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Feb 09, 2012
Governor Jindal’s FY 13 Budget

FY 12-13 Executive Budget: Introduction from Governor Bobby Jindal

This Executive Budget proposal represents the continuation of a bold agenda to reform and restructure state government by improving services for Louisianians even as we streamline operations to put government on a more sustainable path.

Working closely with the Legislature, our previous efforts have included sweeping ethics reforms, tax reductions and revamping the state’s workforce development system to improve the state’s business climate and to expand economic opportunities for Louisianians.  In addition, we have transformed state agencies in order to be better stewards of taxpayer dollars while improving the delivery of services for citizens.

In each case, the state budget played an important role in shaping and supporting these initiatives, demonstrating clearly that fiscal challenges are no barrier to pursuing new ideas, and that achieving positive change is not synonymous with growing government.  Rather, these initiatives provide proof that it’s possible to reduce spending while improving results – that government can, indeed, do more with less.

Our reforms have set Louisiana on a path for strong economic prosperity. Indeed, Louisiana’s economy continues to outperform the Southern region and the nation as a whole, with December marking 15 consecutive months in which Louisiana added private sector jobs.  Our unemployment rate has remained well below the national and Southern averages every month since the beginning of our administration. Louisiana has also climbed to our state’s highest-ever business climate ranking by every leading publication that measures the economic climate of states.

Without question, we have made incredible progress, but we still have challenges to overcome so that state government is on a more sustainable path. That’s why our Executive Budget includes bold plans to improve our schools and state retirement systems that represent a pathway forward for increasing the economic competitiveness of our state and also making state government less expensive, and more effective, for taxpayers. 

For the upcoming Legislative session, I have proposed a comprehensive education reform plan that similarly recognizes the basic truth that it’s not about how much money we spend, but how we spend it.  Over the last four years, total funding for the Minimum Foundation Program (MFP) has increased by nearly $300 million, and this Executive Budget continues to protect MFP funding at a level of over $3.4 billion. Additionally, while the overall state budget has decreased by about 26 percent over the past four years, the MFP has increased by nine percent.

Despite these investments, student achievement is not increasing fast enough. Indeed, 44 percent of our schools are still receiving Ds and Fs, and that means we are spending nearly a billion state taxpayer dollars on failing schools. We need to be smarter about how we spend taxpayer dollars. That’s why we have proposed a plan to improve schools that provides more choices to families, rewards teachers, and gives schools more flexibility with funding and personnel.  Our children do not have time to wait. They only grow up once, they have only one chance to receive a quality education, and it’s clear that we need to take action for reform now.

I have also proposed reforms to the state pension system to keep the state’s promise to workers, protect critical services, and save taxpayer dollars.  Over the last two decades, state retirement costs have quadrupled and the gap between promised benefits and what we have to pay those benefits – known as the UAL – has tripled to $18.5 billion today. Louisiana taxpayers are already spending nearly $2 billion just this year on state retirement, and if costs continue on the current path, the state could see another $3 billion or more added to the UAL by the end of the decade.

The path we are on is unsustainable, and if we don’t act now to reform state pension systems, then the state will be forced to choose among several unacceptable options: break our promise to workers, be forced to cut critical services like higher education and health care, or saddle future generations with debt and higher taxes.  That’s not the future we want for our state, and this budget proposal reflects the responsible approach we must take to begin to get the growing cost of our pension system under control.

For our budget, we have also worked with department heads to prioritize expenditures, to identify savings, and to continue to reform and restructure government with strategies like consolidation, reorganization, and privatization that streamline government while protecting critical services.  As a result of these initiatives, the FY 13 Executive Budget calls for strategically reducing more than 6,000 fulltime executive branch positions, a number that, if approved, would bring the total to over 16,000 fulltime positions reduced since the beginning of our administration.  Even before the new position reductions proposed in this budget, the number of state government employees is already at its lowest level in 20 years.

These strategies for targeted reductions throughout the budget also help to protect valuable investments like higher education and healthcare.  We have partnered with higher education leaders on bold reforms for setting higher standards, improving outcomes, and providing greater autonomy of operations, and because of those efforts and increases in self-generated revenue, the Executive Budget holds spending steady, with no reduction to higher education’s total budget. Additionally, even during a difficult budget year, we are expanding access to critical services through Bayou Health and the Department of Health and Hospital's Behavioral Health Partnership.  Our budget also has no reduction in eligibility or elimination of services from Medicaid.

Every challenge facing our state today is an opportunity to position Louisiana for long-term success, provided we have the wisdom and courage to make the tough choices that reform and restructure government to deliver stronger and more sustainable results for our people.  We are building a better Louisiana that is the best place in the world to raise a family, get a great education, and pursue a rewarding career, and this budget proposal is another critical step toward that goal.

-- Governor Bobby Jindal

Louisiana’s Economic Performance

Since January 2008, Louisiana’s employment performance has been significantly better than the South, and Louisiana has added jobs at a faster rate than the South and the U.S. Louisiana’s unemployment rate in 2011 remained well below the South and U.S., just as it has every month since early 2008.

