The Department of Agriculture rents warehouse space for the storage of commodities received from the U.S. Department of Agriculture. These commodities are distributed to school systems for use in their breakfast and lunch programs and to qualified individuals. To be eligible to receive commodities valued at approximately $25 million annually, the Department of Agriculture must provide for the storage and distribution of those commodities to eligible recipients.

Storage of the commodities received under this program requires that the department lease both cold storage and general warehouse space in strategic locations throughout the state. Leases for such space must be obtained pursuant to the public bid law. The Office of State Purchasing of the Division of Administration (OSP) is responsible for the solicitation of bids for the lease of warehouse space. While the OSP’s staff is well-versed in the public bid law, they are not experts in every service and commodity requested to be purchased by state agencies. For example, OSP may not know if the geographic locations requested by Agriculture are the most efficient distribution sites based on the proximity of the ultimate users. Further, OSP may not necessarily know if the allocations requested for either cold storage or general warehouse space were appropriate for the type of commodity expected to be received during the year.

• The Joint Legislative Committee on the Budget should consider inviting officials from OSP to a future meeting of the Committee to discuss the Office’s ability to deal with complicated bid specifications. Specifically, OSP should explain how it processes such bids, particularly in those instances when it lacks sufficient in-house expertise to adequately evaluate an agency’s request.

• OSP should be asked to explain the following:

The Subcommittee on General Government discussed the viability of drug courts as a crime-fighting tool. The number of drug courts has grown rapidly in Louisiana in recent years. Statistics make a compelling argument for drug courts’ improved cost savings over traditional incarceration and the courts’ lower recidivism rates. For example, a 1998 study from Washington State found that drug court graduates were nearly three times less likely to be charged with a new crime one year after completing drug court compared with offenders who dropped out or never enrolled.* The Office for Addictive Disorders (OAD) began funding drug courts in 1997. Six courts were initially established at a cost of $1.5 million. Since that time, Louisiana has been one of the fastest growing states in initiating new drug courts. Presently, the state has 25 drug courts in operation (14 adult, 11 juvenile) with 1,733 active cases at a cost of approximately $7 million for FY 01.

Many of the early drug courts were established using federal grant money and are facing a loss of funding as the grants begin to expire. For FY 02, the Executive Budget recommends OAD receive $3.6 million in State General Fund to replace the expiring grants.

Staff Suggestions:

• The average annual incarceration cost of an adult inmate in Louisiana is $13,000 per year, compared to $3,600 for a drug court adult treatment slot. For juveniles, the incarceration cost is $40,515 per year compared to $5,000 for a drug court treatment slot. Since Louisiana has one of the highest incarceration rates per capita in the U.S., any rehabilitative program that could potentially divert a person from prison at a lower cost may be worthy of continued funding. While further study of drug courts’ long-term success rates is definitely warranted, the data available at present indicate a lower recidivism rate for these programs than for a person released from prison without attending drug courts.

According to data presented to the General Government Subcommittee, OAD reports that existing drug courts could be expanded by 308 adult slots and 188 juvenile slots statewide with additional funding of $2.1 million in State General Fund and could add 200 new slots at seven new drug courts for a total of $741,000 in State General Fund. None of this new and expanded funding is in the Executive Budget for FY 02. In the future, additional requests for State General Fund money for drug courts are likely to occur as other federal grants expire or if treatment slots are expanded or created.

Staff Suggestions:

The Department of Elections and the Secretary of State both perform an "elections" function. The splitting of the "elections" responsibilities between the two departments duplicates some positions and expenses that could be eliminated if the departments were merged into one.

The "elections" responsibilities performed by each department are as follows:

• The Department of Elections is responsible for registration of voters and the voting machines for Election Day.
• The Secretary of State is responsible for candidate qualifying, ballot printing, and election results certifying.

A fiscal note on an earlier merger proposal estimated a State General Fund savings of $400,000 associated with the elimination of duplicative positions and expenses. Increased efficiency of having both functions coordinated by a single department is not readily quantifiable in monetary terms.

Election Day expenses reimbursed by the Department of Elections to parish clerks of court are not clearly defined. A review of expenses reimbursed to clerks of court from a recent statewide election indicated that a number of these expenses were questionable. For example, a large screen television was purchased by one clerk to train elections commissioners. Another clerk used funds to create and maintain a separate Internet web site containing current elections results, duplicating the Secretary of State’s existing election results web site.

The state gasoline tax, the primary revenue source for highway maintenance and construction, is growing at a rate of 2.4 percent annually. The construction inflation rate is approximately 7 to 9 percent per year. Using a construction inflation rate of 8 percent, the cost of a highway construction project would increase by approximately 40 percent if the project had to be delayed 5 years due to unavailable funding. A 1995 change in federal law allows states to use a portion of their anticipated federal highway funds as a revenue stream to support bond issues. Bonds supported by federal highway funds are called Grant Anticipation Revenue Vehicles (GARVEE) Bonds.

