To get rid of one-time money, hawks embrace it

Q: What do “fiscal hawks” do when they want to spend scarlet “one-time money” on general fund operating expenses?

A: They call it “amnesty.”

And there’s the rabbit pulled from the hat by the “hawks,” a group almost entirely composed of Republican members of the Louisiana House of Representatives, as they contrived to extricate themselves from a mess of their own making. The group once had been known for its jihad against one-time money, or money gathered from recurring sources not tied into the general fund and from nonrecurring sources such as property sales, declaring long and loudly that such money could not stain spending coming from the general fund no matter what legal machinations made it eligible for use in the general fund.

Until in order to save the concept, they had to destroy it. Given the opportunity to excise about $490 million in such funds, where roughly two-thirds was of the recurring kind and the remainder nonrecurring, with House Democrats egging them on they hatched a plan to cut spending somewhat, pare back on tax credits, much of this being little more than pure subsidization of some grossly inefficient economic activity, and to finance the bulk by raising taxes, mostly on business.

While Democrats cheered at the growth in government from the increased taxes, among other Republicans and Gov. Bobby Jindal, it went over about as well as a submarine with a screen door, even to some of the hawks themselves. The fundamental problem was they had to find more revenues, to replace those they were going to keep in a myriad of dedicated funds where they would continue to side idly, far in excess of what was needed for the actual need and priority of what statute tied them to, in order to pull this off without raising taxes and reducing credit for activities that did not produce whopping net losses to the state.

Then somebody among the “hawks” must have gotten the bright idea of conjuring revenues up from something tried most recently four years ago, in setting up a program that provides for a limited time reduced penalties on paying back taxes. And, presto, tax hikes give way to tax amnesty.

Of course, never mind that this amnesty is the textbook definition of “one-time” money; not that the previous incarnation of the plan announced just days ago didn’t have some squirreled away as well, but not at this level it would appear (details have yet to emerge on this iteration). And on a level perhaps not attainable.

While the last amnesty that occurred pulled in an amount of money about triple of what had been imagined, it applied to a time period presumably twice as long as this proposed one will and half of its proceeds was considered genuinely nonrecurring by the Revenue Estimating Conference; that is, it was declared that this never would have been collected without the one-shot amnesty event and therefore cannot be used in an operating budget. The remainder is considered recurring in the sense that it accelerates future fruits of collection efforts and thereby could be used in the fiscal year 2014 budget. Using the 2009 figures as baseline, this means perhaps $125 million might be available for this.

The other major tweak was concentrating tax credit reductions on the least useful of them, a definitive step in the right direction, and the manageable cuts to government spending remain. Still, consider that one of these three major planks to eliminate the use of one-time money is, in essence, to use now future receipts generated from a one-off event of highly unpredictable result. Kind of like borrowing money from a state-created agency with its own revenue state-supplied streams with the promise to pay back in kind later, isn’t it?

Except that move, as demonstrated by their explicit rejection of it in Jindal’s budget, is beyond the pale to the “hawks.” Why? Because they say so, which is the same reason why the reliance on amnesty dollars does not violate their moral scruples. From a lesson they borrowed from their liberal Democrat colleagues, if the facts don’t fit to validate your argument, change the facts.

Regardless of the unmistakable hypocrisy of it all, the “hawks” now mostly have gotten it right. Assuming they have dumped all of the tax increases, the most objectionable thing left in their budget is denying the sales tax rebate for timely remittance for concerns over a certain level of business. It is a stealth tax increase because now these firms lose compensation for the resources they put into being tax collector for the state. Yet keep in mind that with their Democrat friends that “hawks” propose to increase the size of government. Surplus money that would have been swept out of funds and put to good use remains, and extra money instead is collected of which maybe half goes to subsidizing government.

The final product they put forth today, how the Senate receives it, and how Jindal deals with it remain unknown. However, if it contains these present elements – spending cuts, shedding of inefficient credits, and one-time money in the form of the amnesty (plus a wishful REC forecast surplus coming up soon and exhorting more efficient revenue collection) – it’s a positive thing, and the other agents involved ought to support it.

So next time you see one, thank a “hawk” for selling out on principles. It saved them from ignominious defeat on this issue and produced for us something good, so everyone (save those few who lived off the generous tax credits now endangered) wins. With this now under their belts, perhaps next time they decide to play politician seriously, they’ll actually address what really caused the whole dispute in the first place – a state fiscal structure straitjacketed to allow them to avoid hard revenue-raising and expenditure-prioritizing decisions – instead of leaving it as just a fatwa against something born from an accounting definition.