Louisiana registered a record year for business development wins in 2011, securing game-changing projects that include Fortune 500 CenturyLink’s headquarters expansion in Monroe; Gameloft’s major game development studio in New Orleans; Ronpak’s establishment of new manufacturing operations in Shreveport; multibillion-dollar expansions announced by Cheniere Energy and Sasol Ltd. in Southwest Louisiana; Schumacher Group’s headquarters expansion in Lafayette; the Sundrop Fuels announcement of an advanced biofuels refinery in Alexandria; and the Electronic Arts expansion of its global quality assurance center in Baton Rouge on the LSU campus.

As the national economy seeks to rebound in 2012, Louisiana will be positioned to secure a large share of new business investment projects.  Moreover, Louisiana’s economy will experience significant job growth stemming from projects announced in 2008 through 2011. In the year ahead, business retention, small business development, recruitment of new growth industries, customized workforce solutions and cultivation of attractive development sites will remain top priorities for the state.

Job Creation and Private Sector Growth

Since taking office, Governor Jindal has announced economic development wins that will create more than 46,500 new direct and indirect jobs, and generate more than $10.5 billion in new capital investments.  To sustain this momentum and to ensure future success, the FY 13 Executive Budget includes funding for important economic development initiatives that spur job creation; attract, retain, and grow businesses; and further diversify and grow Louisiana’s economy.  Recent economic milestones and recognitions of Louisiana’s progress include:

  • In December, Louisiana recorded its 15th-consecutive month of year-over-year job growth. For the year, Louisiana recorded a net gain of 46,700 jobs in December, compared to the final month of 2010. Louisiana joins Texas as the only states in the South to record an increase in overall employment since the official start of the recession in December 2007.
  • Louisiana’s current unemployment rate of 6.8 percent is well below the state’s rate one year ago (7.7 percent) and compares even more favorably to the current jobless rates for the South (8.4 percent) and the nation (8.3 percent).
  • In 2011, the U.S. Census Bureau reported that Louisiana’s population grew by more than 168,000 from July 1, 2007, to July 1, 2010, a growth rate about 43 percent faster than the U.S. over that time.
  • The U.S. Census Bureau recently reported that Louisiana experienced its fourth consecutive year (2007-2010) of population in-migration, reversing decades of out-migration.
  • For the third straight year, Southern Business and Development magazine named Louisiana either State of the Year or Co-State of the Year, noting that Louisiana attracted more significant business investment and job-creating projects per capita than any other state in the South.
  • Business Facilities magazine ranked Louisiana No. 2 in the nation for Economic Growth Potential and No. 7 among U.S. states for Best Business Climate in 2011, both new highs for Louisiana.
  • LED FastStart™ ranked as the nation’s No. 1 state workforce training program for the second straight year in the Business Facilities 2011 rankings.
  • Area Development magazine ranked Louisiana No. 6 in the U.S. in its 2011 ranking of Top States for Doing Business, a survey of leading site selection consultants who rank which U.S. states are most attractive for business investment. Louisiana ranked No. 3 for states that are leading the economic recovery, No. 4 for states with the best workforce development programs, and No. 4 for states with the best overall business environment.
  • In 2011, Site Selection ranked the Louisiana business climate No. 7 in the nation for the state's highest ranking ever by the magazine.   Louisiana ranked No. 3 in the Site Selection Governor’s Cup Awards with 347 new business location projects. Additionally, Louisiana's per capita ranking jumped from ninth in 2009 to first in the U.S. for 2010 rankings that were released in 2011.

In 2011, Louisiana Economic Development provided assistance to thousands of Louisiana small businesses, including more than 1,300 small businesses served by LED’s Small and Emerging Business Development program and nearly 13,000 small businesses and individuals served by the Louisiana Small Business Development Center network, or LSBDC, with sustained funding support from LED.

It is an absolute top priority of the Jindal administration to keep Louisiana’s economy growing and creating more jobs.  To that end, Governor Jindal has announced economic development reforms he will pursue in the upcoming legislative session to make Louisiana more competitive than other states to secure economic development projects.  And in the year ahead, LED will pursue targeted initiatives to enhance Louisiana’s economic competitiveness, retain Louisiana’s existing economic driver firms, support Louisiana’s small businesses, cultivate attractive development sites, and recruit new growth industries to Louisiana.

FY 13 Budget: Reducing Government to Sustainable Size and Cost

Due to these economic strengths, the overall trend projected by the Revenue Estimating Conference (REC) shows steady recovery in collections of the State General Fund, with revenues projected to increase modestly over FY 12.  However, while year-to-year revenues are higher, in December the REC revised the official forecast $214 million lower than was previously forecast, which, combined with various anticipated cost increases, contributed to a projected $895 million General Fund shortfall for FY 13.  Major factors cited at the “continuation budget” stage included $539 million in increased costs associated with Medicaid payments; $86 million associated with inflationary cost increases statewide; and $40.5 million due to the loss of federal TANF funds previously used to support the LA4 Early Childhood Education program.

