Saturday, February 24, 2007

The Real Low-Down on the GIF Money

The "General Improvement Fund" is drawn from the interest earned all year from deposits of state receipts. Because of the surplus, it has turned into a huge pile of money. Last session each State Senator got $750,000 to spend on their district, and the totals should be far larger this time. The State Reps. got GIF money too.

You have heard a lot of talk about this from the papers, usually in an unflattering light. I am going to try to tie it all together for you and explain the true dynamics.

(Continued- click SATURDAY below and scroll down for rest of story, or if sent straight here just scroll down).


Blogger Mark Moore (Moderator) said...

In times past, the Governor controlled half the GIF money, and the legislature controlled the rest. When Huckabee came in, the ledge and the Executive were from different parties, so the ledge took it all. But the most interesting dynamic was within the ledge itself....

For the longest time, a group of "old lions" in the legislature doled out all the gif. They gave themselves the "lions share" in both House and Senate. These were mostly liberal legislators from South and East Arkansas. They were a small but organized group that kept most of the "pork money" close to home. Beebe was in this group for a while.

Then along came term limits. The small group of South and East liberals tried to maintain control of the money, but their numbers and prestige were thinned by term limits. In 2004 the Senate rebelled agains the system and "The Brotherhood" was born. The initial issue that birthed the brotherhood was the idea that each Senator should control an equal share of the GIF money.

Back when liberal legislators were controlling who got the GIF money, liberal judges did not seem to care. Once it was not that way anymore, judges "discovered" that you could not have bills that applied only to one part of the state and not others. That is, "Local Improvement" type bills were unconstitutional. More on that in a bit.

Now the legislators have been roundly condemned in the press (now that liberal legislators no longer control the money) as greedy pork-barrel politicians for even caring about the gif money, but the truth is more complicated. Some of them just want the pork and will spend it on silly stuff. Some would rather it go back to the people as a one-time tax credit (which would be my first choice). Given that there are not enough votes for their first choice, what is their second choice?

Well, if they lump the GIF money into general revenues, it is likely to added to BASE SPENDING in growing government. The conseravtives don't want that. Some of them judiciously decided that Local Improvement projects that could be used to defer local tax increases are the best practical small-government option available to spend that money. That is pretty good logic. Let me give you an example.....

Rural fire departments are made mostly of volunteers, but they still have expenses. If a legislator gives them the GIF money, that means the county has less pressure to raise local taxes to fund the Fire Departments. In addition, a well-studied use of the money can pay big dividends. For example, some funded the equipment needed for several rural fire departments to get a higher rating. The resulting decreases in homeowners insurance premiums completely paid back the cost of the equipment within two years. That is good government.

So GIF funding like that is the best-worst thing to do when giving it back to those who earned it is not acheivable. Let's get back to the dynamics of the struggle for the money....

The courts ruled local improvement projects are unconstitutional. State spending must be applied to things that have the same rules of application state-wide. This argument has more constitutional merit than anything the court majority said in the Lakeview decision. To address that point, the ledge has countered with a proposal to set up an advisory council on how to distrubute the money. Governor Beebe, who was in on the plan to snatch the Governor's share of the GIF money away when that Governor was a Republican named "Huckabee", now has his own plans for the money, and his own proposal to have people under his control decide what local projects are most "worthy".

The Court's legitimate objections might more easily be addressed by having the legislators requests filed in one mega-bill entitled, "A bill to return excess state money to local entitites in equal shares and for other purposes."

Will some of the projects be corrupt or silly if we continue to let the ledge members divy it up? Sure. But the same could be said if we let some commision divy it up, or let the Governor's people divy it up the way he wants.

Possible scenario on how this could play out: Besbe's "quick closing" fund for new business for example, displayed a new dimension when he said that he would like to use it to help "the businesses we already have" as opposed to luring in new ones. Much of the business community switched their normal sides to put him in office. It would stink to high heaven if some of those same folks benefitted from this fund.

No matter which of these proposals is adopted, taking the decision making out of the hands of the individual legislators has one big draw back for Northwest Arkansas- it returns us to the bad old pre-brotherhood days when the rest of the state ganged up on NW Arkansas and looted them. A lot of the GIF money came FROM NWA, but very little of it ever got back there.

So far the Democrats in the House have been working well with the NWA Republicans. For some reason, the Brotherhood in the Senate seems rather accommodating to the Governor's plan to get control of the money. Is there a backroom deal going on between the Brotherhood and the Governor? I don't know, but it seems mighty odd that they would capitulate without more of a fight considering the GIF money is the reason they united in the first place.

Well, that's my primer on the GIF struggles. Feel free to add your own insights below....

3:56 PM, February 24, 2007  

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