Karass says a law passed in 2005 permits him to take funds from the cash pool and loan it to Dirigo. Enacted as part of a lengthy budget bill, Title 5, Section 131-B has just one sentence: “In order that state obligations may be paid as they come due, the State Treasurer may request the State Controller to transfer funds on deposit among the various funds in the cash pool of State Government by journal entry in such manner as to best manage the available funds to meet current obligations of the various funds and accounts.”
Karass says he makes transfers between funds all the time. But he would not say directly, after repeated questioning, if there have been examples of transfers between funds of the magnitude and duration of the Dirigo borrowing.
The 131-B law allowing interfund transfers, Representative Millet says, was “never intended to be a bailout for a program of the $20-million magnitude.” It was designed, he says, to deal with short-term cash-flow needs.
The State Law Library could not find any record of a legislative debate or hearing testimony on this part of the 2005 budget bill. Senator Turner, who like Millet was on the Appropriations Committee in 2005, says he has no recollection of Section 131-B, adding that it appears to have been “buried” in the budget bill.
Chief deputy attorney general Linda Pistner confirms she told Karass the borrowed Dirigo money should be paid back by the end of the fiscal year. She cites a provision in the Maine Constitution (Article IX, Section 14) that, in her words, “permits temporary loans that will be paid out of tax revenues in a given year.”
But Dirigo’s borrowing in fiscal year 2008 was not paid back by the time that year ended, last June 30. This would suggest, from what Pistner says, that the Dirigo borrowing has already run afoul of the Constitution. To this possibility Pistner replies in an e-mail — seemingly changing her interpretation — that Article IX, Section 14 doesn’t apply to “a program that borrows from the cash pool.” Appropriations Committee chairwoman Rotundo says she is relying on Pistner’s assurance that the borrowing is legal.
Concealing the truth
State representative Jayne Giles, a Belfast Republican on the Appropriations Committee, says it’s “disturbing” that the committee wasn’t informed, while the debate over Dirigo’s funding was going on in the Legislature in the spring, that the agency was taking money from the cash pool.
When Senator Turner heard of the borrowing so late in the game, he says, “I was thinking somebody had subverted the Legislature.” At the Appropriations Committee’s October 16 meeting he plans to question Pistner about the possibility the executive branch has challenged the legislative power of appropriation. Turner notes, though: “The attorney general is a product of the majority party of the legislature.” (AG Rowe is a Democrat who has already announced his intention to run for governor in 2010.)
Subversion or not, what happened looks irregular. In its monthly publication Fiscal News, the Office of Fiscal and Program Review says the administration “turned off” the computer accounting controls to allow Dirigo “to spend in excess of available cash.” Christopher Nolan, an analyst in the office, says the controller now will be required to make retroactive changes to the state’s accounting of Dirigo’s funds. “Those books were wrong,” he says.