Governor Bobby Jindal's Remarks to the Baton Rouge Press Club

Governor Bobby Jindal's Remarks to the Baton Rouge Press Club

Governor Bobby Jindal: "Protecting Louisiana's Future"

Today, Governor Bobby Jindal delivered the following remarks to Baton Rouge Press Club.

NOTE: These are remarks as prepared for delivery. Governor Jindal frequently ad-libs remarks

Governor Bobby Jindal: "Protecting Louisiana's Future"

I want to start right off by saying up front that we are facing a multi-year budget challenge. The problem this year is not our only problem. In fact, our challenges this year are far outweighed by the challenges facing us next year and the year after.

If there is one thing you remember from everything I say today I hope it is that: We are facing a multi-year budget challenge.

To deal with this, we must make long-lasting, real changes to streamline government and make our state live within its means to protect and foster future economic growth.

Now…I am going to go ahead and spend the next 15-20 minutes saying this same thing with more detail...I just wanted you to know this is my main point in these remarks…

Just like any family or business during a time of decreased income, our state is currently in the position of sitting down and taking a hard look at how we can move Louisiana forward while doing more with less.

What does this mean for the state?

Meeting our budget challenges, not only this year, but in the years ahead where we are again expecting decreased revenue, is fundamentally about protecting the future of Louisiana.

Its no secret that the national economy is enduring some rocky times - and many states are experiencing high unemployment and a painful drain of jobs every month.

To date, our reforms here in Louisiana - ethics reform, workforce development reform, and cutting taxes on Louisiana businesses - have no doubt sent a signal to the nation that we are competing to be the best place in the world for businesses to grow and create more jobs.

And businesses everywhere are taking note…

Since we took office, we have secured more than 40 significant business retention, expansion and recruitment projects that result in the retention of over 11,500 jobs and the creation of over 21,000 new jobs. These projects will generate $2.9 billion in direct new capital investment, as well as over $55 million per year in new state tax revenue.

These economic projects also generate billions of dollars in sales for our state's small businesses.

For anyone who ever doubted the connection between job creation and the state budget - these numbers make it clear.

These economic impact figures don't even include the job-creation impact of targeted investments we made in facilities such as the Pennington Biomedical Research Center and Barksdale Air Force Base, the impact of our small-business development programs, or any pending projects like the Foster Farms / Pilgrim's Pride transaction.

Indeed, Louisiana ended 2008 with a record year for economic development despite enduring a significant national economic downturn.

This translates to higher job growth and lower unemployment than the South and the U.S., which led to a positive year for population growth in Louisiana.

Reversing a longstanding trend, several corporate headquarters relocated to Louisiana last year - Albemarle, Bercen, Horizon Entertainment - while others committed to growing here in the years to come - Shaw, CenturyTel / Embarq.

Louisiana's entertainment industry continued to thrive and diversify with a record year for film productions last year...

In fact, since the beginning of the national economic slowdown, Louisiana has outperformed the national economy and the South on virtually every significant measure of economic performance - - especially job growth and unemployment rates.

This job growth and these economic development wins are not accidental.

Most are the result of businesses meeting with us and hearing that we are totally committed to making our state economically strong so we are a foundation for future business growth and success. We tell them we will not rest until Louisiana is the best place for them to expand - hire trained workers - and create more jobs.

These efforts are making a difference…

For example, Albemarle CEO Mark Rohr specifically referenced Louisiana's ethics reforms and improving business tax climate as key factors impacting his company's decision to move its Fortune 1000 headquarters from Virginia to Louisiana.

When Louisiana was battling against Wisconsin for the Gardner Denver consolidation just weeks ago, a key selection factor for the company to locate here and not in Wisconsin was that Wisconsin was contemplating significant new business taxes while we were standing firm against any tax increases.

Our new workforce reforms - particularly our customized workforce solutions program, Louisiana FastStart - were also particularly important in convincing Gardner Denver that they could quickly ramp up operations in Louisiana and staff their company with trained workers.

I told you on the day that I took office, not too long ago - that we had an unwavering commitment to making Louisiana a state that attracts business growth so our kids don't have to leave home to get a quality education and pursue a great career.