Addressing the projected shortfall and balancing the General Fund budget required holding the line on certain anticipated cost increases while finding offsetting spending reductions throughout the budget, as well as a greater focus on all means of finance.

These savings came from $325 million in departmental and statewide reductions (including position reductions, reductions annualized from the midyear deficit, and other departmental and statewide reforms); $286M from not funding certain cost increases anticipated at continuation; $284 million in reductions to General Fund support and by maximizing all means of finance.  This last figure also includes only $230 million in one-time money for recurring expenses, down significantly from the current year, and well below the $377.5 million increase in the REC’s official General Fund revenue forecast between FY 13 and FY 14.

While protecting critical services and restructuring government operations, the FY 13 Executive Budget reflects spending levels as follows:

  • The FY 13 Executive Budget proposes total State funding of $14.2 billion, a decrease of $235 million compared to total state funding of $14.4 billion in FY 12.
  • The FY 13 Executive Budget proposes total funding of $25.5 billion, a decrease of $61 million compared to the FY 12 total existing operating budget of $25.6 billion.

State Government Workforce at Lowest Levels in a Generation

Appropriated Positions
From the start, this administration has continuously used a variety of tools – departmental historical vacancy rates, hiring freezes, technology and efficiency enhancements, and office consolidations – to strategically reduce the number of executive branch fulltime appropriated positions funded in the budget.

The FY 13 Executive Budget proposes further reductions in the number of fulltime appropriated positions in the executive branch by 6,371.  Following prior reductions of 9,885 through budgetary actions, approval of this FY 13 recommendation would mean a total reduction of 16,256 fulltime appropriated positions since the beginning of the Jindal administration.

Actual Employees
These budgetary actions, over time, have made a significant impact on the actual size of the state government workforce.  Based on figures from the Department of State Civil Service, between December 31, 2007 and January 27, 2012:

  • The total “head count” of all employees in state government has fallen from 100,677 to 88,396, a reduction of 12,281, or 12.2 percent.
  • In terms of fulltime employees (or FTEs), the total has fallen from 93,554 to 79,559, a reduction of 13,995, or 15 percent.  These reductions have occurred fairly proportionally between the classified and unclassified workforce, as follows:
    • Since December 31, 2007, the number of classified fulltime employees has fallen from 62,260 to 53,465, a reduction of 8,795, or 14.1 percent.
    • During the same time period, the number of unclassified fulltime employees has fallen from 31,294 to 26,094, a reduction of 5,200, or 16.6 percent.

According to Civil Service historical data, even before the new position reductions proposed in the FY 13 Executive Budget, both the total number of state government employees and the number of fulltime employees in state government are already at their lowest levels in 20 years.

Reforming and Restructuring Government

The FY 13 Executive Budget includes numerous, targeted cost-savings measures across all departments to cut spending while protecting critical services.  For many departments, these savings came as a result of continuing to reduce operational expenses in travel, supplies, acquisitions, operational services and professional services.

Importantly, the FY 13 Executive Budget also continues to build on past efforts to reform and restructure government, utilizing tools like consolidation, reorganization, privatization, and modernization that improve service while saving taxpayer dollars.

Working closely with the Legislature, our previous efforts have included transforming the Department of Labor into the leaner, more effective Louisiana Workforce Commission, making strategic partnerships with community and technical colleges, while also creating LED FastStart, the top-ranked workforce training program in the country, to better prepare our workers for promising careers.

The Department of Social Services undertook one of the largest departmental reorganizations in decades, consolidating and modernizing its operations, and improving its priority initiatives as the revamped Department of Children and Family Services.  Last year, we consolidated almost 30 housing-related programs managed across five different organizations, and created a new, unified Louisiana Housing Corporation, improving effectiveness by reducing bureaucratic overlap, in order to develop focused and coordinated strategies for providing safe and affordable housing around the state.  And the Department of Health and Hospitals is now implementing the first phases of Bayou Health, changing the way Medicaid services are delivered in Louisiana through coordinated care networks that focus strongly on consumer choice, so that patients have better access to primary and specialty care, while reducing unnecessary costs.

