June 13, 2007

Caught on Video: State Treasurer Admits State Ignores the Law on Spending Limits

As a follow-up to my post yesterday reporting that the state budget may include nearly $1 billion in unconstitutional spending, Ben Cunningham has posted the video of an exchange on the state House floor between state Rep. Susan Lynn and State Treasurer Dale Sims in which Sims admits the Bredesen administration has violated the state constitution and state law in the way it calculates how much it may spend under the constitution's "Copeland Cap," an amendment voters added to the constitution in 1978. Cunningham:

The Copeland amendment says that the growth in appropriations from state may not grow faster than the TN economy as measured by personal income unless the General Assembly votes to override this cap. The law is very explicit and says "appropriations. Bill Hobbs' post yesterday lays out some of the questions. Here is a video of a discussion from the Monday House Floor session where Dale Sims, with the Comptroller's office, says YES the Copeland cap has been computed with revenues and not appropriations. Has this allowed Govt to grow faster than it should have? Research is being done to find the answer.

The state constitution was amended in 1978 with this provision, called the "Copeland Cap" after state Rep. David Copeland, who sponsored it:

In no year shall the rate of growth of appropriations from state tax revenues exceed the estimated rate of growth of the state's economy as determined by law. No appropriation in excess of this limitation shall be made unless the General Assembly shall, by law containing no other subject matter, set forth the dollar amount and the rate by which the limit will be exceeded. (Article 2 Section 24)

The law is clear - crystal clear - that the Copeland Cap formula is to be applied to appropriations, not revenues. In other words, if the state spent $100 in the current fiscal year, and the projected economic growth rate for the next fiscal year is 5 percent, the state may spend $105 in the new fiscal year - even if revenues in the current fiscal year actually came in above $100. By applying the Copeland Cap to revenue, the government has - unconstitutionally - permitted itself to spend above the Copeland Cap without declaring it.

Here's how it works in the real world:
The total 2006-2007 fiscal year budget (appropriations) was just over $12.4 billion (appropriations from state tax dollars). Specifically, it was $12,410,400,661

If the projected economic growth rate for this year is 1 percent, then spending could be increased by $124.1 million.

The official projected economic growth rate for fiscal year 2007-08 is 5.46 percent, so the state budget for FY 2007-08 can be $677 million larger - for a total of $13,087,400,661 from state tax dollars - without breaching the Copeland Cap. But the budget just passed by the legislature, containing virtually everything requested by Gov. Phil Bredesen, increases spending from state revenues by $1.4 billion.

That puts it $723 million over the cap. According to the Tennessee constitution and the related statutory provisions, the state can't spend that extra $723 million unless the legislature passes a law stating that it is exceeding the Copeland Cap by $723 million in fiscal year 2007-08. The General Assembly did not do that before it adjourned.

The legislature on Monday passed legislation declaring that it is exceeding Copeland in fiscal 2007-08 - but only by $53.7 million. How did they get that much lower number? By applying the Copeland growth percentage for the coming fiscal to the current fiscal year's revenue which, as we all know, is in record surplus. The legislation authorizing the breaking of the Copeland Cap was short by almost $670 million.

The bottom line: The state budget, which Gov. Bredesen will soon sign into law, includes almost $670 million in spending that the state, legally, is not permitted to spend. It is an unconstitutional state budget.

The Bredesen administration will spend the extra money, though, because the Bredesen administration doesn't care about following the Copeland law - and they don't think you care either.

This kind of budgetary books-cooking is not just a one-time occurence, either.

The state has enjoyed surplus tax revenues almost every year since 1978 - some years more than others. The state even had surplus revenue during most of the four years of the Great Tennessee Income Tax Battle of the late 1990s, when income tax proponents were claiming the state was facing shortfalls.

In the video from the House floor session, Sims claims the Copeland cap number has always been calculated based on the previous year's revenues, rather than the previous year's spending, a claim that has not been verified. I'm guessing that the state followed the law for at least a few years, and didn't make the switch until Rep. Copeland, a tireless budget hawk, retired from the legislature. But if it is true, that doesn't mean - as Sims claims - that continuing to do it that way protects the state budget from legal challenge. On the contrary, it means that the state has been ignoring the law and the constitution for nearly 30 years, and that possibly every single budget passed after the Copeland Amendment was added to the constitution have included illegal, unconstitutional over-spending.

The state Treasurer is one of the constitutional officers who can be impeached and removed from office "whenever they may, in the opinion of the House of Representatives, commit any crime in their official capacity which may require disqualification."

Meanwhile, a number of people are now collecting the information and reviewing the documents to determine when, exactly, state government stopped following the Copeland law and started violating it by applying the formula to revenue rather than appropriations. And they're doing the very tedious math to calculate just how much the state government has illegally spent since 1978.

And if Sims really believes that continuing to violate the law protects the new state budget from legal action, he's quite delusional.

Stay tuned...

Update: The numbers on the section of the story titled "Here's how it works in the real world" were off just a little and were updated Wednesday afternoon with accurate numbers from state Rep. Susan Lynn.

Update: I emailed Gov. Bredesen's press secretary the text of the Copeland Amendment and a simple question: Does Gov. Bredesen believe the Copeland Cap should be calculated using state appropriations or state revenues? So far, I have not received a response.