EXECUTIVE SUMMARY

Overview

This study by the Louisiana Advisory Commission on Intergovernmental Relations (ACIR) began in February 2002 per House Concurrent Resolution 148 of the 2001 Regular Session and House Concurrent Resolution 18 of the 2002 First Extraordinary Session. The Louisiana Legislature adopted these resolutions in response to the findings of the Report from the House Select Committee on Fiscal Affairs (SCOFA) of March 23, 2001. The SCOFA Report directed the legislature to “delineate the fiscal responsibilities between state and local government” according to the guidelines for a “sorting out process” recommended by the National Conference of State Legislatures (NCSL).

The Role of the ACIR in this Sorting out Process

The ACIR, created by statute in 1987, is charged with the responsibility of conducting studies of the existing, necessary and desirable allocation of state and local fiscal resources and to serve as a forum for discussion and resolution of intergovernmental issues to make recommendations for improvement. A July 1997 report of the NCSL, Critical Issues in State - Local Fiscal Policy, Sorting out State and Local Responsibilities, provided the guiding principles used in this “sorting out process” of state and local responsibilities to determine the following:

• What services should be provided by government?
• Which level of government should finance each of those services?
• Which level of government should deliver those services?

Per the SCOFA recommendations, the ACIR responded, where applicable, to the recommended guidelines of the NCSL listed on page two of this report. The ACIR examined issues determined to have the greatest fiscal and service impact on the state.

The Sorting Out Process

At the conclusion of this twelve-month study, the ACIR has achieved certain objectives it sought. This report is significant, not only as a thorough study of the very complex roles and responsibilities of state and local government, but as a document that will educate and enlighten. This study will support some of the findings of the SCOFA Report and clarify other contentions. This process has provided clarity for the ACIR members in some areas which have been problematic or unclear in the determination of fiscal and service responsibilities. Through this process, the ACIR heard many hours of testimony from more than forty presenters from state and local governments followed by discussions from its members. The ACIR examined current studies of these issues and comparative data on peer states to find models for successful solutions to similar problems in Louisiana; therefore, the recommendations in this report represent a consensus of thought from these various sources. These observations and recommendations were then approved by the ACIR members for inclusion in this report. It is the intent of the ACIR to continue to monitor the recommendations of this report to distinguish this study as one with high expectations for implementation.

The General Conclusions of the Sorting Out Process

This report includes the ACIR's general observations and specific recommendations for action or future study by the legislature or entity empowered to act. The ACIR findings indicate that a greater, fundamental problem exists relative to the responsibility and accountability for the delivery of services. Specifically, the state system is a problem, not simply the lack of control over how state funds are spent on local services or the relationship between state and local government in providing services. An additional problem is the significant economic disparity among the state's parishes where population and the tax base continue to decline. Per capita, the poorest city and parish/county in America are in Louisiana, surrounded by the poorest region in the country. Consequently, where there is no population or individual wealth, there is no tax base to support services. Our state system is antiquated and inadequate to fund and deliver services in the best interest and welfare of all the citizens needed to provide the quality of life which is available in the year 2003.

While some attempts at reform have been successful in areas such as education and in the recent passage of the Stelly Plan, Louisiana continues to operate in many areas according to practices and laws which are decades old. For example, Louisiana is distinct in its operation of a Charity Hospital System still run by 1930's practices. A 1929 practice, rather than policy or law, dictates the provision of local school facilities. The state has had the same dedicated fuel tax since 1989 to fund transportation needs. Today, 5,000 out of 16,000 state miles do not qualify for federal funds and remain in a state of disrepair. In the area of economic development, small businesses, as the foundation of an economy, need new forms of tax relief and development assistance from the state. New, high tech industries are reluctant to locate in Louisiana due to practices of the past and fiscal uncertainties of the present.

