kbc2002

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KBC2002

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Louisiana’sLouisiana’sFiscalFiscalOutlookOutlookFY03FY03

Presented by Senate Fiscal ServicesMay 7, 2002

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FY03 Total Means of Financing: $15.7 b.

Federal$5,55836%

StatutoryDedications

$2,37215%

GeneralFund

$6,63642%

(in million $)

Self-Generated$1,088

7%

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FY03 Total Expenditures: $15.7 b.

Education$5,66335%

Other $2,17414%

Human Resources

$4,80931%

Public Safety$7365%

Gen. Gov’t. $2,30115%

(in million $)

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FY03 General Fund Revenue: $5.9 b.

(in million $)

Mineral$5219%

IndividualIncome$1,78930%

Sales$2,33539%

Corporate$4628%

Other$1513%

Gaming$67111%

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FY03 General Fund Expenditures: $6.6 b.

(in million $)

Education$3,55453%

Other $2444%

Human Resources

$1,36621%

Public Safety$4607%

Gen. Gov’t. $1,01215%

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Revenue Growth

• Revenue Growth For Operating Budget from FY02 to FY03 is $122 million.

• To produce this revenue growth amount, the legislature will have to vote to renew $593 million in taxes that will expire on June 30, 2002.

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4¢ sales tax on food and utilities $466

One-half of excess itemized deductions $ 90

$25 per student in K-12 tax credit $ 18

4¢ per pack cigarette tax $ 14

2.5% excise tax on automobile rentals $ 5

TOTAL $593

Taxes Expiring on June 30, 2002(in million $)

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Total General Fund Expenditures:% Discretionary Vs. % Non-Discretionary

Discretionary36%

Non-Discretionary64%

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FY03 Non-Discretionary General Fund Expenditures: $4.2 b.

Education$2,44858%

Other $221%

Human Resources

$69417%

Public Safety$3699%

Gen. Gov’t. $63515%

(in million $)

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FY03 Discretionary General Fund Expenditures: $2.4 b.

Education$1,10545%

Other $2239%

Human Resources

$67227%

Public Safety

$924%

Gen. Gov’t. $37715%

(in million $)

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Above-the-Line: Funded with continuing revenue sources.

Below-the-Line: Contingent on renewal of expiring taxes.

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ItemsAbove-the-LineFY03 Enhancements

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FY03 Budget Enhancements

• Increased funding to Urban Affairs $3.2 m.

• Increased funding to Rural Development $3.0 m.

• Funding for professional service contracts toattract professional sports to La. $0.3 m.

• Capitol Park maintenance adjustments $0.8 m.

• Rent and maintenance of state buildings $2.8 m.

• Capitol Security adjustment $0.6 m.

• Computer-related adjustments $2.2 m.

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• Annualize funding for Homeland Security $1.1 m.

• NCAA Mens’ Final Four and Womens’ VolleyballTournament $1.0 m.

• Partnership of Baton Rouge $0.4 m.

• Public Health Research Facility $1.0 m.

• Hornets Transition to New Orleans $1.8 m.

• Compaq Classic Golf Tournament $0.3 m.

• Advanced Maritime Technology Application Center $1.8 m.

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• Economic Development Grants Match Program $0.9 m.

• Adds 400 slots to the Medicaid MR/DD Waiver Program $3.9 m.

• Increase for Community and Technical CollegesPool $6.6 m.

• Governor’s University-Based Regional EconomicDevelopment Initiative, Master Plan Implementation,and Campus Budget Stabilization $4.0 m.

• Governor’s Brain Gain Initiative $2.0 m.

• Teacher Quality Program $0.8 m.

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• Governor’s Bioscience Initiative at LSU $4.0 m.

• Increase funding for Center for Structural BiologyProteomic $1.0 m.

• Debt Service $53 m.

• MFP and Teacher Pay $45.2 m.

• Under the current MFP resolution, 50% of the growth in state aid for public schools must be used to boost teacher pay for the next few years (FYs 03, 04, and 05) until teacher salaries reach the Southern average.

