A bill that will soon be debated in the Louisiana legislature contains language that appears to clear the way for the state to use money from the potential privatization of the Office of Group Benefits (OGB), the agency that manages state employees’ health insurance, to help plug a budget hole.
As the Associated Press reports, the “fund sweep” bill authored by House Appropriations Committee Chairman Jim Fannin (D) proposes to scrape $231 million from state agencies and put it into an “Overcollections Fund,” which would help cover the state’s $1.6 billion budget shortfall. This kind of “sweep” is not unusual in Louisiana — though the size of this year’s proposal is.
“Nobody would have wanted it if there’d been another source of money. Rather than continue to cut health and hospitals and continue to cut higher education, then they chose this way,” Fannin told the AP.
But the bill also includes language that specifically addresses OGB, which manages the health insurance of around 250,000 people.
As TPM reported last week, the Jindal administration is quietly pushing to privatize OGB, a move which critics charge puts the state and its employees at risk of paying more in the long-run. They also say that plans for a sale are at least partly motivated by the OGB’s half billion dollar surplus fund — money that could help alleviate the state’s immediate budget trouble. (Neither the Governor’s office nor the Division of Administration, which oversees OGB, have returned numerous requests for comment from TPM.)
It has been unclear why or how the OGB’s surplus money would be divided in the event of a sale. Louisiana law currently prohibits it from being used for “cash flow purposes” or any other purpose “inconsistent” with the agency’s administration. But the “fund sweep” bill offers a clue:
After satisfying the requirements of the Bond Security and Redemption Fund as provided in Article VII, Section 9(B) of the Constitution of Louisiana, the treasurer shall notwithstanding R.S. 42:854(C), transfer into the Overcollections Fund provided for in R.S. 39:100.21, the proceeds generated as a result of the sale or other transaction by the Office of Group Benefits which has the effect of transforming its operations.
R.S. 42:854(C) is the law that prohibits OGB funds from being used for “cash flow purposes.” And this provision appears aimed at overriding it.
TPM has reached out to Fannin, the bill’s sponsor, to ask why the provision was included in the “fund sweep.”
The Division of Administration and the Governor’s office have still not returned TPM’s requests for comment.