The FY 13 Executive Budget continues to advance reform and restructuring initiatives, including:

  • Governor Jindal has proposed a pension reform plan that keeps the state’s promise to current workers, helps prevent tax increases, and protects investments to critical services like higher education and health care.  State retirement costs have quadrupled over the last two decades from $478 million in FY 1990 to $1.9 billion today. The gap between promised benefits and assets on hand – known as the Unfunded Accrued Liability (UAL) – has tripled over the past two decades to $18.5 billion today.  These reforms will not impact retirement for employees in K-12 schools, employees in law enforcement and other hazardous duty positions, nor will they impact benefits retirees are currently receiving.
    • The reforms include creating a hybrid retirement plan for new hires – known as a cash-balance plan – which combines the best features of defined benefit and defined contribution plans.  The plan will ensure employee savings for retirement are protected, passing the investment gains on to the employee but not the losses. The plan will be portable and better meet the needs of a mobile workforce by allowing state employees who leave before retirement to roll their savings into an IRA or other account.
    • The reforms will reduce the incentive for artificial inflation of salaries by calculating benefits using an employee’s salary averaged over five years rather than three years.  However, for current employees, their final average compensation will not go below what it is now.
    • The reforms will align the retirement age with the Social Security standard of 67, while exempting anyone who is 55 or older and approaching retirement. Anyone who wants to retire early under the existing provisions can do so, with an actuarial reduction of benefits. Also, anyone who is currently eligible to retire can do so now without any reduction of benefits.
    • The reforms will rebalance the retirement cost burden between taxpayers and employees by increasing the employee contribution rate by three percentage points. Even with this change, state employees will contribute one-third or less of the cost to support the retirement system.  In 1987, both state employees and university employees carried over 40 percent of the cost of supporting their retirement systems.  Today, they carry 25 percent or less.  A national survey of state retirement systems found that employee contributions in 67 percent of the plans were more than 8 percent of payroll, including Social Security contributions.  A three percent increase is still far below the 7 percent increase in payroll costs that state has incurred in the past few years from investment losses.

The Governor’s pension reforms will free up money at agencies so that dollars can be invested in classrooms and in health care services.  Agencies have had to absorb retirement cost increases in recent years and now with these reforms, they can invest in other critical services.  While pension reforms will generate a total savings of $450 million in the first year, over $100 million of which are savings to higher education, after factoring in normal and UAL increased costs, as well as allowing higher education to retain and reinvest their savings, these reforms will generate $55 million in General Fund savings in FY 13.  However, it would require an additional $120 million in General Fund, in the absence of the administration’s retirement reforms, to replace the $55 million savings and to offset increased retirement costs.

  • The Department of Corrections will consolidate the offender population at J. Levy Dabadie Correctional Center in Pineville to Avoyelles Correctional Center in Cottonport and pursue the sale of Avoyelles and convert it to a privately run correctional facility.  Proceeds from the sale of Avoyelles are not included in the Executive Budget, but would go toward refilling the Rainy Day Fund.
  • J. Levy Dabadie Correctional Center is the smallest state-operated institution and houses a lower-risk offender population than any other state-operated institution.  Dabadie exists as a maintenance facility for support to the Louisiana National Guard, and these services will still be provided by transporting offenders to Camp Beauregard from Avoyelles Correctional Center.  This consolidation of the Dabadie offenders into Avoyelles allows the state to streamline the Department of Corrections while still providing the same services.
    • J. Levy Dabadie’s current population of 330 offenders will be moved permanently to Avoyelles, along with 20 employees transferred to provide security and medical care for the transferring offenders (for the first six months).  Six J. Levy Dabadie employees will be permanently retained to fulfill the state’s obligation to provide local-level monitoring and administration of jail facilities in the 8-parish Central Region where approximately 3,000 DOC offenders are assigned.   
    • The sale of the Avoyelles facility is expected to generate approximately $35 million.   Eight employees will be permanently retained to fulfill the state’s obligation to provide local-level monitoring and administration of jail facilities in the five-parish South Central Region where approximately 1,400 DOC offenders are assigned.

The consolidation of J. Levy Dabadie and privatization of operations at Avoyelles is estimated to create a savings of $7.2 million in FY 14.  Compared to the current cost at Avoyelles of $42.85 per offender per day, the RFP will request the bidder to keep the per diem to no more than $31.51 during the first three years of operation, which is the per diem at the private Allen and Winn Correctional Centers.  403 positions will be eliminated as a result of the consolidation, sale, and privatization plan.  Displaced employees will get top hiring priority at the privately managed facility or for another Department of Corrections position.

