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|Department of the Treasury Completes NGO Compliance Initiative|
BATON ROUGE - The Louisiana Department of the Treasury has concluded its effort to bring 34 delinquent Non-Governmental Organizations (NGOs) into compliance with a gubernatorial Executive Order mandating more accountability and transparency in the spending of taxpayer dollars, according to State Treasurer John Kennedy.
As a result, 21 of the organizations, which in total received nearly $2.5 million in taxpayer money, failed to meet their requirements under the law and have been sent to the newly created Office Of Debt Recovery and the Attorney General’s office for immediate legal and collection proceedings. Additionally, 13 organizations, which had been delinquent in their obligations under the law prior to this effort, came forward with sufficient paperwork to technically satisfy the requirements of the Executive Order and avoid referral by the Treasury Department for collection action.
Regardless of their resulting status, Treasurer Kennedy exercised his authority under the Executive Order to refer a majority of the delinquent organizations to the Legislative Auditor for a full review, similar to one conducted last year of the Just Willing Foundation, to ensure that taxpayer dollars were properly spent. (Read the report HERE).
“Even if an organization has technically come into ‘compliance,’ this does not constitute an endorsement from Treasury of their spending practices,” said Treasurer Kennedy. “In fact, I continue to have very serious questions and concerns about the accounting methods of these NGOs, and whether they represent a priority expenditure for the state. Taxpayers deserve a full and thorough review to find out where their money went.”
Treasurer Kennedy also announced that he is referring all 34 original NGOs with compliance issues to the Office of Debt Recovery and the Department of Revenue, for a review to determine whether they properly maintained a 501(c)(3) tax-exempt or “non-profit” status, and if not, whether they owe federal or state taxes.
Under the terms of Executive Order BJ 2008-30, NGOs that receive taxpayer money are required to submit financial documentation to the Treasury in order to maintain their appropriation, or return the funds to the taxpayers. It also provides that the Treasurer “may call upon the Office of the Legislative Auditor and/or the Office of State Inspector General to assist the agency in determining whether Line Item Appropriations are being or have been properly expended.”
To prevent further abuses, Treasurer Kennedy will ask the Legislature and the Governor to initiate further reforms of the NGO process, such as requiring that any funding of an NGO be done in a separate bill, sponsored by a named legislator and passed with a 2/3 vote in an open session. “No more burying the funding in a 1,000 page budget. No more paying NGOs through intermediaries. No more backdoor funding them through hidden consulting contracts and capital outlay grants,” said Treasurer Kennedy. “The best way to end NGO abuse, in my judgment, is to bring the process into the sunlight.”
|Reilly Louisiana Education Quality Trust Fund Breaks|
BATON ROUGE, La. - At a joint meeting of the Board of Regents (Regents) and Board of Elementary and Secondary Education (BESE) today, State Treasurer John Kennedy announced that the Kevin P. Reilly, Sr. Louisiana Education Quality Trust Fund (LEQTF) earned nearly $108 million this past fiscal year -- the most money ever in the history of the program.
"The LEQTF has been providing grants and funding for projects at all levels of education for nearly 30 years," said Treasurer Kennedy. "The Treasury's goals for investments in the fund are to preserve its capital, enhance its market value, and generate a steady flow of income for both Regents and BESE. All of the LEQTF's investments are handled in house at the Treasury so I'm extremely proud of how well the trust fund performed this past year."
The LEQTF began with an initial investment of $540 million in 1986, and the fund has grown to $1.207 billion today. The total return on investments in the LEQTF was 5.8 percent this past year.
"The LEQTF exceeded both its statutory benchmarks and its internal benchmarks during the fiscal year," said John Broussard, Chief Investment Officer for the Louisiana Department of the Treasury.
Earnings on the LEQTF stem from investment income, capital gains and losses, and royalties, and since 1987, $1.483 billion has been distributed to promote education and research statewide. A portion of the fund's earnings are distributed equally to Regents and BESE each year, with each group splitting $58 million this year.
"Both capital gains from securities and royalty income from offshore oil and gas exceeded our original estimates," said Amy Mathews, Investment Officer with the Treasury.
The LEQTF began in 1986 when the state took the proceeds from a settlement with the federal government over oil and gas revenues and put it into a trust fund to improve the quality of education in Louisiana. In 2013, the Legislature renamed the fund to honor the late Kevin P. Reilly, Sr. for his tireless leadership in efforts to improve education.
After presenting a report on the LEQTF to Regents and BESE, Treasurer Kennedy provided members with an update on the state's Student Tuition and Revenue Trust (START) College Savings Program, which has skyrocketed to $464 million in total assets and more than 23,000 account owners.
For more information on the LEQTF or to open a START college savings account for a child, visit www.latreasury.com.
|Louisiana State Bond Commission Approves Over $131 Million for Local Projects |
BATON ROUGE, LA - The State Bond Commission approved over $131 million for projects statewide at its November 21 meeting, according to State Treasurer John Kennedy.
"The Commission also gave the go-ahead for the state to issue an estimated $89 million in bonds for I-49 North and approximately $20 million in bonds for I-49 South," said Treasurer Kennedy. "In late 2014 or early 2015, the state is planning to issue an additional estimated $65 million in bonds for I-49 South."
