Q. Reports frequently cite a “$2 billion to $3 billion deficit” facing the state in the upcoming “cliff year.” What is the projected budget shortfall for the next fiscal year?
State government is facing a projected general fund shortfall of $1.6 billion in its “continuation budget.” In the upcoming fiscal year (FY 12), which begins on July 1, 2011 and runs through June 30, 2012, Louisiana state government is approaching what’s been called the “cliff year,” caused by a combination of national economic forces, increased costs, and a loss of federal funding.
Q. How does the state budget compare to previous years?
From a pre-storm FY 05 total budget of $18.4 billion (when state general fund was $7.2 billion), an influx of federal recovery money and rebuilding activity saw the total state budget grow by 87 percent in January 2008. Since January 2008, the current-year budget (FY 11) has been brought back closer to pre-storm levels, with the total budget down 25.8 percent, to $25.5 billion, and general fund down 11.5 percent, at $7.7 billion. At $7.7 billion, Louisiana’s general fund budget is now at its lowest level since FY 06.
Q. Given the fiscal challenges facing state governments since the beginning of the national recession, how have state government investments to public colleges and universities in Louisiana changed in recent years?
Since January 2008, Louisiana state government has provided $536 million, more than half a billion dollars, in critical higher education infrastructure investments, including construction, renovations, debt service and major repair projects for higher education institutions.
State General Fund appropriations for higher education, combined with State Fiscal Stabilization Funds, have been reduced by $212 million since January 2008. More than half of these reductions have been offset by almost $124 million in increases in tuition and fees, leading to a true impact to higher education of $88 million. Additionally, up to $45 million generated by tuition increases provided by the GRAD Act could further offset these reductions.
Q. How has higher education’s budget fared compared to the rest of Louisiana state government?
While Louisiana’s overall state budget has fallen by around 26 percent from January 2008 until now, higher education’s total budget has decreased by about 4.3 percent - including adjustments for mid-year reductions and new tuition authority under the GRAD Act. In fact, LSU's main campus has seen no reduction in total funding since January 2008 when you include an additional $13 million in new GRAD Act funding they will receive. The LSU main campus budget has actually grown 0.3% from $436.65 million to $437.98 million.
In the FY 10 budget, prior to mid-year cuts, only 37.8 percent of higher education funding ($934 million) went to the classroom. This classroom funding represents instructional spending, including general academic instruction, community education and preparatory and remedial education.
In August of 2010, higher education made up nearly 40 percent of the fulltime workforce in the executive branch of state government. While state government has seen an overall reduction of 8,875 fulltime employees since December 2008 (roughly 10 percent), higher education has reduced only 1,407 fulltime employees in the same period (4.3 percent).
Also, while savings produced by executive branch hiring freezes has been reduced from the budgets of all other departments, higher education campuses have been allowed to retain their savings to use for strategic investments. In the last fiscal year alone, campuses were able to reinvest $12 million.
Q. Is Louisiana behind other states in terms of higher education funding?
In FY 2009, Louisiana ranked 6th in the south on state spending per student across four-year institutions. In FY 2010, Louisiana ranked 9th in the nation for the amount of state dollars spent on higher education as a percentage of state taxes. However, as of May 2010, Louisiana’s six-year graduation rate lagged behind other states at 38 percent - compared to 53 percent for all states in the southern region. (Source: SREB)
Based on SREB data from 2008-2009, if Louisiana’s enrollment balance between four-year and two-year colleges were at the southern regional average, it would save the state over $91 million a year.
According to the American Institutes for Research, Louisiana ranks 13th highest in the country in state funds spent on dropouts – with over $217 million spent on freshmen who dropped out after just one year of college from 2003-2008.
Q. How has government belt-tightening affected LSU’s main campus?
LSU’s main campus has seen no reduction in total funding since January 2008 when you include an additional $13 million in new GRAD Act funding they will receive. The LSU main campus budget has actually grown 0.3 percent, from $436.65 million to 437.98 million.
Q. How much does the state spend per student at LSU’s main campus versus other schools in state?
Based on the 2010 student headcount and LSU’s current operating budget, LSU’s funding per student is over $15,000. LSU’s funding per student is 45 percent higher than the state average and 29 percent higher than any other school in the state. LSU’s per student funding is also 4 times as high as the lowest funded public university in the state.
Q. How does LSU’s main campus spending per student compare to other states’ flagship universities?
Compared to 12 flagship universities in neighboring southern states, such as University of Alabama and the University of Texas-Austin, Louisiana's per-pupil state spending for 2008 is the fourth highest at $13,636. UT Austin, on the other hand, only spent $7,127 per student that same year.
Q. What is LSU’s graduation rate compared to other flagships in the country?
According to the National Center for Education Statistics, in 2008 Louisiana ranked 34th lowest in 6-year graduation rates as compared to 50 other flagship universities in the country.
Q. Compare LSU’s budget from pre-Katrina levels to now?
The FY11 budget for LSU for all Means of Finance is $438 million, inclusive of the new GRAD Act revenues. This is 25 percent more than the pre-Katrina budget in FY05, which was $350 million.
Q. How have the fiscal challenges in the past few years impacted state support for K-12 education?
Between January 2008 and the current-year budget (FY 11), the total budget for the Department of Education has gone from $5.447 billion to $5.474 billion, an increase of $27 million, or 0.5 percent. In other words, the Department of Education’s budget has stayed steady even as the total budget of the state is down almost 26 percent in the same time period.
