MINUTES
Advisory Commission on Intergovernmental Relations
May 9, 2002

I. CALL TO ORDER\ROLL CALL:

The Louisiana Advisory Commission on Intergovernmental Relations met on May 9, 2002, in Senate Committee Room E.

Chairman Harris called the meeting to order and asked the Secretary to call the roll. The following was noted:

II. APPROVAL OF MINUTES

Motion by Mayor Bobby Simpson to approve the February 21, 2002, minutes. Mr. Clarence Savoie seconded the motion. There being no objection the minutes were approved.

III. SUBCOMMITTEE REPORTS

Mr. Mike Zito, Chairman of Education, Health, Social Services & State Fees advised members that there was no subcommittee report. He further noted that he was absent, although there was a presentation made. Ronnie Harris noted that as a member of the committee there was a presentation by the Department of Health and Hospitals relative to their massive budget, budget problems and the delivery of services to local communities. He also advised that there was a brief presentation from the state Department of Education. Mayor Harris concluded noting that the subcommittee is still obtaining information from the various departments and work is coming along with good cooperation from the state departments.

Representative Jane Smith, member of Public Works and Judicial System began with their report noting that the subcommittee heard testimony on mandated costs and services provided relative to public buildings. Testimony was provided by the following :

• Roland Dartez, Police Jury Association

• Cindy Bohrer, East Baton Rouge Parish Mayor's Office

• Buddy Hodgkins, Sheriff's Association

• Debbie Hudnall, Clerks of Court Association

Roland Dartez, Executive Director of the Police Jury Association, gave a listing of the various mandated office spaces for state and parish officials for which police juries are responsible.

Cindy Bohrer, Special Assistant Parish Attorney for the City of Baton Rouge provided handouts and provided testimony relative to specific housing costs that the city/parish pays.

Buddy Hodgkins, Sheriff's Association, highlighted the problems involved with the corrections system as it relates to housing prisoners. He indicated that there is a need for a statewide system for the allocation and sharing of prisoners.

Debbie Hudnall, Clerk of Court for East Feliciana Parish, and Clerks of Court Association, outlined the duties of the clerks of court, and the costs associated with housing the various clerks of court. She also highlighted the inadequacy of the amount paid for housing prisoners.

The following were determined to be public building/housing costs which local governments must pay in response to state mandate or to house state public officials:

*The information provided in this table is not exhaustive and only reflects testimony provided on March 14, 2002.

 
Next Steps

The subcommittee determined that it needs more fiscal information for the next meeting, including what kind of monetary assistance the state provides to locals for state mandated programs. The subcommittee would also like to explore judicial funds, and what types of funding and programs are provided through those funds.

Chairman Harris thanked Representative Smith for her presentation. He noted that Chairman Joel Richert was absent and Mayor Randolph would present the subcommittee report on General Services.

Mayor Randolph began his presentation advising that Mr. Don Hutchinson, secretary of the Department of Economic Development presented information concerning economic development in Louisiana.

• Small business development centers - 15 in the state

• Provides a $308,000 state match- 1.2 million with federal match

• Planning districts - eight in the state/$10,000 for each

• Market Education Retail Alliance - $776,000 to provide lesson relative to economic development to high schools

Louisiana Technology Transfer Office

• Housed at LSU Business Technology Center and the Stennis Space Center- $250,000

• NASA performs infrared scanning of farming plots to determine soil specifications

• 1 million to Super Bowl

• 1 million to sugar Bowl

• $375,000 to Independence Bowl

• $300,000 to New Orleans Bowl

Day to day function:

• Provide resources to companies within the state in the form of tax incentives, tax credits, financial infrastructure assistance, financial workforce training assistance directly to the company, promote the state, and provide loan guarantees

Programs:

1. Economic Development Award Program--- to assist existing businesses and help fledgling business --- 4.5 million

2. Workforce Development--assistance in training employees for specific fields --- 2.5 million

How competitive is Louisiana-- should be more competitive---educate workforce

Chairman Harris pointed out that Dr. Brookie Allphin was present, although she was not planning on making any type of report she is available for any comments, questions or concerns members may have relative to each of the subcommittees. Chairman Harris asked for general comments as to, if this was the proper forum to go about it, as we are attempting to do; having every other meeting of ACIR as a general session as well as subcommittees. He advised the commission would continue this process unless a member has an objection. There was no objection.