We have certainly made important progress in that direction - and meeting the budget challenges facing us now will show if we can continue on this path to making Louisiana the best state in the world for fostering business growth and expansion.

I want to repeat - It is critical for us not to lose the perspective in this upcoming session that responding to the budget challenges facing our state this year and in the years ahead is fundamentally about protecting Louisiana's future.

Meeting the challenges in our state budget by making government do more with less and streamlining government functions is completely connected to the economic climate in our state.

In fact - it will be a determining factor for being able to continue moving our state forward and attracting more economic development projects.

Just like any family - we could choose to look at the declining income to the state and just ignore the problem. Just like a family could choose to use their credit card to pay their mortgage, we could try to sustain our current "lifestyle" in state government even while revenue decreases…

The reality is - this bill would soon come due.

The budget outlook for next year predicts another reduction in revenue, and an even greater reduction in FY 12, especially when factoring the loss of federal Medicaid dollars and the end of federal stimulus money. I'll get into this more in one minute…

If we close our eyes to these challenges they will not go away.

Just like that family, if we chose to ignore our budget challenges this year, we will see continued budget challenges next year…and even greater problems down the road.

Ignoring our budget challenges - both immediate and those that are longer term - is not an option. Instead, we must meet these challenges head on in order to protect our state's future and work to continue economic investment and expansion in Louisiana.

Just as those businesses I mentioned earlier have monitored the reforms the legislature worked diligently to implement last year - businesses all over the country and the world are watching us now. They are watching how states are reacting to this national economic downturn.

They are taking note of the states that just choose to pass the bill on to businesses and taxpayers instead of making the difficult choices to make government live within its means.

We have said raising taxes is absolutely not an option - and indeed, it would be the worst possible thing we could do while we are trying to help our businesses and our people continue to grow in an uncertain national economy.

Instead - we are committed to making government do more with less.

A challenge is always an opportunity…and these budget challenges are an opportunity to make real, lasting change in our state that will make it easier for us to respond to decreases in revenue in the years ahead.

Streamlining government services and not simply attempting to "kick the can down the road" is essential to keeping our economy growing.

Budget Challenges

The national economic downturn - the credit crisis and the banking crisis, 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.

This resulted in a mid-year deficit in the FY 09 budget, required meaningful reductions in our proposed FY 10 budget and is contributing to a significant projected budget deficit next year, and an even more severe projected deficit in FY 12 - especially when factoring in the loss of temporary federal stimulus funds that year.

Following the FY 09 midyear necessary $341 million cost savings we identified in late December, a $1.38 billion reduction of general fund from the previous year plus $371 million in mandatory, contractual, and other required spending increases that had to be offset by reductions in other areas of the budget added up to $1.753 billion in total savings needed to be achieved to balance the FY 2010 budget. That does not include decreasing federal funds I will address.

We had already taken steps to help address future budget challenges by eliminating the previous year's use of $800 million in non-recurring revenue for recurring expenses in the FY 09 budget.

The federal stimulus funds we received did not wipe away our budget challenges. Rather, they offered us a way to transition down to a more sustainable size of government - so we can shift toward greater efficiencies during the two years we have stimulus funds, instead of being forced to make dramatic, immediate cuts to balance our budget with such a serious loss of revenue.

The total amount of stimulus utilized in the FY 10 Executive Budget is $943 million, of which $666 million was used to replace state general fund dollars. The remainder of the $943 million in stimulus funds were used to replace declining federal funds in our budget. Some federal stimulus funds do not affect the state budget…like the transportation funds that go through the capital outlay process.

Again - I cannot overstate this today - our budget challenges are not a one-year - but a multi-year problem.

This means they won't go away by themselves in the next few years. We have to make the tough decisions now about how we can make government live within its means.

The FY 10 Executive Budget utilizes strategic reductions throughout state government, as well as federal stimulus dollars, to mitigate reductions in health care and education and to make sure that total funding for these important services returns to a more sustainable level of spending, normalizing the dramatic rate of growth in the years following the 2005 storms.

The total budget for the Department of Health and Hospitals proposed 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 $518 million more than the FY 07 funding level of $7.242 billion.

