SADOW: Funds Sweeps Are A Fact Of Life In Louisiana’s Budget

The Gov. Bobby Jindal Administration and his leadership allies in the Louisiana Legislature took a route of convenience regarding a court ruling about the practice of “funds sweeps,” leaving for the future the task of correcting an errant court ruling with no practical impact for the present.

Louisiana has hundreds of funds to which dedicated revenue streams flow – most relatively small and obscure, a few large and almost as obscure. They hold billions of dollars, but some of them collect revenues far in excess of actual spending needs. Although theoretically appropriations could be made for their dedicated purposes, in many instances there is little to no genuine reason for that spending, and certainly other things are of much higher priority, so rather than spent wastefully it piles up.

Therefore, given the choice between letting this money lie idle or using it for important objects, the state may legislate a “funds sweep,” meaning a law is passed that transfers money from these funds to another fund where it can be used for general purposes. It’s a safety valve for the lack of courage of too many legislators that refuse to unlock so many inefficient dedications that steer money to the wrong places and/or takes it from the citizenry in various forms for lack of a good reason in the first place, because instead of having to make choices and live with their political consequences, for political cover to avoid this these politicians claim they can’t do anything about it because funds are “dedicated” and then must launch into the necessary corrective of funds sweeps.

In 2012, one such fund, the Adult Probation and Parole Officer Retirement Fund, in a sweep got about $3.7 million sliced from it for fiscal year 2013. Proceeds into it come from a processing fee for supervision paid by those on parole and probation. Collection began in 2009, with the purpose being to build up a nest egg to enhance benefits of parole and probation officers.

This perturbed a nonprofit organization, the Louisiana Probation and Parole Officers Association, an Internal Revenue Service 501(c)(4) entity, which interestingly lost its tax-exempt status the previous yearfor failure to file required forms. It sued the state over the sweep of this fund. And late last year, District Judge William Morvant (fresh off a losing bid for the Louisiana Supreme Court, and with a history ofquestionable conduct and head-scratching rulings) issued a tortuous, if not decidedly bizarre, ruling favoring the group’s position.

In essence, Morvant argued against the prevailing notion that defining the origin of revenue occurs not at the time of physical collection, but when it gets used. He ruled that because the money got swept, it changed its purpose from a fee when collected to a revenue-raising “tax” levy, and because this happened in an even-numbered year, it served as an unconstitutional raising of taxes!

It’s hard to know where to begin with this gobbledygook. So sweeps therefore are constitutional if done in odd-numbered years? Note that by this logic, any contributions that came into the Budget Stabilization Fund because they were revenues realized above forecasts or might have been put there by the Legislature from fees collected suddenly become a tax increase when swept under the special rules governing that for use in the general fund? And these are just the obvious absurdities derivable from the faulty conclusion.

Which if brought to a higher court easily would be uncovered and dispatched as case law as long as those judicial organs felt no need to rewrite the Constitution or to take leave of common sense. But the Legislature and Jindal Administration deferred, having already spent the money, which will require a separate legislative appropriation to return that seems likely to gain thier assent and given the state’s fiscal picture, with legislative leaders saying they didn’t want to waste more time and money on the matter.

Because in the end Jindal and his allies win regardless. For let’s say the bill passes and the money returns to the fund. Its enabling legislation, if sweeps now are off the table, says the cash must sit there awaiting the day the Legislature – needing Jindal’s assent unless it can muster a two-thirds majority to override a veto – appropriates money for enhancing benefits of parole and probation officers. Except that there’s a time limit on it: if not done by Jun. 30, 2015, with Jindal in office six more months, it all reverts to the Department of Public Safety and Corrections to fund supervision. In other words, the Jindal Administration gets the money anyway.

So the reason the appeal was dropped is not because of fear of losing the case, but because by the time it would work its way through the judiciary, the Jindal Administration, absent some unusual resistance in the Legislature, will have the money regardless. And there will be no other suits trying to reverse other sweeps not because of some executive branch pressure, as the group’s lawyer maintains, but exactly because the group won this one on a fluke that others know is far less replicable in their cases.

Sure, some kamikaze lawsuit attack on sweeps might occur (one otherpending ruling, that of a case against sweeps brought by the Public Service Commission, relies partially on this argument, but it has others it could use that on the surface seem less capricious), but the judiciary should swat that away as long as it relies upon the confused lower court ruling here. This is why, in the final analysis, this capitulation will create no change in the way funds sweeps get used.

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