Treasurer: Law says put money in reserve fund
BY MICHELLE MILLHOLLON
Capitol news bureau
October 22, 2012
State Treasurer John Kennedy said Monday that he cannot comply with Gov. Bobby Jindal’s request that he earmark part of a $130 million state government surplus for a health care budget hole.
Kennedy said legislators directed him through legislation to put the extra dollars into the state’s “rainy day” fund. “The law just seems to be abundantly clear to me. There’s no wiggle room,” Kennedy said Monday.
Later in the day, Commissioner of Administration Paul Rainwater, the governor’s chief budget adviser, said Kennedy, who is a lawyer, is incorrect in his interpretation of the legislation.
Rainwater said the language in question expired.
He said using the surplus would prevent further cuts to a health care system that provides for the poor and uninsured. “We’ve made the cuts we needed to cut. It would be irresponsible to move forward on further cuts that are unnecessary when this money is available,” Rainwater said.
At issue is language the Louisiana Legislature adopted earlier this year before an $859 million shortfall surfaced in the Medicaid program. The shortfall materialized after Congress unexpectedly changed the rate the federal government will pay toward the state’s Medicaid program.
Jindal slashed $523 million, but that only took care of part of the funding shortage. The administration still needs to find $94 million in state funding to generate enough federal dollars to erase the rest of the shortfall.
The Jindal administration’s plan is to use part of an expected surplus from strong corporate tax collections to eliminate the $94 million gap.
A hurdle arose when Louisiana House Appropriations Committee Chairman Jim Fannin, D-Jonesboro, said the governor could not use the surplus because House Bill 822 directs Kennedy to deposit up to $205 million in leftover state dollars into the state’s rainy day fund. The governor signed the bill into law this summer.
Formally known as the Budget Stabilization Fund, the rainy day fund serves as a savings account to tide the state over during financial difficulties.
The governor maintains that any money recognized after the fiscal year ended on June 30 is available to help with the health care funding gap and does not need to go into the rainy day fund. The shortfall will not be recognized until months after the end of last fiscal year.
After studying HB822, Kennedy said, he concluded Fannin is correct.
Kennedy said he will transfer the dollars into the rainy day fund once they are officially recognized by a state panel that oversees state revenue. The only way to fix the problem is for legislators to change the law, either during a special session or during next year’s regular session, he said.
Kennedy said he has not shared his decision with the Jindal administration.
Rainwater said it is not up to Kennedy to decide how the dollars should be directed. The language in the legislation passed earlier this year no longer applies because extra revenue was not recognized before the fiscal year ended, freeing up the surplus to be used for the Medicaid hole, according to Rainwater.
The disagreement likely will simmer for months, leaving it to legislators to decide whether they want to put the money in the rainy day fund or divert the dollars to health care.
Rainwater said the Jindal administration will work with legislators next session to spend the money on health care.