The total recommended budget for Higher Education in the FY 10 Executive Budget is $2.63 billion, a reduction of $219 million, or 7.7 percent, from the $2.857 billion budgeted in FY 09, but still more than the FY 07 funding level.

And the total recommended budget for K-12 Education in the FY 10 Executive Budget is $4.95 billion, a reduction of $141 million, or 2.8 percent, from the $5.09 billion budgeted in FY 09, but still $232 million more than the FY 07 funding level.

Budget Challenges - Health Care

Before I drill down into specifics of our plan to address these multiple - year budget challenges we face, I want to finish painting the picture of the very real challenges we face in health care.

As many of you know, the DHH budget for FY10-11 has a total reduction of $413 million.

The challenges here are very real…

In 2004, Medicaid was 10 percent of the total SGF budget. Back in November, the estimate for next year was as high as 22 percent. This means Medicaid has than doubled as a share of SGF in just five years…

In 2007, the legislature passed huge rate increases in the Medicaid program. The total impact of these rate increases, when fully annualized, was more than $1.5 billion. So, even with the budget reductions we are making this year, we are still spending more than we did in 2007.

The reductions we face in health care become even more serious when we factor in our reduced FMAP rates, which will dramatically affect health care funding in the years ahead.

In October of this year, our FMAP rate will drop from 72 to 67.6 percent. The rate drops again from 67.6 to 63.1 percent in October 2010.

The drop in our FMAP rate from 72 to 63.1 percent will cost us an estimated $700 million.

This dramatic decrease is due to a federal formula that calculates all sources of income in a state. From 2005 to 2007, according to the Bureau of Economic Analysis, Louisiana's per-capita income is reported to have increased by 42 percent. This includes ALL sources of income, including temporary government assistance…such as federal recovery assistance administered after the severe 2005 storms…including Road Home and insurance payments.

Meanwhile, 21 states are actually seeing an increase in their FMAP rate. Georgia, Florida, Kentucky, Alabama, and Tennessee are all seeing increases. Mississippi is only seeing a small 0.29 decrease, and their rate is still going to be 75.38 percent compared to our 63.1 percent rate.

The way this federal formula works, New York, Connecticut, Maryland and California are protected from any reductions in their federal match because there is a mandatory floor of 50 percent federal match. Otherwise, using the strict formula, these states would qualify for much less of a match. Connecticut would get a 10% match. California would get a 47% match. New York would get a 35% match.

Our people have suffered enough from the storms that struck our state and we do not need to be punished by the federal government by calculating the recovery assistance funds coming to our state as a way to reduce our Medicaid match rate.

Beginning in July 2010, the DSH Audit rule will also begin to affect us and DHH estimates the impact of this rule to be $91 million.

Add on to this the fact that we are using $327 million of stimulus in this year's Medicaid base budget, which offsets what would have been SGF, and the reality that these funds will have to be replaced when stimulus expires…and the fiscal situation in health care becomes even more serious…

The bottom line in our health care budget is that beginning in July 2011, we have at least a $1.2 Billion hole in our Medicaid budget that will have to either be filled with SGF or we will have to make serious cuts.

For the budget beginning July 2010, assuming the legislature keeps the reductions we have factored in currently, we are facing a shortfall of at least $314 million, which grows to $1.2 billion in July 2011.

If the Legislature doest not keep these reductions and spends over the amount we have allotted and the Medicaid program is permitted to grow, the budget hole will be even larger since we will have to come up with the additional state match for both the organic growth plus the drop in FMAP from 80 percent to 63 percent.

Again - even in health care, this is a multi-year budget problem we are facing. NOT just a one-year challenge. And that is why we need real reforms and ways to streamline government services to protect our critical functions now.

Streamlining Government five Initiatives

We know the challenges are real - and as I told you before, ignoring them is not an option…they will become more complicated next year, and even larger the year after.

But - these challenges are also an opportunity to make government do more with less and that is an opportunity we are going to harness in this session to send a message that we will do what we need to protect LA's future economic growth.

In the upcoming legislative session, we are committed to addressing this year's budget challenges and putting us in a good position to deal with next year's budget challenges and the following year's. Our agenda to Streamline Government to Protect Louisiana's Future is focused on this exact goal.

