Gov. Bobby Jindal today announced he is proposing cuts of $341 million to Louisiana's health and education agencies due to the budget deficit.  Jindal is expecting to cut $118 million at the Department of Health and Hospitals, $20 million in the Department of Social Services and $55 million for higher education. 

Here is a press release from Governor Jindal:

Today, Governor Bobby Jindal was joined by legislative leaders to release the administration’s detailed cost-savings plan for $341 million in necessary spending reductions to meet the state’s FY 09 certified revenue shortfall.

Governor Jindal said, “It is of course not news to anyone that our nation is currently undergoing the most difficult economic situation in several generations, and we know no state is immune to this national economic downturn. When governments face economic shortfalls, there are only three possible solutions: go into debt, raise taxes, or tighten our belt and cut spending. When Washington faces this problem, they usually make the wrong choice, preferring to first incur mountains of debt, then to raise taxes, and rarely do they ever cut spending in any meaningful way. On my watch in Louisiana, we will do it in just the opposite manner.

“When a small business or a family in Louisiana faces economic difficulty, they are forced to find ways to cut spending. They cannot simply send their neighbors a bill or print more money; they have to tighten their belts. In my view, that is the responsible course for a government to take as well.

“Some think the job of government is simply to collect taxes and spend money. I do not subscribe to this view. I believe government has to be innovative and must constantly be in search of better ways to provide quality service in a more efficient manner. We will continue to pursue policies to move Louisiana forward while we tighten our belts in government and ensure we are living within our means.”

Governor Jindal added that, “Eliminating the $341 million deficit for FY 09 is a first step in an effort to right-size state government, to maximize efficiencies, to eliminate non-essential expenditures, and to begin identifying savings that can be sustained in preparation for the much larger projected shortfall in FY 10.”

Speaker of the House Jim Tucker said, “The Governor's plan is a solid approach to tackling non-essential spending and increasing government efficiency, and it should provide a strong foundation for the deeper reductions we will need to make next year.”

Sen. Mike Michot said, “The big story of the day is the admirable job the Governor has done, strategically targeting savings across departments, sparing many Medicaid providers from rate cuts, focusing on new and recently created programs that haven't yet been implemented, and utilizing the flexibility offered by reducing statutory dedications to soften the blow to health care and higher education. Too often, health care and higher education sustain the brunt of a budget blow because they are unprotected in law, but the Governor's plan finds savings in nearly every unit of the state budget, and even opens up statutorily dedicated funding to curb the impact on health care and higher education.”

To eliminate the $341 million FY 09 deficit, departments were asked to identify efficiencies and cost-saving measures. For many departments, these savings came as a result of freezing operational expenses in travel, supplies, acquisitions, operational services and professional services, and halting or delaying the implementation of certain new initiatives.

Other savings were achieved through reductions or eliminations in lower-performing programs. These were strategic and programmatic shifts that focused on streamlining government services and producing more efficiencies in operations. In short – the goal is to make government do more with less. In some areas of government, cost savings were achieved by stopping the creation or expansion of new programs. State government has to be able to afford the programs we already have.

In addition to the savings achieved through the hiring freeze, savings in personnel costs associated with these cost-saving measures and targeted program eliminations in low-performing areas were achieved through the elimination of some vacant positions, as well as, in some instances, the elimination or the shifting of filled positions.

For example, on-hold music was eliminated through the Division of Administration, which along with reductions in other operating expenses saved the state more than $253,000. More than half a million dollars was saved by DEQ by decreasing their “vehicle replacement budget” – funding dedicated to upgrading government vehicles, and $2.5 million in savings was realized from cancelling a $10 million over-budgeted and behind-schedule IT project in the Department of Motor Vehicles.

