Jindal budget spares education more cuts

LSU Eunice and other colleges and universities escape funding reductions under the FY2010-11 budget announced Friday by Gov. Bobby Jindal.

Higher education had previously been advised to prepare for a total of $146 million in additional cuts as the state attempts to balance its budget in a time of falling revenue.

The Jindal proposal also fully funds the Minimum Foundation Program formula for elementary and secondary schools and fully funds the popular TOPS program for Louisiana students attending Louisiana colleges and universities.

Jindal said the proposal uses funds from the Tax Amnesty Program and surplus funds to mitigate reductions to health care, as the state faces extraordinary challenges due to the faulty FMAP formula and the federal changes to the disproportionate share hospital (DSH) program.

Specifically, the budget shields health care services by proposing no eliminations to Medicaid services or changes to eligibility requirements. This budget also restores lost federal DSH funding to LSU Hospitals and Rural Hospitals.

Governor Jindal said, “Unlike Alabama, California, Florida, Georgia, Maine, Maryland, Massachusetts, Missouri, and New Mexico, which all assumed in their budgets that FMAP aid would be extended for their states - this budget does not anticipate federal relief for FMAP, out of an abundance of caution.

“However, if Washington does fix the faulty FMAP formula that is costing our state $500 million a year in health care funding for the poorest among us, we will fight to protect the surplus and amnesty funds in this budget to go toward mitigating health care cuts in the FY 11-12 budget, which is expected to be the worst decline in funding yet. It would be irresponsible to spend additional federal dollars and amnesty and surplus funds in the same budget year rather than save amnesty and surplus funds to mitigate reductions in FY12.”

The Governor said his plan proposes no new or increased taxes.

The FY 10-11 Executive Budget proposes total funding of $24.2 billion, a decrease of $5.47 billion, or 18.4 percent, compared to the FY 09-10 Total Budget of $29.7 billion. This is $12.1 billion less than the $36.3 billion in total funds budgeted in FY 08. The FY 10-11 general fund recommendation of $8 billion is down $2.5 billion from the $10.5 billion in general fund budgeted that year.

Several reforms are included in the FY 10-11 Executive Budget to "right-size" spending to ensure government is living within its means, the governor noted. The reforms are targeted toward increasing efficiencies and rooting out savings, all while protecting state priorities, his staff said.

The proposals includes the following reductions in all means of financing:

· A decrease of $1 billion in General Fund Direct funding or 11.3 percent. Down to around $8 billion from around $9 billion in FY 09-10.

· A decrease of $1.29 billion, or 8.9 percent, in total state funding. Down to around $13 billion from around $14 billion in FY 09-10.

· A decrease of $4.18 billion, or 27.5 percent, in federal funding. Down to around $10.9 billion from around $15.1 billion in FY 09-10.

· A decrease of $5.47 billion, or 18.4 percent, in total budget funding. This is down to around $24.2 billion from $29.7 billion in FY 09-10.

The plan eliminates almost 3,000 fulltime, appropriated positions in the executive branch. More than half are currently vacant and nearly 500 were trimmed in the mid-year reductions in the current fiscal year.

This is in addition to the 3,326 full-time positions eliminated through budgetary actions in FY 09 and FY 10, bringing the total number of fulltime appropriated positions reduced to 6,302 since the beginning of the Jindal Administration.

The Governor again stressed the importance of streamlining government instead of raising taxes on people and businesses to protect the state’s continued economic growth and job creation.

Another priority area in this budget, in addition to education and health care, are economic development investments to spur job creation, including:

$15 million in Statutory Dedications for the Rapid Response Fund to secure economic development opportunities;

· $4.4 million in Statutory Dedications for the Fast Start Program, which delivers comprehensive “turnkey” employee training for relocating or expanding businesses.

Jindal said his proposal preserves the $55 million fund balance in Louisiana’s Mega-Project Development Fund as a critical tool for job creation and expanding our economy.

He said that by streamlining government and prioritizing spending, the state is laying a new foundation for government that will be more efficient and cost-effective, meaning that even when revenues begin to rise again there will be a more sustainable base to build off of to better-serve Louisiana taxpayers.

