Treasurer: State budget could be short more than $100 million

In a transaction that had fits and starts, St. Tammany Parish government is moving forward with buying the former Southeast Louisiana Hospital from the state.

Plans for the property include reselling the hospital to a mental health services hospital operator, expanding Pelican Park and building a sorely needed bypass road. The land is home to two families of endangered woodpeckers. Developers will work around the woodpeckers.

The parish government will pay far less than the Jindal administration originally wanted, doing little to resolve possible fiscal problems as the end of the state budget year approaches. With less than a week remaining in the state fiscal year, the Jindal administration appears to be more than $100 million short of dollars needed for the $25.6 billion state spending plan.

State Treasurer John Kennedy said he’s missing revenue from hospital lease payments, at least two property sales and hurricane recovery repayments. He also still is waiting on the administration to repay a $70 million loan he made from the state treasury to keep higher education afloat.

“This is a hell of a way to run a railroad,” Kennedy said.

Commissioner of Administration Kristy Nichols, the governor’s chief budget adviser, said there is no reason to panic. She said the budget will be fully funded. Her office said the fiscal year doesn’t officially close for accounting purposes until Aug. 14, allowing plenty of time for dollars to arrive.

“Bottom line: Fiscal year 2014 is fully funded. Any speculation to the contrary has no basis in fact,” Nichols said in a prepared statement.

Later in the day, state Sen. Karen Peterson, D-New Orleans and chairwoman of the Louisiana Democratic Party, applauded herself for taking a stand by voting against the state budget when it went through the Legislature. “Fiscal malpractice. And they won’t even cop to it!” she tweeted, adding the hashtag #Jindalized.

At issue is how the state spending plan was put together. With state income falling short of meeting expenses, Gov. Bobby Jindal and legislators chose to sell property; task the state revenue department with finding savings by ferreting out fraud; press municipalities to repay Hurricane Katrina loans; and scrape the loose change from funds scattered across state government. The patchwork approach relied on a number of pieces falling into place.

Much of the piecemeal funding is propping up the state’s public colleges and universities. Higher education received loans from the state treasury when money didn’t come in fast enough to pay bills. The money has to be repaid.

According to the state treasurer’s accounts, the budget still lacks:

$63 million from hospital lease payments.

$17.8 million from the sale of the former Southeast Hospital property.

$8 million for the state revenue department’s anti-fraud initiative.

$5 million from the city of New Orleans and the Orleans Levee District for loans made after Hurricane Katrina in 2005.

Total it all up, and the shortfall approaches $135 million. The state fiscal year runs from July 1 to June 30, which means the current budget year ends on Monday.

Kennedy predicts the administration will wind up borrowing money from next year’s state budget in order to make the numbers balance. He said that’s like taking out a loan to cover expenses until next payday.

“Something’s wrong. Something’s clearly wrong with the way we’re doing things,” he said.

Nichols disputes the state treasurer’s conclusions. For example, she said hospital lease payments are not short by $63 million. She said roughly $48 million is outstanding from Children’s Hospital in New Orleans and LSU Shreveport. Other hospital payments totaling $9 million also have yet to arrive. The Jindal administration contends those payments will arrive by the end of the month.

What is undisputed is that the Jindal administration will not have all of the anticipated money in hand by the close of the business day on Monday. The administration, in part, is banking on unexpected dollars, including early payments that were supposed to go into next year’s budget.

The anti-fraud initiative at the state Department of Revenue was supposed to generate $20 million. It generated $33 million, although only $11.5 million is in the state treasury. The revenue department is supposed to transfer another $8.5 million next week. The additional $13 million is expected to come in at some point before Aug. 14.

The campus of the former Southeast Louisiana Hospital in Mandeville was supposed to sell for $17.8 million. Then the buyer — St. Tammany Parish government — discovered that the campus is home to an endangered species known as the red-cockaded woodpecker, creating possible development problems.

Negotiations between the state and the parish resulted in a lower sales price. The parish will pay $15.4 million for the property, allowing some of the land to be turned into a bypass road from La. 1088 to U.S. 190. The bypass will provide another access point to Pelican Park.

Only $9 million is expected from the parish this fiscal year, and that money will go into an escrow account until the sale is final. The rest of the money will arrive sometime before the end of December.

Kennedy said he can’t touch money in an escrow account. The administration said the excess money from the anti-fraud initiative and hospital lease payments will cover the gap.

Children’s Hospital in New Orleans is expected to make $33 million of next year’s lease payment this year. Children’s pays the state rent in exchange for running the city’s interim public hospital.

Faimon A. Roberts III of The New Orleans Advocate contributed to this report. Follow Michelle Millhollon on Twitter, @mmillhollon. For more coverage of Louisiana government and politics, follow our Politics Blog at http://blogs.theadvocate.com/politicsblog.