State's Medicaid revamp clears Legislature

It is all interconnected, the balancing act Gov. Bobby Jindal is trying to pull off as state revenues look to underperform and state expenditures, basically Medicaid, prepare to overperform. He has to get it right or practical and political ramifications will be substantial.

Naturally the state's current and looming budget deficits have dominated headlines for the past week, even as surrealistically a surplus came about for last year.. Problem is, that surplus cannot directly be used to offset this year's or the predicted deficit. As has been suggested previously, the best use of the surplus would be to boost the Budget Stabilization Fund, which would comprise about 60 percent of it. And while paying off debt and then using interest savings with the remainder also would generate some more short-term cash to offset the future deficit, perhaps a better strategy would be paying down unfunded accrued liabilities of state retirement systems to reduce huge expenditures in the next two decades.

But aggravating spending over the long run will continue unless the single biggest portion of the biggest item growing at the fastest rate continues, and that is Medicaid spending on the poor and indigent. This week, Jindal got a significant victory with legislative approval to allow him to bring to the federal government a coordinated care plan that would introduce private sector aspects to the system that promise to hold down costs.

This came despite two different forces who oppose the plan. One comes from physician organizations which would prefer the fee-for-service model because it better serves their interests. The new plan would reduce providers' abilities to make nonessential and/or duplicative charges and thereby also their revenues. It additionally would force more attention to be paid regarding their own practice management which some would prefer not to do.

The other, represented by the only dissenting legislative committee vote of state Rep. Karen Carter Peterson, objects because Jindal's plan disempowers government too much for its liking. The current fee-for-service arrangement, where government pays whatever reasonably is billed, puts everybody but the health care consumer in charge and encourages no efficiency. Jindal's plan, developed by Health and Hospitals Secretary Alan Levine who supervised a similar reform in Florida, introduces market forces with competing nongovernment administrators. This is in contrast to rumblings coming from Democrats in Washington who now control both majoritarian branches of government and campaigned on providing national universal health care.

Peterson commented that the process was too rushed, even though legislators were not being asked to …
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Thursday, December 18^th, 2008

Baton Rouge, Louisiana

FEW SAINTS IN POLITICS

NOT EVEN LINCOLN

When the Governor of Illinois was arrested recently and charged with selling political favors to the highest bidder, the federal prosecutor in the case was incredulous. He stated that Abraham Lincoln” would rollover in his grave” if he were to know all the shenanigans going on Illinois.  Not so say a number of historians who have written about Lincoln.  Maybe the Civil War President would not have been as blatant as the current Illinois Governor.  But selling political favors for campaign contributions or other personal benefits has been a way of life in Illinois, and other states including Louisiana, for centuries.

I've never fully understood the fascination with Lincoln.  More than 5000 books have been written about the 25th president, more surely than about any other figure in American history. Lincoln was the guy who micromanaged a war that all told took the lives of almost 1,000,000 Americans.  On one day alone, September 17, 1862, more American soldiers were killed in the Battle of Antietam than in all other wars fought by the United States in the 19th century together.  How did Lincoln, this supposedly great compromiser, allow such devastation to take place?  Was ripping apart our country worth such a price?

When it came to patronage and personal gain, Lincoln was certainly no slouch. Pulitzer prize-winning Lincoln biographer David Daniel paints a picture of Lincoln fully immersed in the political world of “pay to play” and patronage tied to large political contributions.  Rather than "rolling over in his grave," Lincoln would have been more likely "rolling his eyes" over the naivety of federal prosecutor Patrick Fitzgerald, who brought the charges against Illinois Gov. Rod Blagojevich.

Thomas DiLorenzo, in his new book, “Lincoln Unmasked,” paints a portrait of Lincoln as the master string puller in Illinois at the time he was elected president.  One of his first acts was to call Congress into a special session in June of 1861 to begin work on the Pacific Railroad Bill, which would eventually result in one of the greatest spectacles of graft and corruption in American history (the Credit Mobilier scandal). Read More...

