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.

Economic Snapshot

By Brett Downer
The Times of SWLA


We’re more likely to have a job than the typical American, thank heavens. We’re more likely to own a home. We have more doctors to choose from — and more hospital beds to climb into — when we’re sick. We have big-dollar economic expansion under way and other prospects peeking in with interest.

We earn thousands of dollars less than the typical American worker, however. We have a tougher time staying in school — whether it’s getting a high school diploma or sticking it out through college. We’re less likely to carry insurance, and when we do, we’re paying more for it.
We’re Southwest Louisiana, and how we stack up with the nation and surrounding regions is outlined in a “Competitive Snapshot” commissioned by the Southwest Louisiana Economic Development Alliance.

The “snapshot” freezes this statistical moment in time for the sake of coordinated economic planning for the future. It was prepared by Market Street Services, an Atlanta-based consulting group which does this work for cities all over the country.

The snapshot tracked data going back four to seven years, sometimes longer, to track Southwest Louisiana trends. In addition, it compared us to three roughly comparable markets — Beaumont, Texas; the Mississippi Gulf Coast; and Mobile, Ala.— and the nation as a whole.

Market Street categorizes the issues by “People, Prosperity, Place.” Its snapshot suggests that Southwest Louisiana grow the workforce, raise wages and educational attainment, diversify the economy, “become an economic garden” for new business, leverage its existing business, expand healthcare access, “improve the environment” and increase civic capacity (more nonprofit groups), among other ideas.

Mac Holladay, the founder and CEO of Market Street, said the snapshot will help the Alliance’s “Southwest Louisiana on the Move!” economic plan.

Jobs
In baseline terms of jobs, the snapshot found that the employment picture here is just about the best anywhere.

Among the three comparison regions and the nation, Southwest Louisiana had the highest level of employment growth from 2001 to 2008. Also, between the fourth quarters of 2004 and 2008, employment growth here was 5.9 percent — far better than the state (1.2 percent) and nation (2.5 percent).

In fact, from 2000-2008, the unemployment rate actually fell here (4.3 percent to 3.9 percent.) While unemployment has gone up in 2009 — to more than 7 percent — the jobless rate is still lower than that of the state, the comparison regions and the nation.

The area’s working population grew 1 percent. That was far below the growth rate nationally (up 8 percent), but still better than the state as whole, which saw a decline.

If the snapshot’s job stats are relatively encouraging, the pay stats present a challenge.

Real per capita income in 2007 was $31,366. That was far below the nation ($38,615), Mississippi Gulf Coast ($36,133) and state ($35,100). Per capita income “is one of the best measurements of a community’s progress in economic development, because it is a key indicator of economic stability and potential buying power.”

Wages in finance, insurance and information services “lag significantly behind national wages,” the snapshot notes.

Quality of Life
The stats on heathcare and insurance represent a mixed doctor’s bag.
Lake Charles has more doctors per person than the state or nation.
Healthcare costs “as a whole” in the region are higher than the state and nation. However, it’s cheaper here to visit the doctor ($75) and dentist ($55) than the national average ($77 and $70, respectively).

The number of hospital beds per capita (619) is far higher than the rates along the Mississippi Gulf Coast (406) and nationally (420). “Since Lake Charles has significantly more hospital beds per capita than the comparison regions, this presents an opportunity to expand capacity in medical research and training,” the snapshot notes.

Also, insurance costs more ($1,536) than the national average ($1,432). The percentage of people without insurance is 22 percent, higher that the state (21 percent) and nation (17 percent).
Education
Education lags.

Too many don’t finish high school. Too many don’t seek college or technical training. Still others enroll in a four-year college, but drop out. Some lose their jobs and need to learn a new skill set.
That’s where community and technical colleges with two-year degrees can some into play.

“I see Sowela and the other technical colleges in the region playing a key role for training -- and re-training — people for the workforce,” said George Swift, the Alliance’s president and CEO. “There are trades and crafts. Petrochemical, with the process technology program. Heath care. Gaming and tourism. Aviation.”

Entrepreneurship
An entrepreneur might find unexplored fields here.

