Jindal wants BP money in ‘rainy day’ fund

Advocate staff photo by BILL FEIG -- Gov. Bobby Jindal makes a point while addressing the joint session of the Legislature to start the 2014 session. Show caption
Advocate staff photo by BILL FEIG -- Gov. Bobby Jindal makes a point while addressing the joint session of the Legislature to start the 2014 session.

Gov. Bobby Jindal’s administration wants to use Gulf oil spill recovery money to help refill the Louisiana’s “rainy day” fund and settle a lawsuit claiming the state needs to return roughly $300 million to the fund.

The proposal is tucked into a budget bill by Rep. Jim Fannin, R-Jonesboro, filed this week for consideration by lawmakers. It would steer dollars that BP PLC is expected to pay for the state’s claims of economic damage caused by the massive 2010 spill.

Those claims are the subject of ongoing federal litigation, and it’s unclear when any of the money might be available to the state.

Jindal’s top budget adviser, Commissioner of Administration Kristy Nichols, said she believes the proposal is a proper use of money that would be designed to compensate the state for economic hardship and losses after the spill.

“I think that the settlement that you see in the bill puts forward the state’s best effort to meet its obligations while continuing the growth of the economy,” Nichols said.

The rainy day fund, formally called the Budget Stabilization Fund, was tapped twice in recent years to help close state budget gaps. But constitutional restrictions require the dollars to be quickly repaid after being used, up to a cap that is set on the pot of money.

Jindal and lawmakers tried to change the repayment trigger through state law, but former state Rep. Ron Gomez and tea party activist Bob Reid filed a lawsuit in 2010, arguing that lawmakers violated the constitution by not refilling the fund after its use.

The repayment would cost more than $300 million.

The Jindal administration and lawmakers previously agreed to settle the lawsuit by repaying the money by the 2015-16 budget year, which would mean the state faces a large payment without a clear source of financing.

“This is trying to move away from the balloon payment,” said Fannin, who as chairman of the House Appropriations Committee files the administration’s budget proposals.

The new plan instead would tap into the BP money to refill the fund or offer a different repayment schedule if the oil spill recovery money isn’t yet in hand.

Gomez and Reid will agree to dismiss the lawsuit if the Legislature agrees to the proposal, said Kyle Keegan, the attorney representing the two men.

“We traded the shorter deadline for a share of the BP money, and we believe the fund will be filled up by the BP money before you get to 2016 or 2017,” Keegan said Friday.

Billions of dollars in civil penalties expected to hit BP because of violations of environmental laws have strings attached in both federal and state statute, requiring the money to be spent on coastal protection and restoration projects.

But Nichols said no such restrictions exist for money Louisiana is expected to receive for damages to its economy because of the massive disaster.

Under Fannin’s bill, each time the state receives proceeds from a settlement or judgment involving economic damages tied to the oil spill, up to 50 percent of the amount would be shifted to the rainy day fund until it is repaid to its cap.

If the dollars aren’t yet in hand, the state each year would pay either $25 million or 25 percent of any one-time or surplus dollars it has to the rainy day fund, with a final balloon payment due in the 2017-18 fiscal year.

The proposed changes would mean that if the oil spill recovery funds aren’t in hand, any lump sum repayment would fall on the next governor. Jindal’s term ends in early 2016.

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Online:

House Bill 1026 can be found at www.legis.la.gov