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Suspension strategy involves intriguing mix of options

So with even the Gov. Bobby Jindal Administration ready to talk about rolling away temporarily tax breaks, what seems a simple matter of a simple majority in fact has left the Capitol dazed and confused and the possibility of fireworks as the budget process plays out.

The clear part of it comes from the Constitution that permits the Legislature, without gubernatorial input, to suspend any law by the voting margin by which it was necessary to enact it, for a period of time 60 days past the end of the next regular session from the one in which the Legislature acted. As tax exemptions require only simply majorities, this means a simple majority of each seated chamber could trigger this, in this instance theoretically for a period as long as 469 days (assuming unrealistically this would happen on the first day of the 2015 session and ending 60 days after the last possible adjournment day of the 2016 session).

What then may occur with the money enters uncharted waters. At least four scenarios, excluding one particular only to the 2015 regular session, could require a supermajority vote of two-thirds at some point for suspensions to happen.

It all starts from how – or whether – the money involved is “recognized” by the agency importuned with making the official call about how much money the state has to spend, the Revenue Estimating Conference. Comprised of the Speaker of the House or his representative, the President of the Senate or his representative, the Commissioner of Administration or her representative, and an academic forecaster from outside these parts of government, the four hear competing estimates about amounts forecast as available for spending in the period in question, and then ordinarily unanimously pick a figure.

More importantly, they divide the figure into two categories – “recurring” and “nonrecurring.” Statute gives them a guideline on what cannot be classified as nonrecurring: “’Nonrecurring revenue’ means revenue received by the state from a source identified by the Revenue Estimating Conference as being of a nonrecurring nature.  ‘Nonrecurring revenue’ does not include revenues received by the state from any source which has been available for the preceding two fiscal years or which will be available for the succeeding two fiscal years.”

In other words, if funds flow from a source that grabs them for at least two years, by definition they must be considered recurring. Those that do not may or may not be recurring, and is left up to the REC to decide. It’s an important question, because nonrecurring funds only may be used in six select ways, none having to do with operating expenditures and cannot directly fund these. That means ordinarily they cannot bail out the presumed budgetary shortfall this year directly.

First, are funds collected as a result of there not being a suspension a kind of revenue? The Jindal Administration seems ready to argue that at least part of these are not; any money related to an exemption that does not offset a tax liability by credit or deduction it claims is an expenditure, and these amounts therefore need no adjudication as to whether they are nonrecurring. While a plausible interpretation, accounting in past budgets for these exemptions never has shown up this way but instead as a diminution of revenue fair game for REC estimation and classification. How then will the REC handle this?

Even supposing some revenues actually turn into lack of expenditures this way, much still enters the assignment fray. Regardless, secondly the REC could fall back on statute in a literal way, making the contingency section of R.S. 39:2(27) mandatory; that is, whatever is not set aside by law as a recurring revenue therefore is a nonrecurring revenue. If at least one member of the REC insisted on this interpretation, that would prevent any of these revenues from going towards operating expenses and getting the state out of a jam.

Should it come to this, likely the three representatives of the governor and Legislature, perhaps out of conviction, perhaps out of convenience, perhaps for both reasons, would not apply this hard-and-fast interpretation. It most likely would come from the panel’s fourth member, Louisiana State University John Rhea Alumni Professor of Economics James Richardson, and under constitutional rules, no recognition of additional recurring revenues could come about if he held out.

But the Constitution also permits the Legislature, by a two-thirds vote, to change that requirement. So if the majoritarian branches wanted to muscle through these additional revenues into operating expenses of government, they could change the decision criteria to a three-quarters vote that could allow for the categorization of suspension revenues as recurring.

Yet another, third hurdle could present a problem here for a simple majority, particular to the House. Its Rule 7.19 requires a two-thirds vote to proceed to eventual passage including any money that is considered “one-time” in nature, depending on whether the House wishes to classify whatever the REC does not recognize as nonrecurring coming from suspensions as this. “One-time” funds represent an interstitial space between recurring and nonrecurring and are not well-defined by the rule, ultimately decided by the Speaker or (if a majority objects) the chamber. Whether this rule would matter depends upon other considerations of the budget in terms of revenue growth, but it could pose an obstacle.

However, assuming something falls through on one of the above that would force a two-thirds vote in one or both chambers somewhere, there’s still a chance a simple majority could muscle through this money in effect to use it to fund continuing operations, courtesy of an opportunity peculiar to this upcoming session that exists for exploitation. A few years ago in their zeal to balance the budget, lawmakers engaged in a maneuver involving the Budget Stabilization Fund that the courts later ruled invalid, necessitating paying back the BSF by the beginning of the upcoming fiscal year. After a relatively small payment this year, that amount is in the $300 million range due right at the start of next year.

Among the half-dozen options for use of nonrecurring funds is to toss it in the BSF. If the REC declared the money reaped from suspensions nonrecurring, then whatever money the majoritarian branches had set aside to pay back the BSF, after chunking the suspensions money into it, now could be used to relieve the revenue gap, and by a simple majority through the general appropriations bill. This indirect laundering of the money would avoid the usual procedure to use directly BSF money, which requires a two-thirds vote and is eligible only in certain circumstances.

The interesting part starts with the governor’s submission of the budget at the end of the month, followed by the statutory REC meeting in March, then commencement of legislative deliberation a month later. Depending upon the agendas involved, the disposition of suspensions money, assuming majorities are there to produce them and what kinds and amounts, could turn into quite a tussle.


Anonymous said...

Never fear, as Bob Mann told in, uneqivocal words : "Jindal ignored Louisiana's problems becdause the solutions to those problems conflicted with is national ambitions."

Jindal will continue to do this. From the Professor: "... The Jindal Adminstration seems ready to argue that at least part of these are; any money related to an execmption that does not offset a tax liability by credit or deduction it claims is an expenditure, and these amounts therefore need no adjudication as to whether thewy are nonrecurring..."




Anonymous said...

As Melinda Deslatte so aptly put it this morning in her article: "Even Jindal is looking for techicalities in his positions, so he can claim he isn't violating his philosophical stances while also identifying ways to fill a budget gap that has reached $1.6 billion next year."

Trying to govern (more like trying to hide) by technicalities and slight of hand. We are really, really in good hands and have a lot to look forward to.

Thanks for your strong efforts, Governor.

Anonymous said...

Don't you owe all of us an apology after everyone now sees where we are and what Lil' Booby has wrought?

The man who was the great reformer, you told us, that was doing things nobody else had the guts and guile to do.

Now, he is resorting to "technicalities" to try not to slaughter higher ed in Louisiana and obiviously not pander again along the way.

I would suggest that when the four candidates for Governor, all of them, are calling for a special session as soon as elected to try to clean up the fiscal/financial mess, they are telling us something about our present leader and what he is leaving them - and it ain't positive!

And, three of them are Republicans!!!

How about it, Mr Sadow?