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• The Executive Budget pegs the MFP's growth at $45.2 million for FY 02-03. Half of this amount, or $22.6 million, is to be distributed to over 59,000 teachers. This provides a $337 raise for the state's teachers. With the average teacher salary estimated at $35,437, the proposed raise equates to a 1.0% increase.

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ItemsBelow-the-Line

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% Of Department Below-the Line

ExecutiveJusticeElectionsLt. GovernorTreasuryAgricultureEcon. Dev.CRTDOTDCorrectionsPublic SafetyHealth & Hospitals

Social ServicesNatural ResourcesRevenueEnviron. QualityLaborWildlife & FisheriesCivil ServiceHigher EducationSpecial SchoolsK-12 EducationLSU HCSDOther Requirements

2.3%8.6%3.0%

28.5%2.5%1.7%3.7%

12.8%0.3%6.2%0.4%

34.2%

0.6%1.5%0.8%

11.7%0.4%0.3%

10.3%8.3%

10.6%0.8%

100.0%10.5%

* If a department is not listed, it had 0% below-the-line.

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Items Below-the-Line by Category: Total Funding

Health &Welfare$1,89389%

Environment$161%

Public Safety & Corrections

$211%

Other$975%

Education$874%

(in million $)

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Items Below-the-Line by Category: General Fund

Health &Welfare

$40568%

Environment$81%

Public Safety & Corrections

$153%

Other$8715%

Education$7813%

(in million $)

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Supplemental Items: 3% Sales Tax

3% Sales Tax Supplemental Items:$1.7 billion total

($344.6 million State General Fund)

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Supplemental Items: 3% Sales Tax• 05-252 — Office of Business Development — $1.7 million La. Economic Development Fund — Marketing and financial assistance programs.

• 06-267 — Office of Tourism — $3.3 million Fees and Self-Generated Revenues — Out-of-state Media Advertising.

• 09-306 — Medical Vendor Payments — $1.3 billion ($303.8 million State General Fund) — Medicaid claims and uncompensated care costs payments to private and public providers of medical services.

• 09-319 — Villa Feliciana Medical Complex — $0.75 million Interagency Transfers — Patient Care in the Inpatient Tuberculosis Unit.

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Supplemental Items: 3% Sales Tax• 09-330 — Office of Mental Health — $6.1 million ($2.4 million State General Fund) — General administration of the central office and oversight of the state mental health systems.

• 09-331 — Central La. State Hospital — $4.2 million — Administrative Services.

• 09-332 — Eastern La. Mental Health System — $16.5 million ($2.3 million State General Fund) — Administrative and Patient Care Services.

• 09-333 — Southeast Louisiana Hospital — $19.2 million ($233 State General Fund) — Administrative and Patient Care Services

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• 09-340 — Office for Citizens with Developmental Disabilities — $34.3 million ($30.9 million State General Fund) — General administration of the central office, oversight of the state facilities serving the developmentally disabled and support services to disabled individuals living in the community.

• 09-342 — Metropolitan Developmental Center — $29.2 million ($0.25 million State General Fund) — Administrative, Patient Care, and Community Support Services.

• 09-344 — Hammond Developmental Center — $32.7 million ($0.47 million State General Fund) — Administrative and Patient Care Services.

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• 09-346 — Northwest Developmental Center — $14.7 million ($0.04 million State General Fund) — Administrative and Patient Care Services.

• 09-347 — Pinecrest Developmental Center — $78.9 million ($1.5 million State General Fund) — Administrative, Patient Care, and Community Support Services.

• 09-348 — Ruston Developmental Center — $7.4 million ($0.07 million State General Fund) — Administrative and Patient Care Services.

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• 09-349 — Southwest Developmental Center — $10.2 million ($1.2 million State General Fund) — Administrative, Patient Care, and Community Support Services.