National Landscape: Country Facing Significant Budget Cuts from Coast to Coast

The country is currently undergoing the most difficult economic situation in several generations and no state is immune to the results of this national economic downturn. The Center on Budget and Policy Priorities said on December 23^rd that at least 44 states are facing shortfalls in their budgets for this year and at least 38 states anticipate deficits for fiscal year 2010 and beyond. The Center reported that 14 states have already raised taxes or taken other revenue raising measures to make up their shortfalls.

In the area of health care, at least 19 states have already proposed or implemented cuts affecting low-income children’s - or their families’ - eligibility for health insurance or reduced their access to health care services. New York plans to cut $1 billion from hospitals, nursing homes and health care providers; California is proposing the removal of more than 100,000 children from their health care program; Washington state is considering dropping dental coverage for poor adults; and Florida plans to eliminate hearing aides, eyeglasses and prescription drugs from the state’s Medicaid program.

At least 20 states are cutting K-12 and early childhood education and 26 states are cutting higher education funding. Rhode Island and New York are implementing mid-year tuition hikes on students and Washington state officials are considering slashing school funding by $1 billion. Hawaii lawmakers are proposing to reduce education spending by closing public schools for six days and requiring teachers to work without pay for four days out of the school year. In California, Governor Schwarzenegger proposed cutting funding for K-12 and community colleges by $2.5 billion. In New York, Governor David Paterson proposed cutting $700 million from education, and Michigan has eliminated a college scholarship program.

Some of the cuts in other states outside the areas of education and health care are just as serious. The Center reports that 34 states are reducing their state workforces and governors in 12 states have called for across-the-board cuts. Massachusetts is considering $1 billion in public safety cuts that include cutting funding for the Massachusetts Sex Offender Registry Board; and New Hampshire is suspending jury trials for a month to save the state money.

Strategic Reductions: Aimed at Mitigating Health Care and Higher Education Impact

As has been widely noted, general fund expenditures in health care and higher education in Louisiana are the most “vulnerable” because they make up a sizable amount of the discretionary or “unprotected” portion of the general fund. 

There have been news reports that current year cuts for these two areas could be in the $160 million range for DHH, and the $109 million range for higher education; however, the administration worked to make strategic reductions in every department in order to mitigate the level of reductions in health care and higher education. As a result of these efforts, current year spending reductions for DHH are $118 million, and higher education’s necessary cost-savings measures were reduced by half – down to $55.2 million.

Health Care Spending Reductions

The state’s health care budget saw a substantial increase in FY 09 over the previous year’s funding due to significant investments in mental health care and Medicaid; and therefore, the net budget, including the $118 million spending reduction for FY 09, remains substantially larger than the year before. 

For instance, this year’s budget includes the expansion of mental health service funding by more than $89 million for direct service programs, a more than $10 million investment in the LaCHIP program to expand health insurance for Louisiana children, and programs previously funded by now-expired Social Services Block Grants.  Also this fiscal year, the Medicaid budget grew by more than $550 million - including federal dollars - primarily to pay for the annualized cost of provider rate increases passed during the 2007 regular legislative session – rate increases that amounted to more than $1 billion annually and included increases to physician services, nursing homes and hospitals. The Medicaid growth also included service utilization increases typical of annual Medicaid program growth. 

While there were no enrollment reductions in the Medicaid or LaCHIP programs (and LaCHIP enrollment in still ongoing) as part of these cost savings measures, certain reductions to provider rates and programs were necessary in the current fiscal year in order to reduce spending to sustainable levels and prepare for what will likely be additional budget constraints in FY 10. The 3.5 percent rate reduction for hospitals, for example, will only take effect for nearly half of this fiscal year and therefore will have a limited impact on hospital expenditures for this fiscal year, while the full savings of this reduction will be realized in FY 10.

Several principles guided DHH’s rationale for reductions in the current fiscal year, including the department’s goals for:

·        Mitigating the impact of this year’s Medicaid rate reductions on children, the elderly and the developmentally disabled, and ensuring access to physicians and critical services is maintained. 

