Short session, short on ideas
The 2009 regular legislative session was the short version of a Louisiana Legislative Session, which lasts 60 calendar days and focuses primarily on fiscal issues. While development of the budget did dominate much of the debate this year, the fiscal focus was limited to ordinary approaches to budget cutting and put off for another year any consequential talk of revenue and spending reform.
Being a hybrid session, in which legislators can introduce up to five non-fiscal bills, action was taken on the education, criminal justice, retirement, health care, ethics and open government fronts. Unfortunately, to a large extent, meaningful reform was delayed or unraveled on each front and any positive action was minor. Records transparency, previous ethics reforms, school accountability, health care for the Medicaid program, higher education and conflict of interest protections all took a blow.
The executive budget initially proposed deep cuts to higher education and health care without a plan for strategic implementation of the downsizing those cuts would have required. The projected budget shortfall was mitigated to a large degree with nearly $1 billion in federal economic stimulus dollars that will be eliminated in 2012, a year that has come to be known as “the cliff.” The proposed budget included $666 million in stimulus funds to replace lost general fund revenue and $277 million to mitigate other revenue reductions. At the outset, this windfall revenue set the stage for two major plots that were played out this session: 1) delaying big decisions that would set clear priorities for spending cuts, and 2) propping up ongoing expenditures with one-time/two-time revenue sources.
All talk of solutions that would have provided additional recurring revenue for the coming years was highly contentious and rejected at the outset. “No tax increases” was the mantra used to fight two ultimately unsuccessful efforts to find a revenue solution – only one of which was an actual tax increase. SB 335, which was supported by PAR, would have delayed an income tax break and held taxes steady for the next three years for the 24 percent of taxpayers who itemize their tax returns. HB 75 would have increased the cigarette tax.
The proposed income tax break delay became the crux of a new level of budget games when it was supported by the Senate in order to reduce higher education budget cuts that the Senate found untenable. The budget volleying relied upon some calculated moves by the House, Senate and governor that centered on contingency budgeting, veto deadlines, propagation of appropriation bills, “finding” money and the usual back-room horse-trading.
Neither the legislative nor executive branch of government was bold enough or prepared enough to propose and stand behind a strategic adjustment to the level of services the Louisiana government can and should continue to provide. The downsizing, right-sizing, streamlining and sustainability were simply delayed.
Throughout the session, budget negotiations addressed a proliferation of proposals to use sources of one-time funding to mitigate cuts. The final FY 10 budget tapped into a variety of cash reserve funds, including the rainy day fund, an insurance incentive fund, the Mega-Project Development Fund and a potential windfall from a tax amnesty program, to minimize cuts to higher education and health care. Even with the additional funding, spending was reduced well below existing levels.
The budget that resulted completely eschews a common principle of fiscal responsibility that calls for recurring revenue to support recurring expenditures. That violation of principle, to some extent, was unavoidable to ease the impact of the fiscal crisis. But, revenue solutions should also have been brought to bear. Though there was much hype and congratulatory remarks being passed around for the last-minute rescue of the higher education and health care budgets, they were balanced by leaning heavily on one-time funds. By steadfastly refusing to consider raising any type of revenue to provide sustainable funding for essential public services, lawmakers left the state’s budget in a precarious position.
Yet, in the midst of a fiscal crisis, budget-makers continued their usual practice of loading up the budget bill with parochial amendments (a.k.a. slush, earmarks, non-state expenditures). They provided almost $34 million in politically-negotiated funding for local governments and nonprofits.
Fiscal reform this session was limited to the governor’s package of bills that called for a streamlining study commission and a few limited measures to increase budget flexibility when shortfalls arise. SB 1 died in conference committee. It called for a constitutional amendment to increase from 5 percent to 10 percent the amount by which the governor and Legislature can redirect dedicated revenue when overall revenue declines by a certain amount. SB 2, which did pass, enables those cuts (still at the 5 percent level) to be made annually instead of only every other year.
The largest and most publicized battle over public records this session concerned records in the Office of the Governor. Currently, all records in the custody of the Governor’s Office (except financial) are shielded from public view. Two bills that would have opened those records were defeated after strong opposition from the administration.
Instead, the administration-supported SB 278 was passed. It will open a few more records within the Office of the Governor than current law allows. However, the bill creates new problems as it uses vague terminology to describe which records will be public and adds a six-month window of protection for records that reflect “pre-decisional advice and recommendations to the governor concerning budgeting.” This new protection extends to any agency or department headed by an unclassified gubernatorial appointee, which will stifle debate on major decisions that will be made in the near future as the state aims to streamline services and cut spending.
Ethics and Contracting
Ethics laws were weakened.
A cornerstone of the 2008 ethics reform movement was to limit or eliminate “freebies” from special interest groups to public servants. One year later, the Legislature has significantly undermined that reform with the passage of HB 591.
