Executive Summary

Balancing the FY03 Budget

·        As approved by the Legislature, the FY03 State Budget is in balance. Appropriations from all means of financing, as adopted, total approximately $16.3 billion, of which State General Fund (Direct) funding amounts to $6.6 billion.  The FY03 total budget represents a 1% increase over the FY02 budget.

·        Although the Legislature voted to reduce taxes by roughly $24 million, the Senate was able to put together a plan to maintain the same expenditure level as proposed in the Executive Budget and fund additional initiatives by utilizing other means of financing. Actions by the Senate Finance Committee that provided additional revenue to support the same expenditure base that was formerly tied to full implementation of the current tax base included the following:

·        $23.4 million Defeasance – to accomplish a $23.4 million defeasance, the Senate had to utilize $23.1 million in Cash Capital Outlay....that is, we reduced cash capital outlay projects by $23.1 million in order to use the monies for a bond defeasance in FY02.  This defeasance freed up money in FY03 without adversely affecting the FY04 budget because the existing debt service schedule will decrease by $23 million in that year.

·        $9.1 million in Means of Financing Swaps in the Departments of Education and Agriculture.  In the Department of Education,  $6.7 million in federal funds replaced State General Fund.  In the Department of Agriculture, $2.4 million in Louisiana Agriculture Finance Authority (LAFA) monies replaced State General Fund.

·        HB 266 dealing with the licensing tax on insurance premiums was used to address a deficit in the Firefighters’ Retirement System.  The State will receive roughly $5.7 in funding from the increase in insurance premiums above the FY02 official forecast.

·        In April, the Revenue Estimating Conference recognized an additional $17.4 million dollars for FY02.  The additional money subsequently was used for the FY02 Supplemental Appropriation Bill. The Conference also recognized an additional $12.1 million for FY03.  The recognition of the additional $12 million for FY03 and an increase in dedicated funds (SELF Funds) helped fund budgetary needs that were not included in the Executive Budget as originally proposed to the Legislature in early Spring.

·        Specific Expenditures in HB 1 – “Supplemental Section” expenditures are no longer directly linked or contingent upon specific revenue sources (such as the TOPS program linked directly to the passage of the suspension of the $25 per child education tax credit).  Instead, the Supplemental Section is contingent on all revenue sources that were up for renewal during the 2002 Regular Session.

·        At the time of publication of this document, all of the tax measures supporting items in the “Supplemental Section” have been enacted and were recognized and incorporated into the FY03 Official Forecast by the Revenue Estimating Conference at its June 20 meeting.

 
The Revenue Picture

Expiring Taxes Approved by the Legislature

Major Changes to Existing Revenue Structure

Excess Itemized Deduction Increase (HB171 - Act 24)

·        In tax year 2001, taxpayers were limited to deducting 50% of their excess itemized deductions (the difference between the itemized deductions included on their federal form and the federal standard deduction). 

·        However, the new law will permit taxpayers to deduct 57.5% of their excess itemized deductions in tax year 2002 and 65% in tax year 2003.  In tax year 2004, Louisiana tax filers will be able to deduct 100% of their excess itemized deductions, unless new legislation is introduced to continue the present law.

Sales Tax Exemption Suspension Renewals (HB169 - Act 22)

·        In FY02, taxpayers paid a 4% sales tax on food and utility purchases. 

·        This tax was renewed in the 2002 Regular Session, but with some changes. 

·        One change was to make one of the pennies permanent.

·        The other change was to phase down the rate on the one penny over the course of two fiscal years:

·        Tax rate phased down by 10% for FY03 (Savings to the taxpayers of $10 million)

·        Tax rate phased down by 20% for FY04 (Savings to the taxpayers of $20 million)

·        The three non-permanent pennies of the renewed tax will expire on June 30, 2004.

