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Eluding the Truth About the Cost of Government

posted in: Weekly Commentary 0
By Lowell L. Kalapa

One of the frustrating developments in recent years is the masking of the true cost of government with all sorts of gimmicks to make it seem that government isn’t costing all that much. At the state level, politicians like to tell overburdened constituents that they actually lowered taxes.
So lawmakers both at the state and the county levels bemoan the fact that now there isn’t enough money to meet the bills and that they just might have to raise taxes. If you believe that lament, there is a bridge in New York that you might be interested in purchasing.
The political rhetoric sure does not match the reality of the fact that as a whole state and county governments are sitting on a lot of money albeit in various accounts and funds that don’t show up on the visible radar screen. This is what is coming to light as budget discussions continue both at the state capitol and at the various county buildings around the state. Over the years, more and more of what used to be paid for out of direct taxes, like the income and general excise tax at the state level and the real property tax at the county level, has been pushed off the table.
Pushed off the table in the sense that those programs or activities of government that have been put in special funds are no longer readily visible to the public or for that matter to elected officials who must find ways to fund public programs. This is the problem that has been discovered by some lawmakers and council members as they go over the budgets of their respective governments.
At the state level, two areas which have gotten this practice down to a science can be found in the department of commerce and consumer affairs and the department of health. Both of these departments have come up with a slew of new user fees and charges that they then stow away in special funds. For example, several years ago all of the business registration fees were increased by the legislature at the behest of the business registration division.
When representatives of the department were asked how they came up with the suggested new level of fees, the response was that this is what was charged for similar documents in New York. So what does pushing paper in Hawaii have to do with pushing paper in New York. Nothing, as an audit a year after the new fees were implemented proved. The state auditor found that after the new fee schedule went into effect, that division generated a surplus of funds in excess of $14 million.
The department did not stop there, they continued to raise other fees and charges under their jurisdiction to the point where it got so embarrassing to report how much was being raised that the department sought legislation last year to collapse all of its special funds into one huge fund called the compliance resolution fund. The department argued that having one big fund would allow it more flexibility to address costs as they arose.
The real reason for collapsing all the special accounts and funds into one is to hide the accountability for the funds raised by the fees and the costs for which they were designed to cover. So now Realtors cannot figure out if the real estate licensing fee they pay when they renew their license is covering the cost of operating the real estate commission or for that matter whether the other professional licensing fees charged doctors or barbers or whatever are either too high or too low to cover the cost of that government service.
And because these are earmarked special funds which are supposed to be used to fund the specific services provided, lawmakers don’t pay very much attention to them because they supposedly are to be used only for that purpose. So they appropriate the money as required, but because they can’t use the surplus moneys for any other purpose, it doesn’t catch their eye. Prior to the devolution of the programs to special fund financing, all of the user fees and charges were put into the general fund and the department had to come to the legislature every year to justify their expenditures before an appropriation of general funds was approved. That is no longer the case because the funds are now designated only for that specific purpose.
At least until this year. Pressed to balance the budget, lawmakers are beginning to pay attention to these special funds. There is growing discussion about how it might be prudent to return to the prior process of putting all the money in the general fund pot and have each department then vie for and justify their spending requests. After all, deny it as they may, these user charges and fees are nothing more than another form of taxation.

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