Over 20 years ago a package of significant fiscal legislation passed the Legislature, and the voters strongly approved amendments to our state constitution. The Legislature designed these reforms to bring more stability to state finances by restricting the use of volatile revenues in funding state services.
The 1980s were tough times for Louisiana’s citizens and businesses. The crash of energy prices devastated the state’s economy and sent many of our citizens packing to other states to find productive employment. The severe recession also decimated the state budget for years, because the oil and gas industry’s market volatility, indirectly and directly, affected Louisiana’s state coffers.
As the state began to climb out of its depths of economic chaos in the early ‘90s, some legislators and fiscal reformers developed the legislation that sought to prevent the mistakes of the ‘80s from repeating. Two of the major changes were the creation of a Budget Stabilization Fund (BSF) and the formation of a Revenue Estimating Conference (REC). The main purpose of the REC is officially to recognize how much recurring revenue is available to fund recurring expenditures. The vote of the four-member panel must be unanimous, and an independent economist serves on it in addition to top leaders of the legislative and executive branches. Prior to the formation of the REC, the Legislature and the governor could come up with their own revenue estimates for budgeting purposes, and there was no prohibition of using non-recurring revenues to fund recurring expenditures.
The BSF was a very progressive reform. The legislation creating it required that mineral revenues in excess of $750 million must go into the BSF instead of an automatic deposit into the state general fund. Of course, legislators back in the early ‘90s never thought that they would reach the $750 million threshold. In later years when collections began to approach that level, they increased the cap to $850 million. The legislation also allowed the Legislature to withdraw money from the fund if revenues fell below projected levels during a fiscal year—with the stipulation that no more than one-third of the fund could be depleted at any time. The state constitution also requires that 25 percent of any surplus funds left over from a budget year must be deposited into the BSF along with any mineral revenue above the $850 million threshold. The reason for those requirements was to prevent the budgeting of large amounts of non-recurring revenue for regularly recurring expenses. It was a brake to stop unwise fiscal maneuvers.
Most people refer to the fund as the “Rainy Day” fund. Those words appear nowhere in the constitution. The Legislature did not design the BSF to be a piggy bank to supplement spending whenever state officials choose to do so. They did design it to prevent a repeat of what happened to state finances in the 1980s.
In recent times, there have been attempts to ignore the constitutional requirement of placing the designated amount of surplus money and mineral revenues into the BSF in order to maintain current levels of spending. Regardless of the merits of the spending, our elected officials swore an oath to uphold the constitution. If those officials want to consider the BSF a piggy bank to use whenever and however they want, they need to change the constitution to legitimize those actions. The constitution does not list “expediency,” “convenience” or “need to avoid tough choices” as exceptions to the governance of the BSF. It is the law that supersedes statutes, and it should be either changed or followed.