State Doesn’t Know How Much Is In Special Funds, but Knows It Wants to Tap in for $4.3 Billion

Wednesday, August 01, 2012

Until last week, the 500+ special funds that receive a fourth of the money to run state government hadn’t been properly audited. Ever. Finding $54 million hidden in a couple of Parks and Recreation accounts a few weeks ago and the promise that billions more might be stashed away elsewhere have ignited public interest in the little-known special funds.

Special funds are separate from the general fund and typically have dedicated purposes related to how they were collected—license fees, user fees, some taxes—and who collected them. The funds will spend more than $37 billion this fiscal year.  

Before the state decided to use an audit to augment the “honor system” of self-reporting by special funds, a San Jose Mercury News review of 17 accounts indicated they could have up to $2.3 billion in surplus funds. 

It is not unusual for money to slosh back and forth between the special and general funds, especially in challenging economic times. To date, the state owes them $4.3 billion, five times the amount it owed in $2008, for borrowing their revenues, and terms of repayment don’t always include a date certain. Sometimes the state just holds on to the money until circumstances require its return.

Critics have complained that if the money being borrowed is truly excess funding, as the state argues, it should be returned to the people or businesses that paid the targeted fees or taxes, rather than redirected to a general fund.

Sometimes state borrowing can be detrimental to the fund. The Beverage Container Recycling Fund was tapped for a $100 million loan for fiscal year 2010-11. Almost immediately, the fund suffered “revenue lag,” according to a CalRecycle report, and although it remained solvent, it suffered from “insufficient funds in certain months throughout the year.” The state has promised to repay an earlier loan of  $172 million from the fund in 2012-13.

Among the 17 funds looked at by the Mercury News, the largest surplus was found in the badgered beverage container recycling fund: $113 million.

Governor Jerry Brown’s administration just borrowed $713 million, including $100 million from a new account created by a settlement with mortgage lenders. 

In 2009, when Governor Arnold Schwarzenegger sought to borrow $350 million to create a one-time benefit for the general fFund, he asked for $99.4 million from the California Beverage Container Recycling Fund, $90 million from the Off-Highway Vehicle Trust Fund, $61 million from the School Land Bank Fund, $30 million from the Fish and Game Preservation Fund and $29 million from the Harbors and Watercraft Revolving Fund.

–Ken Broder


To Learn More:

California Borrowing $4.3 Billion from Special Funds By (Kevin Yamamura, Sacramento Bee)

Millions of Dollars May Lie Dormant in California's Special Funds (by Chris Megerian and Paige St. John, Los Angeles Times)

State’s $37 Billion in Special Funds Is So Special It Isn't Tracked (by Ken Broder, AllGov)

Up to $2.3 Billion in California Public Funds Hiding in Plain Sight (by Mike Rosenberg, San Jose Mercury News)

Quarterly Report on Status of the Beverage Container Recycling Fund (Department of Resources Recycling and Recovery) (pdf)

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