Sen. David Vitter faulted for derailing auto bailout

As Louisiana goes forward to contend with a budget deficit of $341 million this year (so far; there are two more regularly checkpoints at minimum on this figure before the end of the fiscal year) and a potential $2 billion deficit for fiscal year 2009-10, the question arises how the state's fiscal mechanisms can deal with these deficit situations which cannot exist according to the state's Constitution except for extreme circumstances. A review of these procedures is in order.

As of this year note that about 65 percent of the state operating expenditures can be financed currently through federal monies of some kind. Thus, the total being discussed here is about $14.5 billion. (Recognize this excludes any disaster recovery federal dollars.) Of that, a little over 63 percent is discretionary funds that have no strings attached to them in their expenditures, a little over 10 percent are non-discretionary in that they are fees or other self-generated revenues that go back into the programs from which they are generated, and the remainder is by law revenues dedicated to a certain purpose. (Technically, about three percent of the grand total really goes to capital outlay projects.) The "undedicated" monies go into the general fund, and the dedicated funds have each of 36 funds into which they go.

When there is a budget deficit in the current year reported in a fund, appropriations from the fund in question may be reduced. Typically, the only meaningful deficits that exist are in the general fund, and to take care of those typically appropriations must be reduced to the discretionary areas. In this instance, on Friday the Joint Legislative Committee on the Budget is likely to certify the deficit numbers coming from the general fund with little or no deficits from the others.

If it occurs during the current fiscal year, the Constitution empowers for smaller cuts the governor, for larger cuts him and the Committee, and for the largest cuts special sessions of the Legislature, to authorize reductions in appropriations. Except in the latter case, cuts come only in the fund from which the deficit exists, because only in the latter case may statutory changes of a permanent nature be made to shift revenues around rather than interim measures that are not statutory in nature. The only way around this is for the governor to issue freeze executive orders that could cover any program (such as his recently declared ones on hiring and program implementation), which only address smaller amounts, or to get two-thirds approval of the Legislature to redirect revenues.

The problem with this regime as many have identified is that the general fund, except in the extreme …
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LA colleges and health care on the chopping block

If his opponents want to oust Sen. David Vitter from office in 2010, they have found exactly the wrong way to do it. He now enjoys the happy coincidence of an issue where he can come out in favor of his conservative principles and ride public sentiment in his favor while making opponents look sanctimonious and simultaneously devalue the only real vulnerable issue concerning Vitter.

Until last year, Vitter was 99.44 percent assured of reelection, given his strong conservative voting record in a majority conservative state. Then he revealed commission of a "serious sin" in the past, likely the usage of a prostitution ring prior to election to federal office. Given his record on the issues, his apparent contrition, and that many voters will accept somebody who votes the right way as long he doesn't abuse the powers of his office, his chances for reelection may have plunged to 90 percent.

But with the emergence the possibility of the federal government bailing out one or more failing domestic automakers, he may be on the way to that higher plateau of reelection possibility. This issue not only allows Vitter to remind Louisianans of his specific opposition to this, shared nationally, and general dislike of government intervention into the economy, but the way in which his opponents have attacked him about it makes him look even better while pushing away the "character" issue. Just one sample of the rhetoric from a union hack that plays into Vitter's hands:

"I don't know what Sen. Vitter has against GM [which has a major facility in Shreveport] or the United Auto Workers or the entire domestic auto industry; whatever it is, whatever he thinks we've done, it's time for him to forgive us, just like Sen. Vitter has asked the citizens of Louisiana to forgive him," said [Morgan] Johnson, president of [Shreveport] Local 2166. Otherwise, Johnson said of Vitter, it would appear, "He'd rather pay a prostitute than pay auto workers."