New Revenue Enhancements

Additional 12 cents Cigarette Tax (HB157 - Act 19)

A new 12¢ per pack cigarette tax will be in effect in FY03. It is estimated that the new tax will generate approximately $27.3 million in FY03.  The five-year forecast estimates the tax will produce roughly $44 million in year two and in the low $40 million range thereafter.  The proceeds of the tax will be allocated as follows:

·        3¢ for the Louisiana Cancer Research Center of LSU Health Sciences Center in New Orleans and the Tulane University Health Sciences Center

·        2.04¢ to the Louisiana Cancer Research Center for the creation of smoking prevention mass media programs and evidence-based tobacco control programs within the public hospital system, the public school system, and community based programs.  The dedication specifies that Southern University will participate in planning and expenditure of the funds.

·        1.96¢ for the LSU Health Science Center in Shreveport

·        1¢ for the Office of Addictive Disorders

·        1¢ for the LSU Agricultural Center and the Southern University Agricultural Research and Extension Center with a provision that the Southern University Agricultural Center receive $1 million annually from this dedication.

·        1¢ for the Drug Abuse Resistance Education (D.A.R.E.) program.

·        2¢ for the Department of Public Safety 

Use of Surplus and Non-Recurring Revenues

·        The FY03 Capital Outlay Bill contained several appropriations from non-recurring cash sources.  Non-recurring revenues are comprised of the following sources of revenue:

·        The FY01 Surplus totaling $73.1 million

·        $180 million in Amnesty Collections (less $28.1 million for the Department of Revenue)

·        $3 million Incentive Fund balance transfer to the State General Fund

·        In accordance with the law governing the expenditure of non-recurring revenue, 25% of the total monies had to be deposited into the Budget Stabilization “Rainy Day” Fund.  The deposit in the Rainy Day Fund totaled $57.2 million, thereby increasing the balance in the fund to $260 million. The remaining non-recurring revenue could be used for either a payment towards the unfunded accrued liability, debt defeasance, and/or capital outlay. 

·        The Legislature chose to defease debt and fund capital outlay projects with cash. The amount available for cash capital outlay was approximately $132 million after deposits into the Budget Stabilization Fund, allocations for Special Session Obligations totaling roughly $16.8 million, and the amount needed for the Defeasance ($23.1 million).

·        Several Statewide and Higher Education Initiatives were funded with the one-time cash sources - the list below highlights some of the major statewide projects. (amounts are in million $.):

Departmental Budget Overview

 
Urban Affairs & Rural Development Activities

·        Added $3.1 million in enhanced funding for the Office of Urban Affairs for a total funding level of $10.1 million and an additional $3.0 million of enhanced funding for the Rural Development Program for a total funding level of $9.2 million. 

Military Affairs

·        $1.1 million has been included in the budget of the Military Affairs Department for Homeland Security.

Drug Abuse Resistance Education (D.A.R.E.)

·        $2.9 million has been dedicated from the Tobacco Tax Health Care Fund to provide for the administration and operation of the Drug Abuse Resistance Education program (D.A.R.E.).

Louisiana Stadium and Exposition District (LSED) – Saints/Hornets Funding

·        Provided FY02 Supplemental SGF funding of $1.75 million for reimbursement to the Charlotte Hornets NBA Limited Partnership for transitional and relocation expenses associated with the move to New Orleans.  Requires statutorily dedicated fund to repay these monies to the General Fund (Act 152 of the First Extraordinary Session of 2002).

·        Capital improvement monies were provided as follows:

·        $10 million for NBA upgrades to the New Orleans Arena (Act 164 of the First Extraordinary Session of 2002).

·        $6.75 million for construction of an indoor football training facility for the Saints (Act 164 of the First Extraordinary Session of 2002).

·        $6.3 million of new money was provided from the New Orleans Sports Franchise Fund to meet contractual obligations of the State with respect to the New Orleans Saints and Hornets sports franchises.  Act 73 of the 2002 First Extraordinary Session redirected a one-percent hotel occupancy tax in Orleans Parish to fund, in part, incentive packages for these teams.

·        The LSED operating budget includes $10.6 million in Saints inducement payments, in addition to any portion of the above Sports Franchise Fund that will be used to meet Saints contractual obligations.

