BATON ROUGE—Gov. John Bel Edwards’ proposal to close a hole in this year’s budget using funds intended to replenish Louisiana’s rainy day fund conflicts with a legal agreement reached two years ago in a lawsuit between the state and plaintiffs who sued the state over the fund.
Edwards announced on Jan. 19 that he wanted to redirect $200 million -- part of the $1 billion Louisiana receives each year from BP to compensate the state for the disastrous 2010 Gulf oil spill -- and use it to help fill a more than $700 million shortfall in the state’s $25 billion budget. The deadline to close the gap is June 30 – the end of the fiscal year.
Based on the agreement, legislators earmarked the oil spill money for repaying the trust funds that were previously used to balance the state’s budget -- the rainy day fund is one of them. The agreement helped former Gov. Bobby Jindal settle a 2010 lawsuit, which accused the state of not replenishing the funds it took from the rainy day fund several years back.
“When [Gov. Edwards] made the announcement he was not aware of the terms of the settlement agreement in the case, and he has not taken any action yet with respect to those funds,” attorney Kyle Keegan recently told the Louisiana Record.
Keegan represented former state Rep. Ron Gomez and tea party activist Bob Reid, who sued the state over the rainy day fund.
The agreement, signed by Jindal’s attorney Thomas Enright, includes a clause that states that the rainy day fund agreement will be “null and void” if there is any “material change” made to the earmark.
During the Jan. 19 announcement, Edwards emphasized the serious condition the state’s budget is in.
“It is now more important than ever for our state’s leaders, citizens and stakeholders to come together to solve this problem," Edwards said. "The last eight years of bad budgeting and annual cuts to vital services have left us in a fragile position. There is no sugar coating that fact."
The lawsuit Keegan filed on behalf of Gomez and Reid was never dismissed, but was stalled in December after Keegan filed a request to hold off the proceedings. Keegan told the Louisiana Record that reviving the lawsuit would be contingent on how the settlement is handled.
“It depends on whether we are able to work out an arrangement in that regard that satisfies the group I represent who want the fund refilled as quickly as possible, and I’m in discussions with them right now,” he said.
Gomez and Reid filed the lawsuit after legislators and Jindal’s administration failed to refill the rainy day fund after using it twice. The rainy day fund, formally known as the Budget Stabilization Fund, currently contains approximately $487 million, according to the Treasurer’s Office. Its cap is $807 million.
From each payment from BP, the state is required to put 45 percent of the oil spill money into the rainy day fund until it reaches its cap. Keegan said Louisiana’s budget problem is a result of overspending over the past several years.
“I know exactly what caused it,” Keegan said. “Tax cuts and tax credits that the state could not afford at the time they were made over the last seven years. And the problem had been made worse by the decline in oil and gas revenues to the state over the last year.”
Edwards was sworn into office on Jan. 11.