Bill seeks seizure of special funds

Money set aside for programs including wireless enhanced 911, state libraries, child abuse prevention and the University of Hawaii could be seized for the state’s general fund under a proposal being considered by a key Senate panel.

The bill, introduced by Sen. Malama Solomon, would repeal 138 of the state’s special funds and transfer their balances into the general fund.

Supporters say the transfer is necessary for legislative oversight of what should be considered taxpayer money.

Lowell Kalapa, president of the Tax Foundation of Hawaii, said he empathized with the “addictions” of the programs that depend on special funds, but he told lawmakers that many people who testified misunderstood that special funds were ultimately subject to the Legislature’s oversight.

“I have to chuckle because I don’t think people understand the appropriations process anymore,” Kalapa said.

“There are idle funds sitting in cash balances at the end of the fiscal year that sit there,” Kalapa told lawmakers. “Would those cash balances have helped other programs or services that are wanting for funding?”

But critics of the measure say it would bring an end to important programs.

University of Hawaii President M.R.C. Greenwood told lawmakers that without its special funds, the University of Hawaii would have to make “very severe” changes.

“In the case of community colleges, without those resources, we would not have been able to serve those students,” Greenwood said. “We would not have been able to go forward with the West Oahu campus, and certainly would not have had the ability to get a good bond rating to pledge funds against for the UH Cancer Center and other construction.”

Solomon (D, Hilo-Honokaa) said her proposal was aimed at getting a better accounting of all the money controlled by the state.

“The state is facing an $850 million shortfall,” said Solomon. “We are in a deficit situation.”

Solomon estimated there could be as much as $1 billion in special-fund money available to help balance the state budget.

“I’ve been trying to get the information, but it’s difficult to get the actual numbers,” Solomon said.

The Senate Ways and Means Committee deferred action on the bill yesterday, but Chairman Sen. David Ige said members would work on it and try to revisit it before the March 10 crossover deadline, when the House and Senate exchange bills for further vetting.

The proposal drew overwhelming criticism from groups across the state.

In almost all of the more than three hours of oral testimony covering 567 pages of written comments, groups that depend on special funds told lawmakers that repealing the funds and taking their balances would destroy their only dedicated sources of income, forcing many to make severe cuts or even shut down entirely.

Police Maj. Janet Crotteau of the Honolulu Police Department’s Communications Division told lawmakers that without the wireless enhanced 911 special fund, the state would be unable to improve how it detects the location of 911 calls made from cell phones.

Crotteau said HPD’s 911 dispatch handled more than 990,000 emergency calls in 2010, and the number is expected to rise.

“If you don’t know where you are, it’s very difficult for responders, whether they’re police, fire or ambulance, to find you,” Crotteau said.

Gail Tiwanak, director of the Hawaii State Center for Nursing, told lawmakers repealing its special fund would mean the center would close, despite the fact that no state or federal tax money goes into its special fund.

“The center is funded through a $40 fee that nurses pay upon (a) new license or license renewal every other year,” said Tiwanak.

One potential hurdle for the bill could be its legality.

Several portions, if implemented, might violate federal law or even be held unconstitutional, said Deputy Attorney General Randall Nishiyama.

“Fees and assessments imposed by an administrative agency can only be used for the purpose of providing services to the persons or entities paying such fees,” Nishiyama said.

He cited a 2008 state Supreme Court ruling that found transferring special-fund money derived from specific administrative fees to the state’s general fund was deemed an illegal and unconstitutional tax.

“Any other use of those fees would constitute a tax, which can only be imposed by the Legislature,” said Nishiyama. “The source of the money comprising the special fund is important.”

Nishiyama said moving money from certain special funds appropriated through federal law could open up the state to litigation if moved to the state’s general fund.

Ige (D, Aiea-Pearl City) acknowledged that many parts of the proposal would have to be removed if it had any chance of making it out of committee.

“There are lots of areas that are obviously not good ideas,” Ige said. “There are many provisions that are unconstitutional; there are many provisions that may violate federal law or would jeopardize receipt of other funds.

“Clearly we’re going to be going through the testimony and removing those things that are problematic and at least try to identify the universe of special funds that may be candidates for repeal.”