The Mississippi Legislature had authority to raid an insurance fund in 2004 to balance the state budget, the 5th U.S. Circuit Court of Appeals has ruled.
The Mississippi Surplus Lines Association sued the state after the Legislature took $2 million from its surplus. Lawmakers raided several small, fee-funded agencies to pay for large budget items such as schools, roads and prisons.
The MSLA claimed it was a private entity and not subject to legislative appropriation or state contro.
U.S. District Judge Tom S. Lee ruled for the state in 2006. The MSLA appealed to the 5th Circuit, which sided with Lee.
From 1997 through 2005, MSLA collected $5.2 million in examination fees while spending only $1.6 million, resulting in an excess of $3.6 million.
The MSLA argued it was not a state agency, citing a 2004 opinion from state Attorney General Jim Hood. The group also said its money was not subject to legislative action.
“Both MSLA and its funds exist at the whim of the Mississippi Legislature and are public in nature,” the court said.
The 5th Circuit dismissed MSLA’s claims that it is a private agency. MSLA “exists wholly to serve the state and operates under conditions imposed by state law. The state’s legislation appropriating the funds is not a taking of private property because the funds, once they reached the association, were never private,” the court said.
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