An advantage of issuing GARVEE Bonds to finance state highway construction projects is that they permit the state to complete construction projects earlier than would otherwise be possible. Further, advancing construction project completion dates saves money. Debt service costs associated with GARVEE Bonds are estimated to be in the 5.5 to 6 percent range, while inflation in highway construction is estimated to be in the 7 to 9 percent range. The differential in interest costs between GARVEE Bonds and the annual inflationary increase in construction costs could represent substantial savings for the state.

• The Legislature should request that the Department of Transportation and Development prepare a list of construction projects eligible for GARVEE Bond financing along with computations showing the potential savings for each project. It should be noted that the very low growth rate of TTF revenue continues to pressure DOTD’s operating budget. Issuance of GARVEE bonds will increase the commitment of TTF funds to debt service which in turn will reduce funds for operating purposes.

Issue 12: How can the Louisiana Superdome be modernized?

The 26-year-old Louisiana Superdome has a backlog of capital improvements and maintenance needs. To help meet these needs, Act 1191 of 1995 dedicates $2.3 million in hotel/motel occupancy tax collections from Orleans and Jefferson parishes to the District’s Renewal and Replacement Fund.

The stadium recently hosted a slate of NCAA Division I Men's Basketball sub-regional games and is the site chosen for the 2002 Super Bowl. For the facility to remain competitive with other venues across the nation in attracting major entertainment and sporting events, the stadium must be modernized.

The District collects additional revenues that are declared surplus and distributed according to a fixed schedule in state law. Act 1191 delineates the following:

• payment of debt service on bonds ($14.2 million currently);
• $2.3 million for the Renewal and Replacement Fund; and,
• $500,000 to the Greater New Orleans Sports Foundation.

The Act provides for a pro rata distribution of any surplus collections according to this schedule:

 The District may use anticipated surplus hotel/motel tax collections for Superdome renovations only when approved by the Joint Legislative Committee on the Budget.

Staff Suggestions:

• The Legislature may also consider statutorily increasing the amount of funding currently provided for the Renewal and Replacement Fund, providing a stable stream of revenue each year.

The Subcommittee on General Government met to discuss the operation and outcomes of Prison Enterprises. The agency defines its primary mission as three-fold:

• to lower the cost of incarceration by using resources of the Department of Corrections to produce food, fiber, and other necessary items used by inmates,
• to make available to state agencies and to local entities products and services produced by inmates, and
• to provide work opportunities for inmates.

Prison Enterprises produces a variety of goods and services, from traditional prison industry items like clothing, license plates, and row crops, to more varied activities like janitorial services and furniture restoration. The agency estimates that 60 percent of its total sales of approximately $23 million per year are to the Department of Corrections. Due to the large number of state prisoners being housed in local facilities, the agency indicates that its sales to parishes and municipalities have also increased. All items produced by Prison Enterprises are on state contract; thus, there is no need for agencies to bid on every purchase. There are restrictions, however, on Prison Enterprises to prevent it from being in direct competition with the private sector.

A main issue concerning Prison Enterprises is the extent of its utilization by state departments. Louisiana law encourages state agencies to use Prison Enterprises’ products whenever possible, yet this law does not appear to be adhered to very well. On the other hand, some state agency representatives have suggested that the quality of Prison Enterprises’ goods are inferior to similar items available in the private sector and that the selection of items is not as varied.

The Division of Administration’s Office of Risk Management (ORM) manages the state’s self-insurance program. The office provides 15 different types of insurance, the largest of which are Road Hazards, Workers’ Compensation, and Medical Malpractice. Loss payments from all types for FY 00 totaled $87.9 million.

ORM uses a management information system to track claims and to provide information to adjusters and attorneys. This system, however, cannot provide:

• historical "win v. loss trial comparisons"
• "claimant demand v. final settlement comparisons" by type of claim, judicial district assignment, and pertinent facts of the claim.

Without this capability, ORM’s decision-making is left solely to the judgement of the attorneys, adjusters and supervisors involved with a case. A management information system that can fully document claim outcomes would enable ORM to make better decisions on claim settlements and litigation matters.

• ORM should enhance the capabilities of its management information system so it can provide historical outcome information that can be used to better guide current claim decisions. The enhancements would permit adjusters, attorneys, and supervisory personnel working a claim to access the agency’s historical database by using basic facts about the claim. At a minimum, the enhanced capabilities of the management information system should produce a "win v. loss comparison" of all claims in the database with similar characteristics. ORM should report its progress toward enhancing the capabilities of its management information system to the Joint Legislative Committee on the Budget before the beginning of the FY03 budget development cycle.

ORM’s Table of Organization was reduced by fourteen positions in FY 01 as part of an administration move to downsize government. ORM must maintain an adequate staffing level so it can properly investigate and process over 13,000 claims received annually.

• The Legislature should consider restoring fourteen positions. These positions would provide the agency with sufficient staffing to adequately process the number of claims it receives annually. The agency could be directed to make a quarterly report to the Joint Legislative Committee on the Budget, providing basic performance information on the number of claims handled and the effectiveness and efficiency with which these claims are disposed.

Act 916 of 1999 created the Return to Work Program that was designed to reduce the cost of Workers’ Compensation claims. The Office of Risk Management expends approximately $26 million annually for indemnity and medical costs related to Workers’ Compensation claims. This is one of the more expensive types of insurance offered by ORM.

