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Governor Jindal Announces Budget Protects Higher Education Funding, K-12 Funding & Health Care Services

Press Release

By:
Date:
Location: Baton Rouge, LA

Today, Governor Bobby Jindal announced his FY 10-11 budget, highlighting that while the state faces some of the most severe fiscal challenges in decades, his budget protects funding for higher education, K-12 education, and health care services, all without raising taxes on Louisiana people or businesses.

The Governor said that while higher education had previously been prepared for a $146 million reduction in this budget, his proposed FY 10-11 budget does not reduce higher education funding to schools and underscores the administration's commitment to improving universities and providing a better education for Louisiana students. The Governor said the budget also fully funds the MFP formula for K-12, further protecting education dollars.

In health care, the Governor highlighted that the FY 10-11 budget uses funds from the Tax Amnesty Program and surplus funds to mitigate reductions to health care, as the state faces extraordinary challenges due to the faulty FMAP formula and the federal changes to the disproportionate share hospital (DSH) program. Specifically, the Governor's budget protects health care services in this budget by proposing no eliminations to Medicaid services or changes to eligibility requirements. This budget also restores lost federal DSH funding to LSU Hospitals and Rural Hospitals.

Governor Jindal said, "Unlike Alabama, California, Florida, Georgia, Maine, Maryland, Massachusetts, Missouri, and New Mexico, which all assumed in their budgets that FMAP aid would be extended for their states - this budget does not anticipate federal relief for FMAP, out of an abundance of caution.

"However, if Washington does fix the faulty FMAP formula that is costing our state $500 million a year in health care funding for the poorest among us, we will fight to protect the surplus and amnesty funds in this budget to go toward mitigating health care cuts in the FY 11-12 budget, which is expected to be the worst decline in funding yet. It would be irresponsible to spend additional federal dollars and amnesty and surplus funds in the same budget year rather than save amnesty and surplus funds to mitigate reductions in FY12."

The Governor said that overall the budget protects education funding for higher education and K-12 schools, and protects critical health care services, all without raising taxes on Louisiana people or businesses. He said, "This is the Louisiana Way forward through these budget challenges."

RIGHT-SIZING STATE GOVERNMENT, PROTECTING PRIORITIES

The FY 10-11 Executive Budget proposes total funding of $24.2 billion, a decrease of $5.47 billion, or 18.4 percent, compared to the FY 09-10 Total Budget of $29.7 billion. This is $12.1 billion less than the $36.3 billion in total funds budgeted in FY 08. The FY 10-11 general fund recommendation of $8 billion is down $2.5 billion from the $10.5 billion in general fund budgeted that year.

Several reforms are included in the FY 10-11 Executive Budget to right-size spending to ensure government is living within its means. The reforms in this budget are targeted toward increasing efficiencies and rooting out savings, all while protecting state priorities.

While protecting critical services in health care and higher education in particular, the FY 10-11 Executive Budget includes the following reductions in all means of financing:

*A decrease of $1 billion in General Fund Direct funding or 11.3 percent. Down to around $8 billion from around $9 billion in FY 09-10.
*A decrease of $1.29 billion, or 8.9 percent, in total state funding. Down to around $13 billion from around $14 billion in FY 09-10.
*A decrease of $4.18 billion, or 27.5 percent, in federal funding. Down to around $10.9 billion from around $15.1 billion in FY 09-10.
*A decrease of $5.47 billion, or 18.4 percent, in total budget funding. This is down to around $24.2 billion from $29.7 billion in FY 09-10.

Along with these spending reductions, the FY 10-11 budget calls for reducing the number of fulltime, appropriated positions in the executive branch by 2,976. More than half of these position eliminations are vacant positions and this total also includes more than 450 filled position eliminations agencies made in their mid-year reduction plans.

This is in addition to the 3,326 full-time positions eliminated through budgetary actions in FY 09 and FY 10, bringing the total number of fulltime appropriated positions reduced to 6,302 since the beginning of the Jindal Administration.

PROTECTING ECONOMIC GROWTH

The Governor again stressed the importance of streamlining government instead of raising taxes on people and businesses to protect the state's continued economic growth and job creation.