  • The Department of Corrections will also move the substance abuse treatment program at Forcht Wade Correctional Center, which is not cost-effective to run as a stand-alone treatment facility, to David Wade Correctional Center.  These same services will still be provided at David Wade Correctional Center, but at a lower cost to the taxpayer.  This consolidation of Forcht-Wade’s mission into David Wade allows the state to streamline the Department of Corrections while still providing the same level of services.
    • To facilitate the movement of the 500-bed treatment program from Forcht Wade to David Wade, the department will move 500 appropriately-screened offenders currently assigned to state prisons to the local level so that David Wade can reduce its population to account for the program transfer.  Twenty of the 159 employees at Forcht Wade will be transferred to continue treatment programming, in addition to local-level monitoring and administration of jail facilities in the 11-parish Northwest Region where approximately 5,350 DOC offenders are assigned.  The transfer of the substance abuse program is expected to generate a savings of $4.2 million in FY 13 and $8.6 million in FY 14.  Displaced employees will be given priority within the Department of Corrections.
  • The Office of Group Benefits will not proceed with a sale/transaction of its business and operations.  However, in order to operate more efficiently, it will move to a third-party administrator (TPA) for its PPO plan, just as is currently the practice for the HMO and other OGB plans, and of those of almost every other state government.  The TPA contract will be in place for the beginning of the plan year starting January 1, 2013.
    • For FY 13 this move will generate $13.25 million in savings, with an annualized savings of $26.5 million.  It will result in the reduction of 177 positions from its current level of 327 positions, beginning to align its size with other states, as the same office in Florida employs 23 people, while Mississippi employs 20.
    • OGB will implement no premium rate increase for plan members in calendar year 2013.
  • The Department of Transportation and Development (DOTD) will implement a plan, working with local officials, to transition services at the Crescent City Connection, in preparation for the sunset of tolls in December 2012.
    • Services will be realigned with the level provided to other bridges across the state, with DOTD partnering with local governments for bridge lighting, and with state police and local law enforcement agencies for bridge policing.
    • A call for proposals will be issued to public/private operators for best value submittals to privatize the operation and maintenance of the Gretna, Algiers and Chalmette ferries.
    • A total of 148 positions will be reduced (73 positions from the CCCD bridge section, and 75 positions from CCCD marine division once ferries are privatized).
  • In order to focus resources on services most utilized by taxpayers, DOTD will also implement a Streamlining Commission recommendation to eliminate ferry services with low ridership.
    • The Edgard/Reserve ferry carries approximately 350-400 vehicles per day and costs taxpayers approximately $15 per trip for every vehicle.  Less than 2 percent of the operating costs are covered by the $1 round-trip toll, with the balance subsidized by taxpayers across Louisiana.  By closing the ferry, 12 positions will be eliminated, and taxpayers will save $1.5 million per year.
    • The White Castle ferry carries approximately 150-200 vehicles per day and costs taxpayers approximately $17 per trip for every vehicle.  Less than 1 percent of the operating costs are covered by the $1 round-trip toll, with the balance subsidized by taxpayers across Louisiana. By closing the ferry, 5 positions will be eliminated, and taxpayers will save $800,000 per year.

Savings from these actions will be reinvested into local roads.

  • The Department of Education will continue implementing its 2010 reorganization plan, which redirects the department’s human and financial resources to services, functions, and activities that most effectively support the educational needs of Pre-K-12 students in Louisiana.  This new organizational structure is centered on improving teaching and learning.  The changes support the department’s persistent efforts to become more efficient through the integration of overlapping initiatives and programs, the elimination of ineffective or unnecessary activities, and by identifying duplicative roles and responsibilities.  These restructuring efforts, as well as other efficiency measures, will result in the reduction of 58 departmental positions in FY 13, and total savings of $8.9 million.
  • The Department of Children and Family Services (DCFS) continues to streamline its services by consolidating offices around the state, resulting in reduced leases, at a savings of $3.6 million through FY 2013.  These consolidations are possible as a result of the launch of a customer service center this past year, as well as the partnership with more than 450 community partners statewide, providing clients with greater access to information and services.  Since the launch of the call center in July, more than 5 million calls have been received, with an average of 866,000 calls per month.  As a result of these types of department-wide efficiencies, DCFS will reduce 122 vacant positions, at a savings of $6.2 million.
  • The Office of Student Financial Assistance will outsource the Loan Operations program, which will result in the reduction of 60 positions and savings of $1.1 million.
  • The Governor’s Office of Homeland Security and Emergency Preparedness (GOHSEP) is reorganizing and streamlining divisions, consolidating employee duties, and eliminating duplicative services.
    • Through the reallocation of 37 positions to the federally funded Disaster Recovery division, the elimination of a professional services contract, the elimination of four agency take-home vehicles, and the elimination of three vacant positions as well as other personnel savings, GOHSEP will generate more than $646K in savings.
    • As previously announced during the mid-year reduction, annualized savings of $355K are being achieved by streamlining services in logistics, which will be handled by the National Guard in coordination with existing GOHSEP staff, eliminating technology and phone system contracts, and by targeting duplicative services.
  • The Department of Public Safety continues to identify duplicative and unnecessary tasks increasing productivity and decreasing need for personnel. The Office of Management and Finance is realizing savings of $585K and the elimination of seven positions.  The Office of State Fire Marshal has undergone agency-wide cross training of all Fire Marshal positions, resulting in a savings of $405K and the elimination of six positions. 
  • The Louisiana Department of Revenue will save an estimated $315K on the printing and mailing of tax refund checks through the MyRefund Card program.  This program builds on LDR’s continuing success in using technology to reduce operating costs, such as the promotion of electronic filing, which saves $1.50 in operational processing costs for every return filed electronically, while also reducing the average refund processing time to 10 business days compared to 12 to 16 weeks for paper returns.  During the last fiscal year, electronically filed returns increased by 13 percent.

