The Jindal hangover

Gov. John Bel Edwards and the Legislature will have to come up with $155 million over the next four years to satisfy financial commitments made by former Gov. Bobby Jindal to corporations that agreed to locate projects in Louisiana. It’s not uncommon for governors to inherit such commitments, but the timing couldn’t be worse for Edwards, whose administration faces a $750 million shortfall this year and a $1.9 billion gap between revenues and expenses the next. Melinda Deslatte of the Associated Press has more:

In the upcoming 2016-17 budget year, the Edwards administration will owe an estimated $50 million to companies from Jindal’s economic development deals, about $11 million from the state construction budget and another $39 million in direct cash from the general fund. That doesn’t count spending from any tax break programs through which companies in Louisiana can lessen what they owe the state. “Obviously, there have been commitments made that take a huge chunk of general fund dollars to satisfy,” said Edwards’ chief financial adviser, Commissioner of Administration Jay Dardenne. “We’re going to satisfy contractual obligations that we have to.”

The money will flow to nearly three dozen projects including a cruise ship line operating in New Orleans, a steel manufacturer in Shreveport and a video game firm in Baton Rouge.

More could qualify for Medicaid expansion

The state’s initial estimate that 300,000 people would be eligible for coverage under Medicaid expansion has grown to 450,000. The increase comes from including 130,000 people who receive coverage for sexually transmitted infection screenings and pregnant women currently covered under Bayou Health who are eligible to be covered under expansion. Kevin Litten of Nola.com/The Times-Picayune reports Medicaid interim director Jen Steele says even though the numbers of those receiving health care coverage may be higher than expected, the state will still see savings due to expansion.

Patients who are covered by Bayou Health — mostly children and pregnant women — are more costly for the state to insure because that program requires the state to pay 38 percent of the costs. Under Medicaid expansion, a new group of patients who were previously uninsured will receive Medicaid coverage at a much lower cost than those in Bayou Health: The federal government covers all Medicaid costs until 2017. Then the state begins a paying 5 percent of the costs, gradually increasing the matching funds to a cap of 10 percent in 2020. But some of the people in Bayou Health — pregnant women, primarily — could be considered eligible for both Bayou Health and the expanded Medicaid program. Those patients will be moved under the Medicaid expansion umbrella where the state will pay the 10 percent match instead of the 38 percent match that begins in 2020. That could push the numbers higher, possibly as high as 470,000, Steele said.

Budget fix at odds with lawsuit

Gov. John Bel Edwards’ plan to use $200 in BP settlement money to help with this year’s $750 million shortfall may be at odds with a legal settlement requiring that the money be used to refill the state’s “rainy day” fund. The fund was depleted by the Jindal administration and a lawsuit was filed to ensure the funds were repaid. Melinda Deslatte has more:

Redirecting the money as Edwards proposes “would clearly violate the state’s agreement,” said lawyer Kyle Keegan, who represented the men who sued the state, former state Rep. Ron Gomez and tea party activist Bob Reid…It contains a provision that says any “material change” to the rainy day fund earmark will make the agreement “null and void.”

Commissioner of Administration Jay Dardenne told the AP that the state isn’t backing away from its plans to redirect the settlement dollars, saying they are needed to avoid potentially devastating cuts to state services.

Cheap gas could spell trouble

When the price of oil falls it’s usually a cause for concern in Louisiana. But on the national scale, low oil prices has traditionally meant good news for the economy as consumers have more money to spend on other things. But this time it’s a different story, in part because domestic oil production has spiked so sharply in recent years that when prices fall it leads to a cut in investment and jobs. Binyamin Appelbaum with the New York Times has the story.

The losses from lower prices are larger and quicker than expected as energy companies cut back on investment and lay off workers, while the gains are smaller and slower to materialize, as consumers save some of their windfalls. Economists at JPMorgan Chase, who predicted last January that lower oil prices would add about 0.7 of a percentage point to the economic growth rate in 2015, now estimate that lower prices might have shaved 0.3 of a percentage point off the growth rate. This year, JPMorgan predicts that lower prices will help expand economic activity by just 0.1 of a percentage point, while economists at Goldman Sachs said they expected an impact “around zero.” The decline of oil prices is causing other problems, too. It has contributed to the correction in global equity markets; the Standard & Poor’s 500-stock index is down 10 percent this year. And lower prices are weighing on inflation, jeopardizing the Federal Reserve’s plans to raise interest rates by about one percentage point this year.

LBP is hiring!

The Louisiana Budget Project is looking for a bright, motivated professional who wants to make a difference in Louisiana’s challenging policy environment. The senior policy analyst will lead our work on health care and tax reform. Click here for a full job description or email Jan Moller at jan@labudget.org for more information.

New Leaders Council fellows announced

The Louisiana chapter of the New Leaders Council announced its 2016 class of 22 fellows last week – including 18 from the Greater New Orleans area. The NLC  is a 10-day political entrepreneurship program that runs from January through June and covers diverse topics from communications and fundraising to campaign management. For more information on the latest class of fellows click here.

Number of the Day

450,000 – the new estimate of how many Louisianans could be eligible for health care coverage under Medicaid expansion. (Source: Nola.com/The Times Picayune)