In 2008, the Legislature limited the value of food and drink that could be given by certain sources to $50 per public servant, per event. An exception to the $50 cap was created for gatherings “held in conjunction with” certain broadly-defined meetings. HB 591 removes the $50 cap for any “activity, occasion, reception, meal or meeting” held during the “same time period” and in the “same general locale” as those meetings. This bill expands opportunities for special interests to wine and dine public servants, increases the appearance of impropriety and will further frustrate citizen trust in government. Further, the bill expands the ability of public servants to attend civic, nonprofit, educational and political events if they are “assisting” an elected official who qualifies for free attendance. This watered-down approach to ethics reform is far from what citizens had in mind in 2008.
Finally, the passage of SB 280 demonstrates that political leaders are still willing to rewrite the law to accommodate isolated events and powerful people. This bill changes the state’s nepotism law to allow a single, elected district attorney to keep his daughter on staff even though she had been employed for less than a year when he assumed his position. Tactics such as these continue to erode public confidence in the policymaking process.
Contracting was weakened.
HB 801 was adopted, which drastically negates contracting reforms passed last year. In 2008, the Legislature provided that parties responsible for developing bidding documents for a contract could not later bid on or participate in that project. The measure provided a firewall of sorts to ensure that companies would not act in a consulting role to prepare bidding documents that only they could satisfy as a bidder.
HB 801, however, provides that third parties that perform key tasks such as architectural and engineering programming, master planning, feasibility analysis and budgeting would not be prohibited from bidding on projects they essentially helped to design. This bill will allow those who provide significant front-end services on the preparation of a project to later compete as a contractor or subcontractor for that project, giving them a potential advantage in the bidding process.
Accountability was weakened.
Two misguided proposals aimed at stemming the high school dropout rate dominated the education arena this session. SB 259 and HB 612 both set up a framework for the creation of a career major diploma that will be offered in addition to the academic major diploma. The most problematic part of the bills is a provision to allow over-age eighth-graders to be promoted to ninth grade even if they score an Unsatisfactory on the English/Language Arts or mathematics LEAP test. Despite opposition from the state superintendent of education, the provision remained in the final version of both bills, which passed the two chambers and were sent to the governor.
School accountability attracted a lot of attention during the session. Despite strong opposition from the state superintendent and the Governor’s Office, legislators approved HB 495, which allows an alternative high school in Rapides Parish to avoid state takeover, even though the school has failed to reach minimum accountability standards for the past four years. By exempting a single school from the state’s school and district accountability system, this bill opens up the whole system to piecemeal deconstruction. The governor has promised to veto the bill if a compromise cannot be worked out between school district officials and the state Board of Elementary and Secondary Education.
At the same time, however, legislators acknowledged there is a bigger problem in how progress is measured at alternative schools and adopted HCR 165, which urges BESE to develop an assessment system for alternative schools that would take into account the special challenges these schools face.
Other bills sought to carve out exceptions in the state’s LEAP standards for specific groups of students, but only HB 179 was approved. While the bill initially sought to prohibit the use of LEAP scores as the sole determinant of whether a student is promoted, lawmakers deleted that provision and instead ordered the state superintendent of education to develop recommendations for other promotion options for students who fail to pass the test. Lawmakers also approved HCR 194, which asks BESE to study LEAP issues faced by special education students, students with disabilities and students who have limited English proficiency.
School board reform started but failed.
Efforts to reform school board operations across the state failed after intense opposition from the Louisiana School Boards Association and other special interest groups, as well as lukewarm interest from the Governor’s Office. Four measures dealing with nepotism, term limits, pay and compensation, and micromanagement by school boards were proposed. Although none passed, the bills served as an opening to what likely will be an ongoing public debate about the appropriate relationship between school district administrators and the elected board members who oversee them.
Charter school rules were strengthened.
Several measures focused on charter schools passed with little resistance and should ease the way for more charters to be established. HB 187 and SB 146 change the current law on conversions of traditional public schools to charter schools to minimize the potential for derailment of the conversions by parent and faculty resistance. SB 146 also requires local school boards and BESE to use the principles and standards promulgated by the National Association of Charter School Authorizers in evaluating charter school applications. In addition, legislators passed HB 519, which eliminates the existing cap on the number of charter schools that can operate in the state. The action was necessary for the state to take advantage of federal stimulus money set aside for education in the Race to the Top Fund.
Education funding held steady.
The Minimum Foundation Program formula for state funding to local school districts recommended no increase (or cut) in spending for FY 10. This was a departure from the standard 2.75 percent increase that typically is granted each year. Although this was a somewhat controversial decision, state funding for K-12 education is constitutionally protected from significant budget cuts and was in no danger of facing the same funding blows as higher education and health care.
Despite supporting continued funding protection for K-12 education, the Legislature did impose a new requirement aimed at ensuring that state money allocated for specific student subgroups is spent on the needs of those students. HB 821 requires that district-level expenditures match the MFP allocation and requires more detailed budget reports be given to BESE.