These problems are most evident in the comparisons of Louisiana to its peer states. Rapid technological changes and global events further mandate changes if Louisiana is to compete with the rest of the nation economically and socially in providing quality Pre K-12 and higher education and professional job opportunities. Reportedly, the state is failing to maintain or attract its share of college graduates and professionals as well as the nation's most affluent populations, the baby boomers and retirees. Indicators show that the state is losing members of these populations as some retirees follow their children to other states seeking better jobs and tax benefits.

The ACIR Response to the NCSL Guidelines in this Sort Out Process

In response to these problems, the ACIR applied the NCSL guidelines to sort out state and local responsibilities and reached the following general conclusions as supported by the specific recommendations of this study:

1.There is general agreement as to the provision of services for the citizens of the state to assure a standard quality of life for all as supported by the following NCSL guidelines:

a. “assigning services to the lowest possible level of government unless there is an important reason to do otherwise,” as in the areas of community health care and public education.

b. “assume state responsibility for programs where uniformity or statewide benefits will result,” as in the roles and responsibilities of constitutional officers and the courts, transportation, public safety, civil defense, environmental quality, corrections, and economic development in partnership with local governments.

2.There is general agreement as to the agencies that can best fund services to its citizens and “the need for accountability for all transfer funding for these functions “ as supported by the following NCSL guidelines:

a. “consider the fiscal effects of state mandates on local governments to either assume financing responsibility, allow local discretion and implementation, or to repeal them,” as with funding the courts or restricting grandfathered mandates, school boards and civil service systems from exemption by the 1991 constitutional prohibition against unfunded mandates.

b. “provide state financial assistance to local governments that have the lowest capacity to raise their own revenue,” as with the 57 out of 64 designated rural parishes in the state with substantial social and infrastructure needs.

Constitutional Reforms

In response to these profound issues, the ACIR requests a Constitutional Convention to specifically address the fundamental fiscal problems of the state deemed necessary to provide long term remedy for the concerns cited by SCOFA and as determined by the ACIR through this “sorting out” process. Furthermore, the ACIR determines the following as necessary if this recommendation is to be accomplished:

1. That the new Governor should lead the charge to secure a Constitutional Convention to address the problems of the state system;
2. That state legislators and local government leaders put aside individual political concerns and collaborate to support a Constitutional Convention in the best interest of the entire state.

Without rational, constitutional reform, the ACIR concludes that the recommendations of this and other studies will only continue to provide temporary remedies to permanent problems. The subcommittee findings in this report provide more specific recommendations for service delivery and accountability. For the purpose of this Executive Summary, the following conclusions profile key subcommittee recommendations.

Recommendations from the Subcommittees

Recommendations of the Subcommittee on Education, Health, Social Services, and State Fees

Annually the state contributes $2.3 billion to fund the Minimum Foundation Program (MFP) formula of education; therefore, discussions and recommendations in this area were the most extensive, including, but not limited to, the following:

Education:

1. Currently, the federal government only funds 15% of its promised 40% portion committed to the state for providing services for children with disabilities. The ACIR recommends that the legislature urge Congress to fully implement the 40% promised federal funding commitment for local education and to enact all mandates of the U.S. Department of Education's “No Child Left Behind” plan.
2. Louisiana's accountability program goals should form the basis for the Board of Elementary and Secondary Education (BESE) to determine the total cost of a minimum foundation program of education for Louisiana as stipulated in the Constitution. BESE should keep foremost in mind these student academic performance goals, as well as the varying cost of students having different needs, when developing and adopting the formula for the MFP. The MFP formula should provide maximum flexibility to local school boards, with their individual and specific needs, to successfully meet the student academic performance goals contained in Louisiana's accountability program.
3. If BESE includes a specific expenditure requirement in the MFP, it should do so within the framework of the MFP, with state funds allocated in accordance with the relative fiscal capacity of each local school system.
4. Both legislative bodies should consider the MFP formula adopted by BESE and submit it to the legislature. If the formula is not approved, both the House and Senate should approve any recommendation(s) for change before returning it to BESE.
5. No expenditure requirement to local school boards outside of the MFP formula should be mandated unless sufficient state funds are appropriated outside the MFP to fully compensate each school board for the cost of the mandated expenditure. As an example, state reimbursement for group insurance has been moved to the MFP without additional funding to provide for such expense.