Governor Jindal said, "Since taking office, we have announced economic development wins that will create more than 35,000 new direct and indirect jobs, and generate more than $4.6 billion in new capital investment. Continuing this trend of job growth by protecting our economic development initiatives, in addition to protecting the critical areas of higher education and health care in this budget, is absolutely vital for moving our state forward."

Another priority area in this budget, in addition to education and health care, are economic development investments to spur job creation, including:

*$15 million in Statutory Dedications for the Rapid Response Fund to secure economic development opportunities;
*$4.4 million in Statutory Dedications for the Fast Start Program, which delivers comprehensive "turnkey" employee training for relocating or expanding businesses.

Most importantly, the Governor stressed that the budget preserves the $55 million fund balance in Louisiana's Mega-Project Development Fund as a critical tool for job creation and expanding our economy.

Governor Jindal said, "I want to make this point very clear - we will oppose any attempt to redirect the mega fund money to recurring expenses. Investing in our future economic growth to create new jobs in the private sector will not only improve the quality of life for our people, but it will also generate revenues we need for critical state services."

STREAMLINING GOVERNMENT

Governor Jindal said that by streamlining government and prioritizing spending, the state is laying a new foundation for government that will be more efficient and cost-effective, meaning that even when revenues begin to rise again there will be a more sustainable base to build off of to better-serve Louisiana taxpayers.

Important streamlining reforms in the budget include:

*The Department of Social Services is undertaking a major reorganization that will consolidate its current four offices to one, while also pursuing a departmental modernization initiative.
*DOTD will eliminate its photo airplane and eliminate the Melville ferry, which has a low ridership and a high average-cost-per-crossing of $85.29.
*Louisiana's Veterans' homes will save more than $1 million by partnering with private physicians, as is done in most other states.
*DOC is converting the Forcht-Wade Correctional Center in Keithville into a substance abuse treatment facility for a savings of $1.7 million, which will also expand the availability of substance abuse dedicated beds from 80 to 500. Substance abuse is an underlying cause in the majority of crimes committed by offenders, and this conversion will help reduce recidivism and work to successfully reintegrate offenders into the community.
*DPS will eliminate the Oil Spill Coordinator's Outreach Program.
*LED eliminated its less-effective Workforce Development and Training Programs for a savings of $2.5 million and this type of training will be done through the new, highly effective Fast Start program.
*Lastly, a system of care is being coordinated between the Department of Social Services, Department of Health and Hospitals and the Office of Juvenile Justice for youth mental health services that are reimbursable through Medicaid. This will leverage Medicaid dollars and provide $1.1 million in State General Fund savings.

Key investments made in the Governor's FY 10-11 budget include:

*A $516,789 increase in State General Fund to provide funding for seven full time positions that will support on-line predator initiatives in the Internet Crimes Against Children unit under the Office of the Attorney General.
*A $35.7 million investment -- representing a 25.98 percent increase over last year's budget - for the Louisiana Public Defender Board.

EDUCATION -- PROTECTING DOLLARS TO THE CLASSROOM

On K-12 education, while other departments saw midyear budget reductions, the MFP received an increase of $52.6 million. In this budget, the MFP funding level is protected at a recommended funding level of more than $3.3 billion.

Indeed, the protection of the MFP formula marks an upward trend since FY 05 where total state spending per pupil has risen from $3,696 to $5,035. In FY 05, student count was at 710,079 and it is now down to 657,169 in this budget (52,910 less students), while funding has increased by more than $684 million.

This budget also continues to invest in strategic initiatives designed to improve student achievement, including:

*$36.8 million in total funding, including $8.6 million in general fund, for the LA Literacy and Numeracy initiative;
*$7 million in total funding, including $4.4 million in general fund, for the High School Redesign Program;
*$17 million in total funding, including $2 million in general fund, for Career Technical Education;
*$11.95 million in TANF funds for the Jobs for America's Graduates program and for EMPLoY, effective drop-out prevention initiatives;
*$8 million in Statutory Dedication funding to continue Student Scholarships; and
*$75.9 million in total funding, including $15.4 million in general fund and $60.5 million in TANF for the LA 4 Pre-K Program.