It remains to be seen how the budget cuts to higher education will be implemented and just how detrimental they will be to the state’s culture and economic promise. The executive budget proposed a general fund reduction of $213 million (18 percent) from the initial budget of FY 09 for the state’s colleges and universities. Under threat of massive layoffs and reduced student and community services, the administration and Legislature restored $100 million of the funding that was initially proposed to be cut. The state’s entire higher education enterprise was left leaning on a federal fiscal crutch that will be pulled out in two years, and very little was done this year to prepare for the fall.
The budget was not the only story on the higher education front. An important reform was defeated. SB 183would have proposed a constitutional amendment to allow the Board of Regents (BoR) to increase tuition up to certain levels. Also, a new tactic was tried that would have increased the level of budgetary authority granted to BoR by appropriating each system’s budget as a lump sum to BoR for distribution according to the funding formula. The Legislature reasserted its authority in the end by claiming a constitutional right to bypass the BoR in determining how much each system board should get. This issue will certainly resurface next year.
Holding the line.
The 2009 Regular Legislative Session resembled the 2008 session in its approach to health care issues – reactive rather than proactive and with a conspicuous absence of comprehensive strategy. Last year, it was said that legislative inaction would allow the administration time to formulate its call to action – the Louisiana Health First Plan.
However, the cornerstone of that plan, federal authorization to implement HMO-style managed care for the Louisiana Medicaid program, failed to get approval from the outgoing Bush administration. Despite the fact that the LHF plan outlined access, cost and quality problems in the Medicaid program, no alternate strategy was presented to the Legislature to address these issues. Without federal approval for the LHF plan, it would have been prudent for the state to move forward with improvements that could be accomplished without federal permission.
Instead, debate over budget cuts dominated the session, and, while all issues have not been fully resolved, some relief was granted when the governor agreed to allow a decrease in the overall level of cuts. The Department of Health and Hospitals was left with $260 million in cuts. Damaging reductions in a number of areas, particularly private physician payments and private hospital reimbursements, were mitigated to some degree, but problems remain with regard to funding health care for the uninsured.
Mental health, the subject of a much touted administration reform initiative for the New Orleans area in 2008, was hit hard by budget cuts in the administration plan with a total reduction of $41.4 million, or 12 percent. A particularly controversial move was to slate the New Orleans Adolescent Hospital for closure. An amendment to restore $9.1 million for operation of NOAH might not survive the governor’s veto pen.
Legislation was introduced (HB 830) that called for an independent governance structure for the proposed replacement for the New Orleans charity hospital that has been closed since Hurricane Katrina. As the legislative session ended, LSU, Tulane and other members of the planned board of directors struggled for agreement on the details of power sharing and HB 830 failed to gain Senate approval.
Promise for progress.
There were a few positive developments in health care in the midst of the ongoing budget battles. Two health agencies (mental health and addictive disorders) were consolidated by passage of HB 837, a move that should improve care and treatment for patients. A federal grant was provided to the Medicaid program to study ways to divert patients with routine problems away from expensive emergency rooms and toward more cost-effective venues. Another grant from a private foundation will help to expand an already successful effort to provide health coverage for uninsured children.
Sixty constitutional amendments were introduced this session affecting a wide variety of issues, including homestead exemption, taxes, higher education tuition and fees, and freedom of religion. Six were passed by the Legislature and will be presented to voters in the Fall of 2010. They include:
- HB 509 – Changes bid process for property tax sales
- HB 765 – Redistributes state severance tax
- HB 903 – Changes process for property tax increases
- SB 5 – Provides for earlier start dates for legislative sessions
- SB 67 – Delays salary increases for certain elected officials
- SB 209 – Changes civil service status of certain state employees
Back to school
A set of study commissions and task forces are lined up with orders to churn out recommendations on tight timelines this year. This is perhaps the most telling evidence of the scarcity of ideas for strategic solutions to the state’s most obvious problems. Several of the more high-profile of these quasi-governmental study groups have deadlines to recommend ways to streamline government within a matter of months, so that adequate time is provided for the Legislature and governor’s administration to prepare legislation for the 2010 session.
Two of the study groups are charged with examining the spending side of state government. One would find ways to streamline the entire state government (SB 261) and the other would streamline only higher education (HB 794). The revenue side of the equation will be given short shrift. A particularly timid study resolution (SCR 51) will study the feasibility of establishing a study commission to analyze the state’s revenue structure.
If these study groups are successful in their task to re-create Louisiana government over the course of the next year, they will do so only because of the competence and expertise of state employees who might have been given the same marching orders last year to prepare the way for the wasted time that has passed. While careful planning and analysis should necessarily be the foundation of any major governmental reform, there are a rare few instances when a special study commission will be able to do better, more reliable work than career staffers who already have a command of the data and processes under analysis. These commissions likely are mechanisms to provide political cover for ideas and recommendations that have already been developed but would be too controversial for the current players to propose.
It seems that the state’s budget woes were not severe enough this year to force into being the kind of transformational proposals that will be necessary to either cut services or grow revenue to achieve a conservatively balanced budget in the tight years ahead. In a disappointing show of risk-averse leadership, any creative and strategic solutions state officials might have for reshaping Louisiana government were held off for another year when their implementation will be all the more pressing and difficult to achieve.