Presently, the Return to Work Program has not been implemented statewide as required by R.S. 39:1547. It is estimated the state could save between $6 million and $12 million annually if the Return to Work Program were to be implemented statewide. Pilot projects at Pinecrest Developmental Center and Louisiana State Penitentiary have resulted in a dramatic reduction in the cost of Workers’ Compensation claims and indemnity payments, as well as a reduction in the number of employee days lost. The Office of Risk Management has issued two Requests for Proposals in an effort to implement the Return to Work Program, but to date, nearly two years after the program was created, no vendors have been selected.

The Subcommittee on General Government met to discuss Teen Pregnancy and Abstinence Programs, mainly focusing its attention on possible administrative cost savings among the state’s teen pregnancy prevention programs. Based on data from the National Campaign to Prevent Teen Pregnancy, these programs seem to be addressing the target population. From 1991 to 1998, Louisiana’s birth rate among teen girls aged 15 to 19 dropped by 14 percent.*

Various state agencies currently operate teen pregnancy prevention programs in Louisiana — several offices in the Department of Social Services and the Department of Health and Hospitals, among others. At present, there appears to be little coordination among these agencies, although they are offering programs designed to meet a common goal of reducing the number of teen pregnancies. These agencies use funding derived from several different streams, from federal block grants to state match money. The agencies, however, do not appear to be directly competing for funding.

Staff Suggestions:

Issue 18: How could Louisiana best use TANF funding for needy families?

Federal authorities have recently questioned Louisiana’s use of Temporary Assistance for Needy Families (TANF) funds. TANF is a block grant for state programs designed to serve needy families and was created by the welfare reform law of 1996.

The Department of Social Services (DSS) considers TANF funding to be non-recurring since the program must be re-authorized by the federal government in 2002. As a result, DSS has left a significant portion of its TANF allocation unspent in previous years, resulting in an accumulated balance of over $169 million. Other states have also followed this "holding pattern" approach to spending TANF dollars, and there is concern that the preponderance of large surplus funds among the states will lead to a lower level of funding from the federal government after re-authorization.

Federal regulations pertaining to prior year TANF funding stipulate that the unspent $169 million may only be used for cash assistance-type programs in the current and future fiscal years. Also, until recently, DSS had a limited policy plan for utilizing current year and future TANF funding. The current year block grant allocation can be used for more flexible, non-assistance programs designed to prevent people from ever entering the state’s welfare system. DSS must obligate current year TANF funds for programs before the end of the federal fiscal year on Sept. 30, 2001, or lose spending flexibility.

Since January 2001, state officials have been developing a new policy to optimize TANF funds. A draft version of this spending plan will soon be released. The plan will contain a number of new and existing programs, designed to lessen the dependence on government by needy families. During the upcoming Regular Session, this preliminary TANF plan is intended to serve as a blueprint for reaching a consensus on the future course of TANF spending in Louisiana.

• Louisiana should not use TANF funding to supplant state general fund money in programs existing before 1996 when welfare reform was initiated, since the federal government is now highly scrutinizing this type of spending and future problems could result. The state could set up mirror programs using TANF, however, which perform essentially the same services as existing programs, as long as the mirror programs are tied to TANF goals. There are no federal restrictions on using TANF money for new programs for needy families, and the state can set its own eligibility requirements.
• Because current year TANF funding is in danger of rolling over into the large unobligated balance and thus losing spending flexibility, every effort should be made to obligate current year funding into programs for needy families as soon as possible.
• The Department’s prior policy course of using TANF money seems to have erred on the side of caution, but such a conservative tactic is not without merit. Therefore, in developing the new TANF plan, programs should include a "sunset clause" that will allow DSS to terminate them if TANF funding should be reduced or eliminated by the federal government. This would prevent the state from winding up in a situation of having many programs in place with no money available that were originally based on TANF funding.
• During the meetings to develop new TANF policy, several subject areas have been discussed repeatedly. Programs being considered include such initiatives as early childhood development, teen pregnancy prevention, domestic violence prevention, utilities assistance, drug courts, and after-school tutoring, among others.

Even services that required positive identification of an individual could be handled through a specially equipped kiosk using retina or fingerprint scans to verify identity. Over time, kiosks could greatly reduce the need for over-the-counter state operations eliminating employee and benefits costs as well as the purchase and upkeep of facilities. Kiosks can be easily moved to address the changing traffic patterns of citizens. If a kiosk is located in a mall that sees its consumer traffic patterns diminish because of the opening of a new mall, the kiosk could be relocated to the new mall with little expense.

Services available through kiosks would also be available 24 hours a day seven days a week increasing the availability of those services to many citizens who are working during the normal hours maintained by state agencies.

• The Legislature may consider directing the Division of Administration to expedite the development of technology that will permit citizens to access state services through kiosks and the Internet. The Legislature may also consider requesting an assessment from DOA of potential usage of kiosk technology in state departments and that a report be made to the Joint Legislative Committee on the Budget by November 15, 2001.

Questions and comments may be directed to websen@legis.la.gov.
Baton Rouge, Louisiana.