DHH’s proposed rate reductions for the current fiscal year do not include any cuts to rural hospitals, rural health clinics or federally qualified health centers, physician services, LSU charity hospitals, dentists, pharmacy dispensing fees, nursing homes, Early and Periodic Screening Diagnosis and Treatment Services for children (EPSDT), emergency and non-emergency transportation services for Medicaid consumers and home health services.

·        Improving the efficiency of the Medicaid program. 

DHH proposes several policy changes as part of the department’s cost-savings plan aimed at eliminating inefficiencies in Medicaid that are costing taxpayers tens of millions of dollars each year. For example, more than $60 million each year is currently being spent for inpatient institutional admissions and lengths of stay that do not meet current clinical criteria. Moreover, there is currently no prior authorization for certain outpatient procedures that may be duplicative or unnecessary in accordance with accepted clinical standards; and in some cases, because the state’s billing and payment system updates have not been automated, the state may be improperly paying multiple times for some services. 

For example, one patient visited emergency rooms and outpatient centers 30 times and received more than 60 unnecessary CAT scans, exposing him to levels of radiation exceeding 18,000 X-Rays.

·        Focusing programmatic changes on reducing administrative costs, programs that were not yet implemented, programs that were under-utilized or programs where other services already existed to serve consumers.  

The department worked to first reduce administrative costs in the current year through freezing funded vacant positions and reducing spending on supplies and other administrative expenditures.

Where the department is implementing a programmatic reduction, there is either an existing alternative for those in the program, the program itself is not heavily utilized, or those in the program will continue to receive services while the amount of new individuals entering the program is limited. In the Access to Recovery Program, for example, individuals currently being served will continue their treatments until completion, and there will be no reduction to the federally funded Access to Recovery program for adults and juveniles re-entering the community from the criminal justice system.

DHH has already begun working to identify strategic recurring cost-saving measures and rate reductions to implement in FY 10 when there will likely be even greater reductions in state revenue. The department is also developing plans to use possible federal Medicaid funding passed by Congress to help offset reductions in FY 10, with the important understanding that this federal funding would be one-time money, and that identifying recurring program savings is essential to ensuring the state continues to spend within its means. (NOTE: Louisiana’s federal matching rate for Medicaid is expected to decrease from 72 percent to 68 percent beginning in October 2009, meaning hundreds of millions of dollars to the state will be lost. Under the provisions currently being considered by Congress, the match rate may increase, but decrease to the 68 percent by January 2010.)

Education Spending Reductions

Though the reduction for higher education was reported to be initially targeted at $109 million, strategic reductions throughout the budget lowered this target to a savings of $55.2 million from higher education – around half of the reported $109 million.

In particular, while officials initially discussed achieving savings for the state by cutting Louisiana’s community and technical colleges by $14.18 million, and cutting Pennington Biomedical Research Center by $1.3 million, the administration’s final plan to address the $341 million revenue shortfall in FY 09 will have NO reduction of general fund dollars for Louisiana’s community colleges and Pennington. The reductions also do NOT affect the MFP formula for funding K-12 education.

The strategic decisions to avoid cutting Louisiana’s community and technical colleges, which are some of the fastest growing in the nation, and economic development initiatives like Pennington Biomedical Center reflect the administration’s commitment to keeping Louisiana growing while decreasing government spending, and requiring the state to live within its means, just like any Louisiana family or business.

The mid-year funding reduction of $55.2 million means that higher education still received an overall increase in state general fund and overall funding dollars in the current year budget. Higher education formula funding was increased from $1,358,649,447 in FY07-08 to $1,405,422,312 in FY08-09. Prior to this mid-year adjustment, FY 09 total general fund direct investments for higher education increased by $64.4 million for a total of $1.476 billion.

Additionally, LSU received over $25 million for the planning and construction of a chemistry building and $10 million for the roof replacement and repairs to veterinary facilities through capital outlay. LSU also received $10.4 million towards the new chemistry building and $4.54 million for the LSU Veterinary School's large animal disease isolation unit through supplemental appropriations this year.

