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 Press Releases

4/24/2015
National Investors Pull Out of LSU Bond Deal

BATON ROUGE, LA - National investors this morning pulled out of a large portion of a $114 million bond deal for Louisiana State University amid concerns over budget instability and state support for LSU and other Louisiana colleges and universities, State Treasurer John Kennedy announced Friday.

"We're trying to sort out the facts. This is obviously not a welcome development," said Treasurer Kennedy. "It could have ramifications for other universities in Louisiana and for the state's overall bond rating, and it could impact the interest rate on future state bond issues, including an upcoming $300 million state general obligation bond issue."

LSU on Tuesday issued $114 million in revenue and refunding bonds to generate money and to save taxpayer dollars. Proceeds from the bond sale would have funded a Family Housing Complex, residence halls and a Student Health Center and also would have saved interest on existing debt. The bonds were priced on Tuesday.

Earlier this week, Moody's Investors Services lowered LSU's credit outlook from positive to stable because of limited prospects for sustained revenue growth. Moody's action puts LSU one step away from a negative outlook, which could result in a downgrade for the university's credit rating.

"Higher education in Louisiana has been socked with back-to-back years of reduced funding," said Treasurer Kennedy. "Investors are sounding the alarm bell. We need to listen." 

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4/24/2015
National Investors Pull Out of LSU Bond Deal

BATON ROUGE, LA - National investors this morning pulled out of a large portion of a $114 million bond deal for Louisiana State University amid concerns over budget instability and state support for LSU and other Louisiana colleges and universities, State Treasurer John Kennedy announced Friday.

"We're trying to sort out the facts. This is obviously not a welcome development," said Treasurer Kennedy. "It could have ramifications for other universities in Louisiana and for the state's overall bond rating, and it could impact the interest rate on future state bond issues, including an upcoming $300 million state general obligation bond issue."

LSU on Tuesday issued $114 million in revenue and refunding bonds to generate money and to save taxpayer dollars. Proceeds from the bond sale would have funded a Family Housing Complex, residence halls and a Student Health Center and also would have saved interest on existing debt. The bonds were priced on Tuesday.

Earlier this week, Moody's Investors Services lowered LSU's credit outlook from positive to stable because of limited prospects for sustained revenue growth. Moody's action puts LSU one step away from a negative outlook, which could result in a downgrade for the university's credit rating.

"Higher education in Louisiana has been socked with back-to-back years of reduced funding," said Treasurer Kennedy. "Investors are sounding the alarm bell. We need to listen."

4/22/2015
Moody's Lowers LSU's Credit Outlook

BATON ROUGE, LA - Citing limited prospects for sustained revenue growth, Moody's Investors Service has lowered Louisiana State University's credit outlook from positive to stable, State Treasurer John Kennedy announced Wednesday.

"This puts our flagship university one step away from a negative outlook which could result in a downgrade for LSU's credit rating. We don't want that to happen," said Treasurer Kennedy. "Years of slashing state funding for our public colleges and universities and raising tuition, which puts college out of reach for many of Louisiana's kids, are catching up with us. We need to stabilize funding for higher education."

LSU borrows money for building projects. Moody's assigned an A1 rating to $131 million in Auxiliary Revenue and Refunding Bonds, Series 2015, for student housing facility improvements. A downgrade in the university's credit rating would make it more expensive to borrow money.

Moody's wrote: "The revision of the outlook to stable from positive reflects limited prospects for sustained revenue growth due to potential reductions in state operating funding, tight state control of tuition pricing, and pricing sensitivity limiting out-of-state enrollment revenue growth."

The report can be viewed here.

 Opinion Columns

4/16/2015
We're About To Deplete The State's Last Savings Account

You probably hear the words "tobacco settlement" and wonder what the heck that even means. Allow me to boil it down for you: It translates into hundreds of millions of dollars for legislators struggling to balance the state budget, and that's definitely not a good thing. Even worse, it means saddling our children and our grandchildren with a staggering $1.2 billion in debt.

We sued the major tobacco companies years ago over our smoking-related health care costs. Smoking is terrible for your health, but it's certainly legal to smoke if you choose to. However, smoking is also terrible for states' health care budgets. Tobacco companies were asked to pay for the added expense to the taxpayer-funded Medicaid program. All states, including Louisiana, joined in the litigation.

In the end the tobacco companies settled and agreed to pay billions of dollars over several decades. We didn't get the money in a lump sum. We got a recurring revenue stream.