NO REDUCTIONS TO HIGHER EDUCATION

This budget proposes no reduction in state funding to Higher Education schools. It does non-recur one-time special legislative projects and reduce higher education management boards by $5.2 million -- or 27.3 percent, similar to a motion initially adopted by PERC, which recommended reducing their funding by 30 percent.

This budget provides an additional $4.7 million to fully fund TOPS, with a total funding level of $134.6 million.

Governor Jindal said, "We have made higher education funding a priority in our budget, and therefore I want to stress that this year will be a critical time for higher education to put in place necessary reforms that set them on a long-term path of sustainability and higher performance with improved graduation rates for our students. With our loss of FMAP and the loss of federal stimulus for higher education in FY 12, the time to prioritize is now. Higher education must implement a plan to improve their functions and reach important goals for our students immediately.

"The goals are clear: educational attainment in Louisiana must get in line with the economic development needs and opportunities of our state, and we must no longer settle for having the second worst graduation rate in the South. We wouldn't accept that ranking on the football field and we shouldn't accept it for our students."

The Governor said reaching performance goals for higher education requires an honest look at where higher education is today, including that:

*State appropriations for higher education doubled between the 1999 and 2009 fiscal years, representing the third greatest increase among states for that time period.
*SREB reports Louisiana's six-year graduation rate is 38 percent compared to the 53 percent SREB state average.
*In FY 09 Louisiana ranked 8th in the nation for appropriations of state tax funds for operating expenses of Higher Education per $1,000 in personal income; and 7th in the nation in Higher Education appropriations per capita.
*According to SREB, 72 percent of Louisiana students are enrolled in four-year institutions and 28 percent in two-year schools, compared to averages in other SREB states of 55 percent of students in four-year schools and 45 percent in two-year schools.

Governor Jindal said, "We will soon announce a proposal we are pursuing this legislative session to grant higher education more operational autonomy and the ability to establish tuition and fees within guidelines in exchange for meeting specific performance goals. This was a recommendation adopted by the Postsecondary Education Review Commission. As we work to grant higher education systems greater flexibility in setting tuition, we must tie higher education autonomy to meeting specific performance markers for students. The bottom line is that graduation rates must be improved, and funding should follow accordingly."

PROTECTING AND IMPROVING HEALTH CARE

Given the unique challenges posed by the loss of federal match associated with the faulty FMAP formula and the DSH program, the FY 10-11 Executive Budget works to protect health care funding by using the Amnesty Program collections and surplus funds.

In all, $76 million of State General Fund surplus and $233.7 million in collections from the Amnesty Act of 2009 will be used to defease debt in FY 10, thereby reducing State Debt Service by $309.7 million in FY 10-11. The funds made available from this reduction, in turn, are budgeted for the Department of Health and Hospitals. Not using these funds would have resulted in a $1 billion reduction in critical health care services.

While there is discussion in Washington about extending the enhanced federal Medicaid match rate for six months to all states, without a permanent fix to Louisiana's faulty FMAP calculation, in addition to the loss of ARRA funding, Louisiana will still face a projected $1.7 billion shortfall for FY 12.

DHH's budget absorbs a significant fiscal impact from federal policies adversely impacting Louisiana, including the FMAP reduction, the DSH program, the loss of both SSBG and Primary Care Access and Stabilization Grant dollars, and the scheduled expiration of the enhanced FMAP in December 2010. These federal reductions amount to a combined loss of several hundred million dollars in federal funding. DHH approached the challenges in this budget by looking for opportunities to reform out-dated systems and streamline services for Louisianians.

Mental Health Transformation

Due to the permanent loss of federal dollars from the DSH audit rule, the state's system of public, LSU-operated hospitals, mental health institutions and rural hospitals are all facing serious reductions. The total loss of DSH is $198.5 million, including: $135.6 million to LSU; $20 million attributed to the rural hospitals; and $42.9 million attributed to the DHH mental health institutions.

The loss of this $42.9 million of allowable cost to the state's public mental health institutions represents approximately 22 percent of the operating budget for these institutions. This budget proposes to replace $30.9 million of the lost dollars with state sources of funding in the Office of Mental Health. This presents the state with the opportunity to begin a statewide transformation of mental health delivery into a community-based model of care rather than more costly institutional care.