Our agenda works to streamline government functions in several ways that are broken down into five specific initiatives…all of these initiatives give us more tools to protect critical state services in health care and higher education, which are too often the targets of large cuts during times of declining revenue.

First - We will work to implement higher education spending reforms through a new funding formula.

The new funding formula must focus existing and new dollars on performance - and it must 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 also been no 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 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. This new proposed formula must address these needs as well.

During the last session, the legislature passed a resolution calling for the Board of Regents to allocate at least 25 percent of funding based on performance. They also passed a resolution calling for greater consideration of actual program costs at community and technical colleges for training programs that prepare our future workforce.

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.

Our second major reform initiative is forming a "Commission on Streamlining Government" 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.

We will ask this "Commission" to propose recommendations for reform for an up or down vote to the Joint Governmental Affairs Committee 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.

As I said before, this Commission will be working to make real, lasting reform in government. 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 ready-to-go reforms that will be quickly turned into law so we are best streamlining services and making government do more with less wherever we can.

Senator Jack Donahue is the lead author of the bill to create the Streamlining Government Commission.

Third - We will be working with legislators to implement civil service reforms targeted at streamlining the number of government employees on the rolls by tying employees to 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.

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.

Representative Mike Danahay is the lead author of this civil service reform bill.

Fourth: 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.

Second: 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.

Senator Mike Michot and Representative Joel Robideaux are the lead authors of the bill to achieve these two objectives.

Third: 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.

Fourth: 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.

Senate President Joel Chaisson and Represenatative John Schroder are the lead authors of the bill focused on these third and fourth objectives.

Fifth and finally in our Streamlining Government Initiatives to Protect LA's future: We will work to reform 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 allocate weighted MFP dollars to serve these populations of students and annually report on how funds are spent to support them. Additionally, part of this reform will also require the Department of Education to post funding allocation and expenditure 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.

Representative Steve Carter is the lead author of this bill.

Streamlining Government Protects Louisiana's Future

I look forward to working with the authors who are carrying the bills I just outlined - and the entire legislature - to make these reforms a reality in order to help us meet the multi-year budget challenges facing our state.

These reforms are a vital part of helping us to guard against massive reductions in the "unprotected" budget areas of health care and higher education, so we have greater flexibility to make strategic, targeted reductions in spending throughout government during times of declining revenue.

For too long, health care and higher education have taken the brunt of reductions during times of declining state revenues because they are the largest "unprotected" areas of the budget. We must implement these reforms to streamline government in order to put us on a better path to deal with the multi-year budget challenge ahead of us without making severe reductions in these important areas.

In fact, John Matessino, on behalf of the Louisiana Hospital Association, endorsed our budget reform efforts and said, "It is essential and fiscally responsible, to enable the administration and the legislature to put all options on the table when making strategic budgeting decisions." His endorsement went on to add that, "it is critical that the legislature work with the administration in planning ahead for the expected budget shortfall by bringing state government into a sustainable posture."

CABL also endorsed our budget reform initiatives. Their endorsement letter said, "CABL has long been uncomfortable with our current situation that leaves two critical areas of our budget - health care and higher education - vulnerable to the most extreme level of budget cuts. Today, our elected leaders do not have the needed flexibility to make budget cutting decisions based on the state's most immediate priorities."

The AARP also endorsed these reforms and they said, "Every possible option should be examined, with no ‘sacred cows' permitted throughout the budget deliberation processes for fiscal years 2011 and 2012. Every state agency and every state program should meet objective criteria that requires funding the critical needs of individuals and families first, a strategy which will equal the playing field in competing for dollars."

The Rural Hospital Association also endorsed our reform initiatives, saying: "Knowing how important our rural communities are to you, we believe that if SB 1 and SB 2 were in place and cuts could be spread to departments other than DHH and higher education, funding that serves our most needy population in rural Louisiana could continue."

A Shreveport Times April 17th editorial underscored the importance of these initiatives to streamline government when they wrote that: "Putting more budget areas in the line of fire gives state lawmakers and the administration greater flexibility to meet existing priorities and hopefully will encourage greater efficiencies throughout government."

