During the campaign, all the major candidates for governor talked about how rolling back the autopilot portions of the state budget would be key to shoring up state government’s dysfunctional budget system. They said it would free up money to address a towering deficit, which has become an annual occurrence.
Statutory dedications, which legally require government to spend a certain amount of dollars on a specific service, seem an easy target. But as fiscal staffers and legislators review the $3.9 billion locked away in dedications, they’re finding that freeing up that money won’t be as easy as portrayed on the campaign trail.
“That was all campaign rhetoric,” said Senate President John A. Alario Jr., the Westwego Republican who will have considerable say in how lawmakers bridge the shortfall in revenues — now calculated at $1.5 billion to $1.8 billion and probably going higher.
“It’s a part of the puzzle, just not a very big piece,” Alario said.
Lawmakers aren’t sure just how big it is. The Louisiana Legislative Auditor’s Office is tracking down every dedication, seeing how much money is going into each fund and how it is being spent — a task that never has been done routinely.
“A lot of our programs, we put them in place, and then they just go live on and on,” Legislative Auditor Daryl Purpera said.
While “undedicating” the money may prove difficult, many argue that legislators need to do just that and allow budget architects to weigh whether the money would be better spent on, say LSU, which is not protected, than on development of the Audubon Golf Trail, which is partially carved out of the regular budgeting process by a dedication.
The powerful Louisiana Association of Business and Industry, a Baton Rouge-based lobbying group, just finished a seminar for its members about dedicated funds. LABI cited an example of the fees collected on gambling devices, $60 million of which goes to augment salaries for district attorneys and other local government officials.
“Considering the budget challenge at hand, it is past time to scrutinize spending from gaming revenue in order to determine if the use has statewide benefit and whether or not these fees might be better utilized as taxes for high-priority state services,” LABI stated.
The state’s budget totals $25 billion, but most of that is federal dollars and self-generated monies. The part that budget writers deal with is the $9 billion in taxes, royalties and other monies in what’s called the state general fund. But legislators have discretion over only $2.9 billion of the general fund. So it’s understandable why many have their eyes on the $3.9 billion of dedicated money squirreled away in 393 untouchable accounts.
But it’s not that easy, says Republican Rep. Julie Stokes, a Kenner accountant whose lunch hours have been filled with briefing business associations and political clubs about the budget crisis the state is facing when the new governor and new Legislature enter office in January.
For one thing, about $2.15 billion in 40 dedicated funds is protected in the state constitution. They cover a wide variety of programs, such as coastal restoration, the TOPS college tuition scholarships and parish roads. Unlocking constitutional dedications would require a two-thirds vote of both chambers of the Legislature, followed by a majority of the state’s voters in the next election, which is months away.
“Even then, the question is not whether you can, but whether you should,” Stokes said.
The largest of the constitutionally protected accounts is the Transportation Trust Fund, which includes $1.2 billion in revenue from state and federal gasoline taxes. It was installed by voters in hopes of ensuring money is spent on highways.
Another 105 funds, worth almost $1 billion, are what is called “fees for service,” in which a special interest, say farmers, pay a fee for the government to perform a particular service, such as eradicating boll weevils from the state’s cotton crop.
So that leaves funds that were dedicated by only a majority vote of the Legislature and could be undedicated by a similar vote, said State Treasurer John N. Kennedy.
These are called “statutory dedications” and were established in law to direct money to particular purposes, many of them worthy but few that could not instead have been funded through the regular annual budget process.
Back in the 1980s, Kennedy worked for Gov. Buddy Roemer, who walked into office facing a similarly horrific budget crisis. One of the first things Roemer and the Legislature did was enact a single bill that closed 197 of the 275 statutory dedicated funds and deposited the money for use across state government.
Roemer then went on to cut spending, close parks, reduce public school spending, impose taxes, reinstate tolls on some bridges and dramatically restructure the way Louisiana government counts and spends taxpayer dollars.
Kennedy contends that unlocking the dedications went a long way to establish the credibility needed to embark on other controversial but needed reforms. It could work again for John Bel Edwards, who becomes governor Jan. 11.
Kennedy compiled a list of 156 dedicated accounts without constitutional implications and that are not fee-for-service dedications, which could free up about $488 million. He said the incoming administration and legislators should go through the list and ask, “Why did we do this?” and “Is this dedication as important — or more important — than LSU?”
At the top of Kennedy’s list is $12 million for the Louisiana Agricultural Finance Authority.
The money comes from gambling devices, like slot machines, at horse race tracks. There’s a laundry list of recipients of that money, including a program to round up truants in Bossier Parish; $200,000 for the beautification of City Park in New Orleans; and $750,000 for the Equine Health Studies Program at the LSU School of Veterinary Medicine in Baton Rouge.
Agriculture Commissioner Mike Strain said the Finance Authority’s money helps pay off loans on more than 10 projects that were begun before he took office in 2008. As the proceeds guarantee bond repayments through 2027, Strain argues that the money can’t be touched even if it were to be appropriated by a majority vote of the Legislature.
That stance likely could be argued in court, but his point is that should the dedication be unlocked, the Legislature would have to appropriate the same amount of money to cover the bond indebtedness.
These dedications weren’t magically added to the law books. Each one has a constituency that can be expected to fight efforts to free the dollars for the everyday operating budget, Stokes said.
Assuming everything on Kennedy’s list could be available for undedicating, a conservative estimate is that legislators, after much divisiveness, could free up about half of the dedications. “That’s what? $200 million, $250 million, at the most? Yes that will help, but it’s only a drop in the bucket compared to $1.8 billion” that the deficit is calculated to be, Stokes said.
Senate Finance Committee Chairman Jack Donahue, R-Mandeville, said statutory dedications have been in the bull’s eye for some time. That’s why legislators and budget writers are studying them so closely. But the more they study, the less of a panacea for the budget crisis is revealing itself.
“By the time they finish going through all of them, I don’t think there’s going to be a whole lot of red meat,” Donahue said.
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