During my first term as Louisiana's state treasurer, I helped oversee the sale of part of that revenue stream to investors. We wanted to hedge against the possibility of tobacco companies declaring bankruptcy.

Now we didn't just slap a "for sale" sticker on part of our tobacco settlement and start taking bids. We did our homework. We did enough homework to qualify for a graduate degree at Harvard. We looked at every single pro and con. We sat down with experts. We took our time. We treated this revenue stream like the valuable asset it is. In other words, we didn't cart the family heirloom down to the pawn shop so we could take a trip to Walt Disney World.

We only sold part of the revenue stream, and we locked up the proceeds.  They're safely tucked away into a trust fund that earns money for health care, education and TOPS.

Now we're looking at selling the rest of the revenue stream in a fire sale because we're facing a $1.6 billion state budget hole. The Division of Administration will tell you that we can generate $751 million.

Basically, we'll take on debt by selling $1.2 billion in bonds to investors for an upfront cash payment of $751 million. Those bonds must be repaid by 2054. The interest on the bonds will run $475 million. Within three years, the $751 million will be spent. All that will remain are the bills that must be repaid by our children and grandchildren. This amounts to draining their college fund to buy a bass boat and then telling them to saddle themselves with high interest student loans.

Here's what I know. This sounds like the same bad budget policy that drained the Medicaid Trust Fund for the Elderly, raided the Artificial Reef Fund, just about bankrupted the state employee health insurance program and declared a tax amnesty every single year. We're pouring sand into holes and then acting surprised when the wind blows out the granules.

Even worse, we're not going about this the right way. This is the state's last savings account. We've depleted our other reserves because we spend more as a state than we take in.

Do you know how the Division of Administration is picking the financial advisers and other professionals for this nearly $1 billion transaction? They're pumping smoke into a room and making selections. They're not bidding this out to get the best price. They're not bringing the hiring before the State Bond Commission, where this can be decided in front of the public. They're handpicking someone in a smoke-filled room.

Now I don't think the Division of Administration is flouting the law because the officials over there are corrupt. I think they're in too big of a hurry. I think they're trying to tide the state over for six months, and then they're out of here.

Do we need to sell the rest of the tobacco settlement? I have no idea. We haven't gathered data on smoking trends or tobacco companies' financial stability. Are we going to protect the money that we generate? I can't answer that question either because the Division of Administration just wants you to trust that it will be protected. They want you to believe the money will be used for TOPS. Don't buy into that wink and promise.

Legislators have a hefty task before them. They have to balance the budget, and the governor hasn't provided enough money. The proceeds from selling the rest of the tobacco settlement are going to be more alluring than Bathsheba bathing on that roof.

We need to do right by taxpayers. We need to do our due diligence before we sell this income stream. Then, if we do sell it, we need to lock it up in a trust fund. Dedicate the earnings to TOPS. Dedicate them to roads. Just don't waste them.
3/2/2015
Higher Education Can and Must Be Saved

If you look long enough at the cuts to our higher education budget, you begin to feel like Alice in Wonderland tumbling down that deep rabbit hole. You don't know when the nightmare is going to end.


A report by Moody's Investors Services told the nation what we in Louisiana already knew. Our public colleges and universities have suffered deeper budget cuts than anywhere else in the U.S. over the past five years.

Charts by the Center on Budget and Policy Priorities show we're digging ourselves deeper and deeper into a hole.

In 2013, Louisiana was second to New Mexico in the negative change to state spending per student with inflation adjusted. Now Louisiana stands first, spending $5,004 less per student. Our neighbor to the east, Mississippi, is spending $2,524 less per student. Texas has managed to spend only $1,996 less per student.

Moody's warned that Louisiana's colleges are ill-equipped to face additional credit stress. In simpler terms, Moody's is warning that it will slash the credit ratings of our colleges and universities unless we clean up our budget mess. Our higher education system doesn't need a lower credit rating on top of the budget cuts. A lower credit rating would make it more expensive to borrow money when it's time to build new dormitories or fix the chemistry lab.

Thus far, we've settled on raising tuition as the solution to our problems. As Alice found when she ate the "Eat Me" cake and outgrew the room, bigger isn't always better, especially when it means taking a bigger chunk out of our families' household income to put kids through college. That's a tax increase, even if you don't call it one.

So let's stop taking more and more money out of our taxpayers' pocketbooks. Let's not even have a discussion about new tax increases. We don't need to raise taxes.

The state budget under Governor Mike Foster was $12 billion. Now it's $25 billion. Unless we're giving every state worker a $120,000 LS Lexus Hybrid to tool around the state in, we have enough money to meet our needs. All we need to do is stop foolish spending.