Other Significant Budget Items for LSED

·        Provided $4.2 million in funding for Superdome and New Orleans Arena operations that must be approved by the Joint Legislative Committee on the Budget prior to expenditure.

·        Includes $4.6 million in acquisitions and major repairs for district facilities.

Attorney General

·        Provided a restoration of funding ($124,800) and enhanced funding ($230,000) for the Community Living Ombudsman Program in the Civil Law Program.

Agriculture and Forestry

·        $1.6 million from dedications of the Louisiana Agricultural Finance Authority Fund for payment of debt service, infrastructure construction and improvements to rail systems and facilities related to the transportation of sugar cane.  Of this amount, $600,000 has been allocated for improvement of facilities and equipment of the rail system.

·        The amount of $945,000 was provided from the Louisiana Agricultural Finance Authority (LAFA) for debt service related to the Boll Weevil Eradication Program.  This additional appropriation brings total funding from this source to $8 million for the debt service on this program.  Since inception, the state has expended $120 million on the Boll Weevil Eradication Program.

Department of State and Commissioner of Elections

·        To meet the costs of three statewide elections in FY03, the budgets of both agencies were increased as follows: $1.6 million for State and $5.1 million for Elections.

·        Restored  $205,718 for the Outreach Program in the Department of Elections.

·        The Louisiana Technology Park received $4.4 million to meet the third year of a $37 million, multiple-year commitment by the State for a commercial data center and technology business incubator located at Bon Carre’ in Baton Rouge.

·        The UNO/Navy contract received $3 million  in funding for the final installment of the state commitment, which provides for the completion of construction of the fourth building at the New Orleans lakefront.

·        The UNO/Avondale contract was provided $5.3 million for the fifth year of a $50.2 million commitment to fund the construction of a 200,000 square foot ship design facility for Avondale Corporation.

·        Several regional economic development organizations were provided funding: MetroVision (New Orleans) — $450,000; Macon Ridge (Northeast Louisiana) — $250,000; South La. Economic Council — $150,000; the Partnership for Greater Baton Rouge — $350,000; and Baton Rouge Inner City Economic Development District — $25,000.

·        Sports bowl games and tournaments were provided funding as follows:

·        The budget includes $1 million in federal funding from the federal Temporary Assistance for Needy Families block grant for the Micro-enterprise Development Program. This program was transferred from the Office of Women’s Services.

·        The Office of State Parks included funding for new facilities that will be operational during the fiscal year:

·        DOTD will operate a significantly reduced highway construction program due to an anticipated decline of about $100 million in available federal highway funding from the previous fiscal year.

·        The operating budget included the following $1.2 million in State General Fund expenditures:

·        Zachary Taylor Parkway Commission                           $70,855

·        Poverty Point Lake Commission                                   $100,000

·        Amite River Basin                                                         $200,000

·        Fifth Levee District                                                       $150,000

·        Millennium Port                                                            $200,000

·        Louisiana Airport Authority                                           $451,700

Inmate Population

·        As of April 2002, Louisiana had approximately 35,840 adult inmates. Of this total, 19,964 were being held in state facilities and 15,873 were being held in local jails.

·        Sheriffs’ Housing of State Inmates will no longer be in the Department of Corrections budget starting from FY03 (It has been moved to Schedule 20 - Other Requirements by the Division of Administration). Sheriffs’ Housing began the FY03 budget process approximately $8.7 million under-funded (due to the fact that projected population decreases from sentencing reform legislation passed during the 2001 Regular Legislative Session have yet to be realized) and this funding was not restored during deliberation on HB1.

Correctional Officers’ Pay

·        Approximately $16.8 million was provided in FY02 for a pay raise for prison guards and probation and parole officers. This pay raise has been annualized for FY03, plus additional money for merit increases for FY03.

Post Release Program

·        A total of $4 million was provided from TANF (Temporary Assistance for Needy Families) for post-release skills programs, like Project Return, to enable newly released inmates to gain employment and life skills. These skills help former inmates learn to provide emotionally and financially for their families and to reduce recidivism. These funds were provided in DSS - Office of Family Support.

