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Tuesday, July 29, 2014         

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Special funds, justify yourselves


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State lawmakers, in a feverish search for funding to close the $844 million budgetary hole, are considering repealing 138 revolving and special funds set up for purposes ranging from University of Hawaii student activities to driver education.

At its first hearing on Thursday, Senate Bill 120 drew down a rain of protest from every corner of the state government. The job of the Legislature -- and it's a tough one -- will be to sort out which funding could really yield some needed dollars without running afoul of the law or doing excessive damage to public interests.

The original list in the bill must be winnowed, said Lowell Kalapa, executive director of the Tax Foundation of Hawaii. He and various state officials cited examples, such as Wireless Enhanced 911 fund, which is constituted by fees that are matched with federal dollars; repealing that would be legally complicated.

Further, those objecting at the hearing pointed to the basic unfairness of seizing money collected from a small constituency for a specific purpose in order to finance the broader needs of the state. For example, UH students pay a fee to underwrite various student activities, completely separate from the tuition money that does go into the general fund.

However, if nothing else, the bill does force an accounting of the myriad funds, pots of cash scattered across the state that are not well tracked. The advocates of these funds now must defend their programs' need for this money, and how much of a balance is carried over from year to year.

Kalapa argues that one problem with special funds is that the replenishment mechanisms -- the fees or redirected general funds -- are often set up without concern about whether or not the money raised matches the need. This bill will give the state the opportunity to check for mismatches and generally see whether the need still justifies the dedicated funds.

Ultimately, though, raiding special funds can be viewed only as a one-time means to reduce both the deficit and the need for new taxes or fees -- but not as a total solution. Drain them dry, and they won't be around to remedy any fiscal problems that carry over into next year.

The taxpayers need to see a more considered approach to reducing the size and cost of government than the Abercrombie administration has yet proposed. The governor promised during the campaign to look for ways to restructure the way state services are delivered to gain efficiency, directing resources to a rational set of priorities.

Restructuring is certain to be a process that takes more than one legislative session, but it needs to start now, in the administration budget that's already weeks behind schedule. Lacking that framework makes it all but impossible to evaluate proposals to raise taxes. How can the public gauge whether or not their wallets should be tapped again if they don't know what kind of government they're being asked to support?

A clearer sense of state priorities would have been welcome when tax coffers were flush, but it's absolutely critical now as a guide for elected leaders who otherwise will be doing their carving blindly, and with a butcher's knife. How much better it would be to use the scalpel instead.






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