Chairman Harris advised that there seems to be a certain amount of desire by various individual organizations and business groups that would like to be aware of the ACIR meetings. He asked if there was any type of outreach program other than just studying the agenda and moving forward. Metrovision from New Orleans had indicated that they were interested, some economic groups, LABI was concerned and he just wanted to make sure for those who were interested that we could provide notice to them. He asked each commission member that if they knew of any group whom would be interested in the ACIR proceedings and wanted to be in attendance to notify Sabrina Whitaker and she will provide them with the agenda meeting information.

Senator Johnson responded saying that he thought this was a good point. Perhaps what we should do is get the mailing list from an entity like the State Bond Commission, as they usually send out notices to a number of people. What we might want to do, just to maybe make sure that we keep the organization in the front of the mind of members of the legislature, just send each member a notice in the event they want to drop in.

Chairman Harris thanked Representative LeBlanc and members of the legislature for passing House Concurrent Resolution 18 of the 2002 First Extraordinary Session which extends the life of ACIR as the task would be a lot greater.

IV. LOUISIANA's FISCAL PROBLEMS: The Causes and Cures

Mr. Johnny Rombach, Legislative Fiscal Officer, addressed members of the commission. He began stating that the state has problems and will always have problems. He has been around for a long time and until we change the way we do business there will always be a problem. Money is not the answer he said. "When we have problems we always say that the revenue stream does not grow fast enough and we need more money. What if I were to tell you, Mayor Simpson, if you were Governor, I would tell you that you had $3.6 billion dollars to spend in the next six years on an $11 billion dollar budget. You'd probably have a little dance, have a party and have a good time and really be happy. $3.6 billion dollars in six years, what am I talking about? Our budget in the State of Louisiana has grown by $3.6 billion dollars. The Governor and his people tell you, well the general fund was less than the rate of inflation over this period. I trust his staff, it's probably right. State funds have grown tremendously," he said. "We dedicate things and we have fees which has grown very significantly, federal funding has brought us to a level of $3.6 billion dollar increase. So you ask me what is the solution, money is not the answer, we have money. We have money today, we have money tomorrow, we had money a year ago and ten years ago. The problem is we do business like it's 1930 we don't change anything. If we would do business like most states did in the 60's or 50's we could save a lot of money. We are a state that spends like we are Virginia or Maryland, with results like Arkansas and Mississippi. Ladies and gentlemen, if you want those kinds of results don't spend the money."

"In Health Care, we are second in the nation in in-patient expenses, hospitals. Second in the nation on a per capita basis in spending for in-patient care. Where are we in health care results, 50th," he said.

"When you take total taxes including taxes on businesses, individuals, fees, etc., we are fourth or fifth in the South and 29th nationally. The ones paying taxes are the small, medium size businesses. The big businesses have the industrial tax exemption and we have the homestead exemption. The small and medium size businesses are the heart of the economy. When we look against one another at tax reform, we give breaks based on a social issue." He is in favor of removing the burden on individuals, the working poor, for paying disproportionate amount for utilities and food under our sales tax regime right now. "It is unfair and should be adjusted." He continued saying that "if you give about $460 million worth of tax breaks to solve that much smaller problem is fool hearted. What you want to do is give a big part of that break to small businesses so they can hire the working poor. But for some reason we tout the removal of the sales tax on food and utilities on the working poor as an economic tool. It is not, it's a social issue and should not be confused with the growth of our economy. If you want to help our economy, free up the small and medium size businesses so they can compete and prosper. One way to do it is to allow that exemption for the working poor through income tax rebates. We can make it better for both sides. You just have to have the guts to attempt to do it."