Is it possible to critique Vitter in a less intelligent way than this? Here's a guy defending an industry losing money hand over fist because of an inadequate business model that allows a $30 differential in labor costs to its rivals promoted by his very union which allow typical workers to make $55,000 a year (exclusive of benefits worth 150 percent more), which until recently paid people not to work up to two years, paid them more in early retirement than when they worked, and supplies health benefits that even members of Congress would envy. And has the audacity to ask taxpayers many of whom are poorer that these unionized workers to subsidize this? Especially when Vitter …
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LA deficit pegged at $341 million, and worse next year

The news about Louisiana's looming budget deficit probably was beyond what elected officials wanted to hear - current year $341 million, and if spending stays at the current projection factoring in known increases without adding services, it will be a billion dollars more and $1.2 billion less in revenues to cover it.

Some things to note about the issue for this fiscal year: 

• For this year as a whole, this projects to about a 3.5 percent hit on the general fund minus dedicated funds which constitutionally means Gov. Bobby Jindal and the Joint Legislative Committee on the Budget together can handle the cutting (although in reality, since half the year has gone by, it is a 7 percent real cut) by up to 5 percent in a fund
• Over half of this, about $5 billion, for disbursement lies in statutory dedications many of which are stable but some potentially unpredictable in cost - for example, higher enrollments and tuitions at state universities through TOPS, those stemming from judicial proceedings, debt service increases, etc. - which must be paid without the budget going into deficit
• The remainder is not statutorily dedicated and is considered totally discretionary in its treatment, of which almost 34 percent goes to higher education and 40 percent to health care - meaning that potentially if cuts are uniform across agencies at the 3.5 percent level, these two will absorb around $252 million in cuts, or a real reduction in their general fund allocations for the remainder of the fiscal year of 15.6 percent and to their overall budgets of 8 percent and 3.2 percent, respectively
• About 29 percent, the largest portion, of the general fund goes to the Minimum Foundation Program, but that is the exception to the rule and can be cut at most only 1 percent, or around $27 million, providing less than 10 percent of the amount needed.
• About $4.35 billion of statutory revenue dedications, as opposed to those of expenditures above, also come into the state's coffers, but to redirect any of these immediately would require legislation from a special session, so the only savings here would be from operations such as those from executive orders recently issued by Jindal and then subsequent transfers of funds

Next year's numbers truly are sobering (although not unreal such as those of 20 years ago were with a $1 billion deficit to a general fund that then was less than $4 billion in generated revenue), …
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NGOs cut back

Much wailing and gnashing of teeth occurred this summer when Gov. Bobby Jindal did what he said he would, cut down on state government money going to private interests. He employed his line item veto to excise around $16 million going to 258 nonprofit organizations, and some legislators who had one or more such entities in their districts made disapproving noises about how crippling the lack of funds would be for the organizations.

But Jindal and supporters of these moves pointed out that if these truly were desirable functions being performed, other sources of money would compensate for the loss of state funds, or the organizations would find more efficient ways of doing these things, or government formally would oversee the function. Almost six months later, this is exactly what has happened as opposed to the apocalyptic scenarios some legislators asserted would be the outcome.

Some organizations did find other philanthropic sources. Others relied more heavily on volunteers. Still others found ways to work more efficiently. Many had to cut back services to some degree, but that only demonstrates that perhaps they was an oversupply of that service to begin with or a more efficient way or alternative funding sources could not be found. In all, this demonstrates that government money was not being used as optimally as it should have been, as these other solutions and resolutions existed but had not been implemented precisely because of the free flow of money from government.

This disposition also points out why the system has existed so long, not because it is a good use of taxpayers' monies, but because it suited the political needs of politicians. Legislators could promise money to these organizations, the members of which no doubt would work for that legislator's reelection and sing that person's praises. The governor could use line item veto threats of these kinds of projects to entice legislators to support his initiatives.

By taking the issue off the table, however, these political dynamics no longer apply. It was a bold move by Jindal, unilaterally surrendering this tool of power, but he did so and by his continuing to enforce this standard, the state will be better off.

(If you'd like to have Prof. Sadow's column mailed to you, go to http://www.between-lines.com and click on "Join …
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Fleming tapped for 4th District seat

A year ago, when Rep. Jim McCrery semi-surprisingly announced his retirement, it would have been hard to believe that an obscure coroner from Webster Parish would succeed him. Lessons both locally and nationally may be learned from this.