Health: 

Local governments play a limited role in the delivery of the Department of Health and Hospitals (DHH) services. DHH services are financed, primarily, by state and federal funds. Preliminary findings indicate that Louisiana is one of the few states that delivers mental health, developmental disabilities and substance abuse services directly. In most other states, the state is the contractor, not the employer, thereby setting and assuring compliance for the use of state funds by local service delivery systems. In a presentation before the ACIR, the Legislative Fiscal Officer reported that Louisiana is second in the nation in patient expenses for hospitals and second in the nation on a per capita basis in spending for in patient care, yet Louisiana is 50^th in the nation in results. The Legislative Fiscal Officer recommended possible solutions such as regionalizing the health care system to better determine actual service providers and a guaranteed southern average formula for funding which is demographically based to address the dire needs of some areas. The subcommittee suggested following NCSL guidelines if an attempt is made to expand delivery of health services through multi parish models.

Social Services: 

Recommendations in this area included the following actions: developing local children and family cabinets to maximize services; funding grant writing programs for local citizens for grant writing and acquiring a better knowledge of available services to facilitate interaction; providing state funds to assist the Department of Social Services (DSS) to meet the state mandates from local courts for social services and treatment for children; formalizing partnerships to address social problems in the school system, thus creating a common interest in at-risk and special needs children between social services and schools; and finding ways to protect budget cuts which create a drain of professionals from DSS; and providing state run group homes which are now operated through contracts administered by private and nonprofit organizations.

State Fees: 

Recommendations in this area included the following:

1. Restricting grandfathered mandates from exemption by the 1991 constitutional prohibition against unfunded mandates. School boards and civil service systems were exempted from the prohibition.
2. Providing ways of standardizing fines and fees statewide.
3. Defining the duties of the state versus local government relative to fees so that funding can be provided for services by the appropriate provider.

Recommendations of the Subcommittee on General Services

Economic Development:  

That the Department of Economic Development (DED) should work toward greater collaboration with local governments due to locals concerns about the 10-year ad valorem tax exemption for new businesses. The exemption presents economic concerns for local areas due to competition, infrastructure costs, and the impact of businesses leaving when the exemption expires.

The ACIR supports local governments having greater accessibility to funds from the Governor's Office of Rural Development and the Office of Urban Affairs for local economic development projects. The ACIR urges the state to better define and clarify criteria for funding projects through the Governor's Rural Development Office and/or the Office of Urban Affairs, while also providing a more equitable distribution to local governments.

Workforce Training:

Contributing to the state's economic problems is the lack of a well- trained workforce. Another problem exists at the local government level where local officials might lack certain professional skills to effectively manage the complexities of government. The ACIR found that the Department of Labor provides assistance to state citizens for employment and training for business and industry through the Incumbent Worker Program. The state Division of Administration funds education programs for state employees and leaders by contract through LSU. There is no state support for training and education for local leaders, especially in those areas with the greatest needs. Recommendations from the Subcommittee include the following:

1. Conducting a survey of existing education and technical resources for local governments to find ways to assist in the delivery of these programs.
2. Examining the Governor's Office of Rural Development and the Office of Urban Affairs as possible sources of funding for municipal and rural government assistance in this area, as these funds have been used for this purpose in the past.

Elections:  

The ACIR recommends legislation to allow for the coordination of elections to coincide with federal elections at the next possible election cycle. The ACIR encourages local governments to better coordinate elections to lower costs at the local level.

Retirement: 

The ACIR recognizes that certain factors determine a healthy retirement system, specifically, such variables as employer and employee contributions and high yields on investments. The state should strive to achieve these standards and to increase the period of time to fully fund the unfunded accrued liability for all state and state wide retirement systems, which is currently at Year 2029.

