When pitching new programs, politicians love their “dedicated” funds: highway trust funds, housing trust funds, environmental protection funds, wildlife-protection funds, and so on. Under California’s AB 32, California politicians partly sold the state’s cap-and trade program based on how much good could be done with the Greenhouse Gas Reduction Funds that would be raised through the state’s cap-and-trade program.
But when governments hit the fiscal skids, or a politician has a pet project in need of funds, there’s nothing so undedicated as a dedicated fund. As I wrote back in 2013, even being a politically correct fund is no protection. Last year, Governor Brown infuriated environmentalists by deciding to “borrow” $500 million from California’s Greenhouse Gas Reduction Fund and “loan” it to the state’s General Fund. Now, he’s decided to loot the Fund for his pet high speed rail program, despite a finding from the state Legislative Analyst’s Office that high speed rail wouldn’t reduce greenhouse gas emissions until after 2020, which is the year that, in theory, California is supposed to meet its greenhouse gas emission reduction targets.
Of course, such things are old-hat in California. The state’s Off-Highway Vehicle Trust Fund, was established some 40 years ago to guarantee that off-roaders would have well-maintained parks to ride in. Off-roaders paid into the Trust via license fees, park fees, and a share of California’s gas tax. And did they pay: the gas taxes alone brought in $65 million a year. Predictably, the government found that pot of money irresistible. As the Sacramento Bee reported, “Since 1974, according to off-roading groups, $196 million has been diverted from the OHV fund for other government purposes. Much of this money was considered loans, but very little has been paid back.”
And even state supreme court rulings aren’t an obstacle when it comes to finding ways to pervert dedicated funds to general revenues: in 2010, Governor Schwarzenegger sought to divert $1 billion dollars from the state’s transit funding, despite having been slapped down previously for trying to loot the state’s Public Transportation Account for general revenues back in 2008.
In fairness, this is not unique to California. According to an article in the Associated Press, the Texas legislature diverted almost $5 billion in its 2012/2013 budget from special fees and taxes into general revenue. In that same year, Texas collected $250 million for parks and wildlife protection via a special tax. But they only spent $50 million on the Parks and Wildlife Department.
Nor is the problem unique to large states like California and Texas. As a New Hampshire newspaper observes, the granite state had the same problem. In 2008, the state levied a $25 surcharge on real estate transactions to fund the state’s Land and Community Heritage Investment Program (LCHIP). How was the money divvied up? $16 million for the general fund, $6 million for LCHIP. A column on the subject in the New Hampshire Concord Monitor concludes, “Dedicated funds are bait-and-switch operations. They consist of the creation of a new tax or fee whose revenue is targeted for a worthy purpose, like funding the Fish and Game Department or paying for smoking cessation, energy efficiency and conservation programs. But that revenue is inevitably drained by lawmakers for other uses because that’s just the nature of government in a state averse to raising revenue in a straightforward way.”
Even the most critical functions of government aren’t safe from pilferage of dedicated funds. As Joel Moreno reports in KOMO news, state Senators in Washington State want to loot some $15 million funds dedicated to providing 911 service to “other emergency programs run by state patrol and the military department.”
When times get tough, or when politicians get greedy (but I repeat myself), history shows that dedicated funds can be quickly undedicated. Governor Brown’s recent attempt at high-speed pilferage is only the latest example in a long history of governmental abuse of dedicated funds.
Kenneth P. Green is Senior Director, Natural Resource Studies at the Fraser Institute and a Senior Fellow at the Pacific Research Institute.