A report by the Public Affairs Research Council of Louisiana estimated we could save $300 for every Medicaid patient who goes to a doctor's office or a clinic instead of the emergency room. Why is that significant? Medicaid and uninsured patients in Louisiana make 900,000 visits to the emergency room each year for routine care. Get a handle on that problem, and the savings are in the hundreds of millions.

Another problem - and it's one I've talked about so much that even I'm getting a little tired of punching the alarm button - is the number of consultants on the government payroll. We have 19,000 consultants. Would you believe we've paid someone to teach people how to use Facebook?

Let me tell you about Edythe Kirchmaier. Teddy Roosevelt was president when she was born. She knitted care packages for World War I soldiers. Now age 107, she recently became Facebook's oldest registered user. And she did it without the help of a paid consultant. You can follow her on Facebook. If you're unsure how, just ask Edythe to teach you.

The Louisiana Legislature will convene in April to debate the state budget in earnest. Legislators will have to figure out how to fill a $1.6 billion budget hole. I hope they don't continue to devastate higher education with cuts. I hope they don't hire more consultants. I hope they settle on sensible solutions that get us back into credit rating agencies' good graces and set the state on a smooth course for the future.

1/20/2015
Leave TOPS Alone
The year was 1988. A successful New Orleans businessman named Patrick F. Taylor had a speech to give. His audience was 183 restless middle schoolers who weren't college bound. Heck, many weren't even high school bound. They were biding their time until they could drop out of school.

Instead of a pep talk, Taylor decided to make a pitch. He would pay for the kids to go to college if they kept going to class, stayed out of trouble and maintained a "B" average. With that promise, Taylor established the building blocks for TOPS.

TOPS (the Taylor Opportunity Program for Students) is the state-funded college scholarship program that has benefited more than 200,000 kids in Louisiana. It doesn't just send kids to LSU or Southern. It sends them to truck driving school if they want to drive a truck. It sends them to court reporting school if they want to become a court reporter. In other words, TOPS fulfills dreams.

Now some will tell you that TOPS has become too expensive. They'll tell you the sky is falling. They'll tell you the state budget is on a collision course, and TOPS is helping fuel the inevitable crash. They'll tell you that changes can be made gradually to make the program more affordable for the state. Here's what I say: Leave TOPS alone. We can't afford to diminish what TOPS does for our state.

The Hamilton Project, an arm of the Brookings Institution, crunched the numbers last year on what a college degree is worth. Not surprisingly, a degree in chemical engineering is more of a moneymaker than a drama degree. Also not surprisingly, any degree is better than no degree. The Hamilton Project's conclusion: "Median earnings of bachelor's degree graduates are higher than median earnings of high school graduates for all 80 majors studied." For every successful college dropout like Bill Gates, there are a thousand other dropouts clocking in at minimum wage jobs and not making a living wage.

Patrick Taylor knew the importance of a college education. He left home at 16 and made his way to LSU, which didn't charge tuition at the time. Today, it easily costs $10,000 in tuition and fees a year to attend LSU as a full-time student once books and summer classes are included. That's a hefty bill for a middle class family with four other kids still at home.

Now I don't want to shock you, but Louisiana is not a wealthy state. Median income is well below the national average. We're rich in culture, food, history and tradition. Economically, we often struggle. That's why education is so important. Our future can be better than our present or our past, but only if our kids go to school.

We offer our kids a free elementary school education. We offer them a free high school education. But a high school education isn't always enough. We need to continue to offer young Louisianians help with a college education if we expect them to succeed in a keenly competitive, global, knowledge-based economy. We also need to continue to give them an incentive to stay in Louisiana, instead of migrating to Denver and Dallas and Atlanta.

Georgia has a form of TOPS. It's called HOPE. In 2011, big changes were made to HOPE - changes that were made in the name of saving the state money. Suddenly, technical college students had to maintain a higher grade-point average. Tuition assistance was slashed. The result was that 62,504 fewer kids received HOPE. Within two years, Georgia backpedaled on the changes.

We should not make the same mistake in Louisiana that Georgia made. TOPS has been a roaring success. Sixty nine percent of the more than 62,000 students who received an initial TOPS payment between the 2002-03 and 2006-07 academic years graduated from a Louisiana public college. That's a triumph.

I'll leave you with Patrick Taylor's take on why TOPS matters: "Attendance at public colleges and universities must be based on the ability to learn and not the ability to pay."
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