By JOHN HOFHEIMER Leader senior staff writer
Funding local General Improvement Fund projects with state revenue is unconstitutional on the face of it, the state Supreme Court ruled Thursday, dealing a death blow to the practice of legislators divvying up millions of dollars between their favorite programs across the state.
Unless and until they can find yet another “workaround” to funnel funds – some call it pork – to their local projects, General Improvement Fund “grants” are illegal in Arkansas.
For the second time since 2006, the state Supreme Court has upheld former Jacksonville state representative Mike Wilson’s complaint that channeling state GIF funds through grants to local schools, volunteer fire departments, community groups, shelters, historic monuments and other recipients violates the state’s Constitution.
Circuit Judge Chris Piazza found GIF dispersals constitutional, while rejecting the state’s arguments that Wilson lacked standing to bring the suit and that his suit was moot anyway because the money had been spent. Well, note quite.
MONEY NOT SPENT
Of the $2.9 million the Central Arkansas Planning and Development District and the other planning districts each received in 2015, the district still has $923,086 on hand, Rodney Larsen, the director, said on Friday.
Wilson wants that money returned to the state treasury.
As for standing, CAPDD attorney Sam Jones and the state attorney general’s office argued that because GIF funds were from estate taxes, and Wilson hadn’t paid any estate taxes in the year in question, he lacked standing to bring the suit.
But Wilson and co-counsel John Ogles argued successfully that general tax revenue carryover from the previous year was also lumped into the General Improvement Fund, resulting in standing for Wilson.
The Supreme Court, by a 5-2 vote, overturned Piazza on constitutionality, and remanded the case to him to settle the details of returning the money to the state.
END OF SUCH SPENDING
As a new precedent, the decision signals the end of such spending through the state’s other seven planning and development districts as well, Wilson said Thursday.
Writing for the majority, Justice Robin Wynn wrote: “The plain language of Article 5, Sec. 29 requires the purpose of the appropriation to be distinctly stated in the bill itself. Accordingly, we reverse and remand on this point without reaching Wilson’s factual allegations because the acts are facially unconstitutional.”
Larsen said he hoped the judge would allow grant money already approved but not yet delivered to go to the recipients. For those entities that have the money from their grant but haven’t spent it yet, Larsen wonders if CAPDD will have to notify them to stop their projects.
NEEDS CLARIFICATION
“That needs clarification,” he said. “We’ll wait until the final order.”
“The court made it pretty clear that whatever money CAPDD has left, it can’t be spent,” Wilson told The Leader on Thursday afternoon.
“We’ll ask the court to award attorney fees for Ogles, not for me,” Wilson said.
“I’m disappointed,” Larsen said. “GIF grants gave us opportunities to meet a lot of needs in our communities. Smaller and minority communities don’t always meet the threshold for larger state and federal grants CAPDD administers,” he said. He liked the GIF grants because the decisions were made locally and helped promote economic and social development.
He said over the past five years, his agency had passed through about $15 million in GIF grants.
MIKE WON
The state attorney general’s office and Jones, representing Central Arkansas Planning and Development District in Lonoke and its director, Larsen, put it like this: “Mike won.”
Wilson and his attorney Ogles, also of Jacksonville, argued that the “surplus” revenues also included non-estate-tax money rolled over from the previous year, and so Wilson did have standing.
The Supreme Court agreed.
Piazza also said the suit was not moot because some GIF money remained in CAPPD coffers. The high court agreed.
Wilson said the court remanded the case to Piazza to determine the amount of money that remained of the $2.5 million in GIF funds allotted to CAPPD. Wilson wants that money returned to the state treasury at once.
Originally, Wilson wanted all the money, including that already awarded to various recipients, returned to the treasury.
LEGISLATIVE FRAUD
With criminal charges filed or contemplated against several former legislators for kickback schemes or lining their own pockets with GIF money, there doesn’t seem to be much enthusiasm for seeking yet another path to spit up “surplus” state funds, even for use by worthy recipients.
Jon Woods and Micah Neal, two former Republican Springdale state representatives, have been indicted for arranging GIF grants for Ecclesia College and accepting kickbacks.
Also, state Sen. Jake Files, (R-Fort Smith) is under pressure to resign after about $25,000 in GIF funds intended for construction of a softball park allegedly ended up in his pockets. The FBI is investigating.
The Democratic Party of Arkansas on Wednesday demanded the attorney general’s office and the Arkansas State Police launch an investigation into lawmakers’ fraudulent use of at least $40,000 in state money in a kickback scheme through the General Improvement Fund.
“We need to in-crease transparency,” said state Sen. Eddie Joe Williams (R-Cabot). “It won’t be much of a change—we didn’t do anything last year.”
Many legislators felt the writing was on the wall, particularly after all the charges of self-dealing.
“I’m just tired of it,” state Sen. Jane English (R-North Little Rock) said on Friday of the topic.
“I’m not surprised they ruled the way they did,” said state Rep. David Hillman (R-Almyra). “It was a Band-Aid approach.
He said that while he initially disagreed with the GIF disbursements, over the years many things in his district have been helped that wouldn’t have been otherwise.
He said the tide turned with news that some former legislators treated the GIF money as their own cash funds.
Wilson prevailed in his first suit when Circuit Judge Willard Proctor ruled the practice unconstitutional and in late 2006 and early 2007, the state Supreme Court upheld that decision.
MONEY LAUNDERING
The legislators, not to be denied the opportunity to help curry favor among voters and to fund causes, worthy and otherwise, devised what Wilson calls “a money-laundering scheme,” intended to restore such funding.
Instead of directly funding projects from the state treasury, with each legislator getting a share to direct at programs in his or her district, Legislators decided to run the money through the regional planning and development districts and then essentially tell the district what to fund and how much.
Each state representative in 2015 could earmark $70,000 for projects and each state senator could fund projects up to $285,000.
In 2016 Wilson sued again, saying a local grant of state money is unconstitutional, even if it’s run through the planning and development district.
WHOLE MESSY SCHEME
Asked if he thought legislators were likely to try yet another workaround to spend money on constituents, Wilson said, “I think due to the public exposure of the whole messy scheme, it’s awful difficult (for them) to say let’s try something else.”
That’s the same source of funds the governor uses for his rainy-day fund and also for his quick-action fund to attract business to the state, but Wilson said he believes those are not constitutionally deficient.
“The court made it pretty clear that whatever money CAPDD has left, it can’t be spent,” Wilson said Thursday.
