Lawmakers criticize $4 million “savings” contract

One legislator called spending $4 million to find savings in state government “mind-boggling” Wednesday as others criticized the decision by the Jindal administration.

Republican and Democratic members of a state House panel vented over the $4 million contract with Alvarez & Marsal, a New York firm, to identify savings for state government.

State Rep. John Schroder, R-Covington, said it is particularly difficult to swallow when legislators couldn’t come up with funds to cover in-home services for the developmentally disabled but the administration found millions for the contract.

“I don’t know why we are doing it but I know a lot of people don’t like it,” Schroder said. “It’s mind-boggling that we have to go outside this state to find efficiencies.”

State Rep. Tim Burns, R-Mandeville, questioned whether the firm would come up with any ideas “we have not thought of frankly,” many of which have died because of political opposition.

He said t he firm played a role in assessing the state’s tax structure for the governor’s failed tax overhaul last year.

The Jindal administration signed a three-year contract with the global management firm in early January. However, the firm is expected to complete its initial work in four months and receive $4.2 million in payment. Any work performed beyond April will require additional dollars.

The Louisiana House and Governmental Affairs Committee took up the contract during a meeting called to discuss ways to improve efficiency in state government through reorganization.

Administration executive Ruth Johnson said the contract’s objective of $500 million in savings or new dollars identified will be well worth the contract’s $4 million cost.

She expressed confidence that the firm would identify that and more.

Johnson said ideas would be made public as savings are “identified, vetted and finalized” and budget adjustments made if needed as the proposed state spending plan for the fiscal year that begins July 1 moves through the Legislature. “The information will start coming to us in February,” she said.

State Rep. Greg Miller, R-Norco, said the contract looked like duplication of the last five years of efforts that legislators and the administration have been through because of years of fiscal woes.

“We have done a pretty good job of finding efficiencies,” said state Rep. Michael Danahay, D-Sulphur. Now, he said the administration is paying the firm $1 million a month for four months of work.

Johnson said 15 percent will be withheld from every payment and full payment is due based on Alvarez and Marsal meeting savings targets.

“They need to find real recurring savings that we can do administratively or through the budget process,” Johnson said.

If the firm identifies areas that require constitutional or law changes, the savings would not necessarily count toward the target goal, she said. If there is a “very low chance” of passage of the measures, she said, “it probably wouldn’t count toward their target.”

Johnson said there is a potential for the company to do more work past its April 15 initial work if the state needs help in implementing some recommendations.

She said the company would provide “staff augmentation” — personnel who would work with state employees on sometimes technical issues.