Bobby Jindal: Crony Capitalist or Merely Incompetent?

Mismanagement or Misfeasance?

Merriam-Webster defines the term misfeasance this way: "the performance of a lawful action in an illegal or improper manner." This is an important term that must be considered when assessing the performance of Governor Bobby Jindal and his administration in the wake of two devastating reports by the Legislative Auditor released this month.

One involves the collection (or, rather the non-collection) of severance taxes. The other deals with the lack of financial controls within the state's largest department — the Department of Health & Hospitals — during a time of great upheaval related to program changes, privatization and apparent and alleged criminal activity.

Part of the Bobby Jindal myth is that he's a tight-fisted, fiscal conservative who has somehow managed to keep the State of Louisiana's fiscal ship afloat through a daring race to sell off state assets from mental health facilities to public hospitals, laying of public employees by the thousands and having the private sector step up to the plate and deliver services more effectively.

Like most myths, there are elements of truth in Jindal's myth, but two recent reports blow gaping holes in the tight-fisted part of his.

The first story revolves around a report by the Legislative Auditor which found that the state, under Jindal's leadership, had pretty much failed to collect severance taxes on oil and gas produced in Louisiana, starting in 2011. Here's the executive summary.

NOLA.com summarized the core of the problem identified in the Auditor's report this way:

In an effort to streamline government functions, the Department of Revenue transferred much of its severance tax auditing to the Department of Natural Resources in 2011. The result was that Louisiana identified far less outstanding severance tax revenue in 2012 than in 2010.

In 2010, the Department of Revenue found $26 million in potentially unpaid severance taxes. By 2012, under the new audit arrangement, the state only identified $40,729 of back severance taxes. 

A couple of things stand out about this information and these dates. First, 2010 was the year of the BP Gulf Gusher and the Obama administration's moratorium on deepwater drilling. During much of 2010, Scott Angelle served as interim Lieutenant Governor until a special election was held to fill the vacancy that had been created by the resignation of Mitch Landrieu who had been elected mayor of the City of New Orleans.

Angelle then returned to his position as Secretary of the Department of Natural Resources, the agency that ostensibly regulates (among others) the oil and gas industry. Angelle was the head cheerleader for the oil and gas industry against the moratorium in 2010. He was the public face of the Gulf Economic Survival Team, which built a grassroots campaign across the state to fight the moratorium.

Angelle took a week off between the end of his stint as Lieutenant Governor and returning to his DNR job to raise a little money for what would eventually become his 2012 campaign for a seat on the Louisiana Public Service Commission. It was a highly profitable week for Angelle. Friends of the oil and gas industry were very appreciative of his work.

The question that the Legislative Auditor's report raises is this: Did Angelle cozy relationship with the oil and gas industry continue when he returned as DNR Secretary?

The 2012 severance tax collections were based on oil and gas extracted in 2011, Angelle's first post-moratorium year back on the job at DNR.

The Auditor's report notes that about 10% of state revenue is generated by severance taxes — but only if they're actually collected.

The drop in collections since 2011 can be attributed to Jindal's relentless push for efficiencies in government. The Advocate reports:

Problems arose not just when the department switched off GenTax but when changes were made in the name of efficiency. For example, to streamline services across state government, severance tax field audits moved from the revenue department to the state Department of Natural Resources.

According to The Advocate, the Auditor recommended in his December 2 report that responsibility for severance tax audits and collections be sent back to the Department of Revenue, and that the Department agreed with the recommendation.

While steps appear to be underway to end that money hemorrhage, another one was revealed a week later, this one in the scandal-plagued Department of Health & Hospitals (DHH).

It turns out that Jindal had all but eliminated internal audits at DHH back in 2011, according to NOLA.com:

In recent years, Legislative Auditor Daryl Purpera's Office has documented fraud and improperly paid claims for services at DHH, repeatedly citing the lack of an internal audit division as a problem.

The department eliminated all but one internal auditor job in January 2011, and the remaining auditor retired a month later, leaving the agency without the internal checks-and-balance system until Root was hired in May.

DHH distributes about $9 Billion per year but had no internal controls for two years. What could possibly go wrong? Other than, say, the CNSI big rigging?

Well, there is the case of the now former accountant for DHH who was charged with stealing more than $1 million from the Medicaid program.

But that could be small potatoes. The two year window when DHH had not internal auditors also coincides with the launch of the problem plagued (for patients, any way) Bayou Health and with Jindal's privatization of Louisiana's Charity Hospitals which were taken away from LSU and awarded to private companies (at least one of which has never run a healthcare facility).

With the big money deals now cut, Jindal has agreed to put controls back in place at DHH, agreeing to do what The Advocate calls 'rejuvinate' internal audits.

Put together, these two stories paint a picture of an administration that hides behinds claims of tough times and austerity for the public while letting its cronies and friends loot state programs and revenue.

Severance tax collections represent the legal expression of the Commons on our mineral wealth. That is, those taxes represent our common claim on a small share of the mineral and resource wealth of this state. When the state exempts those taxes, it refutes our claim. When it flat out refuses to collect the taxes, it is denying the legitimacy of the claim at all.

For the state's largest department, DHH, to have no internal audits in place during a two-year period when there were several major transitions under way is wreckless and approaches malfeasance.

Bobby Jindal's myth consists of many strands, but the dominant one emerging in the wake of these two reports is that of a Governor committed to allowing a looting of the public treasury of this state through brazen crony capitalism.

The Ethical Gold Standard was a distraction — and a lie.