With legislators in the final throes of debate over the state spending plan for the next two years, they and their constituents should take a moment to reflect on the way they handled taxpayer funds during the last 50 or so working days.
The focus is on the state’s general fund budget, but taxpayers should also be concerned about what is not in the spotlight: expenditures made through a multitude of special funds. There is very little lawmakers, or taxpayers, can do about spending the money locked up in special funds since the spending destiny of those funds has already been determined. While these funds have to be appropriated by lawmakers, what they can be spent on is restricted to the purposes for which the special funds were established.
When special funds beneficiaries come before the Legislature each year, they don’t have to deal with the pressure of justifying every request they make since the funds can only be used for the programs or services allowed under the fund’s terms. Lawmakers may question how the money was used in the past, but there is little they can do to withhold the funds for new appropriations.
Contrast that with the budget process when it comes to programs and services underwritten with general funds. Department heads and program and division managers must justify not only their request for the biennium, but they must also justify why they didn’t spend everything they were given in the last budget go-around. If a department or program didn’t use every dollar it was given last time, then lawmakers might be skeptical about giving the program as much as it is requesting for the next two years.
If lawmakers don’t need to appropriate as much for a particular program, they can redirect the funds to another program they deem of greater need or priority. Because a multitude of programs are financed with general funds, the competition is fierce as department heads and managers justify why their program should be funded. This competition for general funds ensures taxpayers get the best bang for their buck as lawmakers decide the use of funds from program to program.
Not only do lawmakers know how the general funds will be spent, but they can also question whether or not the strategy or planned use of funds will best accomplish the program’s goals. In some cases, they may be able to find out who will be the contractor on a specific project or even know what the design or implementation of the program or service will look like. Much of this information is shared with lawmakers as part of a department’s or division’s efforts to convince lawmakers to fund a particular program, project or service.
With special funds, this may not necessarily be the case. For example, when the nickel per barrel fee on all petroleum products imported into the state was first established, lawmakers had no idea how the money was to be spent except that it was to be used to clean up the shoreline should an oil spill occur. However, when a legislator made some inquiries, much to her surprise, she found that the money from that tax was being spent on trips for training and buying expensive filing cabinets and office furniture. The administrator’s excuse was that his staff needed training in how to clean up oil spills and the furniture was needed to house the staff that oversees the fund.
While those excuses may have been legitimate, they certainly do not meet lawmakers’ expectations. And that’s the problem with the plethora of special funds spawned over the past two decades. At a time when politicians like to espouse transparency, special funds are the antithesis of accountability. Neither lawmakers nor taxpayers can be sure of how the funds are being spent. As they say, “Out of sight, out of mind.”
Finally, advocates argue that special funds indicate how important the programs they fund are to the public and to policymakers. That is why the funds were approved. What they don’t like to admit is that those programs were of such low priority to policymakers that they could not compete for general funds.
Lowell L. Kalapa is president of the Tax Foundation of Hawaii.