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State budget balanced with millions tied up in lawsuits

by Associated Press

BATON ROUGE — As they scraped together dollars to fill gaps in last year’s budget, Louisiana lawmakers relied on nearly $36 million from a state escrow account tied to ongoing tax litigation, dollars that can’t be spent while the lawsuits remain unresolved.

Much of the money earmarked for spending in the budget year that ended June 30 remains inaccessible, leaving that fiscal year out of balance. A $7.8 million transfer was made Tuesday evening after settlement of some litigation and as The Associated Press asked questions about agencies’ lack of access to the money.

Obligations tied to escrow money not moved by the mid-August close of books shift to the current budget year, with uncertainty about whether they will all be met.

The Senate chairman whose committee added the dollars into the budget and Gov. John Bel Edwards’ administration said they’re convinced the cash will be available.

“We felt comfortable that the money would materialize,” said Finance Chairman Eric LaFleur, a Ville Platte Democrat.

The maneuver is reminiscent of the piecemeal financing used during former Gov. Bobby Jindal’s tenure, budgeting tactics that drew widespread criticism for creating uncertainty.

Edwards spokesman Richard Carbo defended the use of the escrow dollars and suggested the governor’s approach to budgeting was different from Jindal, with plans that “are honest and free of gimmicks.” Carbo said the administration is confident “funds used to cover supplemental expenses will be made available to the state over the course of the fiscal year.”

The largest portion of the dollars, $18.7 million, is earmarked for the corrections department to pay Louisiana’s sheriffs for housing state inmates in their parish jails. Another $10 million is designated for a computer project at the Department of Children and Family Services.

Corrections spokesman Ken Pastorick said the department dipped into this year’s money to pay off last year’s obligation to the sheriffs. Catherine Heitman, spokeswoman for the family services agency, said the computer upgrade will continue undisrupted if the department gets the money within the current budget year.

The remaining money is itemized for the health department to pay patient care providers and for the Tangipahoa Parish charity hospital run by LSU, Lallie Kemp Regional Medical Center, to cover operating expenses.

The $28 million that continues to be unavailable is in Louisiana’s hands, but it’s locked up amid two court disputes over temporary taxes enacted by lawmakers.

Nearly $17.2 million was paid in protest by hospitals and other medical facilities for a temporarily re-enacted 3 percent state sales tax on certain medical devices such as syringes and pacemakers. Multiple lawsuits have been filed challenging the tax.

Legislators recently reinstated the tax break, expecting the lawsuits would be dropped. The $7.8 million transfer Tuesday evening involved settlement of some of the litigation.

“We’re in the process of resolving those lawsuits with the different companies,” Revenue Secretary Kimberly Robinson said. “We’re targeting getting the bulk of (the money) released in the next few weeks.”

The remaining dollars involve $18.7 million paid in protest by chemical plants as the Louisiana Chemical Association challenges the temporary removal of a 1 percent sales tax exemption on business utilities. The organization, which lost in district and appeals court, is asking the state Supreme Court to consider the case.

It’s uncertain when a ruling might come — and what it will be.

Robinson expects Louisiana’s high court to allow the lower court decisions to stand.

“We talked to people about the merits of the case, and the level of confidence was high that we would win,” said LaFleur, a lawyer, citing the previous court rulings.

Lawmakers anticipated spending much of that tax revenue in a budget bill last year, only for the chemical association litigation to continue and the dollars to remain locked up in escrow, leaving a budget hole.

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