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The Honolulu Advertiser
Posted on: Thursday, February 13, 2003

Special funds under review

By Gordon Y.K. Pang
Advertiser Capitol Bureau

Whether to tap $30 million in special funds to help make up the $175 million that Gov. Linda Lingle doesn't want to take from the Hawai'i Hurricane Relief Fund is under consideration by the money committees in both houses of the Legislature.

Yesterday was the 19th day of the 60-day session.
The Senate Ways and Means Committee yesterday decided to defer the decision for a few weeks. The House Finance Committee did the same Tuesday night.

Senate Bill 1305, also known as House Bill 1152, would let the administration repeal seven funds and transfer excess cash from 12 others.

The proposed legislation also includes repeal of the $4.3 million Homes Revolving Fund within the Housing and Community Development Corp. of Hawai'i, a division of the Department of Business, Economic Development and Tourism. According to state Budget Director Georgina Kawamura, the funds set to be repealed "no longer serve their original purposes, are not appropriate means of financing for the program activities, or are not financially self-sustaining."

A large chunk of the transfer money, $7.7 million, comes from the Department of Commerce and Consumer Affairs' Compliance Resolution Fund, the agency's main revenue source. Department director Mark Recktenwald testified that his agency is, in fact, looking at the possibility of lowering some of its fees as a result of its surpluses.

"The transfer of these accumulated excess special funds will make the programs more accountable while providing revenues for the general fund," Kawamura told senators yesterday.

The plan to take back from the special funds was fully endorsed by Lowell Kalapa, president of the Tax Foundation of Hawai'i, who urged lawmakers to better scrutinize how the dedicated funds are being spent.

"You need to have these people come here and justify how they are spending the public dollars," he said.

Special funds are inherently bad, he said, because their dedicated nature crimps the ways money can be spent.

"You never know if there's going to be enough money or too much money," Kalapa said.

A separate measure, Senate Bill 420, was introduced by Republicans. It called for abolishing all special funds, with some exceptions, by June 30, 2005. Sen. Fred Hemmings, R-25th (Kailua, Waimanalo, Portlock), said the Senate minority research staff identified 445 special funds that showed $728 million in unencumbered funds, $111 million of which could be returned to the state general fund under the measure.

Both Kawamura and Kalapa testified that they felt the bill was too drastic a step.

Senate Ways and Means Chairman Brian Taniguchi, D-10th (Manoa, McCully), said he wants members to take a few weeks to assess the state's overall financial picture before deciding how to proceed with special fund transfers.

Since the Lingle administration has promised to neither raise taxes nor raid the Hurricane Relief Fund, lawmakers are in a fix to try to find revenue from as many quarters as possible.

"Maybe that $30 million might be too low. We might need to be more aggressive as far as some of the raids on some of the special funds," Taniguchi said. Lawmakers, however, may be reluctant to fully abolish those fund accounts that the administration had targeted for this session. The legislators want more time to study the long-term impacts of such actions.

Reach Gordon Y.K. Pang at gpang@honoluluadvertiser.com or at 525-8070.