Posted on: Tuesday, April 20, 2004

EDITORIAL
Special fund system overdue for reform

One of the areas where the Democrats in the state Legislature and Republican Gov. Linda Lingle find themselves in uncomfortable agreement is on the matter of so-called special funds.

These are funds set up outside the general fund budget to help pay for the myriad functions the state performs for the taxpayers.

There is something like $2 billion parked in these funds, no small potatoes when you consider the entire general fund operating budget is around $3.5 billion.

The uncomfortable agreement between the governor and the Legislature is on the painful necessity of dipping into these funds to balance the budget.

Lingle says she wants to do away with the habit of using special funds to balance the budget on a year-to-year basis, and she is correct. Still, these are difficult times. So despite her misgivings, Lingle proposed dipping into special funds to make the budget balance and cover pay raises for unionized state workers.

The Legislature made its own sweep of special funds in its attempt to write a balanced budget.

These efforts place a spotlight on a budgetary practice that, by any measurement, has gotten out of hand.

There are some 1,800 special funds on the books. That's far too many, and it is a practice that leads to loose and less than fully accountable budgeting practices.

There are some funds that are legitimate, and these super-special funds probably account for the bulk of the $2 billion. These would include the huge transportation special funds as well as the unemployment fund and a few others of this nature.

There are technical and legal reasons why these funds should be carried on the books outside of the general fund. But many of the others should be abolished and their functions (and income) folded into the general operating budget.

As we have seen, the existence of special funds offers lawmakers a way out of making hard choices. The general fund is produced by balancing one need against another. Ideally, this leads to the wisest use of state resources.

But when a service or program is carried as a special fund, it can operate independently. This is good news, perhaps, to the direct beneficiaries of the special fund but not so good news for those interested in sane budgetary policy.

The special funds also operate as a shadowy slush fund, as we are now witnessing, where legislators can take or not take as needs require.

What is needed is a thorough, bipartisan review of all special funds. Many should undoubtedly be eliminated, with their programs placed into the general fund budget where they would have to compete with other programs and priorities.

Individual constituents of these funds will undoubtedly be unhappy. But if the services they provide are worthy, room for them will be found in the general fund budget.

We don't argue for the abolition of all the useful services and programs supported by special funds; we do argue that such spending be considered in the context of the overall general fund budget.