Arkansas AG Agrees to Change Policy On Distribution of Settlement Funds

The process of changing long standing "practices and methods" established under the shadow of 136 years of Plantation Politics in Arkansas is slow but it is happening. The following article by Dan Greenberg details the Arkansas Attorney General decision to yield to public pressure to stop sending collected settlement funds to nonprofits and instead to apply those funds to settlement claims for the victims and to return those funds to State programs.

---

By Dan Greenberg, Advance Arkansas Institute: On October 11, Arkansas Attorney General Dustin McDaniel announced an important policy decision regarding the administration of legal settlement funds awarded to his office or to the state of Arkansas: as of that day, he announced that those funds would no longer be directed to charities. Legal settlement funds typically come from class action settlements, which then result in awards to governments or government officials of all 50 states; at that point, they are properly conceived of as public money. McDaniel’s decision is good for the state of Arkansas and good for its citizens: in the long run, it assures the transfer of millions of dollars to Arkansas state government. Moreover, McDaniel’s move marks an important step toward greater accountability for his office that is welcome and praiseworthy.

Historically, attorneys general have directed settlement funds to various charities, but McDaniel’s activism in this area has recently been the subject of sustained criticism from several public officials and journalists. In the past, McDaniel directed hundreds of thousands of dollars toward charitable organizations such as the Arkansas Food Bank, the Fallen Firefighters Memorial Fund, and the Arkansas State Police Foundation at his own discretion. These entities do good work, and they benefit from any influx of funding. However, the wisdom and legality of using settlement funds in this way is controversial, and not only because the Arkansas Constitution prohibits state government from donating taxpayer funds to charities.

To inject greater accountability into the use of these funds, State Representative Jane English sponsored HB 1046 earlier this year: that bill would have required all spending of settlement funds to be authorized by the Arkansas General Assembly. However, her bill was opposed by McDaniel’s office during the session and it died in committee. McDaniel’s October 11 policy directive, which ends the practice of giving settlement money to charitable organizations, marks a commendable change in the administration and distribution of these funds.

The principal changes to the policy are as follows:

• Funds from settlements will, by and large, only go to state agencies, the state treasury, and consumer restitution.
• The Office of the Attorney General will retain no more than $1 million in a consumer education and enforcement account; the rest will, within 120 days, go to compensate injured parties or directly to state government.
• The Office of the Attorney General will produce quarterly reports for
  the Legislative Council that describe those expenditures.

A recent estimate from the attorney general’s office suggests that it controls approximately $8.3 million in settlement funds, which is about a million dollars more than it held last year. This means that -- once the vast majority of these funds are distributed in the next few months, by the terms of the policy, to state government programs -- McDaniel’s decision will have created significant savings in the state budget (and an opportunity for saving money for Arkansas taxpayers), perhaps in the neighborhood of $7.3 million. (Of course, taxpayers will see no tax or budget benefits if the Arkansas General Assembly sees this influx only as an invitation to spend millions of dollars more.)

To be sure, there is still work to be done. The majority of American states have specific provisions that govern the use of settlement funds received by the state’s attorney general: in a future session, the Arkansas state legislature should follow that path by enacting a measure to require legislative authorization in order to spend monies from settlement agreements. This would ensure that legal settlement funds receive the same degree of scrutiny that the expenditure of other public money regularly receives, and it would prevent future attorneys general from returning to the bad old days of spending public money without checks or balances.

McDaniel deserves credit for setting a policy that will let needed funds flow into strained state budgets, and for being the rare public official willing to take it upon himself to reduce his own institutional power and to increase his accountability to the legislature and to the public.
---------------
Dan Greenberg, an attorney and former state legislator, is President of the
Advance Arkansas Institute.

---

Tags: Dan Greenberg, Advance Arkansas Institute, Settlement Funds, Arkansas, Attorney General, Dustin McDaniel To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!