Gov. John Bel Edwards’ proposal to redirect Gulf oil spill recovery money to rebalance this year’s budget appears to conflict with a legal settlement the state struck two years ago, aimed at ending a lawsuit over Louisiana’s “rainy day” fund.
Edwards wants to steer $200 million Louisiana is receiving this year from BP PLC, compensation for economic damages from the massive 2010 oil spill, to help plug a $700 million-plus hole in the state’s $25 billion budget. The gap must be closed by June 30.
But lawmakers earmarked those oil spill dollars to repay trust funds that had been raided in earlier budget balancing efforts, including the rainy day fund. Passage of that legislation helped former Gov. Bobby Jindal settle a 2010 lawsuit claiming Louisiana hadn’t properly refilled the rainy day fund after its use several years ago.
Redirecting the money as Edwards proposes “would clearly violate the state’s agreement,” said lawyer Kyle Keegan, who represented the men who sued the state, former state Rep. Ron Gomez and tea party activist Bob Reid.
The rainy day fund agreement was completed in November 2014 and signed by Jindal lawyer Thomas Enright, according to a copy Keegan provided to The Associated Press. It contains a provision that says any “material change” to the rainy day fund earmark will make the agreement “null and void.”
“The settlement expressly states that any modification of the terms of that statute which has an adverse effect on the refilling of that fund would be a breach of the agreement,” Keegan said Thursday.
When the Edwards administration announced its budget rebalancing plans Tuesday, the governor’s chief financial adviser, Commissioner of Administration Jay Dardenne, said redirecting oil spill money would help the state avoid “devastating cuts.”
“Things have changed, and we need that money now to deal with the severe short-term problems we’re facing in the budget,” Dardenne said.
At the time, Dardenne said he didn’t think a settlement agreement had ever been formally filed in court. On Thursday, Dardenne said the existence of the court filing doesn’t change the administration’s plan to ask lawmakers to shift the money to plug the immediate budget gap, even if that could trigger nullification of the settlement.
“Even in the face of that agreement, our position right now is that we need to redirect that money to deal with the crisis that we face right now,” he said.
The lawsuit was never dismissed. Keegan filed a request to stall the case in December. He said the lawsuit could be revived if the state is deemed in violation of the settlement.
Gomez and Reid sued after lawmakers and the Jindal administration twice used the rainy day account, formally called the Budget Stabilization Fund, without refilling it.
Constitutional restrictions require the dollars to be quickly repaid, up to a cap. Jindal and lawmakers tried to change the repayment trigger through state law, but the lawsuit claimed that violated the constitution.
Repayment costs more than $300 million. The rainy day fund balance sits around $487 million, according to the Treasurer’s Office, well below its $805 million cap.
To help settle the lawsuit, lawmakers agreed in 2014 to pour some of the $1 billion Louisiana is expected to receive in oil spill economic damages money into the rainy day account. They also earmarked up to $700 million for an elderly trust fund and a smaller amount to another health savings account.
The state is expected to receive the economic damages money over about 15 years. Each time the state receives a payment, 45 percent is slated to go to the rainy day fund until it reaches its cap. Edwards wants to skim the first $200 million from this year off the top before any earmarks kick in.
The economic damages dollars are separate from an estimated $5.8 billion Louisiana is expected to receive in other civil penalties from violations of environmental laws, money that’s required to be set aside for coastal restoration projects and environmental rehabilitation.