Dedications overuse until changed requires funds sweeps

As the Legislature prepares to grapple with the annual budgeting exercise, special attention has come to the practice of “funds sweeps,” hopefully initiating a larger review of funding mechanisms and genuine state needs as previously noted.

In recent years, this tactic increasingly has been used to allow for current funding of programs. This is because money accrues into these accounts, whose funding is set by law, which then builds up and whose recent deposits, much less any substantial portion of their balances, would appear not to be used in the upcoming fiscal of year or perhaps even never given historical use patterns. Rather than sit idle, past gubernatorial administrations have taken to dipping into such funds except for those very few that legally cannot be siphoned this way. While the appearance of dedicated legislation especially for this purpose started under Gov. Kathleen Blanco, earlier instances appear here and there; for example, in the supplemental appropriation bill in 2004 and in a bill creating new dedicated funds in 2001.

The problem with dedicated funding is that it locks in a certain purpose invariant of amount and priority of that eligible expenditure relative to all others. A good example comes from R.S. 56:639.8 that defines the Artificial Reef Development Fund. This fund collects a portion of money from owners of decommissioned offshore rigs that they save from not moving the rigs in deference to sinking them to create an artificial reef, if they follow state regulations in doing so.

Recently, money has been growing steadily in this fund because relatively so little has gone out in financing artificial reef activities. At the beginning of fiscal year 2012 it had nearly $35 million and only a few hundred thousand went out in activities. In fact, the Legislature has noticed this, and in 2010 and 2011 passed into law expanded purposes of the fund in order to tap into the burgeoning balance.

However, it ended the year under $19 million because of a funds sweep. This has raised the hackles of the Louisiana Wildlife and Fisheries Commission, which has threatened a suit if any more money gets lifted (this year $20 million more is planned to go). An indignant vice chairman Billy Broussard claimed that a sweep of this fund ran counter to the deeds of donation made by companies and that a suit was necessary “to protect the national resources of the state.”

That the fund in question runs such huge surpluses, indicating the actual need “to protect the national resources of the state” was much lower than the actual funds inflow, shows little truth to his latter assertion. And the former one is questionable as well. While statute defines the (now three, as a result of the recent statutes) uses to which the fund must be put, since an appropriation has the force of statute, where they are not specifically prohibited sweeps thus are legal despite that language.

Whether a specific donation agreement, which mainly details the obligations of both parties in making the site ready and transferring ownership to the state, can override contrary statute is uncertain but unlikely. But of more interest is the document in question might have a legal defect that would moot the entire question. The relevant language is:

Donor agrees to and shall donate to the Conservation Fund the sum of ­­______ dollars ($____.__), as provided by the Louisiana Fishing Enhancement Act and the Louisiana Artificial Reef Development Program, with such sums then to be placed in the Artificial Reef Fund for the benefit of the Louisiana Artificial Reef Development Program pursuant to the Louisiana Fishing Enhancement Act and the Louisiana Artificial Reef Development Program, as presently written.

The problem is, there is no “Artificial Reef Fund,” only the “Artificial Reef Development Fund,” where money passes through from the Conservation Fund, established in the Constitution. But to avoid any legal hassle at all, the Gov. Bobby Jindal Administration simply could direct any funding from the reef fund to paying for Department of Wildlife and Fisheries functions, consistent with the Constitution’s statement that “[t]he monies in the Conservation Fund shall be appropriated by the legislature to the Department of Wildlife and Fisheries … and shall be used solely for the programs and purposes of conservation, protection, preservation, management, and replenishment of the state's natural resources and wildlife, including use for land acquisition or for federal matching fund programs which promote such purposes, and for the operation and administration of the Department and the Wildlife and Fisheries Commission ….”

Yet the larger point is that, without a funds sweep here, money would be available only for a very low priority purpose that probably never would be used in any event, beggaring much higher priority uses of it, and jealously guarded by a functionary who seems unable to understand that. Far better is the attitude of the Louisiana State Police, which oversees two funds eyed for a sweep this year and one of them having a substantial balance, which recognizes their budgeting requests that Legislature approves don’t spend all the money and therefore don’t object to the haircutting.

Of course, all of this could be avoided through a massive extinction of dedications, review of present means of funding relative to the uses of that money, determination of the most appropriate sources of raising revenues, determination of genuine needs, and matching of money raised in proportion to the priority of genuine needs. But legislators seem unwilling to do that, in part because of the hyper-protective mode exhibited by special interests and bureaucrats as exemplified with reef funding, and in part because it demands political courage to make priorities that will disappoint some, instead of falling back on covering themselves by declaring dedications tie their hands.

Until that time, funds sweeps are a flawed but valuable tool to correct imbalances of funds inflows. As long as the insanity of a fiscal system putting way too much emphasis on the incredible insensitivity of dedications to actual needs, it’s best to live with them.