End, don't mend, both solar and film giveaways

It’s a start to reducing wasteful spending in Louisiana government, but the timidity involved seems unlikely to start the snowball rolling necessary to deal significantly with the larger problem of wealth transfer of the many to the few.

HB 705 by state Rep. Erich Ponti would reduce over the next three years the subsidization the state provides to the solar industry and to individuals with means or to those assisted by the industry. It also eliminates entirely the wind power subsidy, which has deprived the state of little money. The problem comes from solar: it has cost the state over four years nearly $39 million.

Unfortunately, the bill mends but does not end the giveaway. It has showered cash onto solar energy installers, where the exorbitant 50 percent credit with the federal 30 percent version allows Louisiana property owners to install systems for as little as $5,000 – a cost often waived by installers in order to get a $20,000 handout from American and Louisiana taxpayers as they still could make money off the deal. It also has allowed the number of power users, as the number of these owners has increased as a result of the gifting, to get preferential power rates at the expense of other ratepayers, their lower rate meaning others must pay more to make up the difference. The bill allows the installation subsidy to continue, but at a lower level of reimbursement.

Shift in hawk focus might bring them, state success

With the first move made on the Louisiana budgetary chess board, the next came yesterday setting up the potential for competing versions of the document. What’s next, and does it mean genuine budgetary and fiscal reform is on the way?

Monday, under threat that it would go nowhere unless “one-time” money was removed from it, mostly Republican lawmakers allied with Gov. Bobby Jindal removed this source of funding, almost $500 million worth or two percent of the total spending requested. This is a mix of recurring and nonrecurring revenues, with the former distinguished from any other kind of recurring revenue in that it doesn’t go directly into the general fund, while the latter comes from one-off events not defined constitutionally as nonrecurring.

Removal occurred because another group, mainly of Republicans who call themselves “fiscal hawks,” wanted to use a House rule they had gotten adopted a couple of years previously that called for a two-thirds vote on the use of this kind of money past a certain growth factor in a growing budget. By stripping this money preemptively with dramatic cuts to health care and higher education, they could ship the bill to the Senate on a majority vote, removing the “hawks’” veto power. There, presumably the Senate would amend that money back in and ship the finished product back to the House for concurrence by a majority vote.

Hawks succeeding in defeating genuine spending reform

The self-styled “fiscal hawks” of the Louisiana House of Representatives won a couple of battles yesterday – at the cost of near-certain defeat in the larger war to control the state’s budgeting process and in empowering their strange bedfellow allies House Democrats.

Yesterday, the House Appropriations Committee went through the operating budget bill HB 1 and withdrew substantial funding for health care, and some for higher education, to excise what’s termed “one-time” money from that. This refers to money that is redirected from other funds, much tied to dedications of revenue, that comes from recurring sources, as well as other money from non-recurring sources such as asset sales. But it was all a mirage of sorts, for if passed by the House, perhaps almost exclusively by the majority Republicans, the Republican-controlled Senate is sure to put back in the nearly $500 million and return it for concurrence.

This tactic is to avoid the requirements of House Rule 7.19, which means that before a budget vote if this budget contains more than a growth factor over the previous year of one-time money, a two-thirds majority must be secured to proceed. With this kind of funding removed, this prior vote is not required for this version, nor for later concurrence in a budget returning after Senate action. It’s an approach tacitly endorsed by the Gov. Bobby Jindal Administration, whose budget is on the line.

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.

Hawks to self-inflict more power, credibility wounds?

Almost two years ago this space predicted that a desire by many Louisiana House Republicans to posture as budget reformers, leading to adoption of House Rule 7.19, would continue to haunt them. Another spectral appearance of the rule is about to cause them more grief.

This week, the House Appropriations Committee takes up the operating budget HB 1. As introduced, it contains in its roughly $24 billion (with a several hundred million more in ancillary and supplementary appropriations elsewhere) nearly $500 million in “one-time” money. There are two kinds of this kind of funding, one that is recurring where this money comes from other excessively funded dedicated accounts not diverted into the general fund, and a nonrecurring kind, which comes from one-off events such as property sales, settlements, and lending from other state-created special funds.

A number of representatives, almost all Republicans, wish to excise these monies from the budget. And the leverage they can use to cause this is the rule, which states that (in a year such as this where the operating budget of this year exceeds the prior year) any one-time money budgeted beyond a growth factor requires a two-thirds vote to be inserted into the budget. This year, the computation reveals that about $199 million may be implanted without triggering the rule. The Senate has no such rule.