The state's mental health system has historically relied extensively on DSH funding, which can only be used to support institutional services. Thus, over the years, the state has been slow to invest in community-based alternatives to institutionalization. While most states have transformed their mental health systems so they spend on average one-third of their mental health budgets on inpatient hospital-based services, Louisiana continues to spend 57 percent of its mental health budget on inpatient hospital-based institutional services.

This budget changes the state's approach to services for persons with mental illness and those with developmental disabilities with the goal of helping each individual in the most appropriate care setting for them. In this budget, DHH invests $15.3 million SGF across the state in each administrative region and human services district for the implementation of community-based programs and $21 million of SGF to the institutions to help offset a portion of the lost federal funds.

Another $9.9 million in total funds is added to the budget due to increased utilization of Multi-Systemic Therapy (MST) for children and $5.8 million is added due to increased utilization of Mental Health Rehabilitation. Multi-Systemic Therapy provides intensive community-based treatment for severe behavioral problems in children, thus avoiding institutional care. Eighty percent of children receiving MST re-engaged in school and out-of-home placement decreased by 64 percent.

In this budget, DHH also adds 118 therapeutic residential treatment beds for individuals who do not need inpatient hospital level of care, but rather, could reside closer to their own community while receiving the support they need to be independent. Compared to the average cost of state-hospitalization of $390 per day, therapeutic residential treatment beds are reimbursed approximately $70 per day in the private sector.

LSU Hospitals and Rural Hospitals

The DSH rule change also creates a $135.6 million shortfall for LSU, which, according to LSU, cannot be absorbed without the immediate closure of multiple hospitals. This budget proposes to replace the lost DSH funds with $122.5 million in SGF and $13.1 million in federal funds through cost reports.

The budget also includes $11 million in SGF to offset the loss of $20 million in allowable cost from the DSH rule change to rural hospitals. In addition, DHH will file a bill that will authorize an increase in rural hospital reimbursement under Medicaid up to the Medicare reimbursement levels. This will allow the state to match some of the $11 million, which will fully offset the loss of DSH to rural hospitals.

Independence for Persons with Developmental Disabilities

DHH continues to work to ensure that every person with developmental disabilities has the opportunity to achieve their full potential in the most appropriate setting possible. To reach this goal, the Department is seeking to increase its partnerships with private group homes for persons with developmental disabilities rather than operate state-run group homes.

Today, more than 93 percent of residents of community homes are served by a private provider, at a cost nearly $60,000 per individual less than the cost of state-operated group homes. As a result of the annualization of this initiative, DHH added $3.8 million to the budget to serve an additional 150 persons now on the waiting list for services in the New Opportunities Waiver (NOW) program.

An additional $83.2 million of total funds has been included in the budget to pay for annualization of existing waiver slots, case management, children's choice and other expenditures to maintain the community-based programs for persons with developmental disabilities.

According to the most recent data available, Louisiana ranks 8th in the nation in overall spending for individuals with Developmental Disabilities. Louisiana spends $6.61 per $1,000 of personal income compared with the national average of $4.12. The state is simply not spending these dollars in the most efficient manner. Indeed, Louisiana ranks 1st in fiscal efforts directed toward institutions -- spending 38 percent of its expenditures on institutionalization of individuals with developmental disabilities compared to the national average of 19 percent.

In light of this compelling evidence, the Department is implementing a resource allocation effort to ensure each person served receives the resources needed to achieve independence in the most integrated community setting appropriate for their goals.

Transforming Medicaid

The Louisiana Medicaid program provides health care coverage for 27 percent of Louisiana's residents -- more than 1.2 million people. However, the system suffers from lack of coordination, soaring costs, fraud, waste and poor outcomes. Not surprisingly, Louisiana's rate of avoidable hospitalization is among the highest in the country -- leading to even higher costs to taxpayers.

This budget directs the Department to implement the reforms already passed by the Legislature to move toward Coordinated Care Networks. A phase-in of this transformation will begin early in 2011, leading to modest savings of $15 million in FY 10-11, with substantially higher savings expected in FY 2012.

LOUISIANA WAY FORWARD

Governor Jindal said that focusing on protecting the state's priorities while creating efficiencies that streamline government, all without raising taxes on Louisiana people or businesses marks the Louisiana Way forward through the state's budget challenges.


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