Last year (FY 10), while other departments and programs saw midyear budget reductions, the Minimum Foundation Program (MFP), which provides funding for local school districts, received an increase of $53.9 million. For FY 11, the funding level for the MFP was protected, with total funding appropriated at $3.3 billion.
Between FY 05 and FY 11, total state spending per pupil rose from $3,696 to $5,044. In FY 05, MFP funding was $2.6 billion, with a student count of 710,079. With student count now at 658,461, the FY 11 funding level reflects an increase of more than $695 million since FY 05, even while the student count is 51,618 less than it was in FY 05.
Q. It has been suggested that Louisiana state government should eliminate 5,000 government positions for three years, simply by not filling one-third of annual vacancies. Can that be done without impacting services?
First, this suggestion assumes that state government has a 15 percent turnover rate, and the turnover rate could be applied to a state government workforce of 100,000 employees. However, in terms of fulltime employees in the Executive Branch of government in all appropriated agencies, the number was 82,835 as of this August. Additionally, the actual turnover rate for state government employees for the last fiscal year was 14.4 percent, according to the Department of State Civil Service.
Secondly, the overall 14.4 percent turnover rate factors in departments with exceptionally high turnover rates, particularly at correctional facilities and agencies that provide direct care to patients. For example, the Wade Correctional Center in Homer had a 50 percent turnover rate. At the LSU Health Care Services Division, the turnover rate was 51 percent and at DHH’s Office of Citizens with Developmental Disabilities, the turnover rate was 39 percent. Also, all five state war veterans’ homes have turnover rates well above the average, ranging from 30 percent to 70.5 percent.
This means that reducing the state’s workforce based simply on turnover would have severe consequences for those critical services that experience exceptionally high turnover rates.
Also, were a 5,000-position reduction applied evenly across the executive branch annually, higher education, which makes up nearly 40 percent of the executive branch workforce, would need to eliminate nearly 2,000 positions. The Corrections Department would need to reduce over 300 staff, likely affecting public safety, and LSU hospitals would see a reduction of over 400 staff, many who directly care for patients.
Q: Has the Jindal Administration reduced state government positions to produce any budget savings?
In recent years, the Administration has pursued position reductions by utilizing departments’ historical vacancy averages – not by utilizing departments’ turnover rates – which provides a more accurate sense of how many positions a department truly needs to conduct its business without hurting services. Using this approach, the number of fulltime appropriated positions (T.O.) in the Executive branch has been reduced by 6,363, producing a total estimated savings of $382 million, with estimated general fund savings of $153 million since January 2008.
The combination of these position eliminations, along with hiring freezes and other spending reductions, has resulted in the number of actual fulltime employees, between December 2008 and August 2010, falling from 91,710 to 82,835 – a reduction of 8,875, or 9.7 percent, in just over two and a half years.
Q: Would Louisiana law (LRS 22:1065), LaHIPP, (that allows the state to purchase private insurance for low-income citizens when it is cheaper than Medicaid) save $100 million?
The Department of Health and Hospitals released the "DHH Third Party Liability (TPL) Notification of Newborn Children" form to allow hospitals to report potentially Medicaid-eligible births. The Department actively pursues those individuals for the broader Louisiana Health Insurance Premium Payment (LaHIPP) program. Enrollment has increased 35 percent since March 2010. Currently, all cases are analyzed individually for cost effectiveness, but DHH is reviewing the Affordable Care Act to determine whether it will allow more Medicaid-eligible families to qualify for LaHIPP. Despite aggressive promotional efforts over the last year, this program’s target population makes it impossible to achieve the referenced $100 million saving; only about 10 percent of that amount is achievable based on population eligibility estimates.
Q: Can you review all Medicaid hospitalizations for medical necessity to achieve an annual savings of $180 million?
In 2008, DHH expressed concern to the Legislature about the lack of review for Medicaid hospital admission. The Legislature allowed DHH to implement the updated InterQual criteria in phases. Phase 1 of this initiative consisted of updating InterQual hospital length of stay criteria to the 2009 version, and was implemented in November 2009. Phase II, which will extend the Phase I length of stay criteria to the state’s public hospitals, began in August 2010. Since completion of Phase I, data analysis has shown a 10 percent reduction in the average length of stay.
Q: Could the state reform the state Medicaid Preferred Pharmaceutical Drug List to include the most effective drugs at the lowest price for each illness to save $100 million a year?
In 2002, the Louisiana Medicaid Pharmacy Benefits Management Program implemented a prior authorization program with a preferred drug list. Medicaid received $42 million in state supplemental rebates for FY10. The Affordable Care Act also has a major impact on the program because it increased federal rebate percentages for covered outpatient drugs dispensed to Medicaid patients. These changes were effective January 1, 2010, but because states have not received guidance from the Centers for Medicare and Medicaid Services (CMS), states are unable to measure the impact of this statute.
Q: Can the state reduce the $254 million in administrative costs for the state Medicaid Program by 10% to create $25 million in savings?
There have been multiple reductions to administrative costs in the Medicaid Program during FY10 and FY11, which amount to $28 million in savings. The most recent ranking by the Medicaid administration shows that Louisiana ranks fourth in the nation for low Medicaid administrative expenses per enrollee.