• 09-351 — Office for Addictive Disorders — $1.8 million total ($0.4 million State General Fund) — Administration of Inpatient and Outpatient Substance Abuse Services.

• 19-600 — LSU Board of Supervisors — $129.8 million Interagency Transfers — Uncompensated Care Costs Payments to LSU Health Science Center – Shreveport for medical services to uninsured patients.

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Supplemental Items: 3% Sales Tax•19-620 — UL Board of Supervisors — $ 0.25 million State General Fund — Computer Hardware and Software Purchases.

• 19-681 — Subgrantee Assistance — $1.0 million State General Fund — United Charter School in East Baton Rouge Parish.

• 19-653 — La. School for the Deaf — $ 0.09 million Interagency Transfers — Administration and Support Services.

• 19-655 — La. Special Education Center — $5.8 million Interagency Transfers — Administrative and Support, Residential, and Instructional Services.

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3% Sales Tax Supplemental Items:$1.7 billion total


• 19-699 — Special School District — $ 3.3 million Interagency Transfers — Administration and Instructional Services at Special School District #1.

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1% Sales Tax Supplemental Items:$162.3 million total

($116 million State General Fund)

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• 01-100 — Executive Office — $10.1 million State General Fund — Office of Urban Affairs.

• 01-112 — Military Department — $1.1 million State General Fund — Homeland Security.

• 04-141 — Justice Department — $3.0 million ($2.6 million State General Fund) — Administrative Services.

• 04-144 — Elections Department — $0.9 million State General Fund — Activities Associated with Financial Mgt., Elections, and Voter Registration.

• 04-147 — State Treasury — $0.34 million State General Fund — Administrative Services.


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• 04-160 — Department of Agriculture and Forestry — $1.7 million State General Fund — Office of Management and Finance, Support Services Activities.

• 04-146 — Lieutenant Governor — $1.8 million ($0.8 million State General Fund) — AmeriCorp Administration.

• 05-252 — Office of Business Development — $0.55 million La. Economic Development Fund — Marketing and Financial Assistance Programs.

• 07-273 — DOTD Administration — $ 0.07 million State General Fund — Zachary Taylor Parkway.


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• 07-275 — Office of Public Works — $ 1.1 million State General Fund — Five Projects: Louisiana Airport Authority, Poverty Point Lake Commission, Millenium Port, Amite River Basin, and Fifth Levee District.

• 08-403 — Office of Youth Development — $19.9 million ($14.2 million State General Fund) — Contract Services Program, Juvenile Residential and Non-Residential Slots.

• 08-418 — Office of Management and Finance — $ 0.37 million State General Fund —Information Technology Services.


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• 08-421 — Office of Legal Affairs — $0.26 million State General Fund — Increased Administrative Hearings Expenditures.

• 09-305 — Medical Vendor Administration — $3.9 million ($1.0 million State General Fund) — General administration of Louisiana’s Medicaid program.

• 09-306 — Medical Vendor Payments — $46.9 million ($11.2 million State General Fund) — Medicaid claims and uncompensated care costs payments to private and public providers of medical services.


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• 09-307 — DHH Office of the Secretary — $0.7 million ($0.6 State General Fund) — General management and financial administration of the department.

• 09-326 — Office of Public Health — $3.9 million State General Fund — Funding for Bio-Terrorism Activities.

• 09-330 — Office of Mental Health — $0.3 million State General Fund — Administration and Support Services.

• 10-357 — DSS Office of the Secretary — $5.6 million State General Fund — Executive Support, Administrative Costs, and Other Non-allowable Federal Expenditures.


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• 11-431 — DNR Office of the Secretary — $0.8 million State General Fund — Atchafalaya Basin Program.

• 12-440 — Office of Revenue — $0.6 million State General Fund — Tax Collection Program.

• 13 — Department of Environmental Quality — $7.0 million State General Fund — Represents 93.4% of General Fund recommended for this department.

• 16-511 — DWF Management and Finance — $0.2 million State General Fund — Funding for Administrative Hearings.


