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1.6.09

Review of dedicated funds bringing certain uses to light

One silver lining to the budgetary problems facing Louisiana at this time is it is forcing consideration of fiscal matters often forgotten or ignored that likely will lead to better future priorities. A case in point is the disposition of nearly 650 funds tucked away in state government mainly sequestered and largely unavailable for anything but often very narrow purposes.

The state’s laws and Constitution locks away the majority of state funds to dedicated purposes, which legally can be transferred to other purposes only in times of declared deficit, with agreement by both majoritarian branches of government, and, unless there is a huge crisis, only five percent of each may be transferred once in a two-year cycle. Legislation is before the Legislature to double the takings and to make them eligible for such annually (as well as to review them every four years to determine whether they really serve a needed purpose). The additional flexibility afforded by passage of these measures is paramount to more efficient and effective future budgeting.

But some are complaining that some of the money going into the funds – these can be as small as a few thousand dollars in balances while others carry multiple millions – are assessments on private, quasi-public, or local government entities . Therefore, it is “unfair” for the state to take what should have been set aside and used exclusively on behalf of, or at least in comportment with the wishes of, the assessed, it is argued.

There is a certain logic to that argument, but to implement it now would be struggle. Legislators would have to decide which of the 648 would qualify as being mostly designed to benefit the entities paying in, and then write in legal exemptions for them. That wouldn’t happen this session.

But whether it would be correct and desirable to follow this philosophy is another matter. One reason why this has become a point of contention is that the balances carried in all of these funds total nearly $13.5 billion – almost two years worth of state general fund revenues. It must be questioned why in many instances money keeps flowing into these with little going out. If they serve a certain purpose, they need to pursue that instead of turning into savings accounts with the state being the banker.

That’s a role state government should not be playing. If money is to be excised from these sources by government because of a promise to then use that money on their behalf, that needs to be done expeditiously. Letting it pile up leads to nefarious activities, a famous example being former Agriculture Secretary Bob Odom realizing a growing pot of money coming into a fund for boll weevil eradication could be siphoned off to build sugar mills at taxpayer expense. Now the state is left with mills that produce little and having to find extra money to stave off pests because the revenues into the fund have been encumbered to pay off the money-losing mills.

Therefore, ever-growing balances in these funds signal that they really aren’t necessary, that it would be better off to leave those funds in the hands of the private sector or other governments to do with as its members or governing authorities wish. And if one of those things is a collective activity, why must government be the one to coordinate it? Aren’t there voluntary associations that could accomplish the same outside of government, or can’t local governments do it themselves?

Thus, if entities insist upon having state government coerce money out of them for some purpose, they will have to reconcile themselves to the fact that takings of it may occur. Perhaps that will make them reevaluate the desirability of the current arrangement, and they may find subsequent to this analysis that maybe they ought to end it. Or, they should get the money spent on the activity presumed so crucial that state government must get involved in it. Otherwise, they have no room to complain because the State of Louisiana isn’t their private bank.

1 comment:

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