Dr. John Fleming not only was not considered a contender at the time, he wasn't even on the radar screen. But after a couple of big names passed as they liked their current situations, local Republicans were presented with a thin bench of elected officials to compete for this due to a mixture of age, inexperience, too much flirtation with the Democrats, or interest in keeping some semblance of a private life.

Still another factor loomed as well - 2008 was not shaping up to be a good GOP year on the national front. When around Baton Rouge a Democrat slid into that seat in a special election months later, that seemed to confirm the trend, and by then it was known a lackluster nominee would head the Republican ticket for the presidency.

This opened up the field for candidates willing to take risks and those who had little connection with government, given the anti-incumbent sentiment that more than anything else was hurting the GOP. Of the three Republicans who finally contested the nomination, only Fleming had any experience in elective office - serving as Webster Parish coroner from 1996-2000 by virtue of racking up about 7,000 votes, and then bowing out after a single term.

With no real record for any of these candidates to fall back on yet unabashedly conservative in their orientations, Fleming ultimately would come out on top because his personal story was the most compelling. Born of humble circumstances, by grit and wit he had persevered to become an extremely successful businessman - the antithesis to what many saw as the typical Washington politician. This was despite his being probably the most conservative candidate in the contest, articulating some issue preferences that on the surface can be easily caricatured negatively but in reality are nuanced, complex, and on the whole comprise very sound public policy.

Fleming then caught a couple of breaks with his Democrat opponent, retiring First District (Caddo Parish) Attorney Paul Carmouche. While Carmouche fit well the Democrat playbook for the South - be conservative on a few, mainly social, issues to mask a willingness to serve liberal interests in Washington - and had a much larger geographical base, the fact that he was a career politician who had not run a campaign in decades not only provided a lengthy record …
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Fleming hits the ground running

Besides the obvious fact that the biggest loser of Anh "Joseph" Cao's upset win over Rep. Bill Jefferson was the incumbent himself, next in line is the neighbor to the south, Rep. Charlie Melancon, and Louisiana Democrats as a whole.

A Democrat as is Jefferson, he is the most endangered species in the Louisiana House delegation since every single member other member now is a Republican. The giddy dreams some state party officials must have had now have turned nightmarish; the party had hoped to wiggle out of this election cycle with another Democrat to succeed Jefferson on the Second District, Paul Carmouche to pick up the open seat in the Fourth, and Rep. Don Cazayoux to retain the seat he has won by special election only months early, to give the delegation a majority in the state. Instead, despite all being at least even-money possibilities, all three wishes came up craps.

In the short run, the surviving Melancon (unopposed for reelection) really gains nothing more than he already had. Even had Jefferson won, the indictments hanging over his head would had rendered him largely ineffective as a powerbroker, so Melancon among the state's House members, being of the same party as the current Congressional majority and incoming president (plus now among the most senior even just starting his third term), would still have been the most influential. But in the long run, the Cao upset along with these other GOP victories makes Melancon's deteriorating position even worse.

With Louisiana very likely losing a House seat due to reapportionment in 2012, Melancon's seat remains the most threatened. Three interests will jockey over this process, and two of them have a community of interest that will drive it. Republicans will want to create conditions that will ensure at least five of the six seats remain in their hands, while black Democrats will want a secure seat for themselves.

This cuts out white Democrats entirely, and the other two forces have the muscle to put this through the state legislature. Republicans already effectively control the House and while Democrats control the Senate, black legislators among them will defect on this issue. And of course Gov. Bobby Jindal whose approval is necessary on any plan and could only be bypassed with an impossible supermajority is a Republican.