"When we look at our state expenditures (public and private), we spend $1.8 billion more than Mississippi and get the same results (1/3 is state and 2/3 federal (nearly $6 million)). We need to reform the way we do business. Right now, our charity, nonprofit, rural and parish hospitals are all competing. They are all doing poorly and there is no cooperation. We need to make it regional and take the power away from the state. We could have one good hospital and two outpatient clinics. The charity hospital was a good idea in 1930 when there was no medicaid/medicare and HMO's. Some areas do need a charity hospital. But regions have to address the health care needed and provide quality care and in an efficient manner. This state has a great quantity of mediocrity instead of a smaller quantity of quality. We have an opportunity to both save money and make things better but spend more and have horrible results."

Mr. Rombach continued saying that he is not anti-LSU. He is a LSU grad and taught there for fifteen years. "LSU, infrastructurally can handle 20,000 to 25,000 students. They are currently handling 31,000 students. Demographically, they look like a four-year teaching school. There are 5,000 too many freshmen and sophomores. If LSU would have only 25,000 students (eliminating the excess freshmen and sophomores who would go to community colleges and other universities that needs students) this would solve their budget problems. We need to have the foresight and courage to say LSU needs to be smaller but a whole lot better and be a real research institution. If you look at the budget for the last few years, they are addressing all these glitzy high tech sounding projects but you haven't taken care of the foundation. You are building a fancy room on top of the building and the foundation is ready to crumble. If state government would do what it should do by quality, efficient education, health care, highways and police protection, the economy would take care of itself. Right now, we have a very high hidden tax called the private school tax. This is a disincentive to a business who is trying to locate here. But what we will do is spend $37 million renovating Bon Marche on an idea that was good twelve years ago. By the time the bureaucrats on the fourth floor of the capital realize what's hot in the private sector it's ten years too late. If I was wrong about that communism would have lost and we would have lost. The idea that if we build it the private sector will run to is crazy. We've done almost nothing to change what we're doing in this state to make it better. If you are worried, right now, about the out migration of young people (25 or 30 year old) out of this state, wait another five or ten years until all the baby boomers retire, their children have already left the state, they will leave as well. We have an opportunity to actually save money and make things better if we try to do things differently."

Chairman Harris said that the purpose of ACIR studying the SCOFA Report is the future relationship between state and local funding. He asked for Mr. Rombach's view point. "I'm not too concerned about the homestead exemption because that is strictly a parish tax on the parish people," Mayor Harris said. "What services do you believe that the state should provide and where is the line to where local government should provide the services. And if there is any suggestions that you may make as to how we can get the funding to do it? Whose responsibility is what?"

Mr. Rombach responded saying that we should regionalize the health care system. "The state would guarantee a southern average, demographically based, funding because many parts of our state are in dire need for health care. Let the local authorities determine which hospitals would be the premier one and which one would be outpatient. The money goes to the locals anyway. You would not keep three half empty hospitals. The fear, right now, is that if you lose the charity hospital you will lose the money. If all these hospitals are yours and you control them and the funding comes regardless, the funding comes based on your needs not based upon the institution in your area."

Mayor Harris asked, how can there be a guarantee that the funding will keep coming in, so that we can try to spend dollars the best way that we know how on a regional basis?

Mr. Rombach responded, we need to go to a state formula like the MFP. The funding would be based on the demographics of your health care issues.

Mayor Harris said that the coroners are charging fees to local communities depending sometimes as to who pays. Jefferson Parish was able to put a millage and have a regional forensic center servicing other parishes. How can you take an issue such as "coroners" and say in order to reduce cost we need to regionalize, put our scant resources together and move forward. Because if you can't do it with coroners, how can you do it with health care.

Mr. Rombach replied, that's the problem, anything you look at has these political barricades. "We have such a mess in the area of health care and expenditures you almost need to revamp the whole thing and start over. We should look at what should be state functions paid by the state and what should be at the parish level."

Mr. Zito commented to Mr. Rombach that he mentioned modeling health care after the MFP.

