It doesn’t mean necessarily he was entirely wrong, just that he was entirely a hypocrite when Louisiana Treasurer John Kennedy voted against a recent State Bond Commission action for the reason he stated.
Last week, the SBC took up a proposal
to pay off $210 million in debt prior to the end of this fiscal year Jun. 30.
By doing so, in essence it could forward that amount of money into next fiscal
year to pay for operating expenses, which is incorporated in Gov. Bobby
Jindal’s budget. This passed 13-1 with only Kennedy, by law the chairman of
the SBC, dissenting.
His public remarks explained his
vote: he claimed the money did not come from unencumbered, recurring sources
but rather from unpredictable, bonus kinds of money that more properly should not
be recycled in a way that they could be spent on future, recurring items. While
entirely legal, he decried the move violated the spirit of wise budgeting
practice and likened it to using a credit card to pay off a monthly bill that only
will reappear a month later.
Regrettably, he didn’t quite get
that right. Six
potential sources of revenues were used to cobble together that $210
million and other funds for other uses, all declared by the Revenue Estimating
Commission to be nonrecurring in nature. The REC at least once in a budget
cycle makes declarations about funds as recurring or nonrecurring, and the
latter may be used only for a few purposes such as for debt defeasance.
Of that, as outlined in HB 1094, $172 million could be
said to come unambiguously from recurring state general funds, but were
declared nonrecurring because they were in excess of what had been forecast the
previous years prior to this fiscal year’s budgeting. Had back then the REC had
better divination and raised its forecasts by that amount or more, these would
have been classified as recurring funds for this year. Thus, it was a matter of
inaccurate forecasting, not any innate nonrecurring nature to these funds, that
nonetheless got them categorizes as nonrecurring.
Assuming all of these went to the
defeasance this left $38 million more. The five other sources all are
nonrecurring in nature: unspent capital outlay bucks, bonus funds from debt
recovery that used to go directly to agencies involved, bonus funds from new fraud
recovery measures, money from a fund to be spent on housing loans, and money
from a fund to be spent on New Orleans’ Ernest N. Morial Convention Center’s
capital outlays. One could argue that the bonus funds anticipated to be $42
million are predictable enough to be considered recurring, but since these are
new initiatives, nonrecurring status more likely fits them.
The others certainly are
nonrecurring, but one, the Convention Center fund, is highly predictable. As previously
noted, its financing structure, with some revenues derived from state
sources and all necessarily authorized by state law, produces millions in
surplus every year that has led to its sitting on hundreds of millions of
dollars. The state’s plan is to borrow $50 million from it and then make a 3:2
in-kind trade of capital project financing sometime in the indefinite future,
meaning ultimately the state builds an extra $25 million in capital projects
concerning the Center as opposed to something else. Whether that is important
enough of a capital need is debatable, but it does use money that to the
authority running the Center is recurring. Using all of that leaves $12 million
to spare.
So a much more accurate analogy
than Kennedy’s for the maneuver is this: to justify next year’s budget, you used
money that you found because you underestimated your paycheck last year, and
then you dipped into your Christmas savings account that means you’ll put off a
gift purchase you promised to someone that you will eventually make, combining
the two in order to pay for a grocery gift card you’ll use over the next year.
Using the housing fund and forgone capital outlay money would analogize even more distantly from
Kennedy’s, such as by replacing the savings withdrawal with money saved
from deciding not to buy something you don't really need. And the analogies hardly have anything in common if that remaining money from the bonus is used, because this is getting funds from having gone around and gotten some of your debtors to pay up, with the prospect of more from others in the future.
But even if off on the
comparison, Kennedy’s action goes counter to one he took at the Jun.
16, 2005 meeting of the SBC, where unanimously it approved of a defeasance
of almost $63 million for the same purpose. Of that, Act
138 of 2005 authorized about half of that amount to come from state general
funds, also considered surplus and therefore nonrecurring, and the other half
or so came from a funds transfer of what today would be called “one-time money”
from the Mineral Revenue Audit and Settlement Fund, which by statute is a
pass-through device for spending on behalf of the Wetlands Conservation and
Restoration Fund, a constitutional
pass-through device for funding tied to the federal Coastal Wetlands Planning, Protection
and Restoration Act, up to $35 million and thereafter on to defeasance.
Again, it’s all legal, but it has the same effect of “laundering” nonrecurring
funds into recurring funds.
So what’s different now than then
for Kennedy? It’s hard to see what hair-splitting he can attempt here to
justify different decisions on the same issue that would not leave him open to
charges of acting from political convenience rather that principle in being the decisive
dynamic behind his contradictory behavior.
Not that his inconsistency should
detract from the larger point that a more rational revenue collection system
should be put into place. For example, why doesn’t the state revoke any of its
funding directed to the Convention Center and divert it to general sources instead
of letting these pile up so excessively that using them for that fund’s original
purpose would cause building a complex resembling a palace with palatial
grounds around it? Or, more generally, that the legal ability to turn
nonrecurring into recurring funds with only a penalty of waiting a year may
increase the chances of unanticipated problems down the road, and should be used sparingly
if permitted at all -- if, that is, misestimation of revenues in the previous years so taints those funds?
But Kennedy inveighed against the
principle without explaining why it matters now and it didn’t nine years ago. And
this posturing that makes him appear hypocritical thus unfortunately distracts from
that very message his vote could represent.
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