Streamlining reforms in the budget include:

· The Department of Social Services is undertaking a major reorganization that will consolidate its current four offices to one, while also pursuing a departmental modernization initiative.

· DOTD will eliminate its photo airplane and eliminate the Melville ferry, which has a low ridership and a high average-cost-per-crossing of $85.29.

· Louisiana’s Veterans’ homes will save more than $1 million by partnering with private physicians, as is done in most other states.

· DOC is converting the Forcht-Wade Correctional Center in Keithville into a substance abuse treatment facility for a savings of $1.7 million, which will also expand the availability of substance abuse dedicated beds from 80 to 500. Substance abuse is an underlying cause in the majority of crimes committed by offenders, and this conversion will help reduce recidivism and work to successfully reintegrate offenders into the community.

· DPS will eliminate the Oil Spill Coordinator’s Outreach Program.

· LED eliminated its less-effective Workforce Development and Training Programs for a savings of $2.5 million and this type of training will be done through the new, highly effective Fast Start program.

A system of care is being coordinated between the Department of Social Services, Department of Health and Hospitals and the Office of Juvenile Justice for youth mental health services that are reimbursable through Medicaid. This will leverage Medicaid dollars and provide $1.1 million in State General Fund savings.

The budget includes a $516,789 increase in State General Fund to provide funding for seven full time positions that will support on-line predator initiatives in the Internet Crimes Against Children unit under the Office of the Attorney General.

It also proposes $35.7 million investment – representing a 25.98 percent increase over last year’s budget - for the Louisiana Public Defender Board.

This budget also includes:

· $36.8 million in total funding, including $8.6 million in general fund, for the LA Literacy and Numeracy initiative;

· $7 million in total funding, including $4.4 million in general fund, for the High School Redesign Program;

· $17 million in total funding, including $2 million in general fund, for Career Technical Education;

· $11.95 million in TANF funds for the Jobs for America’s Graduates program and for EMPLoY, effective drop-out prevention initiatives;

· $8 million in Statutory Dedication funding to continue Student Scholarships; and

· $75.9 million in total funding, including $15.4 million in general fund and $60.5 million in TANF for the LA 4 Pre-K Program.

The Governor said reaching performance goals for higher education requires an honest look at where higher education is today, including that:

· State appropriations for higher education doubled between the 1999 and 2009 fiscal years, representing the third greatest increase among states for that time period.

· SREB reports Louisiana’s six-year graduation rate is 38 percent compared to the 53 percent SREB state average.

· In FY 09 Louisiana ranked 8th in the nation for appropriations of state tax funds for operating expenses of Higher Education per $1,000 in personal income; and 7th in the nation in Higher Education appropriations per capita.

· According to SREB, 72 percent of Louisiana students are enrolled in four-year institutions and 28 percent in two-year schools, compared to averages in other SREB states of 55 percent of students in four-year schools and 45 percent in two-year schools.

Given the unique challenges posed by the loss of federal match associated with the faulty FMAP formula and the DSH program, the FY 10-11 Executive Budget works to protect health care funding by using the Amnesty Program collections and surplus funds.

In all, $76 million of State General Fund surplus and $233.7 million in collections from the Amnesty Act of 2009 will be used to defease debt in FY 10, thereby reducing State Debt Service by $309.7 million in FY 10-11. The funds made available from this reduction, in turn, are budgeted for the Department of Health and Hospitals. Not using these funds would have resulted in a $1 billion reduction in critical health care services.

While there is discussion in Washington about extending the enhanced federal Medicaid match rate for six months to all states, without a permanent fix to Louisiana’s faulty FMAP calculation, in addition to the loss of ARRA funding, Louisiana will still face a projected $1.7 billion shortfall for FY 12.

DHH’s budget absorbs a significant fiscal impact from federal policies adversely impacting Louisiana, including the FMAP reduction, the DSH program, the loss of both SSBG and Primary Care Access and Stabilization Grant dollars, and the scheduled expiration of the enhanced FMAP in December 2010. These federal reductions amount to a combined loss of several hundred million dollars in federal funding. DHH approached the challenges in this budget by looking for opportunities to reform out-dated systems and streamline services for Louisianians.