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• 16-514 — Fisheries — $0.02 million State General Fund — Aquatic plant control in Monroe.

• 17-562 — Ethics Administration — $1.3 million ($1.2 million State General Fund) — Operating Costs.

• 19-Higher Ed. — Board of Regents, Louisiana Universities Marine Consortium, LSU Board of Supervisors, SU Board of Supervisors, UL Board of Supervisors, Louisiana Community and Technical Colleges Board of Supervisors — $10.6 million State General Fund — Classified State Employees Merit Increase.


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• 19-681 — Subgrantee Assistance — $12.0 million State General Fund — One-time salary supplement for support personnel.

• 20-966 — Supplemental Pay — $27.1 million State General Fund — Supplemental payments to deputy sheriffs ($10.4 million), firefighters ($7.2 million), constables ($ .3 million), and municipal police ($9.2 million). Approximately 39 percent of total supplemental payments.


1% Sales Tax Supplemental Items:$162.3 million total

($116 million State General Fund)

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Supplemental Items: Individual Income Tax – Limitation

on Excess Itemized Deductions

May 15La.

Individual Income Tax – Limitation on Excess Itemized Deductions

Supplemental Items:$139.6 million total


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• 06-262 — Office of the State Library of Louisiana — $1.5 million State General Fund — State Aid to Public Libraries for books, data and telephone lines, computer soft ware and internet access for the public at all parish libraries in across the state.

• 06-265 — Office of Cultural Development — $3.9 million State General Fund — State matching funds for federal art grants.

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• 09-307 — DHH Office of the Secretary — $1.0 million ($0.9 State General Fund) — General management and financial administration of the department.

• 14-474 — Office of Workforce Development — $1.1 million State General Fund — State matching funds for the federal Welfare-to-Work grant.

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• 19-671 — Board of Regents — $4.3 million State General Fund — State aid to independent colleges and universities for academic programs.

• 19-600 — Louisiana State University Board of Supervisors — $3.0 million State General Fund — Neurobiotechnology research at the LSU Health Sciences Centers in New Orleans and Shreveport and Tulane University Health Sciences Center.

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• 19-Higher Ed. — Board of Regents, Louisiana Universities Marine Consortium, LSU Board of Supervisors, SU Board of Supervisors, UL Board of Supervisors, Louisiana Community and Technical Colleges Board of Supervisors — $15.8 million State General Fund — Group Insurance Increase.

• 19-681 — Subgrantee Assistance — $12.8 million State General Fund — Graduate Exit Exam (GEE) 21 summer school, Louisiana Education Assessment Program (LEAP) 21 tutoring program and school improvement grants.

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• 19-610 — LSU Health Sciences Center – Health Care Services Division — $3.3 million State General Fund —Disease Management and Prevention Program operated at all nine facilities for Asthma, H.I.V., Cardiology, and Diabetes patients.

• 19-610 — LSU Health Sciences Center – Health Care Services Division — $0.2 million State General Fund —Vascular surgeon to staff the prisoner dialysis unit at Earl K. Long Medical Center.

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• 20-966 — Supplemental Pay to Law Enforcement Personnel — $18.6 million State General Fund — 26% of the total funding for supplemental pay to municipal police officers ($6.3 million), constables ($0.2 million), firefighters ($4.9 million), and deputy sheriffs ($7.2 million).

• 20-XXX — Miscellaneous — $ 9.1 million State General Fund — Rural Development Fund.

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Individual Income Tax – Limitation on Excess Itemized Deductions

Supplemental Items:$139.6 million total


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Supplemental Items: Tobacco Tax - 4¢ per Cigarette Pack

Tobacco Tax - 4¢ per Cigarette Pack Supplemental Items:

$56.4 million total ($14.0 million State General Fund)

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• 09-307 — DHH Office of the Secretary — $ 0.85 million ($0.77 State General Fund) — General management and financial administration of the department.