Mr. Rombach responded saying that's not a good example because that's pretty messed up.

Mr. Zito replied that's what we run into when you give us a set formula of money but as long as the state controls what we have to do at that particular institution then we lose.

Mr. Rombach said that the MFP is a conceptional idea. It does not work well at all.

Senator Johnson said that, "we are not necessarily here to talk about health care but give me an example of what you are talking about. If you were governor what would you do about New Orleans?"

Mr. Rombach responded that he would try to establish a regional board composed of the providers and they would determine which hospitals receive the disproportionate share of money to care for the indigent population. Right now, the state institutions get all the money (about 90%). The parish provides the services but don't get the money. He would change that so that the regional system can determine who actually is or should do the services. The Charity hospital might stay in New Orleans. In other areas it might be a rural hospital in a rural area. One of those would be the major player and the others are downsized.

Senator Johnson asked Mr. Rombach if there was a way to down size Lallie Kemp?

Mr. Rombach replied that Washington, St. Tammany Charity is becoming an outpatient clinic. Lallie Kemp should completely be an outpatient clinic and send the people to Bogulsa General, which is being upgraded.

Senator Johnson said that there has to be some kind of balance or some kind of notion that you work on whatever you can accomplish. You have to come up with something that is realistic when making recommendations and suggestions. It is not that easy. As far as the charity hospital system is concerned, I think we get a bad rap. The state spends as opposed to the parishes.

Mr. Rombach replied that other states have done it. We are the unicorn in this system that can not fly or run. We spend a whole lots more.

Mr. Zito said that he is concerned about young people leaving the state. He wishes we could do something to turn this around and keep young people here and have people retire here as well. Young people are our future.

Mr. Rombach said that we need to help the small businesses so that they can hire people.

Chairman Harris advised that the concurrent resolution which extended ACIR's time to study the issues indicated that SCOFA reported state spending on local functions totaled more than two and one half billion dollars annually or nearly 28% of the state's own source revenue and that the state has very little control of how these funds are spent. As a local community, he does not receive a whole lot of that $2.1 billion. Mayor Harris said he has a disagreement with the characterization of those funds. Those funds are being spent and he understands that. But is there a perception problem amongst legislators as to what they think they are doing for local government whether it be municipal, parochial or educational systems.

Mr. Rombach replied saying he thinks there is a real problem because we are providing services to you that you may not necessarily want done in that manner and sometimes we are tied constitutionally.

Chairman Harris asked Mr. Rombach what his feelings were on that? Lots of times we don't have control over a state function funded locally.

Mr. Rombach responded saying that we should change these things. For instance, we fund the MFP for teacher pay raises and the teachers protest for you all to fund their pay when it has been funded through the MFP.

Mayor Harris asked where is the line drawn as to what's state or what's local?

Mr. Rombach said that the state should focus on providing quality education, quality health care, roads and police protection and free the locals or regions, in some cases, to mind their own business. We should not be mandated to do things. We should try to decentralize as much as we can and loosen the controls on the locals.

Mayor Harris asked that if it is decentralized and we are talking regional, we have 64 parishes, 303 municipalities, what makes up a region governmentally?

Mr. Rombach replied that he would look at it demographically to make sure that you don't have a starving parish and a prospering parish, share the wealth.

Representative Jane Smith said that we are all trying to figure out how to make it work but it seems as though we will have to have a constitutional convention to figure it out. She commenting on something that Mr. Rombach said, that if we leave Medicaid money on the table then we cannot stand a $300 million cut in the budget. If we do look at a phase out, do we put a time line on it?

Mr. Rombach advised that we misspend Medicaid money. The triggers don't work and are tied to a current percent and if it changes it doesn't work. We got rid of the inventory tax through a seven year phase out. We can phase things out within five to eight years and you have to do the reform while the phase out is going on. Medicaid is part of the big change we need to make because there is $700 million being spent on, to a certain extent, under utilized facilities.

