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Running Public Services For What They Cost

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By Lowell L. Kalapa

It seems like every elected official’s mantra is now begun with the catchwords “special funds” which can either be good or bad, depending on where they are headed with those special funds.
As long as the special fund of the moment benefits their pet project, then the concept of special funds is a good one as it assures the lawmaker that no one can touch the money that goes into that specific fund for anything else other than for the program for which they have been designated. Be it user fees for a park or charges levied for the oversight and regulation of a profession, the idea of a special fund appeals when the promoter sees the funds being limited for the designated use.
On the other side, those who eschew special funds point the finger of blame at how those special funds restrict the flexibility in using those funds and how they tend to obscure the public oversight of those funds. Because once earmarked revenues are destined for a special fund, the money can be used for no other purpose. If the amount of money raised and designated for a specific service or program exceeds the needs of the program or the cost of providing those public services, the funds tend to accumulate. Thus, other programs may be suffering from the lack of sufficient resources while the special fund grows fat from a situation where the sources of revenues produce more than what is needed to provide the service or underwrite the program.
Many of those programs and services funded by earmarked resources that feed their particular special fund thought they were “untouchable,” that is until the general fund started to run dry. The now infamous raids began when lawmakers figured out that they could just lift the veil of protection and go in and deem that the amounts in these special funds “exceeded” the needs of the designated programs or services. Thus, for the last several years when a shortfall in general fund resources occurred, lawmakers “raided” the excesses in these special funds to shore up general fund needs.
And again this year, both administration officials and lawmakers joined forces to raid special funds to the tune of nearly $62 million to fund the next fiscal year’s programs and more than $7 million to fund the following fiscal year’s programs. While lawmakers may believe that they were able to “find” some money to pay for general fund programs, those who had paid into those special funds are crying foul.
After all, people who used the state film facility or those who paid into the petroleum products control fund or insurance companies who believed that the fees they paid were supposed to pay for the regulation of the industry thought that the moneys they had paid in rents or licensing or usage fees would cover the costs of their use or regulation. Indeed, many are now asking why should they have been charged those fees or at least charged at the rate they were if the money ended up paying for programs like education, welfare or corrections.
That is the very point of the matter. Many of the fees or user charges imposed on specific taxpayers or users of public facilities or services where excessive to begin with. That is, the rates were far more than what they should have been to cover the cost of providing the service or maintaining a facility or running a program. Thus, the fee collected generated more than what was needed to run the program. But in many cases, no one was watching as the fees were established by the bureaucrats that run the program and benefited from any largesse that was created. In other cases where rates were set by lawmakers, once the rates were set and funds went into a special fund, no one paid attention.
In other cases, the creation of these special funds which are underwritten by fees and user charges also are a way to perhaps deliberately channel excess funds into the state general fund. Two that come quickly to mind are the receipts of the cigarette stamp tax which is supposed to fund enforcement activities to insure the proper payment of the cigarette tax and the other is the public utilities commission fee which is paid by the utilities regulated by the commission. In both cases when there are funds left in each special fund at the end of a fiscal year in excess of a specified amount, the excess goes to the general fund. Thus, managers of the general fund see these funds as nothing more than a hidden way to generate resources for the general fund while those regulated and their customers end up footing the bill for programs like education and welfare.
There is absolutely no doubt that the whole issue of special funds and how they obscure fiscal accountability begs for review during this interim between sessions!

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