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According to a story ( see here) in last Friday’s Baton Rouge paper the Jindal Administration is again requesting that the State Civil Service Commission agree to freeze the pay of classified state employees for the fiscal year beginning July 1. The administration also plans to again suspend pay raises for those in the unclassified ranks of state employees in the Executive Branch of government.

The freeze, apparently, would not apply to those employees who during the year move into new positions that require higher skills or with more responsibility which provide a higher pay rate.

While this may be an unpopular move with state employees, Team Jindal is to be commended for taking this common sense approach to begin to address the $1.6 Billion revenue shortfall for the coming fiscal year.

The total savings for suspending the pay of the classified employees is estimated at $55 Million. Of that amount $16.5 Million is State General Fund money. The balance is presumably Federal funds.

We will hear complaints that suspending the pay raises for those employees paid partially or wholly with Federal funds doesn’t help the state’s revenue shortfall. It is estimated that the Federal government is running a $1.5 Trillion deficit this year. The source of paying for both the state shortfall (LA cannot run a deficit.) and the Federal deficit comes from the same source — us taxpayers.

Arguments for pay increases

There are some points stated in the story and the  reader comments below it that need to be addressed on behalf of those of us who work or own businesses in the private sector as well as those who are unemployed and those employed who will not be receiving raises this year.

Point 1: The move comes as state employee salaries lag behind those of employees in similar jobs in other states as well as in the private sector. ibid

Response: This statement fails to take into account the cost of living in other states. Nor does it take into account that most of the other states are facing fiscal crisis and are reducing their employees, not hiring.

No evidence is provided that Louisiana civil servants are abandoning Louisiana for greener pastures in other states.

Given the growing unemployment rate in Louisiana, if these incumbent state employees are leaving for other states, there are plenty of unemployed who would be willing to the job at the current pay rate.

There are several recent studies showing that on average public sector employment salaries exceed those of private sector.

Point 2: According to the 2010 Civil Service pay survey, salaries of some classified employees average 22 percent less than the norm in comparable positions. ibid

Response: Assuming this reference is to positions in the private sector it fails to take into retirement and healthcare benefits that in most cases exceed those in the private sector. Defined benefits pension plans (guaranteed benefit amount) provided by the state are becoming extinct in the private sector.

Most private businesses, if they offer any retirement benefits, are 401k programs where the amount of benefits are not guaranteed.

Point 3: [T]he minimum pay in various job categories ranges from 7 percent to 29 percent behind that in Louisiana’s general employment market, the survey found. ibid

Response: Despite the minimum pay entry level for civil servants, it fails to mention the retirement and healthcare benefits provided to these employees that are rarely matched in the private sector and those that do are being phased-out.

Despite the pay freeze there is no limit on these entry level employees from increasing their pay by hard work, passing the appropriate Civil Service tests and moving into a higher paying job classification. With the current economic conditions in Louisiana there are limited similar opportunities in the private sector.

If, as intimated in the story, Civil Servants are fleeing Louisiana for government jobs in other states moving upward shouldn’t take long.

Point 4: An excerpt in a reader comment under the story states: The annual 4% that most state employees used to receive barely kept up with the cost of living. ibid

Response: Social Security recipients, most on fixed incomes with no opportunity to move to a higher classification, had their benefits frozen last year and again this year. The same cost of living increases apply to the senior citizens and when they got cost of living increases they weren’t as much as 4% every year.

Alternative

Probationary employees in the Civil Service system can be fired without cause during the first six months of their employment.

If the Civil Service Commission determines that the pay raises are of such importance that they refuse to suspend them, there is a way they can help meet the state fiscal crisis. It’s similar to the decisions businesses and individuals in the private sector make when faced with revenue shortfalls.

The commission should simply submit a list of the names of specific probationary employees in each state agency that should be terminated in sufficient numbers so that their combined salaries equal $55 Million.  That way their decision would be revenue neutral.

Recommendation

The Legislative and Judicial Branches of state government should also suspend pay raises for the upcoming fiscal year. The lege did this for the current fiscal, but it is unknown if the judiciary did likewise.

Such a move would indicate that these two branches of government actually understand that there is a revenue shortfall. It may make the leges make better decisions on their priorities.

It will also show that the elected officials in these two branches of government understand what the citizens of Louisiana are facing in their daily lives. Sometimes, it seems that they are out of touch with reality.

C.B.

1 CB 8:00 am

In a story in today’s Baton Rouge newspaper ( See story here.) is a good example of one of the many reasons state government finds itself facing a $1.6 Billion fiscal cliff.

The state has been awarded a $286,600 grant by the Bill and Melinda Gates Foundation to “to hire experts on student growth.”  However, in order to get the grant the state must put up $80,000 of the taxpayers dollars.

There is nothing wrong with a foundation, the Feds any other organization or individual offering funding for a particular service if the state is willing to put up a portion of the cost of the effort in order to have some “skin in the game.”

In the case of this particular grant, we don’t know why the state needs to hire experts on “student growth.”  However, on the surface, it is seems clear that it has nothing to do with educating the children currently in the public school classrooms.

The Department of Education has already hired dozens of “experts” at 6-figure salaries to tell us how to improve public and elementary and secondary education in Louisiana.  The head of the department was hired because of his experience and knowledge and is one of the highest paid education heads in the nation.  Why do we need more expertise?

Good investment?

