FOCUS ON THE FISC
Louisiana Legislative Fiscal Office
Office of Juvenile Justice/LAMOD (Louisiana Model)
Stephanie Blanchard, Fiscal Analyst,
firstname.lastname@example.org The State of Missouri juvenile justice system has been a model for other states efforts in rehabilitating youth. Missouri’s unique approach is not a typical correctional model and is comprised of small residential facilities located throughout the state with a focus on rehabilitation. The LA Office of Juvenile Justice (OJJ) is one of several states that has implemented a similar approach. Since 2008 OJJ has implemented a number of national evidence based practices that have shown a positive impact to recidivism rates of youth and an overall decline in the number of youth in the Juvenile Justice System. The LA Model (LAMOD) is similar to the Missouri Model in that it focuses on therapeutic, child-centered environment versus the correctional, custodial model. Components of the model include:
Dorm setting is more homelike as opposed to prison cells
Group processes are led by Youth Care Workers
Dorm sizes range from 10-12 youth as opposed to large institutional care
Youth are more engaged with staff than correctional care
Youth receive very structured expectations for each segment of the day
Each activity is a “teachable” moment OJJ currently operates four secure care facilities for males: Swanson Center for Youth in Monroe, Swanson Center for Youth in Columbia, Jetson Center for Youth in Baker, and Bridge City Center for Youth in Jefferson Parish. As part of the reform of Louisiana’s juvenile justice system, OJJ’s goal is to open small regional facilities instead of the large institutionalized correction
Interest on the Unfunded Liability - $3.69 B
Once the constitutional amendment was passed, the state chose a back-loaded payment schedule. This amortization method led to payments that would increase annually. The original payment method did not cover the accruing interest on the debt and the debt increased as payments were made. In 1992, the legislature revised the payment schedule, which became more heavily back-loaded. This revision allowed the state to make lower annual payments initially, but significantly higher annual payments in future fiscal years. As a result, the debt was allowed to grow for more years due to the payments not covering the interest on the debt. Act 497 of 2009 changed the payment schedule of the UAL by consolidating existing payment schedules and changed the funding of the experience account, which is expected to result in a $500 M reduction to the UAL. Even with this reduction, the original debt on the state systems has increased by $3.69 B.
Investment Gains and Losses - $5.62 B
System investment gains and losses are registered in relation to the specific system’s assumed rate of return. Since 1988, the investment loss amounts have been greater than investment gain amounts, which have resulted in a total investment loss of $5.62 B. For example, over the past 26 fiscal years both LASERS and TRSL have returned 16 years of investment gains and 10 years of investment losses. The majority of these loss years were following the Dotcom Crash (2000-2002) and the Great Recession (2007-2009). It should be noted that the majority of the total investment losses occurred in 2009 when both LASERS and TRSL had a combined investment loss of $4.6 B.
COLA Allocations – $2.88 B
The effect of COLAs on the system has resulted in a loss of investment gains over the years. As a result of COLA formulas, the systems have allocated approximately $2.9 B in investment gains towards COLAs. Had these gains not been allocated to COLAs, the gains would have been used to offset investment losses as described above.
Additional Benefits Promised – $162 M
Since 1989 additional benefits promised have increased the UAL by approximately $162 M. The majority of the amount is due to the accrual rate for LSERS members increasing from 2.5% to 3.3% in 2001. The change in the accrual rate resulted in a $129 M increase. STPOL increased accrual to 3.5% for all troopers in 2001 that resulted in a $30 M increase. In addition, the net additional benefits promised between LASERS and TRSL total $3 M.
Net Actuarial Gains and Losses – $834 M
For each system valuation the system actuary sets a series of demographic assumptions. These long-term assumptions include a wide range of categories that can include member and retiree mortality, salary growth, disability, retirement and termination, and family composition. These assumptions can lead to gains and losses related to actual events that happen during the year. As it relates to the state UAL, these actuarial assumptions have not been met over the years and have resulted in an increase of over $800 M to the UAL. On a year-by-year basis different demographic assumptions that are not met have positive and negative effects on the system UALs. For example, more members may leave the system in one year than assumed which creates a gain for the system, whereas in another year, retiree mortality rates may be less than estimated which creates a loss for the system.
The current UAL of $19.025 B is a projected number based upon 2013 actuarial valuations approved by the four state systems’ board of trustees. This number is subject to change upon approval from the Public Retirement Systems’ Actuarial Committee (PRSAC). PRSAC is responsible for reviewing and adopting each year the official valuations of each state and statewide public retirement system, which are submitted annually to the committee by each system's actuary. The committee historically meets in January to approve actuarial valuations.