Education: Protecting Investments While Pursuing Reform

K-12 Education Funding

Minimum Foundation Program
We continue to protect K-12 education funding in the FY 13 budget, with the MFP increasing from $3.39 billion in FY12 to $3.41 billion in FY13, which includes an increase of $27.9 million in General Fund to reflect the annualized formula increase from the October student count.  Taking into account the new dollars committed to the MFP in this budget, total MFP funding will have increased by nearly $300 million, or 9 percent, since FY 08.

For the upcoming Legislative session, Governor Jindal has proposed a comprehensive education reform plan that provides more choices to families, rewards teachers, and gives school leaders more flexibility with funding and personnel. 

Higher Education Funding

The FY 13 Executive Budget protects funding to campuses, fully funding $97 million in carryover tuition that was included in the current year budget with General Fund and additional tuition funds provided from their tuition authority previously granted through the LaGrad Act.  As a result, there is no change in funding for higher education schools after annualizing the $50 million reduction associated with addressing the FY 12 midyear deficit, and after non-recurring carryover and one-time expenditures in the current year’s budget.  Higher education will also save more than $100 million in retirement expenditures that can instead be used to invest in the classroom as a result of the Governor’s pension reform plan.

$13.6 million in additional funds are provided to fully fund Taylor Opportunity Program for Students (TOPS) awards, Louisiana’s merit-based scholarship program that awards qualifying students tuition payments for up to eight semesters at any eligible Louisiana institution. The projected number of TOPS recipients for FY 13 is 41,990, with a total funding of $168 million. The funding to TOPS includes Statutory Dedications from the TOPS Fund as well as $39.4 million in General Fund.

Improving Health Outcomes
 
The upcoming fiscal year represents a monumental shift in health care in Louisiana. With full implementation of BAYOU HEALTH and the Louisiana Behavioral Health Partnership, Louisiana is embracing a new approach to both physical and behavioral health care that focuses on outcomes, streamlines delivery and payment systems, saves critical dollars, contains exploding health care costs and dramatically improves access to care.

Earlier this month, the Department of Health and Hospitals launched the first phase of the most significant transformation of Medicaid in its 45-year history in Louisiana to better coordinate health care for nearly two-thirds of Medicaid and LaCHIP recipients.

Consider that the United Health Foundation, the Commonwealth Fund and the Annie E. Casey Foundation all placed Louisiana 49th in their most recent overall health rankings. Currently, more than 1.3 million people in Louisiana are enrolled in Medicaid. Despite Medicaid’s substantial budget, the current program does not effectively coordinate care to generate better outcomes for our people.   While the American Cancer Society claims that Louisiana has the highest rate of breast cancer deaths in the United States, only 40 percent of eligible Medicaid women were screened last year for the deadly disease. Only 56 percent of eligible Medicaid women received recommended cervical cancer screening and, in fact, less than 5 percent of adults in the Medicaid program even had a preventative visit last year. According to claims data, 44 percent of children with asthma in Medicaid visited the emergency room (ER) last year. More than 16,590 children in CommunityCARE (Louisiana’s primary care case management program) had four or more ER visits in State Fiscal Year 2010. These figures point to a health care system that fails to promote primary and preventive care, a hallmark challenge of fee-for-service delivery systems.
 
Under BAYOU HEALTH, which will be fully implemented by the start of FY 2013, the state is transitioning away from that fee-for-service model towards models based on medical homes for most Medicaid beneficiaries.  DHH has contracted with five health plans who are responsible for coordinating the care for each of their members – that means ensuring access to quality primary and preventive health care, as well as assistance in navigating and accessing an array of health care services, while reducing the use of higher-cost health care services.

The contracted health plans have the tools and flexibility to offer incentives or enhanced benefits to encourage patients to get healthy, and they can offer providers incentives to encourage participation in the network and to reward better outcomes. Currently, the Medicaid program does not have the funding for these coordination efforts and would be prohibited by federal regulations from offering many of these kinds of incentives.

BAYOU HEALTH will create a savings of $135.9 million in the Medicaid program, which is critical to mitigate even further reductions in the program. 

Transforming Behavioral Health

In addition to a new focus on preventive and primary care for physical health, FY 2013 represents a new way forward for behavioral health care for 50,000 Louisiana children and 100,000 adults. The Behavioral Health Partnership, which includes the Coordinated System of Care, streamlines the state’s approach to delivering and financing behavioral health services to increase access and improve the quality and coordination of services.

Under the Partnership, the state has contracted with a third party to serve as a single point of entry, coordination and, for the adult population, payor for people in need of behavioral health care services. Previously, these services were fragmented and funded through several different mechanisms with some services falling under Medicaid, while others were paid for strictly with State General Funds or federal block grants. By streamlining this in the FY 13 budget, DHH is able to protect critical services and enhance access to care. By realigning dollars from other programs and offices into Medicaid, the state is able to invest $260 million in total spending in the Medicaid program for these services.

