Gov. Bobby Jindal has raised hackles among an unusual mix of critics – including state Treasurer John Kennedy, conservative state legislators, independent budget analysts and one commercial fisherman — by proposing to take millions from funds dedicated for specific purposes in order to balance next year’s budget.
The practice is known as a “funds sweep” because Jindal is planning to sweep money sitting in dozens of dedicated funds into the state’s general operating budget. The money typically comes from fines or licensing fees, such as when someone applies for a concealed gun permit.
Jindal has decided to tap about $102 million in those funds to avoid cutting the budget again this year. Though that money would enable him to balance this year’s budget, it would mean that next year he’d have to find that money somewhere else.
In some cases the money targeted by Jindal is the result of years of accumulation. In others, his administration is counting on a certain inflow into those accounts, but those estimates have not been vetted by the Revenue Estimating Conference, which meets several times a year to certify how much money the state is collecting and has available to spend.
The $102 million that Jindal wants to pull from those funds is part of $494 million in one-time and contingent funding — such as the gain from sale of state property or a pending legal settlement — that is key to his balanced budget.
Among the 42 funds that would lose money are those that finance the Louisiana State Police, pay to turn decommissioned oil and gas platforms into artificial reefs and finance crackdowns on polluters.
Jindal also wants to take $100 million that officials at the Ernest N. Morial Convention Center plan to use for an expansion of the facility. New Orleans Mayor Mitch Landrieu, convention and tourism officials, and members of the New Orleans legislative delegation are trying to stop that.
In some cases, the money in these funds can be used only for the purpose set out in state law. In others, the excess must be directed to the General Fund.
The Jindal administration and its supporters in the state Legislature say the funds sweep — which is up for approval before the House Appropriations Committee on Monday – will prevent further budget cuts to the state’s colleges and universities and its health care system.
“Anytime you’re depleting funds, you should be concerned,” said state Sen. Neil Riser, R-Columbia, who chairs the Revenue and Fiscal Affairs Committee.* “But I’m trying to keep higher education going and take care of the hospitals as best as we can. These are tough times.”
The group of House members known as Fiscal Hawks — nearly all of them are conservative Republicans — decry the funds sweep, House Bill 452, now before the Appropriations Committee.
“We’ve become addicted to using one-time money and funds sweeps,” said state Rep. Brett Geymann, R-Lake Charles, the Fiscal Hawks’ leader.
The funds in question include arcane pots of money, such as the Traumatic Head and Spinal Cord Injury Trust Fund. Jindal wants to pull $1.89 million from that one. He also wants money from two funds that pay for various functions of the Attorney General’s Office:
The Department of Justice Legal Support Fund, which comes from civil fines, fees and penalties collected by the Attorney General’s Office: $8 million
The Department of Justice Debt Collection Fund, made up of attorney’s fees for defaulted state debts: $5.6 million
Practice started under Blanco; expanded under Jindal
Funds sweeps appear to have begun during the administration of Gov. Kathleen Blanco after 2005’s Hurricane Katrina. But people familiar with state budgeting, from both parties, said Jindal has taken the practice to a new level since becoming governor in 2008.
Not only is Jindal draining the dedicated funds, but he now proposes to balance his budget with money that the funds have yet to collect. Previously, Jindal took money that had already been collected, said Kennedy, the treasurer.
“Now the administration is anticipating money that may not be there,” Kennedy said in an interview.
If these funds don’t bring in as much as they expect or they require more than expected to fulfill their intended purpose, the Jindal administration would have to make up the shortfall with midyear cuts, which it has done during each of its five years in office. Fiscal Hawks blame the use of one-time and contingent money for those cuts.
The funds sweep “flies in the face of common sense,” said Steve Winham, the state’s budget director from 1988 to 2000, who is now retired. “It’s not a straightforward, honest budget. It might be OK to do once in an emergency situation. But it’s not OK to do it year after year.”
Jindal officials say they have no choice.
Michael DiResto, a spokesman for the state Division of Administration, which prepares the governor’s budget, said the administration is looking to these sources of money to avoid further cuts in health care and higher education funding, which make up 70 percent of the discretionary General Fund.
“While we have been reforming and reducing the size and cost of government,” DiResto said via email, “should a decision be made to exacerbate an already inflexible budget and remove these dollars, it would mean an unnecessary 19 percent reduction to higher education.”
Overseers of one fund, the Artificial Reef Development Fund, are planning to file a lawsuit if the Legislature goes along with Jindal’s plan to drain their fund of $20 million this coming year. The fund is overseen by the Louisiana Wildlife and Fisheries Commission; Jindal appointed all seven members.
The Department of Wildlife and Fisheries signs agreements with oil and gas companies that need to dismantle aging platforms in the Gulf of Mexico. If the cost of dismantling the platform and moving the parts onshore would cost the company $1 million, for example, the company can sink the platform in a designated area and give half of the savings — $500,000 in this case — to the artificial reef fund. The money is used to maintain the sunken platforms, which create a habitat for fish.
Billy Broussard, a commercial fisherman who is the commission’s vice chairman, said the Jindal administration has violated the state’s agreements with oil and gas companies by taking $48 million from the fund in previous years.
“If they did it again, we said we’d file suit,” Broussard said. “The deed of donation specifies how the money has to be used. Slapping the money into the general fund” violates the deed.
“If we sue,” he said, “we’ll go after everything, the entire $48 million. We know the administration is facing hard choices, but we have to protect the national resources of the state.”
State Sen. Bret Allain, R-Franklin, said Jindal was noncommittal when Allain recently asked him not to drain the fund for fiscal year 2014, which begins on July 1. Allain said Jindal did agree not to oppose Allain’s measure, Senate Bill 128, that would allow voters to pass a constitutional amendment protecting the fund. But that vote wouldn’t occur until November 2014, so it would not insulate the fund for the coming fiscal year.
The Louisiana State Police oversees two of the dedicated funds Jindal is eyeing:
Riverboat Gaming Enforcement Fund, from which Jindal wants $36.6 million
Video Draw Poker Device Purse Supplement Fund, from which Jindal wants $1.1 million
State Police spokesman Capt. Doug Cain said the funds have a surplus because the State Police is collecting far more in licensing fees and fines than the Legislature allows it to spend on its operations.
The Jindal administration had planned to take $1.3 million from another fund that State Police oversees, the Concealed Handgun Permit Fund, but reversed itself on Friday.
Time to review all dedicated funds?
State law has created more than 400 of these funds, Kennedy said. He recommends that the Legislature review them to determine if they continue to serve their original use and whether they are collecting the correct amount of money.
Kennedy was a senior advisor to former Gov. Buddy Roemer when the Legislature did a similar review in the late 1980s. Lawmakers eliminated most of the 280 dedicated funds and freed money for the state’s pressing budget needs.
In the years since, Kennedy said, legislators have reversed course and created more special funds.
*Correction: This story originally stated that the Revenue and Fiscal Affairs Committee will write the Senate’s version of the budget. The Senate Finance Committee does that. The error has been corrected. (April 29, 2013)