.1 million of stimulus funding is being used in Medicaid to temporarily replace state general fund dollars to mitigate against further programmatic and rate reductions.
DHH's budget ALSO includes $1 million of state general funds proposed for the implementation of an Involuntary Outpatient Commitment and Treatment Program for convicted Sexually Dangerous Predators who have victimized children 12-years-old and under.
DHH achieved $344.9 million in general fund savings through efficiencies, strategic reductions, or through improved use of means of finance to take advantage of federal dollars.
The Department proposed several initiatives to transform the role of government. I am going to highlight just a few of these. We will hand out a document with more details on all of this:
These cost savings initiatives include the merger of facilities, supporting Human Service Districts and increasing the use of private, community-based options where there are high-quality, cost effective alternatives.
The John J. Hainkel home provides excellent long-term care services, and does so at a Medicaid cost per day 54 percent higher than similar community-based nursing facilities. As part of its initiative to transform the department, DHH will propose to sell the facility. The state will benefit from out-year savings of nearly a half million dollars annually, avoidance of future capital costs and proceeds from the sale.
The consolidation of New Orleans Adolescent Hospital into South East Louisiana Hospital will result in savings of $9.1 million in general fund without reducing services.
Some Supported Independent Living (SIL) services and community-based services operated by OCDD will be transitioned to private providers, resulting in a net savings of approximately $1.9 million without reducing services. Reduction of staff, community support teams, and resource center costs in OCDD will save $3.8 million in general fund dollars, while maintaining safe staffing ratios.
DHH is proposing legislation to combine the Offices of Addictive Disorders and Mental Health into a new Office of Behavioral Health. This consolidation will reduce the size of the senior department administration while also clinically aligning these functions, which is consistent with national best practices. Savings from the transfer of 54 beds from the OAD Greenwell Springs recovery center to the office of mental health will result in $200,000 in general fund savings, as many of these services become Medicaid eligible.
The Office of Public Health will realize more than $5.3 million in general fund savings primarily by reengineering processes, eliminating or renegotiating unfavorable contracts, and matching workload to the demand in public health units.
Education Funding in FY 10 Budget
On K-12 Education Funding in the budget: the FY 10 Executive Budget aims to maintain budget gains in education during FY 09 while continuing to emphasize reform and fund strategic initiatives.
For instance, the FY 10 Executive Budget recommendation for the Minimum Foundation Program (MFP) reflects a total means of financing of more than $3.26 billion, which is unchanged from the FY 09 Existing Operating Budget.
The FY 10 Budget continues investment levels for strategic initiatives designed to improve academic performance for students, including:
$14 million for the LA Literacy and Numeracy initiative,
$4.9 million for the High School Redesign Program,
$4.5 million for Career Technical Education,
Total funding of $108 million for the LA-4 Pre-K Program,
$3.3 million in TANF funds for the Jobs for America's Graduates program and for the EMPLoY program - drop-out prevention pilot program initiative,
And $5.6 million for stipends to teachers earning National Board Teacher Certification.
The budget also includes increased assistance of $1.6 million for Morehouse Parish and $1 million for Union Parish due to the loss of local revenue.
To strengthen efficiencies in Higher Education, the FY 10 budget recommends that all state general fund dollars and the federal stimulus funding provided to higher education be provided to the Board of Regents and then distributed by them, in coordination with the university systems, according to a review of high-performing programs.
This is an important reform and one that will drive better performance and outcomes from our colleges and universities. I will talk more about this reform in a moment
The budget also includes an additional $10.1 million to fully fund Taylor Opportunity Program for Students (TOPS) awards.
Additionally, the budget includes $6.5 million in one-time funding for Endowed Chairs and Professorships.
Also - $10 million in workforce training for high-demand fields is now a recurring Statutory Dedication for the Louisiana Community and Technical College System in the FY10 budget.
Lastly, to provide career assistance to Louisianans of all ages, the Louisiana Workforce Commission's Incumbent Worker Training Program is funded at $45.2 million for FY10.
Continue Funding for State Priorities While Reforming Government
In order to keep Louisiana moving forward, the FY 10 Executive Budget contains recommendations to continue or strengthen investments in strategic initiatives. I won't list them all, but I will highlight a few:
In public safety and emergency preparedness, the recommended budget includes $1.5 million in state general fund to Adult Probation and Parole for 300 Passive GPS electronic monitoring units for increased monitoring of sex offenders.