Representative Dale Erdey commented that the biggest problem we are going to have, is getting through the politics and make everyone understand where exactly are the efficiencies of operations and that is going to be a major task.

Mayor Simpson said that last year during the legislative session there was a very innocent study resolution passed on the registrar of voters employees pay. About a month ago he got a letter from State Civil Service stating that they were under paid statewide and that he was to appropriate $7,000 more to pay the registrar of voters employees. This came from a study resolution to a state agency to a mandate on the city. With budget problems from last year, we can't do it. So, we requested an attorney general's opinion which said they cannot mandate the city to do this. There were parishes that had already done it. But that's how the process filters down and ends up in $7,000 of new money and benefits.

Senator Johnson said we should make some good strong recommendations. The individual's we should invite to appear before this commission should have a dialog, such as the governor as well as the speaker of the House and president of the Senate. We need all of the leaders to come up with recommendations.

Chairman Harris' concern was that the commission meet's once a month, but we can try and schedule a comprehensive invitation list.

Mayor Simpson said they went through 2 ½ years of the SECURE Commission set up by the legislature and did a comprehensive plan that might be a good starting point. Maybe the commission could get the executive summaries of those studies because that focused on the expenditures of state government.

Mr. Guillot said that before the next meeting, he would send everyone a copy of the final report from SECURE and the final report from a group that was created by an executive order two or three years ago.

V. CAPITAL OUTLAY PROCESS-State/Local Government

Mrs. Frankie King made a presentation on Capital Outlay. She began saying that capital outlays are defined as "expenditures for acquiring lands, buildings, equipment, or other permanent properties, or for their preservation or development or permanent improvement". The details for the preparation and implementation of the capital outlay budget are contained in Title 39:101 et seq., of the Louisiana Revised Statutes. The Capital outlay process consist of four parts: formulation, enactment, the execution and the legislative oversight.(see handout, green booklet) she said.

Mr. Broussard made a recommendation for consideration, any state office wanting to purchase furniture, equipment, etc., funded by local government be submitted and included in House Bill 1. Parishes are mandated to supply equipment and furniture, etc., as requested. I'm recommending all the requests for such be included in House Bill 1 and let the legislature decide the approval.

Chairman Harris advised of this motion and/or recommendation and asked if there were any questions to the motion. Mr. Roussell seconded the motion/recommendation. There being no objection, the motion/recommendation was adopted.

Mr. Guillot advised that one possible alternative would be to refer that item to the appropriate subcommittee so that it can be included in the subcommittee report and back to the full body rather than starting with individual recommendations at this level.

Mayor Simpson asked if DOTD's budget contained the appropriations for road work and not capitol outlay. Does everything goes through HB 1 he asked?

Mrs. King responded saying that in HB 1 you have the parish transportation fund. HB 2 is where your money for, from the transportation trust fund, the TIMED program and those are funded and are funded in what is referred to as schedule 7, a different section. She continued saying ideally and realistically, when the transportation trust fund and the TIMED funds were passed, no one was supposed to get both projects. In the capitol outlay bill you would go through the priority process and be funded this big lump sum of money that goes into DOTD that come's with federal money which matches state money. A lot of people say that they are so far down the line and will never get their projects funded. So they started finding capitol outlay projects, bridges, levees, hurricane protection whatever, showing up as other funds, i.e., selling bonds for it. Capitol Outlay is very political.

Mayor Simpson had a recommendation that local governments, if the state comes up with a set fee that they are responsible for, for the constitutional offices and they submit the state fee to the state of Louisiana and they fund those agencies. He said to come up with a per capita costs of a court, statewide and they could have that money. Local governments get caught up in what is reasonable and customary which is constant.

Chairman Harris asked that this item be placed on which ever subcommittee appropriate so it can be discussed at the next subcommittee meeting in June.

VI. ADJOURNMENT

Mrs. Rhorer made a motion to adjourn. Motion was seconded by Councilman Zito. There being no objection, the meeting was adjourned.

___________________________

Approved, Chairman Ronnie Harris