Covering Louisiana

Mar 4, 2013 4:57 PM by Janet Hollinshead

Governor's office responds to Treasurer Kennedy's criticism of budget

The Governor's office released the following response to Treasurer Kennedy's column about the state budget.

The Commissioner of Administration Kristy Nichols said: "We appreciate the Treasurer's opinion, but given his long track record of half-baked gimmicks and his office's recent miscalculation of the state's debt, we will pass on his suggestion. We also disagree with the Treasurer's call for cuts to higher education and healthcare. The reality is that the budget is balanced, makes state government more effective and less expensive for taxpayers and continues to help foster an environment where businesses want to invest and create jobs. At the same time, our budget also protects K-12 schools, colleges and universities and healthcare services."

The release goes on to outline bullet points with specific responses to the Treasurer's suggestions:

1. Pretend the state will have an extra $800 million to spend as a result of the yet-to-be realized savings from leasing state hospitals to private hospitals, even though the leases have not been negotiated.
· With this point, Treasurer Kennedy reveals himself to be an opponent of reforming the old charity hospital model, not to mention that he apparently does not know how to read the budget.
· Congressional action in July reduced Louisiana's Medicaid funding match rate to the lowest it has been in 25 years, dealing an impact of more than $1.8 billion to the Department of Health and Hospital's budget. In spite of this, DHH is continuing to protect critical health care services in the coming fiscal year by operating more effectively and strategically.
· One major outcome of the FMAP reductions was accelerating a restructuring of the LSU public hospital and graduate medical education system. LSU officials in October announced a plan that maintains critical services and keeps all hospitals operational, including the medical home-model clinics that provide much of the care to recipients in the public hospital system today.
· The overall savings in the FY 14 proposed budget as it relates to the partnerships is $106.7 million. DHH's FY 14 proposed budget includes $849 million in total funding for the partnership hospitals, and as a result of these partnerships, the hospitals are receiving $191 million more in funding than they were anticipated to receive as a result of the Congressional FMAP change.
· The proposed budget includes lease payments of $93 million - not the $800 million that the Treasurer makes up - based on a conservative estimate of the fair market value of the partnership hospitals. Most importantly, these historic public-private partnerships will preserve patient services and strengthen graduate medical education programs, while providing opportunities for increased access to specialty care and enhanced medical training.

2. Refinance the state's tobacco bonds (good idea) but dump the $90 million one-time savings into the operating budget and spend it next year (bad idea).
· With interest rates at historical lows, refinancing the state's tobacco bonds not only produces substantial savings for the state, it's also a financial deal that's in the best long-term interest of the state. Our plan will also generate $8 million dollars in savings on a future value basis over and above the Treasurer's plan. These savings, by law, go to the TOPS fund to use toward giving college scholarships to deserving Louisiana young people, and the budget includes $60 million (not $90 million) for that purpose. The Treasurer insults Louisiana's young people by comparing the state's commitment to providing them a college scholarship to paying for a "Disney World vacation."

3. Propose to sell state real estate at inflated prices well above appraised value and spend the money before they sell.
· With state government consolidating and reducing its footprint, it just makes sense to sell underutilized state government property, returning it to productive use while generating savings that can be reinvested in services to the taxpayer. These sales are based on appraised value of the property. Again, the Treasurer exposes himself as a big government defender of the status quo who would rather keep underutilized property in government's hands instead of downsizing government's footprint and returning the property to the private sector.

4. Borrow $100 million from the New Orleans Convention Center to keep our colleges open while promising to repay the loan with the proceeds from future bond issues that will exceed the state's constitutional debt limit.
· It was the Treasurer's office itself that recently created a manufactured crisis over the state's debt limit because of its inability to count. Thankfully, the Division was able to correct the Treasurer's error, which equated to more than $400 million in bonding capacity for construction projects. We are working with the Convention Center and other city stakeholders to reinvest construction dollars for projects in the city.

Here is the original article from Treasurer Kennedy

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