The budget includes an additional $18.4 million for Supplemental Pay to Law Enforcement Personnel.
The budget also includes an additional $51 million for coastal restoration projects and protection management.
Additionally, the FY 10 budget makes the maximum use of federal TANF dollars to provide child protection investigations for enhanced services to at-risk families.
The Department of Wildlife and Fisheries' budget also includes a total of $8.4 million for aquatic weed control.
The budget protects gains made through last year's historic government ethics reforms by exempting cuts in this area and providing the full funding level requested - specifically $4.2 million for the Ethics Administration.
The FY 10 budget also includes funding increases for several of our veterans homes across the state.
Using Federal Stimulus
The second major area I want to focus on is the "bridge" I mentioned that will help the state transition into a more sustainable size of government - the use of temporary federal stimulus funds.
Most importantly, federal stimulus dollars are not permanent. Therefore, these federal stimulus funds are not a "silver bullet" for our budget challenges. While utilizing some of this temporary federal funding, the budget includes many significant reductions as the state prepares for additional reductions in future years.
While Louisiana's portion of federal stimulus money is estimated to be about $3.6 billion, the total amount utilized in the FY10 Executive Budget is $943 million, of which $666 million was used to replace state General Fund dollars.
I want to note here that yesterday we did officially certify to the federal government our intention to use the stimulus funds coming to Louisiana. Some of these funds will run through state agencies, other funds will go directly to certain programs or localities - as specified in the stimulus legislation.
To prepare strategically for future years, it would be irresponsible to utilize all the federal budget stabilization funds in one fiscal year. Instead, the fiscally prudent use of these dollars is to spread them over a two-year period, as the federal government will not allow the funds to be spent after these two years
Stimulus used in the budget to replace General Fund dollars included:
Federal Medical Assistance Percentage (FMAP) - $327.1 million,
State Fiscal Stabilization Fund - including:
o Higher Education - $218.7 million,
o MFP - $37.5 million,
o State Fiscal Stabilization Fund ("Flex" Grant) - $64.5 million,
DSS Grants (Child Support Enforcement, Child Welfare, Vocational Rehabilitation, and Independent Living) - $4.5 million,
Community Development Block Grant (CDBG) - $7.5 million,
Agriculture - Wildfire Suppression - $3.1 million,
Vocational Rehabilitation (DSS) - $345,000,
Edward Byrne Memorial Justice Grant (LCLE) - $3.2 million,
Stimulus used in the budget to mitigate other reductions included Federal Medical Assistance Percentage (FMAP) of $241.7 million to replace a loss of federal funds - $35.8 million of which is due to the decreased DSH and Medicaid match rate over nine months in FY10 (these match decreases will apply to 12 months in FY11);
Fiscal Stabilization Fund (Education) of $33.8 million for MFP to replace decreasing statutory dedications;
And Vocational Rehabilitation (DSS) funds of $1.5 million to replace decreasing federal funds.
Some federal stimulus funds do not affect the state budget. For example, federal stimulus transportation funds will go through the capital outlay process.
Additionally, as you know, the state has declined the use of federal stimulus funds that would require a permanent change in state law and ultimately result in a tax increase on Louisiana businesses under the federal stimulus provision for unemployment insurance.
Second Pillar: Major Reforms For FY 12
In closing - the last major area I want to focus on is that second pillar that frames the FY 10 budget being presented today: the major reform initiatives we need to pursue as we face a more severe decline in revenues ahead in FY 12.
We will focus on five major reform efforts to reduce the size of government as we move our state forward, streamline functions, and dramatically reduce spending to live within our means.
First - We will work with legislators during this session to implement higher education spending reforms through a new funding formula, as I touched on earlier.
The new funding formula will focus existing and new dollars on performance and be more connected to the missions of our colleges and universities, while recognizing different program costs in different areas.
The current funding formula incentivizes enrollment growth in general, and funds institutions at an amount believed to be comparable to their peers. There is little, if any, incentive to target resources to academic programs that produce graduates in critical shortage areas in the workforce, or focus attention on research that will make the state more competitive in the global economy.
There has not been sufficient funding incentive for institutions to move students to their graduation date on time so more of our kids are graduating college rather than dropping out.
There is also not a sufficient mechanism within the funding formula to recognize the true costs of operating various academic programs, such as recruiting high caliber faculty and purchasing equipment needed to operate successful programs.
There is also not a sufficient funding incentive for institutions to generate external research funding in sectors identified as economic development priorities OR to devote an appropriate amount of funding toward campus maintenance.
