2011 - Division of Administration - Louisiana

The Honorable Bobby Jindal, et al.December 28, 2011Page 3The Louisiana GRAD (Granting Resources and Autonomy for Diplomas) Act was passed duringthe 2010 legislative session giving colleges and universities in the State increased autonomy andflexibility in exchange for a commitment to meet clearly defined statewide performance goals,including boosting graduation rates. Participating institutions will be allowed to increase tuitionand fees, without legislative approval, by up to 10 percent until they reach the average tuition andfees of their institutional peers. The tuition autonomy granted by the GRAD Act will allow collegesand universities to generate additional revenue through tuition and fee increases reducing theirdependence upon General Fund appropriations.Under the direction of the State Healthcare Reform Act (Act 273 of 2007 Regular Session) theLouisiana Department of Health and Hospitals has begun the process of moving the State’sMedicaid System away from a strictly fee-for-service model into a system that encouragescoordination among different types of healthcare providers (e.g. inpatient, physician) through theuse of Coordinated Care Networks (CCNs). The Department of Health and Hospitals projectsthat the statewide rollout of the Coordinated Care Networks will be completed by December of2015. The switch to CCNs is expected to improve the quality of healthcare provided by the StateMedicaid System and reduce Medicaid related expenditures in the state by two to nineteenpercent.Louisiana reduced its number of state civil service employees by 6,226 in fiscal year 2011. Thereduction was accomplished through the elimination of almost 3,000 appropriated fulltimepositions (T.O.) in the fiscal year 2011 budget, as well as a combination of retirements andattrition. As a result civil service related payroll expenditures were reduced by approximately$279 million in fiscal year 2011.IMPLEMENTATION OF NEW ACCOUNTING STANDARDSDuring the current year, Louisiana implemented GASB Statement 54, “Fund Balance Reportingand Governmental Fund Type Definitions.” This statement enhances the usefulness of fund balanceinformation by providing clearer fund balance classifications that can be more consistently applied. Itestablishes fund balance classifications that comprise a hierarchy based primarily on the extent to whicha government is bound to observe constraints imposed upon the use of the resources reported ingovernmental funds. This statement also clarifies existing governmental fund type definitions, whichresulted in changes to Louisiana’s fund structure. These changes primarily related to many specialrevenue funds no longer meeting the GAAP definition of a special revenue fund, so are now beingreported in the General Fund for GAAP purposes.ECONOMIC OUTLOOKThe national recession has negatively impacted Louisiana’s economy; however, it has been lesssevere in Louisiana than in many other states. According to figures obtained from the Bureau of LaborStatistics, the unemployment rate increased in Louisiana from 7.1% in state fiscal year 2010 to 7.8% instate fiscal year 2011. During the same period, the U.S. unemployment rate decreased from 9.7% to9.3%. The national economy is showing signs of growth. The economic outlook for the nation and theState is projected to be positive over the next two fiscal years.The forecasts for the State of Louisiana are based on the following assumptions: 1) the nationalreal gross domestic product is expected to rise by 2.1 percent in 2012 and 2.8 percent in 2013; 2) theconsumer price index is expected to rise modestly by 2.4 percent in 2012 and 2.5 percent in 2013; and 3)oil prices will fluctuate between $80-$110 a barrel over the next two years and natural gas prices areexpected to remain relatively low and stable at $4 per mmbtu.Louisiana’s economy is quite diverse, as can be seen in comparing the Metropolitan StatisticalAreas (MSAs) of Louisiana. Below are the forecasts for the major MSAs of Louisiana.- 3 -