Among the individual projects approved were:
- Acadia Parish, $500,000 in Certificates of Indebtedness: for fire protection facilities and equipment.
- Rapides Parish, $3.5 million in Certificates of Indebtedness: for purchasing school buses and equipment.
- St. Tammany Parish, Fire Protection District No. 9, $50,000 in Limited Tax Certificates of Indebtedness: for fire protection and emergency medical service facilities.
- Tangipahoa Parish, Tangipahoa Parish Water District, $7.175 million in Water Revenue Bonds: for waterworks system improvements.
- St. Charles Parish, Hospital Service District No. 1, $20 million Loan and New Market Tax Credit Transaction: for construction of the Plantation View Medical Office in Destrehan.
- Louisiana Housing Corporation,(Cyrus Homes Project), $4.5 million in Multifamily Housing Revenue Bonds: for the construction and equipping of a 32 unit multifamily apartment facility located in Jennings.
- Louisiana Community Development Authority, (East Carroll Parish Law Enforcement District Project), $16 million in Revenue Bonds: for the acquisition of a correctional facility.
- Calcasieu Parish, Calcasieu Parish Public Trust Authority (Mortgage Credit Certificate Program), $20 million in Single Family Mortgage Revenue Bonds or Mortgage Credit Certificates (Volume Cap): to acquire mortgage notes of property owned by low and moderate income people.
- Louisiana Public Facilities Authority (St. Anthony's Gardens Project), $60 million in Revenue Bonds: for the construction and equipment of a senior rental living community in St. Tammany Parish.
|A Solution to NGO Abuse|
Louisianians believe in walking the walk, not just talking the talk. Your actions should match your words. That's not always so in Louisiana state government.
Public officials will tell you the state needs to fund its priorities first -- universities, schools, roads, health care, coastal restoration and small business development. So why do we spend hundreds of millions of dollars of taxpayer money each year on less important, and in many cases, unimportant things?
Take NGOs, for example. "NGO" stands for nongovernmental organization. You've probably seen the names of some state-funded NGOs in the media recently: the Just Willing Foundation, the Purple Circle Social Club, Serenity 67, the Smiles and Happiness Foundation and the HOP-2-It Music Company. Through the years the legislative and executive branches have given these and other NGOs at least $500 million, all of it at the expense of vital services and products that taxpayers need and deserve.
Some of this money is given to NGOs directly through line item appropriations in the state's operating and building budgets. Some is given to other governmental entities, such as the City of Baton Rouge, which then distributes the funds to the NGOs. The most recent way NGOs get paid is through consulting contracts with state agencies.
The funding process can be very hard to follow. For example, in 2008, the legislature appropriated $160,000 to an NGO called Riz Up Louisiana. The governor vetoed this funding (Veto #72, #149). Riz Up Louisiana then walked across the street and got a consulting contract (#674048) with the governor's Department of Social Services. The same process -- appropriation, veto, consulting contract -- resulted in funding for Doorway to Louisiana, SMILE Community Action, the Shiloh Missionary Baptist Church, City at Peace and 21 others in 2008 and 2009.
There are, of course, NGOs worthy of state funding. The Council on Aging comes to mind. All NGOs, however, should be required to provide quarterly accountings with receipts and cancelled checks so taxpayers can see how their money is being spent, though many NGOs refuse. I just forwarded 19 NGOs that refused to provide accountings to the new state Office of Debt Recovery to be sued. We're going to try to get back the taxpayer money and, if it has been spent, seize the assets of the noncompliant NGOs.
The real issue with NGOs, however, is not whether they are worthy -- some are, some aren't -- but whether they are as or more worthy than the state's other competing needs, such as colleges, schools, roads, ports, health care, wetlands and small business. If a public official decides to fund the Purple Circle Social Club before funding LSU, people deserve to know why.
The best way to end NGO abuse, in my judgment, is to bring the process into the sunlight. No more burying the funding in the bowels of a 1,000 page budget. No more paying NGOs through intermediaries. No more backdoor funding them through hidden consulting contracts.
The new rule should be: an NGO can receive taxpayer money only through a separate bill sponsored by a named legislator that the legislature, in public session, passes with a 2/3 vote, after which the NGO, if successful in receiving funding, will be required to provide quarterly public accountings and be subject to automatic periodic audit by the Legislative Auditor.
Do this, and taxpayers will know which of their elected officials actually walk the walk --and which just talk the talk.
|The Financial Risk of Charity Hospital "Privatization"|
The reason advanced by the Jindal Administration for privatizing Louisiana's charity hospitals is that a private hospital like Lafayette General or Ochsner, for example, can manage a hospital more efficiently, and therefore cheaper, than the state.
That's why I was taken aback when the chairman of the private entity taking over the Shreveport state hospital testified before the Joint Legislative Committee on the Budget that the private contractor's costs to run the Shreveport facility will be the same as the state's. Where, then, will the Jindal Administration's promised annual savings of $150 million come from if not from achieving operational efficiencies?
