A third of the way into the budget year, state revenue from hospital privatizations, property sales and other sources is millions of dollars short of what legislators promised to pay in legal judgments to people who lost relatives or were injured in accidents on state roadways.
The Jindal administration announced Thursday night $5.8 million will be shuffled together to pay the judgments against the state until the budgeted money materializes. The governor’s chief financial adviser said there is no cause for alarm.
A New Orleans man who spent 12 years in prison is owed $250,000 for his wrongful conviction. He will get paid. So will a Shreveport woman who is due $305,410 from the state for a car accident that killed her infant and left her paralyzed days before Christmas. A Lake Charles area family should receive $495,000 because a sign placed too close to the roadway allegedly caused a driver to swerve and flip his car, suffocating him.
Before Thursday night’s announcement, state Treasuer John Kennedy said he had been fielding phone calls from legislators and lawyers about why checks were not in the mail.
“Everything that has to paid ... depends on a rabbit’s foot. We’re gambling,” Kennedy said, adding that a more stable budget approach is needed.
Kennedy, who writes the checks for state government, paid $475,000 in judgments before running out of cash four months into the state budget year to satisfy another $5.8 million owed to plaintiffs.
“The Legislature’s told me to pay (the judgments). The Legislature’s voted to pay these judgments,” Kennedy said. “This is the first year that I remember we’ve ever had the problem.”
The problem: Gov. Bobby Jindal and legislators planned to pay the judgments — as well as much of higher education’s bills — with hospital lease payments, legal settlements, property sales and dollars that have yet to fully materialize.
Commissioner of Administration Kristy Nichols, the governor’s chief budget adviser, said Thursday night that a solution is in place.
She said the state will essentially loan itself the money needed to pay the legal judgments, taking dollars from one pot and moving it into another pot.
Nichols said the money needed to repay the loan, or seed, will materialize. Seeds are done when revenue flows into state government at different points in a year.
She said $32 million of $140 million in hospital lease payments is in the bank and at least a portion of the $65 million in legal settlements arrived.
She said active final negotiations are taking place on the sale of a building the state owns on Third Street in Baton Rouge.
In the meantime, she said, a $5.8 million treasury seed can be made in anticipation of expected revenue. “That revenue is coming in and in terms of us being on target ... no, we’re not concerned,” Nichols said.
State government relies on a variety of revenue sources to pay for health care, schools and other public expenses. The revenue flows into different funds that are cobbled together to build a $25.4 billion state operating budget. Building a flow chart to see where money originated and where it went could keep an computer-savvy economist busy for days.
At issue is the overcollections fund that needs to pay $414 million of state government’s bills in the state fiscal year that started in July.
Money is supposed to flow into the fund from leases involving public hospitals, the sale of state property, anti-fraud initiatives at the state Department of Revenue, pharmaceutical legal settlements and other sources. Once the money arrives, various bills are supposed to be paid, including:
- $294 million for the state’s public colleges and universities.
- $24 million in termination payments to public hospital employees who lost their jobs when the state hired private companies to care for the hospitals’ patients.
- $12 million for judgments stemming from oil and gas royalty disputes, criminal convictions, accidents on state highways and other legal matters.
The problem is that the money is not coming in fast enough, at least according to Kennedy.
For example, the state Department of Revenue is supposed to generate $20 million by catching fraudulent requests for refunds before the checks are written and identifying people who should have filed returns but did not, among other efforts. To date, Nichols said, the department has generated $4 million from the effort.
Prior to shuffling money for a seed, the balance in the overcollections fund was $22 million, of which $262,000 could have been used to pay millions of dollars in judgments, according to the state treasurer’s office.
Nichols said the treasurer is not accounting for all the money that has come in for the fund and that revenue flows in at different times instead of all at once.
The state Department of Natural Resources already received a $4 million treasury seed to satisfy a judgment involving royalties. The money will be repaid once the overcollections fund produces more money. Likewise, the $5.8 million seed for other judgments also must be repaid.
Kennedy said he finally informed the Jindal administration that money needed to be shuffled around after growing tired of phone calls from legislators and attorneys.
“It’s a normal course of business in terms of managing cash flows,” she said.
Lake Charles attorney James D. Cain said he was not yet worried about $495,000 owed by the state to his client, who lost her husband in a car accident after he swerved to avoid a state sign in Cameron Parish. Cain said he was giving the state a few months into the budget year to produce the money.
“It’s government. It’s bureaucracy. I don’t expect it to work like State Farm Insurance, where in 30 days they cut you a check,” Cain said.