Fund money fight illuminates divisions on govt size

The arcane world of Louisiana budgeting is fueling conflict illuminating broader ideological visions of the size of government between the Louisiana House and Senate.

For the upcoming challenging budget year, both chambers agree a solution is to use $198 million of the Budget Stabilization Fund, about a quarter of its total, to balance the operating budget. The problem is, as both chambers must give at least two-thirds assent to this use, that the House leadership refuses to go along with it unless also a part of any appropriations would be an offsetting amount in non-recurring funds generated from a tax amnesty last year in addition to that portion already used in part as dictated in the statute to replenish the Fund.

The Senate leaders say this is not necessary, pointing to the produce of Act 226 of last year that specifically exempts any placing of funds in the BSF “until such time as the official forecast exceeds the actual collections of state general fund (direct) revenue for Fiscal Year 2008.” This will not happen next year and perhaps not for another couple of years, buttressing the Senate leadership’s view.

But Art. VII Sec. 10.3 of the Constitution addresses when the Fund is to receive money, and a constitutional provision takes precedence over statute. Supporting the House’s view is that last year’s change was authored by state Rep. Jim Fannin, who disagrees with the Senate’s interpretation.

Regardless of the admissibility of the obligation to deposit, political considerations define the issue as the fund’s tapping requires both chambers’ approval. At least on the Senate’s side, this has caused the rhetoric to deteriorate with one of its leaders on the issue, state Sen. Mike Michot, complaining the House irresponsibly wished to keep stashed away resources.

In essence any money plunked into the Fund will not be able to be spent for some time without amending the Constitution (although that effort is apace) because it is unlikely that a year-over-year decline in state revenues will occur next year to this one, a necessary condition to withdraw money. Making matters more complicated is that the Revenue Estimating Conference must declare the source money’s availability, either as recurring or not.

In other words, depending on the combination presented to the Conference, this money either could be spent on recurring items this year only, while the House’s strategy would make it unavailable for those purposes in future years. The Senate has plans for this tax amnesty money, to have it declared recurring for next year’s Medicaid expenditures. Hence the conflict over the size of government – the House wants to force more restraint than the Senate.

The Senate’s bargaining chip is that there would be $198 million more in cuts than presently budgeted for in the Legislature’s view (but not the governor’s). While the House can argue nothing happens unless its view is followed, the Senate can point out that something the House does not want, nothing to happen, is what it’s going to get unless it acquiesces.

The House head honchos can win this conflict if they spell out to the public why their interpretation is correct, forcing the Senate’s hand. Otherwise, the battle does become more shaped by public opinion, which may end up to the Senate’s advantage with all of the convoluted explanations about the process generally glazing eyes over but which can find focus on the fact that more cuts have to be endured. Even the most technical kinds of things eventually boil down to politics, especially in this state.