The snapshot counted just 14,500 self-employed people, though “Beaumont had nearly 22,400, the (Mississippi) Gulf Coast had nearly 26,000 and Mobile had just over 27,800.”
Also, small-business loans, patents and research trail all other areas.
Swift sees opportunities.
Plant employees might realize helpful processes or products — then go get patents or form their own businesses. The “cultural economy” has potential for the musicians, artists, cooks and others who season the only-in-Louisiana gumbo of food, arts and entertainment. Also, “more companies are outsourcing things,” Swift said. “They need support services, consulting and technical services.”

Toward this end, the Southwest Louisiana Entrepreneurial and Economic Development Center is being formed. The Alliance is joining with the city, parish and state to build and operate a business incubator near the McNeese campus. The SEED Center, as McNeese President Bob Hebert named it, will house the Alliance offices, the university’s Small Business Development Center and the tools and resources needed to cultivate new business ventures.

Best Face Forward
The area has its challenges, economic and otherwise, when you’re showcasing the area to suitors.
Swift skipped the statistics when asked to name the first ones that came to mind. Instead, he pointed out the window.

“Litter, and the appearance of the I-10 corridor,” he said. He turned his chair toward his third-floor office window, which affords a view of the half-century-old Calcasieu River Bridge. “You have an I-10 bridge that is not attractive, wide, or safe-looking.”

“It’s not aesthetically pleasing,” he said. “There are no travel plazas that they can easily see...I-210 looks good, but most people take I-10.”

Nevertheless, he said, there’s a good face being put forward when people arrive by other means.
“The new airport is a major improvement for people’s first impression,” he said. The $28 million Lake Charles Regional Airport terminal is a rare welcome legacy of Hurricane Rita. Also, over at Chennault, “Million Air is a great-looking facility for people who arrive that way.” He also cited area casinos and golf courses as powerful imagemakers for the area.

What’s most attractive to outside prospects, Swift said, is an emerging fresh image of the state.
“There’s a new overall attitude and acceptance of the region by new companies and new people,” he said.

The Alliance helps that idea along through advertising and marketing that touts the petrochemical industry, gaming, health care and school achievement. “We can tell a good story,” Swift said. “We get past the perception of Louisiana. Ethics laws and marketing ... move away from the perception of political corruption and the things we don’t do anymore.”

Prospects
To get potential new businesses interested, “we have a database of available buildings and sites and demographics on the area. We contact developers and site consultants. We field RFPs (requests for proposals) usually through the state,” Swift said.

“Say someone wants a hundred acres, with rail (service), and along the interstate. We can be the link between government — on a local, parish or state level — and whatever a potential client might want. We’re kind of the liaison between these entities.”

“We’re also marketing the area in publications and online,” he said.

“We’re behind the scenes, working. We try to identify opportunities.”

And even with the wait-and-see national economic prospects, “people are looking here,” Swift insisted.

“Yes, people are still looking, and that’s a good sign. But they want to see that there’s an upswing in the national economy. There are about eight good prospects right now” — he declined to name them — “so we feel really good about the region.”

He added: “I don’t want to make light of a single person who has lost their job. But I talk to civic clubs all the time, and I tell them I can’t think of another place where I would rather be than Southwest Louisiana.”

FACTBOX:
It's All Part of a Plan
The “competitive snapshot” done by Atlanta consulting group Market Street Services is part of a four-part effort this year by the Southwest Louisiana Economic Development Alliance.

The first step was an analysis of the Beauregard Regional Airport and industrial park effort. The acreage at the site has some rail service, but needs water and sewer lines.

“It has tremendous potential long-term,” Alliance CEO George Swift said of efforts to get the facility designated as a Louisiana Megasite. “And maybe short-term.”

The second step was the competitive snapshot. It was funded by the Alliance, L’auberge du Lac Casino Resort and Louisiana Economic Development.

Next will be a Target Business Review to find targets and opportunities for economic diversification. For example, existing businesses in the petrochemical or agriculture sectors might spark related prospects for new businesses. That review will take place in mid-October.

The final phase will be an Implementation Action Plan with a timeline and benchmarks. “They will look at our five-year plan, Southwest Louisiana on the Move, to see what needs to be re-prioritized,” Swift said.

The Alliance’s plan began a year and a half ago — before the 2008 hurricane season and the national downtown — so changes are expected. Workforce development and new business recruiting, for example, have been high priorities, and will remain so. However, an emerging factor is business retention — developing opportunities from the businesses already here.
The Alliance will have a game plan “by the end of the year,” Swift said.