The idea all along has been to carve up Melancon's Third District and shifting other districts at the margins. This would allow the Second District to take in majority black areas of the Third and reach into …
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Thursday, December 11^th, 21008

Baton Rouge, Louisiana

LOUISIANA CITIZENS INSURANCE SCANDALS

CONTINUE TO GROW

A year ago, it would have been hard to imagine that conditions at Citizens Property Insurance Company could get any worse. The state created and state run company was in debt by over $1 billion.  The Rouge Business Report called Citizens the biggest financial disaster in the state's history.  But never underestimate the ability of some state agencies to make a dysfunctional situation go from bad to worse.

 The Board governing Citizens, that includes statewide elected officials, has shown little oversight of the Companies’ spending and management decisions, sparking not only criticism from the Legislative Auditor in Louisiana, but also provoking  major investigations by both state and federal law-enforcement agencies.

The latest Citizens scandal boiled over last week when the former CEO was indicted with 14 counts of theft by fraud, filled with allegations that he spent more than $285,000 on questionable expenses including airline tickets, meals, retirement gifts and stays at lavish hotels. But his attorney said last week that his client is being singled out and “used as a scapegoat" in the poor management of the insurance company. Sources close to the investigation seemed to agree, saying that the latest indictments are just "the tip of the iceberg."

The whole controversy has significantly elevated due to the resistance of Louisiana's Insurance Commissioner to turning over some 2000 e-mails requested by the Legislative Auditor’s office. The Louisiana Insurance Department is arguing that the information requested by the auditor is proprietary, and it cannot allow this information to be made public. Such an argument is spurious at best, since, by law, the Auditor’s office has the same confidentiality restrictions that apply to the Commissioner of Insurance. Questions are being raised as to why the insurance department has been so defensive in turning over these 2000 e-mails requested.

Rumors are rampant throughout the Department of Insurance that many e-mails are "extremely personal" in nature with risqué and bawdy language flowing freely.  So some department employees are concerned that the Auditor’ office will weed out these salacious e-mails to show a pattern of employees abusing the use of state owned computers for matters of a …
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Change on horizon for Caddo schools

Newcomer Caddo Parish School District Superintendent Gerald Dawkins has introduced a plan to deal with schools threatened by state takeover, which should receive an answer concering it from the state next week. As befitting a situation where dramatic results must be changed the plan is bold. Unfortunately, it addresses too few of the impediments that have created the underachieving problem in the first place.

To prompt better performance out of failing schools, first one must be clear about why the underperformance happens. No one cause, but several in part interrelated must be addressed before any substantial improvement can occur. They deal with the students' backgrounds themselves, the competency of the teachers, and the administrative/political environment in which it all operates.

Dawkins' plan faces long odds because it cannot adequately address all of these considerations. It seeks to create a theme at each subpar school (typically utilizing some already-developed education system), clear all present positions of their occupants and invite open hiring into them, and add instructional and development time among other things. The hope is to attract students from other attendance zones in the district interested in theme areas which (even if this goes unstated) can increase the school's test scores, as well as to attract better teachers to get students to achieve more.

These outcomes may be realized, but given all of the other inertia they are unlikely to cause the big improvement necessary. The least controllable factor of school performance is the students themselves, more specifically the backgrounds and cultures from which they hail. Simply, in these schools, children disproportionately come from families that do not possess the attitudes and/or abilities to facilitate success in learning.

 Regrettably, too many of these children have parents who do not value education and/or are unable to assist their kids in their schoolwork or in providing support that encourages students to stay in school and learn. (Not surprisingly, most of these parents were poor or indifferent students usually if now working in low-paying jobs that afford them little opportunity to give support, creating a cycle of low achievement.) Shamefully, until welfare reform in the past dozen years, these attitudes were encouraged (what was so important about doing well in school if the state would support you regardless?) and it will take a generation to undo the entitlement mentality present in the subculture of underachievement, something Dawkins' plan can do nothing about.

Teacher competency in their subject knowledge base also contributes. In its initial certification guidelines (and note that schools are not forced to hire only teachers certified in the subject area they teach), Louisiana requires some undemanding demonstration of knowledge, but none to renew certificates. And a …
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