Wednesday, January 28, 2015

Wednesday, January 28, 2015

WISE Fund on the chopping block; Budget cuts hit “red” states the hardest; Teachers retirement plan gets poor review; Job numbers up; and Sasol delays decision on massive industrial project

WISE Fund on the chopping block

The much-touted Workforce and Innovation for a Stronger Economy (WISE) Fund is likely to see deep cuts in funding and may be gutted completely due to the looming $1.6 billion dollar shortfall in the 2015-16 fiscal year. As the AP reports, Jindal urged legislators to set up the fund in order to link higher education money to workforce demand.

As Jindal opened the 2014 legislative session, he told lawmakers that Louisiana’s biggest challenge was making sure it has enough workers to fill the jobs his administration has helped attract to the state. He pitched the WISE Fund as a key way to address the worker shortage. “Economists have recently said they have never seen an industrial expansion like the one under way in Louisiana, but have also warned that we must do a better job training skilled workers that will be needed to fill the demand for jobs,” Jindal said, signing the bill in June.

 

Although WISE funding wasn’t certain to appear every year, many colleges used it for recurring expenses such as salaries and training programs while others used it to provide scholarships. The $40 million program represents a mere fraction of what might be cut from state colleges and universities, as officials have been told to prepare for reductions of up to $400 million.

 

Budget cuts hit “red” states the hardest

When Congress cuts federal spending on social programs, the results are disproportionately felt in conservative “red” states, a new analysis by Reuters discovered. That’s in part because the president has wide latitude to decide where money gets spent, while Congress has given up on the “earmarks” process that let powerful lawmakers steer dollars to their home states.

 

Between the 2009 and 2013 fiscal years, funding for a wide swath of discretionary grant programs, from Head Start preschool education to anti drug initiatives, fell by an average of 40 percent in Republican-leaning states like Texas and Mississippi. By contrast, funding to Democratic-leaning states such as California and politically competitive swing states like Ohio dropped by 25 percent.

 

Teachers retirement plan gets poor review

The National Council on Teacher Quality gave Louisiana’s teacher retirement system a C-  , the national average, and estimates that the system is $11.3 billion in debt (the state’s estimate puts the debt closer to $12 billion) – or $16,134 per public school student. The Advocate reports that 82 percent of every dollar teachers invest in their retirement goes to paying off the system debt, not the benefits.

 

The Board of Elementary and Secondary Education was set to launch a $143,000 study of the system but opted not to at the urging of House Retirement Committee Chairman Kevin Pearson.

 

Pearson said in an interview earlier this month that other studies have been done on retirement costs and that the one considered by BESE would be a waste of money. Asked about the report on Tuesday, Pearson said he and other lawmakers “have been working our butts off … to get this system on a better track, slowing the locomotive down…“Yes, the systems are underfunded to a level that we don’t like,” he said. “But Louisiana has stood tough and said that unfunded liability will be paid off by 2029. That is only 14 years from now.”

 

Job numbers up

Louisiana’s unemployment rate climbed to 6.7 percent in December and is now the nation’s sixth-highest – well above the national rate of 5.6 percent. But the state also keeps adding jobs and is just 7,800 short of reaching the 2 million mark for the first time. The Advocate reports that the rising jobless rate is a sign that more people are entering the workforce, not that the economy is slumping.

 

“This growth, sustained over many months, represents thousands more opportunities for people in Louisiana,” said Curt Eysink, the LWC’s executive director. “We’re adding jobs at a strong pace, and our labor force is growing to match that increasing demand.” For the eighth consecutive month, though, Louisiana’s unemployment rate increased in year-over-year comparisons.                   

The Bureau of Labor Statistics reports that “The (nation’s) only statistically significant (unemployment) rate increase occurred in Louisiana.”

 

Sasol delays decision on massive industrial project

Low oil prices have prompted South African petrochemical giant Sasol to delay its $14 billion gas-to-liquids facility near Lake Charles. The Advocate reports:

 

The gas-to-liquids plant’s addition would have made the Sasol complex the most expensive industrial project in Louisiana history. Sasol announced Wednesday the company was formulating “a comprehensive plan” to conserve cash in the wake of plummeting oil prices…Sasol’s announcement comes a little more than a year after Royal Dutch Shell plc abandoned plans for an Ascension Parish plant that would convert natural gas to diesel.

Sasol is still planning on building a $8.1 billion ethane cracker that will convert natural gas into ethylene. Both projects–if they are completed–stand to gain $257 million in tax incentives, as the Advocate reported in its “Giving Away Louisiana” series last year.

Sasol’s decision to delay the GTL plant due to oil price changes lends credence to the view that companies really make businesses decisions based on market forces, not taxes and giveaways.

 

Number of the Day
82 – The percent of each dollar that a teacher spends on retirement that goes to pay off retirement system debt, not funding future benefits. (Source: The Advocate)