For the third time in a little over a decade, the Arkansas Supreme Court on Thursday ruled in favor of a lawsuit by former state Rep. Mike Wilson of Jacksonville to stop lawmakers from funneling millions of dollars in state surplus money to local pet projects.
The high court's 5-2 ruling declared that a series of appropriation laws that sent $2.9 million to a regional nonprofit organization two years ago violated the state constitution's Article 5, Section 29. That section says that the purpose of legislative appropriations must be "distinctly stated."
Wilson's latest lawsuit, in particular, took issue with appropriation laws that awarded "grants" from the surplus General Improvement Fund to the nonprofit Central Arkansas Planning and Development District in Lonoke.
The money went to the planning district, which disbursed it to dozens of local governments, assistance agencies and other groups for a wide range of building projects, equipment purchases and other uses, records show. An individual legislator's approval for any grant was nearly always required, according to testimony in the case.
Wilson said Thursday that he hoped the decision in Wilson v. Walther signals the end of state lawmaker-directed spending of General Improvement Fund money.
The Supreme Court's opinion "made it pretty clear that appropriations bills must state their distinctive purpose ... what the money is to be used for," Wilson said. "That is the basis for public accountability."
The majority opinion by Justice Robin Wynne said the finding that the appropriation laws were "facially unconstitutional" because they lacked a stated purpose made it unnecessary for the court to consider Wilson's second set of arguments. Wilson's lawsuit had also argued that the General Improvement Fund grants were unconstitutional because Amendment 14 to the state constitution bars lawmakers from enacting local or special legislation.
Thursday's ruling reversed an earlier decision by Pulaski County Circuit Judge Chris Piazza and sent the case back to the lower court to determine what to do with any remaining General Improvement Fund money.
Gov. Asa Hutchinson applauded the Supreme Court decision. The governor's budget this year did not include surplus money for lawmakers to direct.
"I am pleased with today's Supreme Court decision because it raised constitutional concerns over legislative use of General Improvement Funds. With the recent news about abuses on the use of GIF, I will be supportive of legislation that will permanently end the practice."
Legislative leaders said Thursday that they had already begun phasing out the system of lawmakers directing state money through private nonprofit groups.
"If we ever look at funding projects with surplus [funds] again, it needs to be a transparent process," said Senate Majority Leader Jim Hendren, R-Gravette.
Although Wilson's latest lawsuit specifically targeted the Central Arkansas Planning and Development District, Arkansas has eight regional planning and development districts that have awarded General Improvement Fund grants on behalf of legislators for more than 10 years. Those grants statewide have involved tens of millions of public dollars.
A study earlier this year by the Arkansas Democrat-Gazette found that the eight planning and development districts, since 2013 alone, approved more than 4,200 grants directed by individual legislators, totaling more than $50 million.
General Improvement Fund grants attracted public attention in early January, when former state Rep. Micah Neal, R-Springdale, pleaded guilty in federal court to one fraud charge involving accepting $38,000 in kickbacks in exchange for channeling General Improvement Fund grants to Ecclesia College in Springdale and Decision Point Inc. addiction treatment center in Bentonville and its related entities.
Former Sen. Jon Woods, R-Springdale, Ecclesia College President Oren Paris III and consultant Randell Shelton Jr. have pleaded innocent to fraud and other charges regarding similar grants. The three face a Dec. 4 trial.
General Improvement Fund grants by legislators reach back to at least 2004, records show. Wilson, an attorney, remembers talking with other former legislators about the money for lawmakers' pet projects then and feeling "outrage," he said Thursday. Wilson, a Democrat, served 12 two-year terms in the state House, starting in 1973.
The former lawmakers didn't like that the grants sometimes went to groups to help the then-legislators' re-election campaigns. And Wilson didn't like the unfairness, for example, of one volunteer fire department getting a state grant when another down the road did not.
He filed his first lawsuit in July 2005. In a pair of 2006 and 2007 rulings on Wilson's lawsuit, the state Supreme Court said the practice of spending surplus General Improvement Fund money on local projects was illegal when lawmakers directed the money themselves and the purpose of the spending wasn't distinctly stated.
Starting in 2007, lawmakers revised the practice, by sending the General Improvement Fund money to the eight nonprofit regional districts, which then directed the funds to projects that the lawmakers recommended.
In his latest lawsuit, Wilson argued that the practice of legislators directing General Improvement Fund grants never really changed, and that lawmakers still got the final say in where the money went.
To prove his point, Wilson cited communications between members of the General Assembly and the staff at the regional development district in which lawmakers appeared to give approval for certain projects.
State attorneys argued that the appropriation laws clearly spelled out their purpose as "grants to planning and development districts."
The Central Arkansas Planning and Development District didn't rubber-stamp spending on lawmakers' pet projects, the district's attorneys said. In court filings, the agency pointed to "numerous" examples in which money was spent without lawmakers' approval.
Rodney Larsen, executive director of the Central Arkansas Planning and Development District, said he was out of the office Thursday and could not recall how much money from General Improvement Fund grants had yet to be spent. He said some of the money had been promised to ongoing projects that would now have to be cut off, though he could not cite specific examples.
"CAPDD exists to help our state with economic development, social well-being and to make our state attractive to development," Larsen said.
Justices Rhonda Wood and Shawn Womack each wrote dissents, which agreed with the majority that Wilson had standing as a taxpayer to file the lawsuit. But they disagreed with the high court majority's finding the General Improvement Fund grants were unconstitutional.
Womack, a former Republican member of the General Assembly, was one of four lawmakers who in 2007 filed a bill to create a commission to receive and divide up money for local projects. That proposal never became law.
Attorney General Leslie Rutledge represented state officials named in Wilson's lawsuit, including Department of Finance and Administration Director Larry Walther, state Auditor Andrea Lea and Treasurer Dennis Milligan.
A spokesman said Thursday that Rutledge plans to work with the governor and lawmakers to carry out the court's decision and to seek "common sense reforms" for spending taxpayer dollars.
Little Rock lawyer and public interest advocate Scott Trotter, who has sought a constitutional amendment banning General Improvement Fund grants, said Hutchinson and lawmakers need to go further than Thursday's ruling.
"Mike Wilson has won an important victory for Arkansas taxpayers. However, I am concerned that a future legislature may seek a path to circumvent this narrow ruling," Trotter said in an email Thursday. "The court did not rule on Mr. Wilson's argument that the GIF statutes violated the constitutional prohibition on local and special legislation as found in Amendment 14.
"For that reason, I will urge the governor and legislature to pass a law that not only prohibits the practice of individual legislators designating the recipient of state funds, but also exposes them to a criminal penalty if they do."
A Section on 10/06/2017