Decision could trigger enormous LA fiscal change

Hold on to your hernia belts, a potential court decision either could make Louisiana state budgeting more intractable or become a catalyst for badly needed change.

After years of sifting through legal minutiae, a state district court finally will hear on the merits a suit brought by the Public Service Commission against the Legislature for sweeping money from dedicated funds that provide revenues for PSC operations. Past special appropriations bills have yanked millions of dollars from coffers set up to hold money for the PSC.

Statute can be interpreted to support either side. For example, R.S. 45:1177, in setting up the Utility and Carrier Inspection and Supervision Fund, states that “[t]he monies in this fund shall be used solely for the expenses of the operations of the commission” and “[i]f the amounts contained in the fund provided for in this Section are in excess of that necessary to fund the operations of the commission, then that excess shall be retained in such funds,” or pretty standard boilerplate for a dedicated fund.

But also in statute, and likely to tip the scale in favor of the Legislature, are that the PSC uses money in the fund “only in the amounts appropriated by the legislature” and that excess funds “shall be subject to appropriations by the legislature in subsequent years.” Plus, the Constitution generally recognizes the appropriations power of the Legislature, where the body has the power to create statutory funds and then by appropriation adjust those.

Funds sweeps went on long before the PSC filed suit, although the practice became heavier during the former Gov. Bobby Jindal Administration, as a consequence of poor fiscal practices creating little appropriations discretion for lawmakers as a means to evade political responsibility. Instead of letting dollars pile up idly in funds because of low-priority uses hardly demanding these, Jindal decided to put them to work rather than increasing taxes to prop up a budget he never found an easy way to deflate.

Current Commissioner of Administration Jay Dardenne argues a certain mootness to the case, as he alleges not enough money remains in such funds to make sweeps anyway. But, in fact, the state after fiscal year 2016 sat on almost $1.3 billion, down from about $4 billion five years earlier, yet still enough (over a third sits in funds constitutionally protected from sweeps) for some relief, although not on the order of the past, such as in 2009 when over $400 million (including PSC money) was gobbled up.

Yet things would become really interesting really fast if the courts eventually (undoubtedly appeals will come regardless of this upcoming outcome) decide in favor of the PSC. That would rob lawmakers of the funds sweeps tool, which would tighten the fiscal straitjacket caused by the hundreds of dedicated funds even tighter.

The bad news would be that this would increase pressure for needless tax increases, without the safety valve of sweeps. However, the good news would be that could provide enough reform impetus finally to break these chains, prompting legislators to rid the state’s fiscal structure of most dedicated funds and thereby increasing legislative flexibility to steer money currently going to low-priority purposes and perhaps idled to high-priority functions that at present go begging.

Clearly, advocates of right-sized government should prefer the latter, but an adverse decision to the Legislature would bring no guarantee it would respond that way, leaving the status quo as perhaps the least risky scenario. Now it’s all in the hands of Louisiana’s elected judiciary.