Emergency Response and Civil Defense: 

The state provides for emergency services through various agencies. The new Homeland Security agency of the federal government will affect many of the funding and service operations relative to emergency responses. The state is in process of adapting existing plans to meet new standards and programs. The ACIR concludes there is a need for greater coordination among agencies that provide federal, state and local emergency services. The state has budgeted $10 million in FY2003 for Homeland Security Initiatives.

Recommendations from the Subcommittee on Public Works and Judicial System

Public Works/ Highways/Roads/Streets: 

According to the Louisiana Department of Transportation and Development (DOTD), the state lags behinds its peers in terms of how much money is raised for funding, and the state burden responsibility for transportation is disproportionate. Louisiana's transportation revenues are within the bottom third of all states. The state has had the same dedicated fuel tax since 1989. Louisiana has 16,000 state miles of highway funded by a 16- cent gasoline tax for every gallon of gasoline sold in the state. By comparison, Florida has 10,000 state miles funded by a 26-cent per gallon gasoline tax. The subcommittee recommends the following objectives as ways to address the state and local transportation problems:

1. To examine other user indexing and non traditional funding sources for transportation such as the Governor's Office of Rural Development and the Office of Urban Affairs funds for transportation infrastructure and federal grants.
2. To further recommend that there be a redefinition of the state's core transportation, flood control, and other public infrastructure responsibilities with appropriate funding.
3. To increase the road and bridge funding to DOTD and provide the option to fund local government services with locally raised revenues.
4. To recommend a special session to address the comprehensive issues of transportation and the Transportation Trust Fund, as there are about 5,000 out of 16,000 state miles that do not qualify for federal funds.

Prisoners and Corrections: 

Institutional growth is down in Louisiana. Three years ago institutional growth was increasing at a rate of 3,000 per year. Last year, that rate decreased to about 800 inmates per year. This decrease is good for the state, but not for local governments and communities where some local parishes struggle to pay the debt service on institutions they have constructed to house prisoners. It should be noted that Louisiana's prisons, once under a federal Consent Decree, have met the standards for accreditation as set by the Decree. The ACIR recommends the following:

1. That the state should retroactively pay for the costs of incarceration for a person charged with a state crime who is convicted of a state crime from the start of his confinement. This should be accomplished in a “phase-down” system in which the state would assume responsibility for a portion of the payment for such expenses over a five-year period.
2. That the state should further study the governance and maintenance of parish prisons and of regionalizing incarceration facilities/prisons, especially for state prisoners.

Coroners/Constitutional Officers: 

The ACIR recommends further study of constitutional officers, their roles and responsibilities; the funding of these officers to clarify vague terms in the law relative to funding and providing for these officers; and regionalizing coroner offices to make these state-funded offices for more uniformity among the offices.

The ACIR recommends legislation to provide judicial immunity for legitimate activities of coroners as provided other officials with similar liabilities.

Judicial System and Court Costs: 

The primary concerns in this area are for a needed definition or standardization of reasonable expenses for the district court system, including the following recommendations:

1. To urge the Special Committee on Court Costs to conduct a complete and comprehensive study of court costs.
2. To study the feasibility of local governments sending money to support a “big fund” formula to better distribute court costs.

 
ACIR Recommendations of Items for Future Study

This study does not exhaust the examination of all issues affecting the funding and service relationship between state and local governments. The ACIR recognizes that some areas are more complex and require more extensive study before complete recommendations can be made. Current studies relative to the judicial system, the courts and funding for public education were not complete or fully available at the conclusion of this study. The most substantial recommendation for study and action is that of how to address the state's fiscal problems. The ACIR has recommended a Constitution Convention for fiscal reform and notes the importance of further study to determine priority issues to be addressed in that process. The ACIR urges the Special Committee on Court Costs to conduct a complete and comprehensive study of court costs. The ACIR recommends additional study in the following areas: the roles and responsibilities of constitutional officers; the determination of coroners as statewide officials; state funding for local government training to better prepare them as partners in economic development and efficient government management; itemized reporting of court costs to the local parish with responsibility for funding those courts; and the establishment of a centralized mechanism n with uniform criteria for local government reporting of annual revenues and expenditures.