Kennedy made this characterization
when releasing information about monies still owed to the state even as the fiscal
year was coming to a close. He claimed the amount to be $134
million, out of $413 million derived from property sales, legal
settlements, lease payments, loan repayments and other financing arrangements.
Commissioner of Administration Kristy Nichols reminded
that, for accounting purposes, any budgeted money collected prior to Aug. 15
would be credited to fiscal year 2014 completed today. Only then would the
state face a shortfall if that didn’t come through. She predicted that, except
for money from the sale of Southeast Louisiana Hospital that got delayed and slightly
reduced for legal reasons which could be compensated from greater proceeds from
an anti-fraud initiative than figured, the other missing funds would come in by
then.
On the one hand, the just-in-time cash management strategy of the state is reassuring in that it doesn’t collect too much money idly sitting earning almost no interest that could be left in the pockets of taxpayers. On the other hand, there’s some playing too close comfort here that invites unpleasant surprises.
Reviewing these kinds of money
from episodic events and contracts, with the latter those are anticipated periodic
payments the use of which constitutes sound budgeting strategy, because they will
be made unless the contracting party wishes to become liable to default, which
if ever would be rare. Regardless, with the contracting out of state hospital
operations, joining other things like two prisons and benefits for state
workers and retirees, the amount of revenues subject to this constraints has
gone up significantly in recent years.
Monies coming from things like
tax amnesty and the anti-fraud program, even if not quite as accurately
forecastable, still also are adequately likely in amount that appears to
include as revenues in an operating budget. The key here would be conservative
estimations – even as lawmakers might resist the idea because when a surplus of
these comes through, the Revenue Estimating Conference may declare some or all
of that surplus non-recurring and therefore unavailable for operating expenses,
so the higher the estimate, the more dollars that would become available for
spending as they wish. Additionally, overreliance on these tactics can dry the
well. Responsible policy-makers can act to prevent these temptations from being
pursued.
But the unpredictability of
property sales and legal settlements makes these items best avoided when
constructing an operating budget. Too many contingencies, as exemplified by the
hospital sale held up by environmental issues, make the timing and amount of
these things insufficiently reliable. Also, in a theoretical sense the idea of their
use this way grates for they are true bonuses that cannot be replicated.
Therefore, the Legislature and
governor should place the following legal restriction on the use of money from
property sales or legal settlements: any such money should go to debt
defeasance in the current fiscal year, which essentially passes that amount on
to become available for the next fiscal year. This way, no chickens get counted
before hatching, it reduces a long-term liability temporarily (as the portion
paid off becomes freed for next year’s use for operating expenses netting out),
and the equivalent amount can be used for operating expenses down the road.
For all their posturing, the
so-called “budget hawks” in the Legislature who assert concern over
questionable budget practices, nor any other legislator, have made this kind of
proposal. That should be queued up for passage into law or the Constitution next
year, to take effect for fiscal year 2017 budgeting. And, courtesy of term
limits, since the governor and a number of legislators will not be returning
for budgeting for that year and thus will not have to govern under that
restriction, maybe they’ll actually do it. Nor would it hurt Kennedy or anybody
running for election as governor or to the legislature or considering doing so
to propose this as part of what they’ll do if elected.
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