On the surface spending $80,000 in state dollars in order to get $286,600 in private dollars sounds like a good “investment.”

The story offers no explanation of what the additional “experts” expect to accomplish when it comes to student growth. It does beg the question of whether $80,000 is the highest and best use of the taxpayers’ dollars especially when the state is anticipating a huge revenue shortfall.

Real life example

The above grant is like a family buying a second or third automobile simply because the auto dealer offers a once-in-a-life-time discount.  In order to take advantage of this discount, the family would have to use their funds set aside to pay for their children’s’ college tuition for the coming year.

Is the deal on the automobile worth temporarily delaying their children’s’ education for at least one year while tuition is expected to rise in the future.

Who’s setting the priorities

I’m sure the Gates Foundation does tremendous good with its funding.  However, what we are doing while facing a fiscal crisis in basic services is allowing a private foundation to determine our budget priorities.

As in the example above of paying tuition or buying another automobile, is there anything for which this $80,000 could better be used in the state budget?   For example, would it be better to use the $80,000 to get a 3 for 1 Federal match for Medicaid funding for treating the elderly, poor and the young?

Decision-making clouded by MFP

State Treasury John Kennedy has produced a lengthy list of such contracts (thousands) just in the LA Department of Education where state funds match Federal and private money.   While many of these projects may be worthwhile, they are never scrutinized in terms of whether the state matching portion could be better used elsewhere in the budget.

Nor are they looked at from the standpoint of whether they will actually improve the individual quality of education of our children for which we recently received an “F” in comparison to the other states.

The situation with the LA Department of Education begs a question: If its basic funding (”MFP”) wasn’t constitutionally-protected would the bureaucrats at DOE be making the same decisions in using scarce state dollars to match funds that do not go directly into the classroom as they are currently making?

History lesson

The use of short-term grants to entice and trap the state into on-going expenditures of state-only funded programs is nothing new.  As early as the 1970s, then-State Representative V.J. Bella, Berwick, a member of the House Appropriations Committee warned that these offers of short-term Federal grants (just to try a program) would ultimately leave the state with the financial responsibility for the new program.

Bella knew and argued that once the state began providing a service, it would never be able to stop offering it just because the Federal funding stopped.   This is precisely why Louisiana offers one the most comprehensive array of optional services in the state Medicaid program.

Louisiana picked up every 3-year funded program the Feds offered despite knowing that continued funding would be solely with state dollars.  Today, we still have most, if not all of these programs, despite the reduced or eliminated Federal funding.

Macro vs. Micro

Instead of looking at each program, i.e., the Gates grant, individually, the leges need to look at all expenditures from the overall needs of the state.  The consensus seems to be that the state’s worst financial problems exist in Higher Education and Healthcare for the young, the poor and the elderly.

Each time the leges decide to expend a dollar, they should make a conscious determination if that expenditure is more important than Higher Education and Healthcare.  Such determination should especially include money appropriated to local governments and NGOs.

Shift responsibility to local

It is my strong believe that if the state focused it limited tax dollars only on state programs there would be plenty of money to fund them at adequate levels.  There would be money left over that would allow reductions in the State Sales Tax, for example, by 1.5 cents.

The local governments would be given the authority to impose the 1.5 cents (or any portion of it) without raising the overall tax rate in the state.   The only difference is that the local politicians and bureaucrats would have to make case directly to their constituents who have the constitutional right to vote on sales and property tax increases.

If the locals want a new city hall, the locals simply vote to impose the tax on them and not ask the leges to impose a tax on everyone in the state for a purely local project.

Dangling carrots is no way to set state spending priorities.

C.B.

1 CB 10:18 am

Wednesday, at the Annual Meeting of the Louisiana Association of Business and Industry, “The Roads Scholar” missed a perfect opportunity to assure the public and especially the business community that he has a plan for addressing the state’s $1.6 Billion “fiscal cliff.” ( See story here.)

If there is one thing that businesses fear is uncertainty.  Jindal did nothing allay those concerns.

Instead of showing leadership and that he has a plan to address the uncertainty; Jindal showed once again, that, at best, he is a policy wonk.

Jindal floated another “trial balloon” for charter schools for which he asked the business community to help fund.   Without certainty why should business invest the dollars they do have in another wonkish idea?

Other than to say he won’t raise taxes, Jindal said little in terms of specifics.  Such words ring hollow when one considers Jindal’s support of significant college tuition increases and a tax increase on our drivers’ licenses during the 2010 Regular Session.

Recently, Carl Redman, Executive Editor of the Baton Rouge Advocate, described the impact of college tuition and fees as falling “like a tax, on [students] and their parents.” Sunday Advocate, January 9, 2011.

Jindal said nothing to ally the public’s concerns over cutbacks in vital state services.  Nor did he mention any significant governmental structural changes.  Nor did he suggest that he will set real priorities by eliminating funding for non-state mandated services (including NGOs).

Just mentioning some specific plans to address the “fiscal cliff” may have amounted to nothing but political rhetoric, they would have at least shown that Jindal was concerned about the impending problems facing our state in less than 6 months.

As the state hurdles on the road towards the July 1 “fiscal cliff” Jindal ignores the cliff and suggests planting spring flowers on the side of the road to distract us from the reality of the fiscal train wreck ahead.

Because Jindal has no plan (nor do his top administrative people or the lege leadership) he simply chooses to ignore the problem.

That is not leadership.   That is cowardice.

C.B.

1 CB 9:04 am