Tobacco Tax - 4¢ per Cigarette Pack Supplemental Items:


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Supplemental Items: Auto Rental Excise Tax

Auto Rental Excise Tax Supplemental Items:


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•09-307 — DHH Office of the Secretary — $ 0.28 million ($0.25 State General Fund) — General management and financial administration of the department.

Auto Rental Excise Tax Supplemental Items:



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• 08-419 —State Police — $0.45 million (Statutory Dedications) — Gaming Enforcement Program.

• 11-432 — Office of Conservation — $0.82 million (Statutory Dedications) — Oil and Gas Regulatory Program.

• 13 — Dept. of Environmental Quality — $7.5 million (Statutory Dedications) — Environmental Trust Fund.[Fee package passed during 2002 Special Legislative Session.]

Supplemental Items: Miscellaneous

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• 20-OREQ — Other Requirements — $7.4 million (Statutory Dedications) — Pari-mutuel Live Racing Facility Gaming Control Fund.

Supplemental Items: Miscellaneous

Miscellaneous Supplemental Items:$16.2 million total

(All Statutory Dedications)

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Supplemental Items: Suspension of the $25 per Child

Education Income Tax Credit

•19-661 — Office of Student Financial Assistance — $18.0 million State General Fund — 19% of the total funding for the TOPS Tuition Program.

Suspension of the $25 per Child Education Income Tax Credit

Supplemental Items:$18.0 million State General Fund

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4¢ sales tax on food and utilities $466

One-half of excess itemized deductions $ 90

$25 per student in K-12 tax credit $ 18

4¢ per pack cigarette tax $ 14

2.5% excise tax on automobile rentals $ 5

TOTAL $593

Taxes Expiring on June 30, 2002(in million $)

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Pending FY03 Issues

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Budget Shortfall in the Medicaid Program

Based on current projections, the Medicaid program is roughly $270 million ($78 million State General Fund) short for the continuation of existing programs and services and to absorb the increases in utilization of services and growth in service costs.

Part of the problem is due to the use of $44.8 million in non-recurring revenue sources in building the FY 2002 budget.

Pending Budget Issues for FY03

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Health Care for Inmates

Effective July 1, 2002, the federal government will no longer allow the use of federal financial participation in DSH payments for inmate medical services at “charity” hospitals.

Currently, HCSD provides $32 million of health care services to inmates at its facilities across the state.

Beginning in FY 2003, State General Fund will become the primary revenue source for this care.


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Risk Management

Has not been fully funded to provide for anticipatedclaims $55 m.[Anticipated claims = $150 m.; $95 m. has been budgeted.]

Premium increases to cover road hazard claims and to restore reserves to an acceptable level $41 m.

Sheriffs’ Housing

Funding needed to cover projected state inmate population in local jails $8.7 m.

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The MFP and Health Insurance

The Executive Budget provides $31.8 million for local school systems to pick up part of the tab for the increase in Group Insurance health care costs. This funding is not provided through the MFP, however.

BESE’s projected FY03 budget currently calls for the MFP to provide an additional $25 m. for school systems to address anticipated increases in the employer’s share of health insurance premiums. Further, the pending MFP resolution also seeks an additional $13.9 m. to address additional formula growth factors.

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Amount of One-time Permanent RaisePay Supplement (includes benefits)

Increment

1,000$ 39.7$ 44.9$ 900$ 35.7$ 40.4$ 800$ 31.8$ 35.9$ 700$ 27.8$ 31.4$ 600$ 23.8$ 26.9$ 500$ 19.8$ 22.4$ 477$ 18.9$ Hines Amendment400$ 15.9$ 18.0$ 329$ 12.5$ Act 670 of 2001320$ 12.0$ HB 1 - Below the Line300$ 11.9$ 13.5$ 200$ 7.9$ 9.0$ 100$ 4.0$ 4.5$

( in millions )

SCHOOL SUPPORT WORKER PAY


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Tax Plan

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Tax Plan Proposal

• Eliminate 4-cent state sales tax on food and utilities. ($252.4 m.)