Key higher education investments in the current year included:

·        Higher education formula funding increase from $1,358,649,447 in FY07-08 to $1,405,422,312 in FY08-09

·        $34.7 million toward full formula funding for every college and university

·        $10 million for workforce training “rapid response” at two-year institutions

·        $4 million for dual enrollment

·        $3 million for the Fast Start job-specific training initiative

·        $8 million for endowed chairs and professorships

·        An additional $650,000, for a total of $120 million, for continued full funding of TOPS

·        An additional $9.2 million, for a total of $24.2 million, to fund Go Grants, the state’s need-based financial aid program

·        $75 million toward deferred maintenance for higher education facilities

·        $50 million in capital investments for Pennington Biomedical Research Center

·        $10.7 million in general fund for merit increases

·        $25 million for the planning and construction of a chemistry building for LSU

·        $10 million for the roof replacement and repairs to veterinary facilities through capital outlay for LSU

·        $10.4 million towards the new chemistry building and $4.54 million for the LSU Veterinary School's large animal disease isolation unit

·        $208.7 million in Priority 1 and Priority 2 capital outlay investments for higher education

The administration has made substantive increases in investments to K-12 education also, which are not affected by FY 09 cost savings measures. These increases include $70.1 million toward teacher pay raises this year, giving each teacher an increase of $1,019 ($1,176 with related benefits); $12.6 million in new funding for the Ensuring Literacy and Numeracy for All initiative; and a $500,000 increase in funding for Teach for America for a total of $968,468. Additionally, the budget also included increases of $10 million for flexible pay for rural school districts, and $90 million for the Minimum Foundation Program (MFP) school funding formula for public elementary and secondary schools.

Statutory Dedications

As Governor Jindal said, the administration took the approach that “everything is on the table” in order to identify needed savings for the state, which includes finding savings in statutory dedications.

The administration reviewed all statutory dedications when formulating cost-savings plans for FY 09, but excluded certain funds where reductions would be counterproductive or unhelpful to the goal of alleviating the impact of general fund cuts. Even more statutory dedication savings are anticipated for FY 10.

Government Personnel, Programs, and Offices

This cost-savings plan for FY 09 includes the freezing of more than 1,000 vacant government positions statewide. This is in addition to the elimination of close to 1,000 funded positions in the existing budget. Given the projected shortfall for the coming fiscal year, it is likely that many of these 1,000 positions for FY 09 will be eliminated to generate further savings.

The Department of Public Safety has already begun a reduction in middle management positions, eliminating two Lt. Colonel positions in the Office of State Police. Also, the Office of Management and Finance will eliminate one IT Deputy Director position, and the Office of Motor Vehicles will eliminate four middle management positions.

In addition to hiring freezes and other expenditure freezes, the plan also includes the closure of offices, the elimination of programs, and a total of 335 layoffs as part of departmental cost-savings measures, which includes 163 permanent full-time employees, 102 WAE employees, and 70 probationary appointments. This figure does not include layoffs that may be included in the budget reduction plans of statewide elected officials or higher education systems, or the elimination of filled student worker positions certain departments will undertake.

The Department of Veterans Affairs will implement a layoff plan for 12 administrative positions. The Department of Corrections will stop the expansion of its Skilled Nursing Facility at the Elayn Hunt Correction Center and eliminate 70 probationary appointments to the program. DOC will sell the Steve Hoyle Rehabilitation Center in Tallaluh to a private entity, resulting in a loss of 151 full-time state employees (the facility may then be operated as a federal detention center and administered by a contract firm, which will be required to hire back former employees as needed). Corrections will also eliminate 102 filled “When Actually Employed” (WAE) positions department-wide.

Concerning programs, the Department of Public Safety will cancel the implementation of the Next Generation Vehicle Project, an over-budget and behind-schedule contract for the Office of Motor Vehicles. The department will instead move forward with upgrading its existing mainframe. Additionally, the Department of Environmental Quality will close its office in Mandeville and continue operations from their other existing offices.

