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Governor Jindal Announces Budget Flexibility Legislation to Help Protect Higher Education and Health Care

Press Release

Location: Baton Rouge, LA

Today, Governor Bobby Jindal announced three bills the administration will pursue in the legislative session to provide greater flexibility in the state's budget process and help protect critical services including higher education and health care during budget reductions.

Governor Jindal said, "As we confront the budget challenges in the next fiscal year, we must transform state government to become more efficient and sustainable while protecting critical services for our people like education and health care. These budget flexibility bills are an important way to free up funds that are currently locked away, while the areas of higher education and health care are left vulnerable to reductions in tough budget years."

"A total of $4.75 billion is locked away in dedicated funds in the current fiscal year. These three bills will put more options on the table so we can access this funding to help protect critical services. As we have said before when we fought for similar legislation, we must be able to put all state spending on the table, especially as we work to make reductions and improve efficiencies across state government."

The Governor stressed that the ability to access all budget items is essential to a sound budget process that makes the best use of taxpayer money.

Chairman of Blueprint Louisiana Bill Fenstermaker said, "For the last four years, Blueprint Louisiana has advocated for systemic reforms to make the state a better place to live and work. We recognize the state's budget challenges are considerable, but they also present an opportunity for additional governmental reform. We applaud Governor Bobby Jindal's budget flexibility package, which aligns with Blueprint's recommendation to unlock protected dollars and free up funding for statewide priorities, such as health care and higher education. We look forward to working with the Legislature and the Governor to get this set of bills passed into law."

Regents Chairman Bob Levy said, "I support any effort that would result in a lessening of the disproportionate burden borne by post-secondary education when there is a severe budget deficit."

President of the LSU System John V. Lombardi said, "Given the challenging budget circumstances we face in Louisiana, we all need to make the necessary adjustments to enable education, health care, and other vital services to continue for our citizens. The LSU System continues to support initiatives that will give legislators flexibility to make strategic adjustments throughout the state budget to spread and minimize the impact of revenue reductions on all of the state's public services."

President of the Louisiana Community and Technical College System Dr. Joe May said, "There are areas of our budget that we could tap into in times of revenue declines; however, we're limited by a five percent reduction cap, meaning we lack options in balancing the state budget. We need to open up the process and give the Legislature more options for how they can properly balance the budget while avoiding cuts to higher education. I think the Governor's budget package does just that."

UL System President Randy Moffett said, "The University of Louisiana System supports the efforts of Governor Jindal to review all dedicated funding with an eye towards the more appropriate distribution of funding and flexibility as government priorities and functions change. Currently, the hands of our legislators and administration are tied during economic downturns, forcing significant cuts to higher education and health care. If Louisiana is to prosper, we must invest in the education and well-being of its citizens."

Iowa pharmacist and Chairman of the Louisiana Independent Pharmacies Association Ricky Guidry said, "Balancing a budget becomes more challenging for our state and nation; just as it does for small businesses and families. Our elected leaders should not have to isolate education and health care as the two most at-risk budget categories while they try to meet the constraints of the resources we have. We support budget flexibility in the appropriations and management process."

Sen. Mike Walsworth said, "For too long, our areas of higher education and health care have taken the brunt of cuts every time our state saw a decrease in revenue. To sacrifice the education and health of our children is unacceptable, and that's why legislators need more flexibility in reviewing the budget and making more strategic reductions so we can continue delivering the sort of services our citizens rely on."

Louisiana Hospital Association President and CEO John Matessino said, "The LHA supports the Governor's strategy on budget flexibility. We cannot continue to force healthcare and higher education to bear the brunt of the budget shortfall. Making smaller reductions in a number of programs, rather than large cuts in one or two, is not only smart, it's fiscally prudent. If we want Louisiana to prosper, we must change the way in which the state's budget is addressed."

Three Budget Reform Initiatives to Improve Budget Flexibility:

1.) Increase the annual five percent cap of cutting dedicated funds to 10 percent during a deficit. This initiative will help mitigate budget reductions that may be made to health care and higher education as a result of a deficit. (Sponsored by Sen. Gerald Long)

Traditionally, general fund expenditures in health care and higher education in Louisiana are the most vulnerable in budget challenges. Nearly 95 percent of higher education's state general fund monies are unprotected. This initiative will help direct funding to health care and higher education to ensure that funds are available so critical services are protected.

In the 2009 legislative session, the Governor signed ACT 479 by Sen. Chaisson which eliminated the two-year limit on dedicated fund reductions to find savings in dedicated funds in back-to-back years during multiple year budget shortfalls. Prior to passage, 5 percent of budget adjustments had to be spread over a two year period.

This new law would allow another option for the administration and Legislature to use when developing a budget savings plan. Current law, in accordance with the state constitution, allows reductions to be considered to statutory dedications of up to five percent during a deficit. Previously, the Governor proposed a similar plan that would increase the annual cap from five to 10 percent that would affect constitutionally mandated funds. This year's legislation will focus on those funds that are not protected by the Constitution and will also exclude those dedications based on fees paid by businesses for specific regulatory services.

The author of the bill, Senator Gerald Long, said, "For us to best do our jobs, we need to have the freedom to review the budget and make adjustments accordingly, and right now we just don't have enough access to certain parts of it to make the best decisions for our citizens. The Governor's budget package will provide the budgeting process with more transparency, give us more of an opportunity to openly discuss how we're using our dollars and empower us to vote on how those dollars should be used. In tough economic times, we need more flexibility to make a more efficient and effective government, and I think this package of bills will get the job done."

2.) Access interest (non-principal funds) generated by statutory dedications during a deficit, and mitigate any budget reductions that may be made to health care and higher education as a result of a deficit. (Sponsored by Sen. Gerald Long)

This new statute would allow interest earned on specific statutory dedications to be used to ensure that critical services are not disproportionately affected during a deficit. Interest that is earned on funds is often carried over year after year to increase fund balances. It often does nothing but earn more money. Rather than cutting critical services while allowing interest to accumulate in a fund, this legislation will allow access to this funding to help mitigate reductions to the most vulnerable budget areas -- health care and higher education. Approximately $153.9 million in interest was accrued in FY10 for all statutory and special funds and 180 funds earned interest in FY10, ranging from $3 to $30.5 million per fund.

The proposed law would allow the interest of funds to be reallocated during a deficit. The bill will focus only on the interest of funds that are not protected by the Constitution and will not include those dedications based on fees paid by businesses for specific regulatory services.

3.) Require the sunset of all dedicated funds, with few exceptions. (Sponsored by Sen. Mike Walsworth)

Last year, Governor Jindal signed into law Act 492, which requires that an annual report be submitted for all entities and activities supported by appropriations from each fund. Additionally, 25 percent of funds must be reviewed every two years by the Joint Legislative Committee on the Budget. While the enactment of this law ensures that the Legislature exercises greater scrutiny over dedicated funds, there is no mechanism in this statute for removing special protections for funds that are no longer necessary or that no longer serve their intended purpose.

This legislation will routinely remove special protections for dedicated funds, except as provided by the Constitution of Louisiana and those that are exempted in present law. Unless the Joint Legislative Committee on the Budget recommends the continuation of a fund, and the Legislature enacts a law to continue or modify a fund, that fund should sunset for regular review.

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