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Just Give Me One More Special Fund

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By Lowell L. Kalapa

Last week we looked at the state spending limit and how lawmakers and administrators made every effort not to give surplus money back to taxpayers by either tying up general funds on appropriations that they knew would never be spent or squirreling those excess dollars away in newly created special funds. 

Although lawmakers ultimately raided these special funds as revenues began to dry up with a withering economy in the mid-1990’s, an important lesson was learned about those special funds and that is once the money is earmarked, it limits the programs on which the money can be spent. Further, special funds that are underwritten with revenues that have no direct relationship with the program or service generally tend to be either under funded or over funded. In this case, general tax revenues were being earmarked for a specific type of service or program. 

That said, not all special funds are bad. In fact, where the purpose of the special fund is matched to the program or service it is to fund, the fees or taxes should be directly responsive to the demand for that program or service. For example, the state highway fund has three major sources of taxes or fees. The largest contributor is the state fuel tax on gasoline. The consumption of gasoline is the number of miles the highway user drives. The more miles the highway user drives, the more gasoline is probably consumed. 

The motor vehicle weight tax, on the other hand, measures how much wear and tear the highway user’s vehicle puts on the roads. A heavier vehicle will probably do more damage than a lighter vehicle and therefore the heavier vehicle will pay more in the weight tax. 

Finally, the flat vehicle registration fee reflects an “admission” charge of sorts. Each vehicle owner pays the same flat registration fee to “enter” the state system of highways. The more cars on the road, the more is collected in the motor vehicle registration fee. 

Observers sometimes ask about the rental motor vehicle fee of $3 per day and the tour vehicle surcharge which varies according to the number of passengers the tour vehicle can carry. From a historical perspective those particular fees were introduced when the legislature took back the general excise tax collected on the sale of fuel for use on the highways but didn’t have the fortitude to raise the fuel tax sufficiently to make up for the loss of those revenues. Not wanting to raise the ire of resident highway users, lawmakers decided to hit the state’s visitors who can’t vote for them. What they did seem to forget was the fact that we, as residents, often rent vehicles either when we go holo holo or travel to a Neighbor Island to do business. 

But even the state highway fund has been a target for lawmakers’ bad habit of raiding special funds when in the last years of the previous administration, they managed to “steal” more than $150 million in state highway funds. And motorists wonder why the highway department can’t seem to fix all those potholes. 

However, most highway users seem to have learned how much they are paying in federal, county, and state fuel taxes, and there are a whole lot of us highway users. Such is not the case with professional licenses issued by the state which are supposed to raise enough money so that the state can regulate professions. During the lean years of the 1990’s, the word went out to all departments to try to make their departments self-sustaining, that is, to find ways to raise their own money to fund their operations rather than dipping into the general fund. 

So the business registration division began raising licensing fees over which it has control. In many cases, there was no rhyme or reason for the amount of the increase. In fact, in one hearing when asked how these amounts were determined, the reply from the state official was that was what they charged for the same license in New York – as if that was some logic. 

In any case, fees went up and soon the department was realizing surpluses equal to their annual operating budgets. To hide the fact that all of these surpluses were being generated, the fees collected, which were once reported by profession, were collapsed into one gigantic fund so no one group of professionals could determine if they were paying into their fund more than what was needed to regulate their profession. 

By this time a new administration had come into office and lawmakers, who allowed this to happen, were outraged. They seemed to have forgotten that it was lawmakers who created the problem because they took the departments to task. 

So just give me another special fund to hide the accountability of government.

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