• Eliminate 4-cent state sales tax on businesses that purchase manufacturing machinery and equipment. ($162 m.)

• Reduce the personal income tax by restoring the deduction. ($90 m.)

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Tax Plan Proposal

• Phased-in using 10% and 20% reductions based on 3% and 6% growth rates respectively for each category over a period of time until the taxes are phased-out.

• The total amount of taxes estimated to be eliminated is approximately $500 million. Theoretically, 10 percent a year would be $50 million.

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Tax Plan Proposal

Tax on Utilities on Residences ($16.8 m. X 4) = $67.2 m.Tax on Food ($46.3 m. X 4) = $185.2 m.Restore Excess Itemized Deductions = $90.0 m.Manufact. Machinery & Equip. ($40.5 m. X 4) = $162.0 m.

TOTAL TAX CUT = $504.4 m.

ANNUAL TAX CUT OF 10% = $50.4 m.

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Tax Plan Observations

• Will guarantee the current revenue stream through FY03 because projected revenue growth level will not trigger a tax cut.

• In the event that at least one penny of the sales tax on food and utilities along with the renewal of the suspension of 1/2 of the excess itemized deduction were defeated this session, an additional $200 m. would have to be cut from a budget that’s already $100 m. in the hole.

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• Could eventually eliminate the “regressive” tax on food and utilities.

• The 4¢ sales tax on food and utilities is one of the more regressive taxes that can be imposed. The governor’s plan, if revenue growth thresholds occur, could lead to the elimination of this tax over a period of time.

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Tax Plan Observations• Eliminates the need to renew taxes every two years.

•The current practice of renewing over $600 million in taxes every two years creates unnecessary turmoil in the budget process and makes for a very confusing and complicated budget and appropriations bill.

•The uncertainty of this revenue source is of some concern to Wall Street because of Louisiana’s significant debt. It is unlikely that the enactment of the governor’s plan will lead to an immediate upgrade in the state’s bond rating because of the many other budget uncertainties that the state still faces, but the elimination of this item will bring the state a little closer to an improved rating.

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•The Tax Plan has the intention of being a ten-year phase out. There is no guarantee, however, either in the legislation or otherwise, that will ensure a ten-year elimination of the taxes.

•The mid-1990’s saw significant growth in revenue because of the start-up of the gaming industry — close to $500 million. Currently, there are not any new revenue sources on the horizon.


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•If revenue decreases occur mid-year, there is no mechanism to take the tax cut back.

• This tax plan does not address our structural deficit ...


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Tax Plan ObservationsStructural Deficit

0

2000

4000

6000

8000

10000

12000

FY 03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

DOAMinus Tax Plan5-yearK-12/HE

Cost of continuation budget plusrequirements to bring teachers andhigher education up to southern average.

Cost of continuation budget using only major expenditure items.

Projected revenue growth using 5 year forecasts of the Revenue Estimating Conference extended. through FY12

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•Estimates indicate that it would take somewhere around $286 million to bring teachers’ pay up to the Southern average, and close to $280 million to bring university funding up to the average of Southern peers.

•This cannot be accomplished incrementally, because the average is a moving target and increases each year.

•The tax plan is not revenue-neutral nor is it tied to specific expenditure reform so that a clear picture of impact on state services is not available.


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Tax Plan Observations: Initiatives

•Many of the popular initiatives over the past 10 years have been funded with excess revenues:

• Teacher pay raises;• Debt Reduction;• Teacher supplies;• Teacher Technology Fund;• LaCHIP;• LSUHSC-HCSD’s Disease Mgt. Program;• School-Based Health Centers; • Home and Community-Based Waiver Programs

• Adult Day Health Waiver

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• Elderly and Disabled Waiver;• Children’s Choice Waiver (TEFRA-Lite);• MR/DD Waiver;• Personal Care Attendant Waiver;• Drug Courts;• Outpatient Mental Health Services, including pharmaceuticals.

