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Executive Budget: Failure to Consider Revenue Means Deep Cuts to Education and Health Care

Posted on February 22, 2013

By Steve Spires

With Louisiana facing a $1.3 billion shortfall heading into the next fiscal year, Gov. Bobby Jindal released a budget blueprint Friday that contains painful cuts to education, health-care and other critical services. It is the fifth straight year of deep cuts, providing fresh evidence that Louisiana has a revenue problem, not a spending problem. Until policymakers confront that fact, Louisiana will continue to under-invest in education, infrastructure and a healthy workforce—ingredients that we know are essential for strong economic growth and job creation in the future. What follows is a breakdown of the most short-sighted cuts and the cumulative impact of five years of slash-and-burn budgeting:

K-12 Funding. The governor’s budget leaves base per-pupil funding for K-12 education flat for the fifth year in a row (overall funding is increasing due to enrollment growth). That means local school districts will get tens of millions of dollars less this year than they need to maintain their current programs. And the funding shortfall has been getting worse every year. Had school budgets kept pace with inflation since 2009, districts would be receiving an additional $560 per student next year than they will get under this budget. Districts have cut back on tutoring and canceled after school programs, increased class sizes, laid off teachers and deferred maintenance to make up for the loss of expected revenue.

The budget also keeps more than $20 million in funding for private school vouchers in the Minimum Foundation Program funding formula, even though a district judge recently ruled this funding arrangement unconstitutional. The case is currently being appealed by the administration.

Higher Education. The executive budget continues a disturbing pattern of cuts in state support for public colleges and universities, made up for by increased tuition costs for students and their families. This year’s cut is $75 million, made up through tuition increases of the same amount. If approved by the Legislature, this would bring the overall cuts in state support for higher education to $700 million since 2008. In the meantime, in-state tuition at LSU’s flagship campus has gone up nearly 50 percent.

This is bad news for students, but also the state as a whole, as many top-rated professors have decamped for greener pastures, taking their reputations and research dollars to other states. LSU system interim president William Jenkins even said recently that LSU is in danger of losing its “tier one” status due to budget cuts.

According to Commissioner of Administration Kristy Nichols, higher education would be cut by 19 percent next year were it not for the use of $424 million in patchwork “one-time money” in the budget.

One of the few areas that are seeing an increase is funding for TOPS scholarships, which go mainly to students from well-off families. Funding for these scholarships is going up by $32 million, while funding for need-based Go Grants is being held flat for another year.

LSU Hospital Privatization. The seven LSU hospitals that serve nearly half a million patients throughout South Louisiana are being cut by $781 million—which is equal to 94 percent of their FY13 budget of $825 million. Six of the seven hospitals are being completely defunded; only Lallie Kemp Regional Medical Center in Independence will receive direct state support. Three public hospitals in north Louisiana are also being cut by hundreds of millions more. In all, eight of the 10 LSU hospitals are slated to be privatized.

The governor’s office says privatization of the facilities and lease payments to the state by private hospitals will make up for much of the cut and help maintain services for the uninsured and low-income residents. However, as with many things, the devil is truly in the details.

None of the new privatization deals have been completed. For some hospitals, private partners have not even been publicly identified, even though services at the existing hospitals are set to be cut and the “savings” are already counted in the budget. More than 7,000 LSU health employees will be laid off, though many could be rehired by the private partners.

The lack of transparency surrounding privatization—including crucial details about how care will be paid for and what patient protections will be included in the partnerships—is troublesome. Furthermore, the state still needs federal approval for these arrangements. The continued uncertainty puts patient access and graduate medical education at risk.

This budget means the statewide network of public hospitals that low-income and uninsured Louisianans have relied on for generations is being decommissioned. But critical details surrounding the new “public-private partnership” model that is supposed to replace it have yet to emerge.

Medicaid and Health-Care Services. One in four adults in Louisiana lack health insurance, yet the executive budget fails to accept the hundreds of millions of dollars in new federal money that will be available in 2014 to help the state provide health care to as many as 400,000 people. The federal government will pay the full-cost of Medicaid expansion for the first three years before the state has to pay a dime, making this policy a fiscal no-brainer. In fact, expansion would help generate significant savings in the current fiscal year.

The state’s rejection of this federal revenue means that more than 50,000 adults in the New Orleans area will lose access to primary care services that are currently being provided through a Medicaid “waiver.” When the waiver expires Dec. 31, and there is no expanded Medicaid program to take its place, New Orleans health clinics will face financial stress that will likely mean fewer services and reduced access—a devastating hit that would undue many of the reforms and improvements to the New Orleans health care system since Hurricane Katrina.

The budget also includes cuts to behavioral health services, placing more hardship on families who have children with mental health issues and on Louisianans seeking substance abuse treatment. Overall, the budget reduces the Department of Health and Hospitals by $54 million.

Conclusion. This budget proposal continues a five-year trend that has seen Louisiana under-invest in children and young adults, even though world-class education is crucial for being competitive in the 21st century economy.

It also threatens harm to the most vulnerable Louisianans—children with mental illness, people with disabilities and low-income adults who lack health insurance—who could lose access to needed health care services as the state’s safety net is dismantled.

This administration has been trying for five straight years to cut its way to prosperity, and it isn’t working. Louisiana has a revenue problem, and policymakers should fix it by closing wasteful tax loopholes and asking a little more from those who can most afford it so we can reinvest in education and health care. The last thing Louisiana needs is tax policies that would farther tilt the playing field in favor of the wealthiest.

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