Now, more than ever, we must target our investments to programs that are high-performing and are aligned with the state's workforce and economic needs.
Second - I am announcing today that we will be forming a "Commission on Streamlining Government" during this legislative session to examine each state agency's statutory and constitutional duties in an effort to reduce the size of state government.
This commission will target programs and agencies whose functions can be consolidated, in addition to identifying opportunities for privatizing and outsourcing current state functions.
This overhaul of state government is extremely important, especially in these times of national economic turbulence, to ensure that state tax dollars are being spent as efficiently and effectively as possible. Many state agencies were created 30 years ago and served a purpose that may or may not be relevant today.
We will ask this "Commission" to propose recommendations for reform before the next legislative session. Once approved, we will work with the legislature and stakeholders to prepare the appropriate legislation needed to implement the recommended reforms into law.
This is not window dressing. We don't want a group of people to meet for show and write a report that sits on a desk and collects dust.
This commission will be about implementing real, ready-to-go reforms that will be quickly turned into law and permanently reform government so we are best streamlining services and making government do more with less wherever we can.
Third - I'm also announcing today that we will be working with legislators, including Reps. Mike Danahay and John Schroder, during this session to implement civil service reforms targeted at streamlining the number of government employees on the rolls by rewarding employees for their job performance and not simply encouraging them to achieve government tenure.
These reforms will have three main focuses:
First: Getting rid of "bumping" by eliminating seniority as the ultimate protector of an employee, instead relying on positive performance reviews.
Second: Reducing job classifications and pay bands that are typically very detailed, narrow classifications - - and currently total 1,400 different job descriptions in our state.
Third: Making classified employees' merit increases contingent on performance and reviews, and therefore serving as the basis for promotions or realignments. Currently, compensation is dictated by job classification and level. Raises are typically automatic as employees move up pay steps within a job class, dictated solely by their time on the job.
As we work to reform government programs by tying their expansion, growth and funding to performance - - government employees should be no different.
Every Louisiana business must be successful in order to get ahead. Government should be no different.
We must make sure that every aspect of government - from our employee level - to the program level - to the agency level, is operating at its absolute maximum efficiency.
Fourth: As we have previously announced, we will be working to increase flexibility and accountability in budgeting through four major fiscal reforms in this session.
One: We are proposing a law to authorize the automatic sunsets of all dedicated funds beginning at the end of the next fiscal year, July 1, 2010, with renewed or newly created dedications to sunset every four years thereafter.
Two: We are proposing an annual review of the performance of statutorily and constitutionally dedicated activities, similar to the Activity Performance Review the Division of Administration conducts for funds supported through the general fund.
Three: Currently, when a deficit is projected, the state's constitution only allows for reductions to statutory dedications up to five percent. We are proposing to increase this discretionary limit to ten percent so that it will provide far greater flexibility in identifying potential cost savings when revenue falls and deficits are realized.
Last: Current statute says that the five percent reductions to statutory dedications can only be made over a two-year period. We are proposing to get rid of this limit, which will create more flexibility on a yearly basis to strategically reduce spending in areas other than higher education and health care.
Fifth and finally: We have proposed reforming the MFP education funding formula to make it more accountable and transparent.
Currently, the MFP formula has additional costs associated with educating students living in poverty, and those who need special education services, career and technical education, and a more challenging curricula. However, because the MFP is a block grant to school districts, there is no accounting for how these targeted funds are used to benefit these targeted students.
Beginning in Fiscal Year 2011, under this legislation, local school districts will be required to report on how funds are spent to support the students the funding is targeted toward. Additionally, part of this reform will also require the Department of Education to post funding allocation information by district and school level on a new user-friendly website for parents.
With the help of these fiscal reforms, the state will be better prepared to approach budget challenges in the future while continuing to provide critical services for our people.
In conclusion: We absolutely cannot talk about the measures taken in our proposed FY 09 budget without recognizing that we have much greater challenges ahead in FY 12.
And, let there be no doubt: the only way we can face our budget challenges head on is through reform. The status quo will not work. Doing nothing is not the answer. And, as I have said before, we don't have the option of printing more money - as is too often the answer in Washington, DC and would be the wrong answer, anyhow
Our budget challenge is real - but like any challenge, it is also an opportunity.
We have the opportunity now to make real, generational reforms in our state government. We are starting that today - and I look forward to working with the legislature on these plans in the days and weeks ahead.