The Houma Daily Comet also came our in support of the reforms, saying that: "This year's budget dilemma illustrates exactly why the state must be allowed more flexibility in setting spending priorities to deal with tight economic times."

The Lafayette Advertiser also supported these reforms and said they "would begin to untangle and demystify the bizarro world of Louisiana government finance."

The Alexandria Town Talk supported these reform initiatives and said: "This is about eliminating that which has no value and doesn't work, fixing that which is worth saving, and building anew, all for the future. That means this is also about a bit of pain -- in the short term -- but make no mistake: These are the right goals."

Again - we know we must begin to meet these budget challenges head on through these important reforms to streamline government in this session.

Building on the economic successes we have experienced in the past year absolutely depends on our success in this area.

Let there be no doubt that how we respond to these budget challenges will absolutely determine the economic climate we foster in our state. And, the nation, indeed the world, is watching.

They will take note of how we respond here in Louisiana - just as they are taking note of states all across the country.

I know we can meet these challenges. Just like any family or business, we can buckle down and make government do more with less…while protecting the most critical services government provides and continuing to invest in economic projects that are critical for continued job growth in our state.

One Last Thing…Other Session Priorities…

While I have spent a lot of time talking about our commitment to putting our state on a better path to deal with the multi-year budget challenges facing our state by making government live within its means - I also want to quickly highlight some other bills we will be working on in the session:

In education - we will take the next step to empower our teachers to restore discipline to their classrooms. We will work to reduce absences by holding parents accountable.

We are also strengthening regulations on electronic communications by an employee at a school to a student to prevent any inappropriate contact.

We will also take the next step in workforce development to improve graduation rates and ensure college and career readiness for our high school students.

The Louisiana Department of Education, in partnership with business groups and other state agencies and organizations, launched the "Educational Mission to Prepare Louisiana's Youth" or "EMPLoY" dropout prevention pilot program in 14 "Target" Louisiana parishes to meet these very objectives.

This dropout prevention pilot program focuses on providing GED support and Work-Ready Certificates so that those students who don't finish traditional high school will still have the certifications they need to enter the workforce as a skilled and trained worker.

Tax Incentives: We will extend the duration of the Research and Development Tax Credit for income and corporation franchise taxes through 2014.

We will extend the duration of the Angel Investor Tax Credit for income and corporation franchise taxes through 2014; Authorize a motion picture investor tax credit for state-certified infrastructure projects; Remove the Jan. 1, 2010 termination date for issuance of the digital interactive media producer tax credit; and remove the January 1, 2010 sunset date for issuance of the sound recording investor tax credit.

In Crime and Public Safety: We will create the crime of operating a vehicle while under suspension for certain prior offenses; Increase penalties for refusal to submit to DWI tests; Streamline administrative law hearings in DWI cases; and Increase monitoring of sex offenders after they are released from prison.

We will also push legislation to monitor the hiring of employees by local public school boards and require the disclosure of information of certain instances of sexual misconduct, abuse, and neglect.

We will make it a crime when an educator molests a juvenile.

We will create the crime of "unauthorized use of a wireless router system" for the purpose of downloading, uploading, or selling pornography involving juveniles - to help law enforcement catch and prosecute more child predators.

Additionally - The Department of Corrections is partnering with sheriffs in a program to better prepare state prison inmates for release and re-entry into society so they do not become repeat offenders.

In order to fill this void in reentery skills programming being offered at the local level, Corrections will begin to contract with sheriffs to operate up to 10 regional reception and re-entry programs specifically for state inmates housed in parish and local facilities. This partnership will be a long-term, phased-in initiative, with the goal of reducing the number of repeat offenders through better skills training to prepares them for a more productive life in our communities.

In Social Services: We will authorize the Department of Social Services to conduct criminal background checks on certain persons working with children; and Require the Department of Social Services to search the central registry of abuse and neglect cases to assess potential employees who would be working with children. We don't want predators hired to work with our children. We have to take whatever measures we can to prevent this. That is common sense.

Lastly - We will enact the Louisiana Tax Delinquency Amnesty Act of 2009 to allow eligible taxpayers to pay back overdue taxes to the state.

Thank You - I want to stop there and take your questions.

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