One component of the Partnership – the Coordinated System of Care (CSoC) – represents a transformation in helping children most at-risk of or in out-of-home placement. These children and their families have typically had to navigate disparate agencies and programs with no focus on coordination of their care. Under CSoC, DHH, the Department of Children and Family Services, the Department of Education and the Office of Juvenile Justice have come together to pool their programs and funding for these children and work closely with local entities to provide intensive, wraparound care for the children and their families.

With a scheduled start date of March 1, these initiatives are built into the FY 2013 budget as investments that allow these programs and services to be maintained as well as to be expanded.

Containing Health Care Costs to Protect Critical Services
 
Nationally and in Louisiana, Medicaid costs continue to balloon out of proportion to state budgets and revenues. According to national figures, there is little end in sight, particularly with the explosive growth of the program contemplated under Obamacare if the courts do not stop its implementation. In the past six years, nationally, Medicaid expenditures have increased by about 40 percent with an average rate of growth annually of nearly 7 percent. Projections have that kind of growth continuing in the coming years.

DHH has been focused on that growth trend in recent years and has taken several steps over and above better coordination of care as noted above to contain costs. That effort has been successful in that it has been able to slow the rate of growth despite enrollment increasing by about 15 percent or an average rate of 2.5 percent a year over the past six years. In the same time period, expenditures have grown about 5.4 percent each year – lower than the national average rate of growth of nearly 7 percent annually.

The FY 2013 budget contains several more cost-containment strategies, particularly among areas of Medicaid that don’t currently fall under the coordination umbrella of BAYOU HEALTH or the Louisiana Behavioral Health Partnership. These critical measures help minimize reductions in the Private Provider Program and protect both eligibility and optional services in Medicaid.

These cost-containment measures include implementing utilization management strategies for Hospice ($1 million); expediting the inclusion of Waiver recipients into BAYOU HEALTH for coordination of non-waiver services ($1.2 million); using a managed care approach for long-term personal care services ($3 million); transitioning the pharmacy program from using the Average Wholesale Price to Average Acquisition Costs ($1.5 million); restructuring payments to hospitals to a Medicare-like reimbursement system ($3.2 million); and changing the reimbursement methodology for nursing homes to base reimbursements on the acuity of Medicaid patients instead of the entire homes’ population ($6 million).

Because of the continuing line of growth anticipated, DHH will also be implementing an overall 2 percent reduction in the Medicaid private provider program. The Department will be working closely with each provider type in Medicaid to identify the best approach to achieve that reduction for each.

That same 2 percent reduction in the private provider program will also be applied to the managed care companies for both BAYOU HEALTH and the Behavioral Health Partnership.

The savings from BAYOU HEALTH is helping to contain costs by mitigating the reductions in the Private Provider Program, which would be nearly 5 percent without those savings.
 
Reforming the DHH footprint in health care services.

Additionally, DHH is optimizing savings from various programmatic reforms implemented during the past four years and expanding those with new efficiencies, right-sizing and privatization opportunities.

A key component of this effort is to continue to reduce DHH’s role in service provision to better partner with the private sector, when it is better equipped to provide high-quality services at a lower cost to taxpayers.

This results in reduction of the Department’s workforce. The total number of positions funded in the DHH budget is 6,928, which is reduced from the 8,458 funded in the DHH budget as of Dec. 1, 2011. This is a reduction of nearly 50 percent since 2000 – the majority of which has been achieved by providing more appropriate care for individuals with developmental disabilities and those in need of behavioral health services in the community, as well as using the private sector to take over facility operations as appropriate.

Restructuring the state’s approach to Supports and Services Centers
The FY 2013 budget includes the privatization and right-sizing of Northlake and Northwest supports and services centers for a savings of almost $6.9 million. These initiatives build on the Department’s work of recent years to better use state funds while emphasizing the most independent living settings for individuals with developmental disabilities. The facilities will be transferred to private providers in their current locations and remain large Intermediate Care Facilities (ICF/DDs), working closely with quality partners in the community.  DHH has already had several successful transitions to private providers with the Acadiana Regional Supports and Services Center in Iota, which was taken over by the ARC of Acadiana, as well as several group homes throughout the state that have been privatized in recent years. In fact, 84 percent of individuals with developmental disabilities in Louisiana already reside in Intermediate Care Facilities, Group Homes and Community Homes operated by private providers.  In addition to providing quality care, the average annual cost per person served at Acadiana is $75,920, nearly half as much as the annual cost of $162,517 per person at Northwest Supports and Services Center, and about a third the annual cost of $220,247 per person at North Lake.

A new model for Central Louisiana State Hospital
This budget anticipates the first phase of a multi-year plan to relocate and right-size Central Louisiana State Hospital. Built to house more than 3,000 people on 400 acres of property in the heart of Pineville, Central now has only 60 beds. As more advanced treatment of behavioral health services allows people to thrive in community-settings, the role for institutions like Central has changed. By consolidating the hospital this year and beginning to build a new, more efficient facility on property adjacent to nearby Pinecrest Supports and Services Center, savings of $2.5 million are realized in FY 2013.