State Trooper Pay Raise

·        A $15.6 million pay raise was provided for Louisiana State Troopers during the 2002 Regular Session of the Legislature. This funding will raise the starting pay of troopers from $22,048 to $31,304, with a salary increase to $36,601 after one year of service.

Homeland Defense

·        For FY03, a total of $2.4 million and 68 state troopers and civilians, including equipment and supplies, were added for Homeland Defense efforts.

Other Significant Budget Items

·        $450,000 for enforcement activities for slot machines at race tracks in the Gaming Enforcement Program in the Office of State Police.

Beyond the $5.1 billion recommended in the FY03 Governor’s Executive Budget for the Department of Health and Hospitals, the Legislature has enhanced the department’s funding by approximately $280 million. Thus, the total operating budget for the Department of Health and Hospitals is $5.4 billion for FY03.

Louisiana’s Medicaid Program

The total funding for medical services for Medicaid clientele and the uninsured will increase by roughly $130 million from FY02 to FY03.  The total Medicaid budget for FY03 is $4.4 billion, including $864.9 million State General Fund.

·        $70 million for private and public providers of medical services to both Medicaid clientele and the uninsured.

·        $25 million for the various existing Home and Community-Based Waiver Programs – MR/DD, Children’s Choice, Adult Day Health Care, and Elderly and Disabled Adult - and the development of a new adult waiver program.

·        $16 million for the continuation of the Behavioral Management Program for autistic individuals.

·        $16 million for the expansion of the CommunityCARE program, Primary Care Case Management for Medicaid enrollees, including reimbursement rate increases for primary care services provided by physicians.

·        $4 million for an increase in the cost of Medicare premiums for the state Medicare Buy-Ins program enrolling Medicaid/Medicare dual eligibles in the Medicare program for primary health insurance.

Public Health Services

·        Funding has been restored to ensure the continuation of the Hemophilia program ($2.6 million) and Genetics program ($1.8 million). 

·        $900,000 in funding and 25 positions have been added for the collection and transportation of water samples from the local water systems to the public health labs. 

·        $300,000 has been provided through the Office of Public Health for the LSU Veterinary School for encephalitis testing.

·        Funding of the parish public health units has also been stabilized with a restoration of $11.1 million and 231 positions in the Personal Health Service program.  

Mental Health Services

·        There are sizable increases in community mental health services for children and adolescents - $4.1 million for crisis intervention services, $2.2 million for newer medications, and $1.6 million for assertive community treatment teams.

·        Further, $3.1 million has been cut at Southeast Louisiana State Hospital in Mental Health Area A to eliminate 16 adolescent inpatient beds and 10 child inpatient beds and $1.4 million has been cut at Central Louisiana State Hospital in Mental Health Area C to eliminate 16 adolescent inpatient beds and 6 child inpatient beds.

Services for the Developmentally Disabled

·        For FY03, $4.9 million State General Fund has been added to the Office for Citizens with Developmental Disabilities (OCDD) budget to build capacity in the community.  This State General Fund offsets a reduction of $3.1 million reduction in Interagency Transfers from the Medicaid program.

·        In the facilities, funding has been added to expand community services - $800,000 for specialized medical/behavior resource centers, $248,808 for consumer and family training, and $1.2 million for assertive community treatment teams. At the same time, $4.4 million has been restored for patient care in the facilities. 

Addictive Disorders

·        Funding has been stabilized for treatment services for addictive disorders.

·        In addition, $2.3 million is slated for the Office of Addictive Disorders from the Tobacco Tax Health Care Fund per Act 19 (HB 157) of the 2002 Regular Legislative Session.

In FY03, the state will spend $10 million on Homeland Security Initiatives in various departments.

DHH Office of the Secretary

·        DHH has received a federal grant of $1.9 million for the development of a bio-terrorism response plan in FY03.  This project will be cooperative endeavor uniting DHH with the Louisiana Hospital Association and the LSU Health Sciences Center.

