Lawsuit claims $200M owed to 'rainy day' fund

Associated Press

A lawsuit filed Monday challenges the way state lawmakers balanced last year's budget with $200 million from Louisiana's "rainy day" fund and seeks a repayment that could damage this year's budget.

Former state Rep. Ron Gomez of Lafayette is one of two plaintiffs on the lawsuit, which claims legislators violated the state constitution by not refilling the rainy day fund after using it to help close a deficit in the fiscal year that ended June 30.

The repayment issue was at the heart of a dispute between House and Senate leaders in budget negotiations in the last legislative session. Senate leaders won the debate, arguing that a 2009 statutory change doesn't require the rainy day money to be repaid for years, and a majority of House members and Gov. Bobby Jindal went along with that interpretation.

The lawsuit, filed in East Baton Rouge Parish district court, argues that a statute can't trump a constitutional provision governing the fund that requires the fund to be repaid. The lawsuit calls the statute illegal.

Gomez and co-plaintiff Bob Reid of Baton Rouge list themselves as residents and taxpayers on the lawsuit. In a joint statement, the pair said they filed the lawsuit to prevent state officials from repeatedly raiding the fund.

"Our state government is attempting to avoid its responsibility to balance the state budget through the traditional means of regulating spending and revenue levels. If allowed to continue, these actions will quickly result in the exhaustion of the fund, and will place Louisiana back in the precarious and unstable fiscal condition which the fund was designed to prevent," Gomez and Reid said.

Treasurer John Kennedy and the state are listed as defendants.

"I followed the statute, but whether the statute is constitutional or not we're going to have to let a judge tell us," Kennedy said Monday. "I was afraid this was going to happen."

Senate President Joel Chaisson, D-Destrehan, wasn't surprised the lawsuit was filed, saying he had heard business groups had been looking for someone to challenge the way lawmakers used the money without repaying it. But he added, "I strongly feel that the case is without merit."

House Speaker Jim Tucker, who unsuccessfully pushed for rainy day fund repayment, disagreed.

"In my mind the statute and the constitution are in clear conflict, so we'll see how the court views it," said Tucker, R-Terrytown.

If the money is required to be repaid, it would create an estimated $200 million hole in the current $25.5 billion state budget that would have to be closed by June 30, which likely would require budget cuts across state agencies.

"We will reach out to agencies to ask them to prepare plans for absorbing an additional $198 million reduction, in the event that the court takes issue with this budget language. We are not raising taxes, so if the court rules against this language, we will have a plan in place to make the necessary reductions," said Paul Rainwater, commissioner of administration and Jindal's top budget adviser.

Formally called the Budget Stabilization Fund, the rainy day fund was created in the state Constitution in 1998 to help with state budget shortfalls.

Certain funds immediately flow into it, including budget surpluses and state income tied to oil and gas, unless the fund has reached its cap. There are limits on when the fund can be used and how much can be taken from it, and a two-thirds vote of lawmakers is required.

The fund is currently at $644 million, which is below its cap. But rather than oil and gas money flowing into the fund as provided by the constitution, the state followed a 2009 statute that doesn't require the fund to be filled until the state's revenue reaches the levels of the 2007-08 fiscal year, a high-water mark in state income.

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