Investing in local communities
This budget reflects the start-up of the Acadiana Area Human Services District – the sixth local governing entity for human services to be established in Louisiana. FY 2013 will be the new District’s “shadow year” and the funding reflects transitional funds for that purpose. With its own local board and management team, the AAHSD will be able to maximize local revenue sources and use local control to manage community-based care for those with behavioral health needs as well as individuals with developmental disabilities. The budget also includes start-up funding for the remaining four regions to phase in LGEs (regions 5, 6, 7 and 8). 

Investing in access to care and improved health outcomes
Birth Outcomes
DHH’s FY 2013 budget continues to invest in the Birth Outcomes Initiative and includes funding for smoking cessation counseling for pregnant women. Louisiana has struggled with high rates of infant mortality and preterm birth for decades. In the past year, DHH’s concerted Birth Outcomes Initiative has sought to reverse those trends and has been recognized nationally as a leader in taking bold steps with provider partners to end the practice of non-medically necessary births prior to 39 weeks. The initiative also includes efforts to improve behavioral health screening and care for pregnant women as well as modeling an intraconception care approach, particularly for women at risk of a second or third preterm birth.

GNOCHC
Building community capacity in health care has been a key priority for the past three years, and one of the hallmark examples of this is the Greater New Orleans Community Health Connections (GNOCHC) initiative, which continues to be funded through a special waiver in Medicaid and the use of block grant administrative funds in hurricane recovery programs.

The GNOCHC clinics represent a gold standard of the primary care medical home model for our state and nation. Originally funded by a three-year $100 million grant after Hurricane Katrina, DHH applied for and received permission to allow the clinics to draw down Disproportionate Share Hospital (DSH) dollars normally used for hospitals to care for the indigent. By investing the DSH dollars into primary care, DHH is changing the landscape of health care. The state committed $30 million over three years from administrative funds in the Community Development Block Grant (CDBG) program as the state’s match, and that plan was approved by the U.S. Department of Housing and Urban Development to draw down about $70 million in federal funds in order to continue the grant funding for these clinics.

Promoting Primary and Preventive Care in Underserved Areas
$1.4 million in State General Funds is included in this budget to help phase in 16 new Federally Qualified and Rural Health Centers. Additionally, the budget includes about $1.7 million in State General Funds to annualize funding of 22 Centers enrolling on FY 2012.

Much like the community clinics in New Orleans, these RHCs and FQHCs reach an underserved population that often has few other health care resources other than hospital emergency rooms. Investing in primary and preventive care saves taxpayers money in uncompensated care costs and expensive avoidable hospitalizations, and it provides a better quality of care for our citizens. 

Ensuring continued access to care for low-income population
Over the past two years, DHH has received approval for various Upper Payment Limit programs for hospitals, including private, public and rural hospitals. The different UPLs are expected to provide $259 million to hospitals in FY 2012. The FY 2013 budget continues UPL payments and adds $14.4 million in federal funding for a new Ambulance UPL. This UPL program allows local governments (whether they run their own ambulance service or contract that service out) to send local dollars dedicated to emergency medical services to the state. The state can then use those dollars, which are currently unmatched, as match to access federal UPL dollars to pay to ambulance services to ensure continued access for Medicaid recipients.

Promoting independence
The policy priority of the Administration has consistently been to afford every person with developmental disabilities the opportunity to achieve their individual potential and to achieve their goals in the most appropriate setting possible. Since 2008, DHH has provided more robust independent living options for 2,175 more citizens with developmental disabilities, investing total funding of $115 million more in the NOW waiver. The FY 2013 budget includes total funding of $17.3 million for the annualization of 877 NOW slots.

Health Care Funding
The Health Care Budget for FY13 is proposed at $8.96 billion – up from the FY 12 existing operating budget amount of $8.28 billion, for a total net increase of $678.7 million.

The increase is necessary to continue to keep up with the rising cost of health care and avoid draconian cuts to health care services and providers.  Nationally, medical inflation is expected to be 8.5 percent in 2012 and continue to climb into 2013. In recent years, across the country and across all health care segments, health care costs have risen.  In Louisiana, DHH has successfully contained expenditure growth at about 5.4 percent each year – lower than the national average annual growth rate of nearly 7 percent.

In FY 13, there are other increases reflected in the total budget that are increases in federal funds, increases for mandated programs or increases caused in the DHH budget by movement of money from other agencies. Some of those include pharmacy utilization as drug prices increase ($48.7 million); federal funding for a new Ambulance UPL ($14.4 million); an Obamacare mandate to increase Primary Care Provider rates as of Jan. 1, 2013 ($29 million); Annual Nursing Home rebasing ($49.3 million); and moving the office of elderly affairs to DHH ($44.6 million).

Even with the $135 million of savings from cost containment measures and better coordinated care through BAYOU HEALTH, this additional funding for private providers is necessary to avoid further reductions in private provider rates that would be as high as 18.5 percent if it wasn’t included.

 

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