SADOW: The Schroder Sequester, And Edwards’ Ironic Irritation

Irony stares Democrat Gov. John Bel Edwards right in the face as Republican Treasurer John Schroder hoists him on his own petard.

Last week, Schroder announced that he would not authorize a move of $25 million from the unclaimed property account to the general fund as budgeted. The fund keeps monies owed to the public by state government, which in its balance floats between $850 million and $900 million. Around $88 million comes in every year, and until this year creditor entities typically claimed only around $30 million annually.

However, the balance doesn’t go higher because the Legislature siphons off tens of millions annually. R.S. 9:165.1 allows $15 million yearly to go towards completion of Interstate 49, but the rest goes into the general fund. Further, in the past year repayment efforts have improved considerably, meaning in the future the gap between retained and claimed will shrink and leave fewer dollars theoretically available for immediate use. In fact, the gap’s magnitude shrunk so much that Schroder reported difficulty in paying off successful claims in a timely fashion.

That’s the practical side of the issue, which Schroder used to justify his actions when he gave full warning about his intention to hold back the funds earlier this year in an opinion column appearing prior to the legislative session. He did this in the context of stumping for a bill that would put unclaimed funds into escrow and use interest off that principal to lend money to local governments for infrastructure improvements.

That came as a result of a similar effort passing the Legislature in 2018 but drawing a veto from Edwards. In his message, he complained that the bill would have an impact on the use of unclaimed funds on general fund spending but would work with Schroder to come up with something for 2019. Instead, he opposed the similar HB 291, HB 292 and their related HB 496, as much out of animus for their authors Speaker Taylor Barras and state Rep. Neil Abramson, who have bucked Edwards on fiscal issues before, as for these bills’ success would allow state government to spend fewer dollars while Edwards doesn’t want to shrink the size of government.

Yet this puts Edwards in an ironic, if not hypocritical, situation. The unclaimed money becomes available only because of a funds sweep, where money collected for a purpose in statute becomes used for another unrelated matter. Edwards has called these sweeps when in the form of appropriation legislation illegitimate and crows about keeping these monies out of the budget.


But the law, as currently interpreted, is on Schroder’s side. That comes courtesy of a convoluted 2018 court ruling that declared all funds sweeps – which occur through specific appropriation – unconstitutional. Without any real constitutional basis, the decision created two classes of funds usage, dedication and general, and when dedicated funds through a sweep go for a general purpose, the ruling deems them a tax not constitutionally implemented.

That philosophy would apply to this situation. According to the ruling’s logic, the use of money government has used for a purpose not collected – even if not accomplished through a specific appropriation – is a forced taking of personal property by government without a voluntary reciprocal service rendered (which would be a fee), which is the very definition of a tax. Even if the law doesn’t prohibit use of these funds through the state general fund, of if a law passed specifically allowing that, the logic behind the ruling invalidates these considerations (and also would render the I-49 sequester unconstitutional).

An Edwards Administration spokeswoman, when asked whether the governor would take Schroder to court over the transfer not happening, replied “We certainly hope it doesn’t come to that.” They better hope not, because under current jurisprudence they’ll lose.



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