Completing the Process

The $341 million budget deficit elimination plan outlined by Governor Jindal today is a complete package put together strategically and thoughtfully to protect state priorities, while reducing state spending to an affordable level. As RS 39:75 dictates, today the Governor issued an Executive Order by his own authority to immediately reduce up to three percent of the general fund by budget unit. By this Executive Order, the administration cut $162,544,637. The administration also announced that they have been working closely with legislative leadership and they expect to present a plan to the Joint Legislative Committee on the Budget on January 9, 2009 to seek approval for the remaining $178,403,597 in savings needed for FY 09.

To the greatest extent possible, Governor Jindal said that agencies are preparing to translate cuts made in the current fiscal year into sustained savings for FY 10. Also, for FY 10 savings, many of the positions that are frozen under the current hiring freeze will be eliminated.

**CLICK HERE for a breakdown of cost savings by department/agency amounting to total savings of more than $316 million, which added to the more than $24 million in savings from statutory dedications, totals the necessary more than $340.9 million in savings for FY 09.***

Below is a press release from the Louisiana Community and Technical College System regarding the cuts:

BATON ROUGE , La. - Over the past year, tremendous progress has been made in strengthening community and technical colleges as part of Governor Jindal's comprehensive workforce redesign package that was announced in March 2008. In keeping in line with that commitment, today as Gov. Jindal announced budget cuts for the State of Louisiana and the higher education community, he also announced his desire to work with the Board of Regents and Commissioner of Higher Education Sally Clausen to keep funding for the Louisiana Community and Technical College System (LCTCS) intact for the current fiscal year. The designated budget cuts for the entire higher education community is $55 million.

"LCTCS recognizes that the state is at a critical stage in effectively combating the severity of the economic downturn, and we are appreciative for the Governor and his staff's hard work in providing relief to our colleges at this time. We are extremely fortunate that the administration understands the value of community and technical colleges and our ability to step up and assist in turning this unfortunate situation around for our state's citizens and how we can ultimately contribute to Louisiana's overall economic recovery," said LCTCS President Dr. Joe D. May.

"Allowing our budget to remain whole will provide us with an opportunity to continue working with Louisiana Economic Development and the Louisiana Workforce Commission to fully develop and implement the workforce redesign efforts unveiled last March. As a result, ultimately everyone will benefit as we grow and train students, put more people to work , and help business and industry thrive as we boost the economy," Dr. May added.

National trends show that during dire economic situations, community and technical colleges see increased demand for their workforce-training programs from people who have been laid off or are in search of additional skills. This trend became visible last fall as the economy began shifting and LCTCS experienced a 13.6 percent enrollment increase from 52,405 students in fall 2007 to 59,506 students in fall 2008.

Additionally, many families simply cannot afford tuition at four-year institutions as they deal with the reality of severe financial challenges. Therefore, rather than enduring a cutback, it is critical to expand community college services during tough economic times. Out of work or underemployed people must be trained for jobs that require skilled workers. Furthermore, getting people into better jobs can also offer some relief to the state's budget challenges by increasing tax revenues.

LCTCS remains committed to delivering the programs and services needed to ensure that Louisiana citizens, business and industry, and the State as a whole are able to endure through this tough situation. All colleges will be working closely with local partners to offer services needed to aid in the state's recovery efforts and to ensure individuals can enroll in courses and programs that will yield the best benefits for the state's economy.

The mission of the Louisiana Community and Technical College System is to improve the quality of life of Louisiana citizens through educational programs offered through its colleges. LCTCS strives to increase the opportunity of Louisiana's workforce to succeed through skills training programs, and the system works to provide Louisiana citizens with the opportunity to learn continuously. LCTCS is committed to teaching what is needed, when it is needed, and where it is. The system includes seven community colleges, two technical community colleges, and 37 technical colleges located in eight regions throughout the state.