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There's Nothing So Undedicated as a Dedicated Fund

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When pitching new programs, politicians love their "dedicated" funds: highway trust funds, housing trust funds, environmental protection funds, wildlife-protection funds, and so on. Most recently, under AB 32, California politicians partly sold the program on the basis of all the good that could be done with Greenhouse Gas Reduction Funds raised through the state's cap-and-trade program.

But when governments hit the fiscal skids, there's nothing so undedicated as a dedicated fund. Even being a politically correct fund is no protection, as Governor Brown has shown in his recent move to "borrow" $500 million from California's Greenhouse Gas Reduction Fund and "loan" it to the state's General Fund. The move, decried by environmental groups, was utterly predictable: When government's hit cash-flow problems, supposedly dedicated funds often find themselves less than dedicated.

But surely, the Governor will pay the Greenhouse Gas Reduction Fund back, right? Maybe so...and maybe no. Consider California's Off-Highway Vehicle Trust Fund, 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 they paid in handsomely: The gas taxes alone brought in $65 million a year. Not surprising, politicians and bureaucrats have found that 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, Governator Schwarzenegger sought to divert $1 billion 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 a problem 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 particularly new, the same article observes that such shenanigans have gone for decades: "San Antonio Republican Rep. Lyle Larson said the state has diverted $14 billion in highway funds since 1986 and spent it instead on the Department of Public Safety."

And the problem isn't unique only to huge states like California and Texas. As a New Hampshire newspaper observes, they have 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 collected money subsequently 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, history shows that dedicated funds can be quickly undedicated. California's only the latest example in a long history of governmental abuse of dedicated funds. This is one area where Al Gore may have had things right: Sometimes, you really do wish for a lock box.

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