A meeting next week could determine whether state Treasurer John Kennedy takes Gov. Bobby Jindal to court for allegedly usurping his duties.
At issue is the Jindal administration’s plan to start paying vendors through a program called ePayables. Instead of writing checks, the administration wants to make payments through merchant accounts set up by the Bank of America.
In the new arrangement, the state would make payments through credit transactions, freeing businesses of divulging the banking information required for electronic payments and saving the state the cost of paper checks.
Using a Visa-style platform of transactions, the state would approve invoices and direct Bank of America to put money into merchant accounts. Vendors would draw down money from the accounts.
Commissioner of Administration Kristy Nichols said the move would modernize government business practices and save the state money.
Built into the proposed state budget for the fiscal year that starts July 1 is $1.5 million of an expected $2.5 million to $3.6 million in annual savings.
Kennedy said he is concerned that the program will be a fiasco leading to the type of uproar that accompanied the Jindal administration’s attempt to issue state income tax refunds on debit cards.
He said Bank of America will profit by charging businesses a fee to get their money from state government. The state is supposed to get an annual rebate based on the amount of financial transactions.
Kennedy said he expects businesses to erode the rebate by passing the fees back to state government. “Vendors are going to wise up and just bill it into their invoices. The only one who’s going to make money is the Bank of America,” he said.
The Jindal administration disagrees, saying contracts have fixed prices that limit what businesses can charge. The administration said businesses will want to participate because they will not have to worry about a check getting lost in the mail or giving the state their banking information.
“The treasurer has previously helped LSU implement this same program, so we obviously did not expect any problems in simply trying to expand a successful program statewide to achieve even more savings,” Nichols said.
LSU began using a similar program in 2010. Hundreds of vendors participate. Kennedy is a member of the Cash Management Review Board, which the Jindal administration said agreed to let LSU implement the program.
Deputy State Treasurer Jason Redmond said LSU asked the Board for a new bank account to collect banking charges. He said the Board’s approval did not extend to the use of an ePayables program, since LSU had the authority to launch that on its own.
Kennedy said he is concerned about doing business with Bank of America, which he said does not have a storefront presence in Louisiana. He noted that the banking giant paid $410 million to settle a class action lawsuit concerning overdraft fees.
“We don’t need Bank of America,” he said.
Kennedy plans to sit down with the administration next week. He said he will pursue the matter in court if the conversation does not go well.
As state treasurer, Kennedy’s constitutional powers and duties include “the custody, investment, and disbursement of the public funds of the state.”
He signs the state’s checks and makes electronic transfers.
Kennedy said it might be unconstitutional for Nichols to enter into an agreement with Bank of America that encroaches on his duties.
The Jindal administration contends that the treasurer still would maintain control of public funds by making payments to Bank of America necessary for vendors to get compensation.
“While the treasurer has not directly communicated specific concerns to us, we’re glad that his office has agreed to meet and discuss the issue, and we look forward to the opportunity to work cooperatively in implementing this money-saving initiative,” Nichols said.
Kennedy said he wants assurances that the state would save money.
“I’m going to try to work this out. They have to show me how anyone but Bank of America wins. If they can’t show me, I’m going to protect my constitutional duties and if it means having to file a lawsuit, that’s what I’ll do,” Kennedy said.