Machinations and fortune are combining to make the ultimate disposition – and therefore the fate of a balanced fiscal year 2014 budget for Louisiana – of the latest version of state tax amnesty more and more interesting, and political.
Turns out that the nonprofit (if funded by both politically neutral and leftist sources) news source The Lens got hold of a memo from state Rep. Joel Robideaux that described past tactics in dealing with amnesty money. The first phase of this version has been completed with a goal of securing $200 million that appears to have been exceeded. Each of the next two fiscal years also features smaller, less-generous versions to delinquent taxpayers.
In it, Robideaux lays out a strategy of funds transfers that he said for fiscal year 2010 laundered amnesty dollars for use in the operating budget. Any money that arrives in excess of forecasts by the Revenue Estimating Conference, which explicitly excludes amnesty proceeds, when forecast subsequently by the REC, unless it designated otherwise is classified as nonrecurring and thereby becomes unavailable for use in the operating budget. Robideaux described a process that shifted money, some designated by the statute setting up the amnesty and another portion declared by the REC as nonrecurring, and essentially sanitized it all into recurring money thusly eligible for use as operating funds.
Charitably, this violates the spirit of the state Constitution, which sought to enunciate a principle that if money came in as a bonus, it should not go to operating expenses. Less diplomatically, it violates in letter the Constitution. And despite all of the caterwauling of a group of legislators who styled themselves the “fiscal hawks” because, among other things, they opposed in budgeting the use of “one-time money,” in part recurring dollars collected for one purpose used for another via a funds transfer like that elucidated by Robideaux, not only did they embrace the idea of using one-time money from amnesty initially, but also as yet no public complaints have emanated from any of them about the propriety of the funds transfer subterfuge explained here as a possible strategy to deal with the upcoming amnesty bonanza.
However, members of the REC – an independent academician and the governor, House speaker, and Senate president or their representatives – might not be so amused at this notion. Already, the non-politician on it, James Richardson, has voiced skepticism that a portion, perhaps any portion, of the booty should get designated as recurring. The House’s chairman of its Appropriations Committee, state Rep. Jim Fannin, expressed doubt that all of it could be used for operating expenses.
Theory supports such views. While a good chunk of what gets collected logically fits as recurring – because it merely accelerates what would have been collected from scofflaws absent amnesty – some of it is cash that otherwise never would have come in, either through illegal avoidance or successful legal cases against the state, without relaxation of penalties. The writers of the 2013 law tried to minimize this segment by stretching the process out over three years – to dodge the limitations in statute that define nonrecurring monies as those not lasting more than two years, even if it’s clear that by definition amnesty even spread out over three years is not a recurring source of revenue for most of what gets collected – and by eschewing any language that directs money directly to nonrecurring purposes, as was done in the 2009 legislation.
But REC members, particularly Richardson, in light of the letter might adopt on this matter the aphorism of if fooled once, shame on you, but if fooled twice, shame on me, thereby tempting them to rule (because their decisions require unanimous consent, otherwise the old forecast without the proceeds stays in effect) a substantial portion of the found bucks as nonrecurring and thus daring legislators to perform another shell game yet this time with an aware public. Which is why there is much interest in what that final number will be, because a political solution may present itself if enough is collected over $200 million to save face by then allowing a significant amount to be declared nonrecurring without any shenanigans needed to slough off an adequate amount declared recurring to balance the budget.
For purposes of fiscal integrity, in this short term, legislators should accept whatever amount, even if below $200 million, is designated as recurring by the REC at its next meeting (usually occurring in the middle of this month, but perhaps will end up delayed precisely in order to get a good reading on the amnesty haul) without the creative accounting. In the long term, legislation or a constitutional amendment needs to pass addressing the matter by stating any money designated as nonrecurring that enters a fund always keeps that label no matter where it may be transferred. After all, the whole idea was to use recurring money for ongoing purposes, and nonrecurring money for paying down “debts” of several kinds. Inconvenient circumstances do not provide absolution from following clear intent expressed in the Constitution.