Hood's rulings on special funds will apply for now

The agency charged with approving state spending has decided to follow the opinions of Attorney General Jim Hood on what special funds may be swept into the state’s general fund for the current fiscal year.

“Just as all past Executive Directors of the Department of Finance and Administration have done, we do plan to follow the opinions of the Attorney General,” DFA Executive Director Laura Jackson told Mississippi Today.

Jackson took over as head of DFA on July 1 after former director Kevin Upchurch retired. Her department manages the state budget completely, cutting checks and making cash transfers to individual agencies.

Confusion has swirled about state spending since the Legislature in April enacted a new law, called the Budget Transparency and Simplification Act.

In the law, legislators decided to pull $187 million of fees and assessments from some agencies’ special funds into the general fund. The law also eliminated inter-agency transfers, such as one agency charging another for rent or Internet and technology services.

A number of agency heads objected to the loss of the special funds and sought opinions from Hood as to the legality of the Legislature sweeping those monies into the state’s general fund. Legislative leaders, most prominently Lt. Gov. Tate Reeves, R-Florence, have said that the Legislature has the authority to decide how those funds are spent, not the agency heads.

In eight written opinions and “several informal discussions” with agency heads, Hood said that a total of $79.4 million of the scheduled $187 million special fund sweeps could not legally be swept from the agencies under the Mississippi Constitution.

Under Mississippi Code, any transfer of funds without legal authority would constitute a misappropriation of public funds, Hood’s office said. Any agency head who transfers or spends funds without getting prior legal authorization could be held personally liable for that action, his opinions stated.

The decision by Jackson to follow Hood’s opinion settles, for now, a weeks-long dispute between Hood and Reeves, who championed the law this past session.

Jackson’s decision also leaves a $79.4 million hole in the current fiscal year’s budget, an amount that will have to made up elsewhere unless state revenues exceed current projections.

Jackson said she has met with Reeves and House Speaker Philip Gunn, R-Clinton, regarding the new law, stating the three “are committed to working together and keeping an open line of communication to reach resolution on those issues.”

“These are all issues we will continue to monitor and address if need be during the 2017 legislative session,” Gunn’s spokeswoman Meg Annison said Tuesday.

After the law was signed by Gov. Phil Bryant on May 6, agency heads scrambled to determine what their budgets might look like in its wake. Many of the departmental leaders were caught off guard by the law’s passing and publicly criticized Reeves and lawmakers, calling the passing of the law “short-sighted” or “crippling.”

“You know, there have been ones (agency heads) who go to the media and cry, and there are those who are trying to find a solution and work with the executive and legislative branches to get those done,” Reeves said in an interview with Mississippi Today in June.

Even the Legislative Budget Office, which writes the state budget after the Legislature passes it each year, was affected, releasing the final budget weeks later than usual because of the impact the law had on the numbers.

Bryant, Reeves and Gunn have all said the new law presented unforeseen problems that can be worked out when the Legislature convenes in Jackson in January 2017. Jackson said lawmakers could fix some of the issues with the law “if they so desire.”

The $79 million amount in question is slim relative to the entire $5.8 billion general fund budget for fiscal year 2017. That amount can be resolved with tweaking of numbers throughout the course of a fiscal year or even one month of higher-than-expected revenues.

However, adding a $56 million accounting error made when writing the 2017 budget, there could be as much as a $135 million gap in the budget.

After Hood released his opinions and discussed the $79 million total in public, Reeves, a Republican, called Hood’s math “questionable” and chalked up the Democratic Attorney General’s actions to political maneuvering.

Reeves, who previously served eight years as the state Treasurer, has made several quips in the past few weeks, like: “I don’t take budget advice from the attorney general. Heck, I don’t even take legal advice from him.”

“Opinions (of the attorney general) are just that,” Reeves’ spokeswoman Laura Hipp said last week.

As agency heads have considered what to do with their budgets, even Republicans have criticized or questioned the law.

State Treasurer Lynn Fitch ran with Hood’s numbers in her Neshoba County Fair speech two weeks ago, stating that the state is “$135 million in debt.”

Secretary of State Delbert Hosemann has been critical of the law after losing $18 million in special funds that were swept into the general fund under the new law. Insurance Commissioner Mike Chaney has also criticized the intent behind the law.

“I’m not opposed to taking special funds and putting them into the general fund,” Chaney said. “What I’m opposed to is taking money intended for a specific purpose and using that for whatever else. When we lost inter-agency transfers, I can’t do smoke alarms, I can’t inspect elevators, which I have to do by law…

“I’ve been around a long time, and I’ve seen the damage on both sides,” Chaney said. “It’ll take us 10 years to undo the damage that’s been done.”

But for now, Jackson’s decision to adhere to the Attorney General’s opinions should clear matters up until the Legislature meets in Jackson in January.

“We are in the process of meeting with the agencies that were included in SB 2362 and evaluating each of their special funds to make sure we are all in agreement as to the actions that DFA will take to satisfy the language in the bill,” Jackson said. “So far, the meetings have been helpful for all involved.”