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Teacher pay raises: Over $350 million in state funds have been committed to teacher salaries, with almost all of that coming in the last 6 years.


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Louisiana SREB

1992 - 1993 26,102$ 29,920$ 1993 - 1994 26,285$ 30,640$ 1994 - 1995 26,461$ 31,671$ 1995 - 1996 26,800$ 32,372$ 1996 - 1997 29,025$ 33,388$ 1997 - 1998 30,090$ 34,425$ 1998 - 1999 32,384$ 35,663$ 1999 - 2000 33,109$ 37,362$ 2000 - 2001 33,615$ 38,614$ 2001 - 2002 35,437$ 39,698$

YearSchool

Average Salaries for PublicElementary and Secondary

School Teachers


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Teacher Supplies: one-time revenue sources were utilized in FYs 98 and 99 to provide $23.5 million in funding for teacher supplies and equipment at an average of $200 per teacher.

Classroom-based Technology: one-time revenues have helped provide over $70 million in hardware and software for the state's classrooms in recent years. The initiative has improved the student/computer ratio from 88:1 to 6:1.


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School and District Accountability: The current budget for improvements in teaching, testing, charter schools, etc., is $56.3 million. Most of this funding has been provided in the last 6 years.

TOPS: The scholarship assistance program begun in 1997 will provide $93 million in FY 03 for 39,000 participating college students.


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• Since FY 1993, Louisiana has invested $615.9 million more State General Fund in its Medicaid program.

• During the same time period, the overall program has only grown $310.2 million.

• Without the stabilization of the state financial participation in the Medicaid program after the federal government ended the 3:1 Disproportionate Share Payments, severe cuts in the provision of services and reimbursement rates paid to providers would have been necessary.


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RadarScreenIssues

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Louisiana owes the federal government $246 million for over billing Medicaid and other federally funded programs to cover road hazard claims.

Louisiana owes the federal government $322 million (estimate) for holding harmless private pay patients in nursing homes from a provider tax levied on nursing home beds. This was violation of federal rules.

Radar Screen Issues

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The current cost of bringing Louisiana teacher pay up to the Southern average is $286 million. If both the Louisiana and Southern averages increase as expected next year, the cost of reaching the average will be $291 million.

Radar Screen Issues

Revenue from the gasoline and special fuels tax will grow by 1.3% next year while the cost of road construction and maintenance grows 4.5%.

Louisiana’s self-insurance reserves will dip to about $24 million (Less $10.5 million dedicated for future medical payments) this year while its claims liability is over $1.2 billion.

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Radar Screen Issues

Turnover in the state workforce is approaching 25% per year. This high rate of turnover is costly because it requires a larger workforce to do the job.

For the past 12 years, agencies have had to absorb the cost of merit raises ($33 million) and inflation ($61 million). By making agencies eat this cost, the savings of nearly $100 million can be used for other priorities of government. No one knows how much longer this practice can continue.

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Under the Balanced Budget Act, the federal government placed a cap on the federal matching funds used in state Disproportionate Share Payments (DSH) Programs.

For FY 2003 and beyond, the DSH cap is $631 million.

In the current year, DHH is budgeted to spend $627.8 million in federal funds on DSH payments. Current estimates for FY 2003 project federal funds for DSH at $625.8 million.

Once the federal share of DSH expenditures reach $631 million, State General Fund will be required for any program growth or cuts will have to implemented.

Radar Screen Issues

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The DSH Cap and Federal Funds Expenditures on DSH Payments in

Louisiana's Medicaid Program

$713.0

$631.0 $631.0$631.0

$713.0$713.0

$575.8

$662.2

$562.6

$627.8 $625.8

$638.3

$0

$100

$200

$300

$400

$500

$600

$700

$800

FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Federal Funds (Millions)

Fe de ral DSH Cap Fe de ral Funds Expe nditure s

Radar Screen Issues

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As the future for health care is contemplated, national expenditures on health care are projected to grow 7.3 percent per year through 2011. Pharmaceutical costs are estimated to rise 18 percent per year. Additional state funds will be required to maintain current services in the future.

