No Buried Treasure Hidden in State Special Funds, Just a Lot of Confusion

Monday, August 06, 2012

A week after finding $54 million stashed in two Department of Parks and Recreation accounts, the discovery of a suspect accounting “honor system” in the rest of the government’s 500+ special funds held out the possibility that billions more might be just a keystroke away.    

On Friday, the administration announced its findings and initial news reports were confusing. The Los Angeles Times headline came right to the point. “California budget audit finds no other hidden funds,” it said and other newspapers around the state concurred, citing Department of Finance Director Ana Matosantos.

“There are not other hidden asset-type circumstances,” Matosantos said after looking through previously unaudited special funds that account for about 28% of the state’s $142-billion budget. The money generally comes from user fees and targeted taxes related to the activities they support.

But within hours the Los Angeles Times changed its story. A new headline read, “California finds $119 million more in untapped funds,” and, indeed, the new interpretation proved how vexing it has been to figure out the accounting for $37 billion in special fund money that annually sloshes around in government coffers.

The “final” interpretation was that there weren’t millions of dollars, like the Parks and Recreation money, purposely stashed for years in accounts hidden from public view. But, there was $30 million extra in an account for healthcare programs, $29 million in one for reimbursing crime victims and $12.5 million for cleaning up underground petroleum tanks that had previously gone unreported.

Whether the money was more properly considered similar to the $113 million found languishing in a recycling program a few weeks ago or like the Parks money that cost the department director her job was left to the media to sort out.

The followup Times story no longer mentioned an earlier $415 million in discrepancies that had been found but attributed it to accounting methods, payment timing, human error and other more mundane reasons than parks millions being hidden for more than a decade. It now referred simply to “hundreds of millions.”  

As angry donors—who contributed money to the state when it looked like nearly a quarter of its 280 parks were going to close because of budget restraints—began to demand their money back, Governor Jerry Brown proposed using $20 million of the fund for parks operations. He referred to it as matching funds for the donor money already in its possession and expressed a desire to continue this partnership in the future. The other $34 million would remain in the off-highway vehicle fund.

Reed Holderman, executive director of the Sempervirens Fund, a nonprofit conservation group in Los Altos, had hoped for a different solution. “They sort of came to us under false pretenses. They cried wolf, and we responded,” Holderman said. “An elegant solution would be for them to refund the nonprofits, and put whatever is left into parks.”

Normally, the $20 million Brown is committing back to the department would have been used by the department in the first place . . . if the state didn’t borrow it first. Special funds are owed $4.3 billion for money borrowed by the governor and the Legislature to supplement the general fund, which pays most of the bills.

Around $1.3 billion of that does not have a payback date. The state has amped up its special fund borrowing since the economic crash, increasing it six-fold since 2008.

Mark Murray, executive director of Californians Against Waste, called borrowing from special funds “a little bit of the Wild West. . . . The Legislature and governor can set their own rules, and sometimes those end up being shortsighted.”

–Ken Broder  


To Learn More:

California Finds $119 Million More in Untapped Funds (by Chris Megerian and Paige St. John, Los Angeles Times)

California Budget Audit Finds No Other Hidden Funds (by Chris Megerian, Los Angeles Times)

Jerry Brown Wants to Use $20 Million to Help Keep Parks Open (by Anthony York, Los Angeles Times)

Donors Who Bailed out State Parks Want Their Money Back (by Paul Rogers, San Jose Mercury News)

Audit Finds No Other Hidden Assets in California Budget (by Amy Chance, Sacramento Bee)

Special Fund Balance Reconciliation (Department of Finance)

California Reaches Deep into Special Funds to Pay for Schools, Prisons, Social Services (by Kevin Yamamura, Sacramento Bee)

Bookkeepers Try to Figure out if State Is Sitting on Billions of Dollars (by Ken Broder, AllGov)

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