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PAR Develops Post-Katrina Research Agenda

ORIGINALLY PUBLISHED ON SEPTEMBER 13, 2005

The Public Affairs Research Council of Louisiana (PAR) has adapted its research agenda to conform to the changing needs of Louisiana. In the aftermath of Hurricane Katrina, public policies at the federal, state and local levels will have to be adapted to rebuild and stabilize the Louisiana economy. PAR will focus its research efforts specifically on state-level public policies in the areas of state finance, education, healthcare and oversight/transparency. Our research will provide meaningful policy guidance as the state rebuilds its fiscal stability and economic viability.

Louisiana’s infrastructure needs have never been greater. The state was facing a $10 billion backlog in construction projects prior to Katrina’s destruction. That amount will multiply as damage estimates are developed. Additionally, the temporary loss of one-third of the state’s general fund revenues, which are generated by the New Orleans area, will create an immediate cash flow problem. The state will likely adjust its revenue projections downward to account for lost income, sales, gambling, hotel and severance and royalty taxes, while demands for services increase. The state’s already-challenged health and education systems are struggling to cope with massive displacement and service demands. And, as billions of dollars in rebuilding and recovery contracts are awarded, oversight and transparency requirements will be critical to prevent fraud and corruption.

The following categories describe the areas PAR’s research will address throughout Louisiana’s recovery from this disaster. Our focus will be to monitor each of these issues as they progress. Some areas will call for in-depth analysis, and others will require only brief comment. This list is by no means a comprehensive accounting of the questions that must be answered in the coming months and years, but it will serve as a guideline to help PAR best focus its available resources to make a positive difference for the state.

Fiscal Planning/Budget Stabilization Policy

Constitutional and statutory changes may be necessary to stabilize the current budget. PAR has several longstanding recommendations, which generally caution against tapping funds or deviating from the established limits and prohibitions. We continue to urge caution, but recognize the special circumstances of this crisis. PAR’s fiscally conservative approach will be maintained as new recommendations are developed. Restraint must be exercised to minimize the debt Louisiana carries into its uncertain future.

One-third of the state’s $400 million Rainy Day Fund will be accessible for appropriation by the legislature if the Revenue Estimating Conference predicts a shortfall in its reevaluation of the current budget. This amount will fall far short of replacing the expected losses in state revenues.

  • Should the Rainy Day Fund provisions be reexamined?
  • Will the state need to tap its $3 billion in trust fund reserves to make debt payments and continue to provide services?
  • Will the state’s limit on annual bonded indebtedness, which is around $313 million for FY 06, need to be relaxed to fund a growing list of necessary capital outlay projects?
  • Should the state sell the remaining portion of its Tobacco Settlement Agreement? Is there a market for it?
  • Should inter-fund and inter-agency borrowing capacity be expanded?
  • Should there be a reallocation of service delivery responsibilities between state and local governments?
  • Will the existing revolving loan program for local projects be sufficient to meet local needs? What are the alternatives for providing local governments the assistance they will need?
  • Should the constitutional balanced budget requirement and expenditure limit be relaxed? How about the prohibition against borrowing for current spending?
  • Do the debt and expenditure limits for the Interim Emergency Board need to be raised?
  • If budget cuts are required, should the governor’s authority to shift agency funding and apply across-the-board cuts be expanded?
  • How should budget-cutting priorities be established?

Economic Recovery and Development Policy

Tapped trust fund and federal aid dollars may not be sufficient to cover the state’s ongoing operating expenses. The state may need to adjust some taxes (up and/or down) to compensate for losses and encourage development.

  • Which economic development incentives are available to jumpstart the state’s southeast economy?
  • Are personal income tax breaks required to help citizens rebound and encourage them to stay?
  • Should special provisions allowing the state to collect local sales taxes and to develop local tax sharing agreements be developed?
  • What state policies can be developed to help local communities deal with the strain of shifting populations?
  • How can the state ensure that expropriation rights are not abused as the area is redeveloped? Where does the line lie between development for the public and private good?
  • Is there a need to adjust the property tax laws for the affected areas?

Education Policy – Pre-K through Postsecondary

Students and staff at all levels of the state’s public and private education institutions have been scattered around Louisiana and other states. Facilities have been damaged and destroyed. The sudden demands for service in some areas and (sometimes permanent) closure of institutions in others complicate the state’s funding scheme. Higher education faces new challenges in workforce development. Elementary and secondary education faces new challenges for its accountability system.

  • Will the enrollment shifts require adjustments to the state’s education funding formulas?
  • Will previously allocated funds travel to districts and institutions where students are newly enrolled?
  • Should state and federal accountability program rules be adjusted to allow for the disruption of performance the migrations will likely cause?
  • Should the legal requirements for certified teachers be adjusted? How well are districts meeting the requirements in the midst of massive student and teacher migrations?
  • What policies will ensure that the Louisiana Community and Technical College System (LCTCS) is able to quickly adapt its workforce training programs to meet new needs?

Public Health Policy

The evacuation and closure of nearly all hospitals in the greater New Orleans area creates tremendous, immediate strain on available healthcare resources. Both short- and long-term health problems are expected to be widespread. The irreparable damage to Charity and University Hospitals in New Orleans and the relocation of the LSU medical and dental schools to Baton Rouge will have long-term impacts requiring the state to step up its healthcare reform efforts. Prior to the emergence of this new set of challenges, Louisiana’s funding for healthcare consistently topped the charts in nationwide comparisons.

  • How are public hospital services going to be provided?
  • What will be the impact on plans to replace the charity hospitals in Baton Rouge and New Orleans?
  • Are there ways to satisfy growing health demands with more efficient service provision?
  • What is the impact on the state’s Medicaid program? How will the additional demand be funded?

Infrastructure Redevelopment Policy

Louisiana’s transportation systems have suffered widespread disruption and destruction. Some rebuilding contracts have already been awarded through a fast-track bidding process.

  • Do state and local responsibilities need to be adjusted?
  • What will be the impact on the state’s highway funding priority list?
  • Should the state take a roll in repairing local roads?
  • How can federal funds best be leveraged?

Oversight/Transparency Policy

The hurricane and its disastrous aftermath have greatly impacted transparency in government decision-making. Emergency provisions allow public officials to bypass standard contracting procedures and call special meetings in responding to critical needs. The governor has issued an executive order calling upon the inspector general’s office to monitor transactions made during this emergency. Striking a balance between the government’s ability to act rapidly and the public’s right to accountability may be difficult. However, the laws assuring an open and transparent government must not be ignored.

  • Should oversight of cooperative endeavor agreements be expanded?
  • What mechanisms will assure the proper monitoring of emergency contracts to ensure fairness and transparency as aid dollars are spent?
  • At what point should the open meetings law exception allowed for emergency circumstances be curtailed to prevent its abuse?

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