Due to the permanent loss of federal dollars from the DSH audit rule, the state’s system of public, LSU-operated hospitals, mental health institutions and rural hospitals are all facing serious reductions. The total loss of DSH is $198.5 million, including: $135.6 million to LSU; $20 million attributed to the rural hospitals; and $42.9 million attributed to the DHH mental health institutions.

The loss of this $42.9 million of allowable cost to the state’s public mental health institutions represents approximately 22 percent of the operating budget for these institutions. This budget proposes to replace $30.9 million of the lost dollars with state sources of funding in the Office of Mental Health. This presents the state with the opportunity to begin a statewide transformation of mental health delivery into a community-based model of care rather than more costly institutional care.

This budget changes the state’s approach to services for persons with mental illness and those with developmental disabilities with the goal of helping each individual in the most appropriate care setting for them. In this budget, DHH invests $15.3 million SGF across the state in each administrative region and human services district for the implementation of community-based programs and $21 million of SGF to the institutions to help offset a portion of the lost federal funds.

Another $9.9 million in total funds is added to the budget due to increased utilization of Multi-Systemic Therapy (MST) for children and $5.8 million is added due to increased utilization of Mental Health Rehabilitation. Multi-Systemic Therapy provides intensive community-based treatment for severe behavioral problems in children, thus avoiding institutional care. Eighty percent of children receiving MST re-engaged in school and out-of-home placement decreased by 64 percent.

In this budget, DHH also adds 118 therapeutic residential treatment beds for individuals who do not need inpatient hospital level of care, but rather, could reside closer to their own community while receiving the support they need to be independent. Compared to the average cost of state-hospitalization of $390 per day, therapeutic residential treatment beds are reimbursed approximately $70 per day in the private sector.

The DSH rule change also creates a $135.6 million shortfall for LSU, which, according to LSU, cannot be absorbed without the immediate closure of multiple hospitals. This budget proposes to replace the lost DSH funds with $122.5 million in SGF and $13.1 million in federal funds through cost reports.

The budget also includes $11 million in SGF to offset the loss of $20 million in allowable cost from the DSH rule change to rural hospitals. In addition, DHH will file a bill that will authorize an increase in rural hospital reimbursement under Medicaid up to the Medicare reimbursement levels. This will allow the state to match some of the $11 million, which will fully offset the loss of DSH to rural hospitals.

Independence for Persons with Developmental Disabilities

DHH continues to work to ensure that every person with developmental disabilities has the opportunity to achieve their full potential in the most appropriate setting possible. To reach this goal, the Department is seeking to increase its partnerships with private group homes for persons with developmental disabilities rather than operate state-run group homes.

Today, more than 93 percent of residents of community homes are served by a private provider, at a cost nearly $60,000 per individual less than the cost of state-operated group homes. As a result of the annualization of this initiative, DHH added $3.8 million to the budget to serve an additional 150 persons now on the waiting list for services in the New Opportunities Waiver (NOW) program.

An additional $83.2 million of total funds has been included in the budget to pay for annualization of existing waiver slots, case management, children’s choice and other expenditures to maintain the community-based programs for persons with developmental disabilities.

According to the most recent data available, Louisiana ranks 8th in the nation in overall spending for individuals with Developmental Disabilities. Louisiana spends $6.61 per $1,000 of personal income compared with the national average of $4.12. The state is simply not spending these dollars in the most efficient manner. Indeed, Louisiana ranks 1st in fiscal efforts directed toward institutions – spending 38 percent of its expenditures on institutionalization of individuals with developmental disabilities compared to the national average of 19 percent.

The Louisiana Medicaid program provides health care coverage for 27 percent of Louisiana’s residents – more than 1.2 million people. However, the system suffers from lack of coordination, soaring costs, fraud, waste and poor outcomes. Not surprisingly, Louisiana’s rate of avoidable hospitalization is among the highest in the country – leading to even higher costs to taxpayers.

This budget directs the Department to implement the reforms already passed by the Legislature to move toward Coordinated Care Networks. A phase-in of this transformation will begin early in 2011, leading to modest savings of $15 million in FY 10-11, with substantially higher savings expected in FY 2012.

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