Search This Blog


Debate preferred over rhetoric in assessing budget funds

While to some delving into the mysteries of Louisiana’s state budget ranks up there with root canal surgery, understanding its eccentricities develops a better understanding of what constitutes better and worse budgeting, and what needs changed to make it better. Dissecting Gov. Bobby Jindal’s fiscal year 2015 attempt on this account to go before the Legislature within the month exemplifies the issue.

Something about it that got observers wondering was how targeted spending increases could occur in certain areas when overall revenues were down overall. Even a small increase in general fund receipts would not account for the entirety of that. Let’s see why.

Again, to understand where everything is going, it’s helpful to keep terms straight. A simple kind of revenue to conceptualize is “nonrecurring.” These are defined as an unanticipated bonus beyond forecasted revenues and may be used on any of a half-dozen different purposes constitutionally defined, including debt defeasance, paying into the state’s Coastal Protection and Restoration Fund, supplementing its Budget Stabilization Fund or savings account, and paying down the state’s unfunded accrued liability on its retirement funds.

These kinds of funds are declared as such by the state’s Revenue Estimating Conference, which ratified $119 million worth eligible for FY 2015 spending. $20 million more of unspent capital outlay dollars also counts here, with some already recognized. Finally, constitutionally any REC-named surplus from a previous fiscal year must be considered nonrecurring, and $161 million was recognized as surplus in the REC’s last meeting.

Also simple to comprehend is a “recurring” revenue, which in its purest form means it has a mechanism to collect it in a regular and predictable fashion to be spent on a purpose either dedicated or generally. About 98.7 percent of the FY 2015 recurring expenditures in the budget technically gets funded from these sources.

But not all recurring spending, because of the nebulous “one-time money” that exists in a state between that of recurring and nonrecurring. These monies like recurring funds have a known revenue stream attached to some government activity, but that stream is difficult to forecast in size and timing (such as settlement of litigation) and/or is dedicated to some non-general purpose that requires additional legislation, known as a “funds sweep,” to make it available for general purposes. In its entirety, it comprises $333 million

Of that, $28 million is being backed out to pay for supplemental FY 2014 spending now, seven months after the fiscal year began, known to be coming due in addition to what was budgeted. A $186 million slice is going into the rest of the operating budget; both of these are recurring expenditures requiring the use of recurring dollars and is the “one-time money” in the budget. The remaining was the declared nonrecurring part – the $119 million. This with the FY 2014 surplus and unspent outlay bucks makes for $300 million.

The controversy comes in as, while $25 million is to refuel the BSF and $14 million to tackle the UAL, the other $261 million can get recycled into the budget as recurring funds. One method takes $51 million, puts it into the CPRF, and then apportions it out, so long as that spending can be tied to activity connected to coastal restoration. The other $210 million pays off bonds, which then constitutionally frees those proceeds tied to their repayment next year to be used in any fashion, by paying up with nonrecurring funds prior to the end of FY 2014 (such as with surplus revenues), making what are nonrecurring in one fiscal year into recurring funds in the next through bond prepayment.

So, if keeping score, that’s $214 million in one-time money and $261 million of funds that were at one point nonrecurring that legally can be used for recurring purposes for a total of $475 million, or about 5.5 percent of all state general fund spending. These are what enable that additional spending, but with this tactic irritating some, such as state Rep. Brett Geymann, who calls this “absolutely money laundering” despite the legality of it all.

(Last year, Geymann led the charge of a group known as “budget hawks” who allegedly favored sounder budgetary practices including the ridding of one-time money being used in the operating budget. In its place, they first proposed a large tax increase, settled for a small one, expanded spending by a couple of hundred million bucks, and largely financed it through the gimmick of tax amnesty. Readers may decide which approach, the one he championed or the one he criticizes, promotes a more sensible attitude on spending.)

The more calm and collected Public Affairs Research Council found greatest objection to the use of the CPRF. It argued that similar kinds of monetary pass-throughs have been justified with a rationale that they are “transfers,” which would appear to violate the Constitution’s stricture that no “appropriation” from it go to anything inconsistent with the state’s “Coastal Protection Plan” (termed specifically the “Comprehensive Master Plan for a Sustainable Coast”). But the budget envisions almost three times the $51 million being spent on Coastal Protection and Restoration Authority activities, the agency that oversees plan implementation, with a little over half of that coming from statutory dedications. If budgeters can show that $51 million ends up in that appropriation from that dedicated fund, then the Constitution will have been followed.

In other words, there’s nothing inherently wrong, constitutionally or legally, with what is going on here. If the Legislature wants to have a say in defeasance decision-making, it should pass a law additionally regulating that procedure (whether it should engage in such micromanaging of the executive branch is another matter), or, if it thinks “bonus” revenues in current years necessarily must be spent on nonrecurring purposes without freeing up funds previously attached to nonrecurring expenditures in future years, it should remove that procedure. And if it wants to cordon off CPRF funds so that they only may be removed through appropriation to designated capital outlay projects, it may approve such an amendment for voters’ ratification (and it is up to legislators presently to ensure that what is spent under current constitutional wording is consistent with activities under the plan).

Understand that this is a debate not over the legitimacy of these approaches, but over their wisdom. And the real question out of all of this is, if this debate even takes place, whether those who condemn these practices can and are willing to make a persuasive argument for changes, or they never get that far, out of a preference to limiting themselves to advancing rhetoric designed to grab attention.

1 comment:

Anonymous said...

I disagree with your assertion that the legitimacy of these actions is not in question. It is.

However, even putting that aside, the fiscal sanity of these methods is truly devastating. It is a "Ponzi" scheme, pure and simple.

Jindal is going to leave the next governor with such a treacherous fiscal situation that he will have to raise taxes or make cuts of draconian nature that they will scar everyone.

You cannot continue to use revenues that will not be available in the future for recurring, operational funds. it cannot last. The Piper will have to be paid.

At least, if you are not Bobby Jindal, who will be gone when the dance stops and the Piper has to be paid.

Why, why, do you continue to support and condone these actions?