Dig deeper into the details and it becomes apparent that the planned "savings" won't result from lower costs but from getting more money from the federal government through an accounting change. This won't make the charity hospitals or Louisiana's Medicaid program, which pays for the hospitals, more efficient. It will just make them more expensive, fueled by additional federal (American taxpayer) money.
Here's how the new financial strategy will work. Medicaid, which is government health insurance for the poor, is a federal-state program. The states run it but the feds put up most of the money. In Louisiana, for every $1 in state taxpayer money we contribute, the feds contribute $2. The more money we put up, the more money the federal government contributes.
Under the Charity Hospital privatization, the state will "lease" the charity hospitals to private hospitals, which then will be responsible for treating our low-income and uninsured citizens. The state will pay the private hospitals to do this with large amounts of federal money from our Medicaid program. The private hospitals will then return some of those federal dollars to the state as "lease payments." The federal dollars paid to the state as "lease payments" now become new state dollars, which the state can use to draw down even more federal money.
This accounting maneuver is undeniably clever. The question is whether it is legal. It must be approved by the federal Centers for Medicare and Medicaid Services (CMS).
Louisiana's track record with CMS is not good. CMS has previously rejected similar financing strategies designed to leverage federal money. In the early 1990s, for example, Louisiana and other states adopted financing strategies such as "provider taxes," "provider donations," and "intergovernmental transfers," designed to launder federal Medicaid funds into state funds in order to draw down more federal funds. CMS and Congress spurned them all. (The Medicaid Disproportionate Share Hospital Payment Program: Background and Issues, The Urban Institute, No. A-14, October 1997).
In fact, Louisiana was more aggressive than most states in trying to leverage federal dollars. Our health care budget grew from $1.6 billion in 1988 to $4.48 billion in 1993. 90% was federal funds. The amount of money actually contributed by the state during this period declined from $595 million to $462 million. (Washington Post, 1/31/94, A9).
When CMS and Congress stepped in to stop what then Congressman Bob Livingston called Louisiana's "abuse" of Medicaid financing, and, in Livingston's words, the "unjustified and unwarranted benefits" came to an end (The Advocate, 2/6/97, 1A), newly-elected Gov. Mike Foster was faced with a $1 billion deficit in the health care budget. To clean up the mess, Foster appointed Bobby Jindal as DHH Secretary, who sought special relief from Congress. As The Advocate newspaper editorialized, "Louisiana pleaded guilty as charged, threw itself on the mercy of the court and got off easy," because "the state for years ran a scam using 'loopholes and accounting gimmicks' to justify fantastic increases in federal payments." (The Advocate, 4/29/96).
Perhaps this time is different. Perhaps CMS will view the new "lease payments" being used to obtain additional federal money more favorably than the strategies CMS has rejected in the past.
One thing's for certain, though. We need to find out. The state should seek CMS review of its new strategy immediately-not "soon" as DHH has promised-but now. Until then, our entire state health care delivery system for over 2 million of our people is at financial risk.
|Louisiana Bondholders and Taxpayers Are Protected from Default|
The federal government shutdown is now in its second week. Congress and the President also must make a decision on exceeding the federal debt ceiling by October 17 or the United States could default on its debt, because Washington is so addicted to borrowed money. (The national debt has increased 57 percent under President Obama.) The events taking place in our nation’s capital today raise questions and concerns about how the financial crisis – and a potential U.S. default – could affect Louisiana state government operations.
At issue is whether or not the federal government should increase the amount of money it is legally allowed to borrow. It wasn’t long ago that Louisiana lawmakers went through similar heated discussions about the state’s debt ceiling and debt limit. We never shut down state government operations, and we never ran the risk of defaulting on our debt obligations. The truth is the U.S. Government may or may not default on its debt, but Louisiana bonds are safe, thanks to the state’s Bond Security and Redemption Fund (BSRF).
Louisiana is unique in that it is the only state in the nation with a constitutionally protected BSRF. In the simplest terms, the holders of Louisiana bonds have first dibs on state revenue before any other item in state government is paid. All State Treasury receipts (minus federal fund receipts and a few statutorily and constitutionally mandated exceptions) must first flow into the BSRF to pay debt before anything else.
The BSRF provides a level of security to the holders of the state’s full faith and credit General Obligation bonds. From a legal, rating agency and investment perspective, the BSRF effectively provides that bondholders have a first lien on virtually all revenues of the state. This guarantees that their principal and interest payments stand in front of all other creditors or lien holders.
The BSRF benefits more than just bondholders investing in Louisiana, however. Taxpayers are saved millions of dollars in interest payments each year, because the fund ensures a higher credit rating for the state. The higher the credit rating, the lower the cost of financing when the state sells GO bonds and other appropriation backed debt.
The federal government might consider taking a page from Louisiana’s book and discuss the creation of a national bond security fund. It would go a long way toward reassuring the markets, and quite frankly, the American people.
In the meantime, we will find out soon what happens if Congress and the President can’t agree in this important debate on the nation’s long-term debt. Regardless of the outcome, however, Louisiana taxpayers can rest assured that we can and will meet our obligations to bondholders and to them.