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Sunday, May 24, 2009

Ind. Law - More on "Lawmaker adding 'doomsday' to budget planning: Checks if state may tap reserve to stop shutdown"

Updating this ILB entry from May 18th, quoting a story from the Evansville C&P, two more papers chime in today.

Mike Smith of the AP reports in the South Bend Tribune:

The two words frame the biggest question of the special legislative session Gov. Mitch Daniels is expected to call next month: What if lawmakers don't pass a budget by June 30, when the current two-year spending plan expires?

The Daniels administration is taking a "don't even go there" approach. But Sen. Luke Kenley, R-Noblesville, has already begun checking out contingency plans, even though he says he's "100 percent hopeful" that it won't be necessary.

"I'm just doing this as a kind of contingency type of thinking," said Kenley, who asked for answers from the Legislative Services Agency, the General Assembly's nonpartisan research arm. "I just want to know what's at the end of the trail for me."

Crafting a budget that passes Daniels' muster at a time when revenues have plummeted — tax collections from December to April were $386 million below estimates — has already vexed lawmakers once. * * *

The Legislative Services Agency says that except for a few institutions such as the Indiana School for the Deaf, most of state government would grind to a halt unless lawmakers passed legislation to keep current spending going.

"There has to be an appropriation to pay state money," said Jack Ross, LSA's executive director. "For the most part, money cannot be spent unless it is appropriated by the General Assembly." * * *

Ryan Kitchell, director of the Office of Management and Budget, said no one in his shop is looking into the "what if" question.

He said his staff is crafting a budget proposal to present to a panel of lawmakers on June 1 and is "optimistic that something resembling it will pass."

Daniels is expected to propose a much leaner budget bill than the one voted on during the last day of the regular session, and that could create a tough sell among Democrats who control the House.

Mike Smith's story is also in the Elkhart Truth, in a longer version, including:
But Kenley's question has come up during previous special sessions to enact budgets. LSA came to the same conclusion during a special session in 1991, when U.S. Sen. Evan Bayh was governor.

Indiana Supreme Court Justice Frank Sullivan, Bayh's budget director, said then that Bayh -- even without legal authority -- would ensure that state prisons and state police continued to operate absent a new budget. Lawmakers ultimately passed a spending plan that Bayh signed in time to avoid such steps.

The concern was raised again in 1993, when a special session ended on the last day of the fiscal year with lawmakers approving a budget by overriding a veto from Bayh.

A stalemate that June over the budget and taxes lasted so long that Sen. Patricia Miller, R-Indianapolis, prepared legislation that would keep funding at the previous fiscal year's levels in case lawmakers didn't meet the deadline.

She hopes that's not needed next month but said it's an alternative lawmakers and Daniels could use if they can't reach an agreement on time. * * *

House Speaker Patrick Bauer, D-South Bend, worries that Daniels will insist on cutting $1 billion from the earlier plan. If that's the case, Bauer said he is not optimistic it could pass his chamber because it would mean cuts in education and job creation.

"The possibilities will be judged by what he puts on the table," Bauer said.

The outcome of the special session, expected to be called in mid-June, could hinge on a new revenue forecast due Wednesday and how well headstrong leaders in the House and governor's office work together.

Senate President Pro Tem David Long, R-Fort Wayne, considers June 30 a "day of reckoning" because of uncertainties about how state government would function after that if a spending plan isn't approved on time.

"It's that sort of pressure that hopefully brings everyone to their senses and we come up with an agreement on the budget," he said.

One of the applicable statutes in case of an appropriation bill failure is from the 1869 special session. According to the Centennial Hisory of the General Assembly, pp. 177-178, the General Assembly convened in twenty regular and ten special sessions between 1851 and 1889. "Lawmakers failed to pass an appropriation bill at least ten times during a regular session." Here are the first two sections of the still in effect 1869 law, IC 4-10-15:

Sec. 1. Whenever there shall be a failure at any regular biennial session of the General Assembly to pass an appropriation bill or bills, making appropriations for the objects and purposes hereinafter mentioned, it shall be lawful for the Governor, Secretary and Treasurer of State, until appropriations shall be made by the Legislature, to direct the Auditor of State to draw his warrants on the State Treasury for such sums as they may, from time to time, decide to be necessary for such purposes respectively, not however exceeding the amounts appropriated for the same objects respectively by the last preceding appropriations which shall have been made by the General Assembly; and to pay such warrants as may, from time to time, be drawn and presented, a sufficient sum of money is hereby appropriated.
(Formerly: Acts 1869(ss), c.5, s.1.)

Sec. 2. The warrants may be drawn for the necessary and current expenses of the following:
(1) All psychiatric hospitals (as defined in IC 12-7-2-184).
(2) The Indiana School for the Deaf, established by IC 20-22-2-1.
(3) The Indiana School for the Blind and Visually Impaired, established by IC 20-21-2-1.
(4) The Indiana Veterans' Home.
(5) The Plainfield Juvenile Correctional Facility.
(Formerly: Acts 1869(ss), c.5, s.2.) As amended by Acts 1976, P.L.44, SEC.15; P.L.2-1993, SEC.33; P.L.12-1996, SEC.2; P.L.69-1999, SEC.1; P.L.1-2005, SEC.57; P.L.218-2005, SEC.1.

It is interesting to see that Sec. 2 was last amended four years ago.

Although the Art. 10, sec. 3 of the Indiana Constitution provides:

Section 3. No money shall be drawn from the Treasury, but in pursuance of appropriations made by law.
there are plenty of continuing appropriations in the Indiana statutes. Often they are overridden in the biennial budget bill, but if there is no new budget, then they presumably are effective again. One would expect all of these laws are indexed somewhere.

A surprising discovery, to me at least. was IC 4-10-18-4(b), a part of the Counter-Cyclical Revenue and Economic Stabilization Fund. Subsection (a) is a continuing appropriation from the general fund to the counter-cyclical fund. But that operates only in good years. In bad years, subsection (b) comes into play:

(b) If the annual growth rate for the calendar year immediately preceding the current calendar year is less than a negative two percent (-2%), there is appropriated from the fund to the state general fund, for the state fiscal year beginning in the current calendar year, an amount equal to the product of: (1) the total state general fund revenues for the state fiscal year ending in the current calendar year; multiplied by (2) negative one (-1); and further multiplied by (3) the remainder of: (A) the annual growth rate for the calendar year preceding the current calendar year; minus (B) negative two percent (-2%).
Other sections of IC 4-10-18 may also come into play, as may the provisions of the 2007 budget bill cited in this earlier ILB entry.

The state board of finance (IC 4-9.1-1) has enormous authority to move money around, to negotiate loans, etc.

In the story quoted in the May 18th entry, Senator Kenley was looking to cobble together a way to keep state government operating for one month after the current budget expires -- i.e. the month of July 2009. It appears that it may be possible, with some creativity, to devise a plan to keep a severely hobbled framework of state government going, but not if no advance planning has been done.

Posted by Marcia Oddi on May 24, 2009 05:49 PM
Posted to Indiana Government | Indiana Law