Louisiana lawmakers’ pet projects could create $100 million worth of ‘bad debt’

Louisiana lawmakers have put over $400 million toward their pet projects since 2020, but much of that money never actually reached the entities that were supposed to get it. (Wes Muller/Louisiana Illuminator)

A playground. A high school athletic foundation. A golf foundation. A Catholic church. A local Knights of Columbus chapter. An etiquette organization. A local youth sports complex.  

Louisiana lawmakers have allocated $406 million in state funding for pet projects like these since 2020, according to an Illuminator review. But two-thirds of that money is in limbo because the entities slated to receive the funding haven’t filled out the proper state paperwork for years.

The state may have to claw back $103.5 million from dozens of organizations that haven’t submitted documents to the state showing how they spent the cash, according to information released by the Louisiana Department of Treasury. 

Another $165 million earmarked for pet projects still sits in government bank accounts unused. It hasn’t gone out at all because the state hasn’t received the paperwork it needs to release it.

“There’s been a spike in the bad debt” related to the projects, said state Treasurer John Fleming, whose office handles the paperwork and distribution of funds. “Some [organizations] have never, after two years, submitted their cost reports.”

More money, more problems

Good government proponents said the pet project funding problem is one lawmakers made for themselves.

“This is what happens when lawmakers insert millions of dollars of taxpayer-financed pet projects into the budget with no public discussion about how the money will be spent,” said Steven Procopio, president of the Public Affairs Research Council of Louisiana, a think tank that examines state budget practices.

Pet projects are defined as those that benefit local governments and nonprofit entities, but haven’t been vetted through public discussion and don’t reflect state budget priorities. 

Lawmakers pick pet projects, which are almost always tied to their districts, to receive the money through a secretive process that makes it difficult to link the legislator to the entity getting the money. They avoid discussing the earmarks during budget debates, even though the projects total several millions of dollars every year. 

Those that benefit pet project funding include local governments, school boards, nonprofits, religious institutions, sheriffs, sororities, fraternal organizations and private museums. 

For years, legislators steered clear of inserting such personal projects into the state budget, in part, because Louisiana had very little extra money. That dynamic changed in 2020, when the state became flush with cash from federal COVID-19 pandemic assistance. 

Pet project funding ballooned over the course of Gov. John Bel Edwards’ second term. Allocations went from $25.2 million in 2020 to $190.6 million in 2023. Earmarks included hundreds of items, most getting anywhere from $10,000 to $1.5 million from the state. 

The money has not been distributed evenly. The lion’s share of it goes toward the districts and priorities of legislative leaders. Edwards, as governor, also vetoed pet projects of lawmakers who didn’t support his legislative agenda. 

The special treatment is also likely to continue this year. The House Committee on Appropriations passed a budget proposal Tuesday that included $45.6 million in pet projects Tuesday, according to an Illuminator review. 

Among the entities slated to receive money in the latest budget proposal are Archbishop Shaw High School in Marrero for its seafood festival ($10,000); the Christian Acres Youth Center in Tallulah ($25,000); the City of Kenner for an amphitheater ($475,000), the Town of Welsh for museum building restoration ($150,000) and the Black Data Processing Association-Monroe Chapter ($250,000). 

The state treasury department already has $268.4 million in pet project funding problems from the past four years to resolve before any of the proposed projects approved this year come online. Projects without the proper paperwork to draw down their money include small nonprofits and towns but also larger local governments like the City of New Orleans and the City of Shreveport.

In some cases, lawmakers have allocated new pet projects to organizations and local governments that haven’t filled out paperwork and used money available from previous pet projects.

For example, the Central Athletic Foundation, which benefits high school sports in the city Central, was awarded $2 million in 2021 and hadn’t drawn down all those state funds or submitted the appropriate documentation for the funding. But it still received another $1.1 million in 2022.

The YWCA of Baton Rouge was allocated $300,000 by lawmakers in 2022 for early childhood education as well as crime and poverty reduction programs. It never received any of that money because they didn’t submit paperwork to the state, according to a report from the treasurer. But the organization is slated to receive another $250,000 for building renovations in the current state budget proposal. 

The deadline for hundreds of entities to complete legal agreements with the state to access the money is June 30. If no action is taken, project money that hasn’t been released yet will go back into the general fund to be used for other purposes, said Lindsay Schexnayder, chief financial officer of the treasury department.

Millions of dollars that has already gone out to the organizations will also have to be recouped.

Treasurer: Pet projects require another staffer

Fleming proposed systemic fixes to deal with the backlog of pet project funding in a presentation he made to lawmakers last week. 

The treasurer said his office needs at least one more staff member to help the person who already works full-time on pet projects. One employee is not enough to deal with the paperwork, discussion and negotiations with the hundreds of entities in line to receive this funding, he said.

State laws and regulations require the treasurer’s office to enter into a binding contract called a cooperative endeavor agreement with any entity receiving the pet project funding. The surge in projects in recent years means the treasurer’s office has gone from executing about 200 agreements per year to 1,400, according to Fleming.

The treasurer’s office starts reaching out to entities who receive pet project funding in August after the annual state budget has been finalized. They follow up with monthly emails about the required paperwork to draw down the money, but most entities don’t realize they need to fill out forms before they receive the money. 

“They think once it’s allocated to them, they think they just get a check,” Fleming said.

In other cases, the treasury department has had a difficult time figuring out which entity is supposed to receive the funding. Sometimes the pet project involves an entity with a common name, such as St. John the Baptist Church, which makes it hard for the treasurer’s staff to figure out where the money should go, Schexnayder said.

Because legislators have added the projects anonymously, the treasurer’s office doesn’t always know who to contact to ask questions for clarification.

This year, the process is expected to be more transparent.

At the request of the treasurer’s office, lawmakers putting pet projects into the budget in this session will have to fill out a form signing their name to the project. They also have to provide contact information for the entity that’s supposed to receive the money.

For the first time, lawmakers will have to reveal, on a document, that they are making a pet project request.

The Public Affairs Research Council of Louisiana praised this adjustment as an improvement on the old system.

“While some of the projects may be worthy causes, Louisiana’s taxpayers should expect nothing less than signed documents describing the plans for the spending and filed paperwork detailing whether those dollars were spent as intended,” Procopio said in a written statement.

“The treasurer should be applauded for performing his due diligence in ensuring that level of basic accountability for Louisiana’s tax dollars, though arguably many of the projects never should have even been included in the state’s budget,” he added. 

Legislators have also been using a workaround to try to clear up the intent of their pet projects. At their monthly joint budget meetings, lawmakers typically vote to add “clarifying language” to several projects to help the treasurer’s office speed up the release of funds, but they do it discreetly. They don’t debate the measure, and it’s often not clear to onlookers what they are doing. 

Lawmakers have also added language to budget bills to delay the deadlines for pet project funding. This allows the entities to avoid losing the money or having to turn it back over to the state.

This year, legislators appear poised to delay some of those deadlines again. One of the current budget bills extends the finishing date for at least 30 pet project entities to collect their money from June 30 of this year to June 30 of next year. 

At last Friday’s hearing, a few lawmakers also sought to blame the treasurer’s office, in part, for the slow process of getting project funding out the door.

They said some organizations who have received money from the state for years were encountering more restrictions than in the past. A few legislators thought the treasurer’s office should be more willing to part with state funding ahead of receiving expense reports. 

The treasurer’s office responded that because of the surge in pet projects lawmakers have put in the queue, it was more prudent to strictly enforce the rules about spending and avoid a potentially large increase in debt. 

“Many, if not most, are not compliant,” Fleming told lawmakers. “That’s just reality.”

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