Office of Public Health

·       Continued into FY03, the OPH budget contains $3.9 million and 44 positions to detect and/or respond to a bio-terrorism event.

Office of Mental Health

·        $300,000 and 4 positions are included in OMH’s budget for FY03 to train mental health professionals for mass crisis.

Office of State Police

·        For FY03, a total of $2.4 million and 68 state troopers and civilians, including equipment and supplies, were added for Homeland Defense efforts.

Military Affairs

·        $1.1 million has been included in the budget of the Military Affairs Department for a Homeland Security Initiative.

·        $5.6 million in the Office of the Secretary was included for a “supervisory management support system for compliance with laws and regulations governing the department,” including internal audit functions. 

·        $660,000 for education, training, counseling, and rehab services for released inmates.

Temporary Assistance for Needy Families (TANF):  The TANF program has undergone several changes since FY02.  TANF initiatives as appropriated in the FY03 budget are:

·        $4 million for a Biotechnology Initiatives and Health Care Workforce Development

·        $7.6 million for Emerging Community and Technical Colleges Pool

·        $6.4 million for the Performance and Quality Improvement Distribution Pool

·        $2.8 million from the Higher Education Initiatives Fund for implementation of the Master Plan

·        $3.2 million for Prisoner Health Care at the LSU Health Science Center - Shreveport

·        $4.3 million for Aid to Independent Colleges

·        $10.6 million for full funding of Classified Employee Merit Increases

·        $15.8 million for full funding of Group Insurance Increases

·        $800,000 for a Teacher Recruitment /Quality  program partnered between Board of Regents and BESE

·        $500,000 for the LSU Fire and Emergency Training Institute

·        $2.5 million for Neurobiology Acquisitions in Capital Outlay from non-recurring revenues

·        $5.5 million in Bio-Technology Acquisitions in Capital Outlay from non-recurring revenues

·        The FY03 budget includes an additional $43 million for the Minimum Foundation Program (MFP) to be distributed to the state’s 66 local public school districts.  Half of this money is earmarked for teacher pay raises averaging $368.  Teachers, however, will not receive an across-the-board increase.  Rather, the funds will be distributed according to the MFP formula, which takes into account key factors such as student enrollment, a parish’s wealth, and how much local funding a parish raises for public education purposes.  As a result, the state-funded pay increases for public school teachers across the 66 school districts will range from zero to $1,410 next fall.  Local school boards have the option of granting additional raises from local revenues. 

·        Next year’s spending plan also includes $20 million for pay raises for support workers, including teacher aides, cafeteria workers, janitors and bus drivers.The average raise amounts to nearly $500 per worker next year. 

·        HB 1 also provides that the first $11.5 million of any State General Fund (Direct) surplus the state realizes during the next fiscal year would give support workers an extra one-time bonus of $300.  This provision would be implemented only if the state receives more general fund revenues than already budgeted.   Vetoed by the Governor - July 1, 2002 (Veto No. 4)

·        An initiative in teacher mentoring is funded at $1.5 million for FY03.  

·        An additional $65 million in federal funds has been budgeted to implement the No Child Left Behind Act, which redefines and expands the federal role in public education.  Schools will be required to undergo annual performance evaluations, and federal funds will be provided to poorly performing schools. Further, parents will be allowed to transfer their children to better performing schools. 

·        House and Senate amendments provide approximately $1.87 million in additional monies for Type 2 Charter School growth.

·        Major educational initiatives funded with TANF monies include LA4 ($29.5 million); after-school enrichment ($8.0 million); and child literacy ($4.75 million).

·        Included in the total funding for HCSD is $17.3 million State General Fund for medical services for state inmates as the federal government will no longer provide federal financial participation through the Disproportionate Share Payments program for inmate health care. This leaves roughly $18 million in expenditures not funded for the remaining portion of the costs of caring for state inmates and the total costs of providing medical care for local inmates.