Radar Screen Issues

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FY02Supplemental

AppropriationsBill

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Additional Revenue Contained in Appropriation Instruments

Recurring:Revenue over the FY02 Official Forecast $70.3 m

Non-Recurring:*FY01 Surplus $73.0 m*Amnesty Prog. and Incentive Fund transfer $156.0 m

TOTAL $229.0 mLess Rainy Day Fund $57.25 m

TOTAL $171.75 m

*Surplus / Non-recurring Revenue can be used for Deposits into the Rainy Day Fund (25%); Debt Defeasance; Payments to the UAL (Unfunded Accrued Liability); and Capital Outlay.

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FY02 Supplemental Appropriations Bill

Executive Office — ($0.5 million) — Reduce appropriation forthe re-engineering of DHH because project will not start thisYear.

Division of Administration — $2.5 million — Reimbursement for the portion of the Endowed Chairs funding that was seededby the DOA.

Division of Administration — $0.04 million — Settlement of alawsuit in 19th JDC involving a tax sale of property in Aug. ‘91.

Military Department — $9.3 million — Match request from theOffice of Emergency Preparedness for federal funds from FEMA approved for damages from Tropical Storm Allison.

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Military Department — $1.1 million — Funding for enhancedsecurity measures for Louisiana’s military installations as partof Homeland Defense.

Women’s Services — $0.1 million — Maximum funding neededfor the termination pay of those employees in positions beingeliminated (42).

Office of Business Development — ($5 million) — Eliminatefunding for Lafayette Economic Development Authority.

CRT/Office of the Secretary — $2.4 million — Funding for activities associated with the Louisiana Purchase Bicentennial.

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Corrections — Sheriffs’ Housing — $7.2 million — Funding for an additional 880 state inmates housed in parish jails.

State Police — $4.6 million — Funding for 32 troopers, 29 Dept. of Public Safety security positions, 7 civilians, equipment and overtime as part of Homeland Defense.

State Police — $2.7 million — Covers shortage in revenue to the Riverboat Gaming Fund.

Gaming Control Board — $0.02 million — Judgment of State of Louisiana First Circuit Court of Appeal against the Louisiana Riverboat Gaming Commission. Pursuant to La. R.S. 27:31 B, all obligations of the former Riverboat Gaming Commission were transferred to the Gaming Control Board.

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Medical Vendor Payments — $55.6 million — Utilization of FY02 excess revenue to be deposited to the La. Medical Assistance Trust Fund.

Office of Public Health — ($0.3 million) — Decreases State General Fund and increases Statutory Dedications (La. Fund) to maximize available Tobacco Funds for smoking prevention and cessation grants and school-based health centers.

Firefighters Retirement System — $3.2 million — One-third of the estimated $9.5 million additional funding for the system required for FY03.

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La. School for the Visually Impaired — $0.3 million — Judgment ordered for payment of back wages and related benefits as a result of violation of tenure law.

OSFA — $0.8 million — Funding for the estimated deficit in TOPS from the TOPS Fund (Statutory Dedications).

Subgrantee Assistance — $1.6 million — PIPs program shortfall projection for FY02.

Subgrantee Assistance — $3.8 million — One-third of the $11.2 million needed to compensate the 16 local school districts that were impacted by one-time reductions in the MFP in FY02.

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LSU HCSD — ($3.5 million) — Means of Financing substitution decreasing General Fund and increasing Statutory Dedications (La. Fund) to maximize available Tobacco Funds for FY02.

Other Requirements — $0.04 million — Funding for reimbursement of Federal participation in the Administrative Services and Administrative Support Ancillary agencies.

Other Requirements — $0.4 million — Addresses anticipated shortfall of revenue from slot machines at racetracks needed for debt service for the Boll Weevil Eradication Program.

TOTAL Supplemental Appropriations Bill: $89.7 m.

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