Budget & Tax
Rainy day fund raid vindicated? Not so fast
July 19, 2017
After draining all $240 million out of Oklahoma’s Constitutional Reserve Fund, Secretary of Finance Preston Doerflinger decided to ask the state Attorney General whether doing so was legal. Recently, the Oklahoma Attorney General issued an opinion that, with minor caveats, claims to legitimize Doerflinger’s actions. In doing all this, Oklahoma’s executive branch has drained away not just the money, but the very purpose, from the Constitutional Reserve Fund.
Sound legal analysis begins with common sense, so let’s start there. First, it appears that before last year no one had ever claimed that Oklahoma’s executive branch could unilaterally take money out of the Constitutional Reserve Fund. Second, the purpose of the provision is rather obvious: to have funds in reserve and to protect those reserve funds in the state Constitution. If the money can be removed by a single, unelected state official, that purpose is frustrated.
A final point of common sense, though it might not be so common these days, relates to what constitutions are for. The Oklahoma Constitution is how we, the people of Oklahoma, both grant and limit the powers of our state government. Put another way: the Constitution belongs to us; it exists for us; we are its intended beneficiaries.
One of the ticklish questions for Doerflinger is why he did not take money out of other state funds that actually had more in them than the Constitutional Reserve Fund. TSET, for example, had more than four times the balance. The Attorney General, waiving such questions aside, says the Constitutional Reserve Fund is “not held in trust for another entity or a specific purpose.”
The Constitutional Reserve Fund is held in trust for the people of Oklahoma—taxpayers and service recipients alike—with the specific purpose being that in a fiscal pinch or dire emergency the state might have a third option rather than suddenly raising taxes or cutting services. The fact that the Constitutional Reserve Fund lacks a designated bureaucracy or its own special interest beneficiaries is no excuse to consider it less important than other constitutional accounts. It is a sad irony of modern government that narrow interests are “special” while those things that benefit the whole people are devalued.
The Oklahoma Constitution creates the Constitutional Reserve Fund and specifies its uses. In short, 3/8 of the funds can be appropriated to address a projected revenue shortfall, 3/8 can be appropriated when there is a revenue failure, and 1/4 can be appropriated when either the governor or the legislature declares an emergency (this requires either a 2/3 or 3/4 supermajority in both legislative chambers). Again, until last year, everyone seems to have believed these were the only ways to take money out of the Constitutional Reserve Fund.
The Attorney General’s opinion claims the Constitutional Reserve Fund is just one more state “treasury fund” subject to borrowing in order to pay the state’s monthly bills. Instead of the Constitution defining the only ways to take money out of the fund, the opinion declares that the Constitution limits only “appropriations” from the fund. Such a claim demolishes the very idea of a rainy day fund. The Attorney General’s opinion takes the position that money in the Constitutional Reserve Fund is entirely up for grabs, so long as whoever does the grabbing does not call it an appropriation.