John Kennedy Talks State Government Reform

By Chaney Ferguson
Editor, The Times of SWLA

State Treasurer John Kennedy stopped by The Times offices to answer questions and explain exactly what the Streamlining Commission is all about:

What is the Streamlining Commission?

Governor Jindal requested the legislature create the 10 member streamlining commission to recommend ways to cut state government expenses. The governor and the legislature collaborated over the membership, a fairly representative group in the sense that there are some elected officials, some public appointed officials and some members of the private sector. Then we’ve broken it down into five subcommittees, and I chair one of them.

How do you and your committee brainstorm ways to cut spending? That has to be difficult.

We came out of the chute very quickly because, frankly, my colleagues and I have a lot of experience between us. I’ve been in and out of government for almost 20 years, and we each know what needs to be done.

John Kennedy, La. Treasurer

What needs to be done?

The problem is pretty straight forward. The budget today is 29 billion dollars. We will not have that money to spend next year or the year after. We’re going to have somewhere in the neighborhood—over the next couple of years—of 26 or 27 billion. That’s the bad news. The good news is that that’s up from 19 billion in 2005, only four years ago. So, given the shortfall, and given the fact that our constitution requires a balanced budget, we can do one of two things: we can raise taxes or we can reorganize and downsize. I contend we do the latter.

How do you suggest we reorganize and downsize?

We’re number one in the south and number 9 in the country in the number of state employees per 10,000 people. My plan is to charge state government—every department in it—with the elimination of 5,000 jobs a year for three years. No one will be fired. No one will be laid off. We have a big turn-over in state government. We have about 22% turn over. We just won’t fill the vacancies. You restructure. You reduce your layers of management; you extend your spans of control. In other words, we have one manager per three employees. The minimum would be one manager for 10 employees. Restructuring regional headquarters would save labor costs quickly—800 to 900 million dollars. You take 10-20% of those savings and use that to increase the salaries of those people on the front lines who are asked to take on additional responsibilities.

What do you see as the biggest challenge here?

Getting the legislature to agree. They’re split pretty evenly. Half of them think the answer is to raise taxes. The other half believe as I do. Some think that revenues are the answer but my response to that is the state with the largest personal income tax in America is California. The state with the highest sales tax in America is California. The state with the largest budget deficit is California. You can not solve this on the revenue side; you’ve got to solve it on the spending side.

Explain your plan for our universities.

I do not believe—and some of my colleagues disagree—that we have too many universities. I believe that we have too many universities that all want to do the same thing. It’s the way we’ve structured the university system. We’re one state. We have three systems. We have a Southern University System—all the schools there are in that system are governed by a Board of Supervisors. Then we have the LSU System and they have their Board of Supervisors, and then there’s the University of Louisiana System—McNeese is part of it— and they have their own Board of Supervisors. The statutes creating these Boards of Supervisors tell them to fight over turf, and then we have a Board of Regents which is suppose to coordinate everything. That’s a board governing a board. I have believed for many years that we should eliminate these three systems and their Board of Supervisors. We should put all the universities—and the universities are equal—on the same footing regulated by a single board.

LSU is the flagship. We can only afford one but all our other universities are important and should have their own area of expertise, their own role, their own scope and their own mission. But that doesn’t mean every university can have a nursing school or an architectural school or an engineering school or a law or medical school. We can’t afford that and we don’t need it.

Do you think the legislature will go for this?

I don’t know. It’ll be controversial. I do know this—you cannot have a 21st century higher education system without coordination, without your base being community colleges. And then you have four year schools with their role, their scope and their mission, and then you have your flagship. That’s the way Florida does it. North Carolina is another example. Your core is your community college. It’s cheaper to educate a kid in a community college. Before we had a community college system—and ours is new—kids were going to a four year school and spending their first year in remediation. Now they can go to a community college, get up to speed and move on. It will be the best thing to ever happen to our schools but I do understand that it will be controversial and there will be a lot of fear because all these schools want to be protected; they have their protectors and their mission is to grow; everybody wants more programs. We’re only 4.3 million people; we can’t afford to give every school a school for architecture and we don’t need it.

What will happen to McNeese’s school of nursing?

This doesn’t necessarily mean you’ll lose it, but in North Louisiana for example, we have schools of nursing within 25 or 30 miles of each other. If we consolidate those through economy and scale, we’ll save money and serve the students better. But I’m not an education expert. A single board may decide that we need more nursing schools. The decision ought to be based on sound education policy not politics, and right now it’s based on the programs or allocated according to the most muscle and that’s not a rational way to allocate scarce resources. We can continue doing what we’re doing if people are willing to pay more personal income tax and more sales tax, but I don’t think they are and I don’t think they should.

Share some of your other recommendations to the committee:

We have a Charity Hospital system. We hired a firm called Alvarez & Marsal to go in and do a performance audit at the largest Charity in New Orleans. They did—and after three months came back with their report showing how to save 72 million there. One example is there was one nurse acting as a manager to three nurses so we had three nurses actually being nurses and one who was not providing nursing services but shuffling paper. I’ve also suggested that Arkansas, Louisiana and Mississippi join together in areas that will save us money. We buy a lot of gravel and asphalt. We buy a lot of food for prisoners. If we bought them together we’d lower our unit costs. We all share borders. We have hundreds of bulldozers, airplanes, heavy equipment. If we share we don’t need as much or as many. It’s pooling our resources on common products or services. Wisconsin and Minnesota do it and it works.

What’s the next step?

The next step is convincing the whole commission into considering these things. We’ll start doing that in October. We have to have a report by December. I anticipate that we’ll spend a good portion of October and November discussing and there will probably be some healthy debate. Once we finish our work and everything is on the table, we’ll make a report to the governor and the legislature.

Are there any drawbacks to this plan?

Oh, sure, sure—there’s no perfect solution here. In a perfect world every penny people pay in taxes would be spent effectively. In a perfect world your legislature would say they’ve got X number of dollars to spend and have rational discussions of what their priorities ought to be. If education is a priority then that’s where they spend the money. If roads are the second priority then that’s where they spend the money. But life doesn’t work like that and neither does state government.