State’s $37 Billion in Special Funds Is So Special It Isn't Tracked

Wednesday, July 25, 2012

The government’s 500 “special funds” are only about 40% the size of the state’s $91.3 billion General Fund—where income and property taxes go to be spent—but they have something special besides their name going for them: they aren’t tracked very well.

And as shown by the $54 million scandal that broke this week at the Department of Parks and Recreation, where the money was found stashed in a couple of special funds, a little bit of obscurity can go a long way.

When the San Jose Mercury News inquired of state finance officials precisely how they went about accounting for the $37 billion collected by various agencies of the government, often in the form of user fees and assessments, the answer was characterized by the newspaper as an “honor system.” While the General Fund is scrutinized via a formal accounting system, special funds are not.

Which is not to say that no one is running a tally. Individual agencies report how much money they have collected and the Office of the State Controller runs its own numbers on what should be in the funds. Both submit their figures to the Department of Finance. But no one apparently matches the numbers up.

“It would seem like we need a better system of accounting,” Derek Cressman, regional director of California Common Cause, told the Mercury News. “It doesn't seem like it's working adequately to have each department self-report.”

Although special funds are separate from the General Fund and typically have dedicated purposes related to how they were collected, it is not unusual for money to slosh back and forth between the two, especially in challenging economic times.

In 2009, when Governor Arnold Schwarzenegger sought to borrow $350 million to create a one-time benefit for the General Fund, there was much to choose from. 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 School Land Bank Fund, $30 million from the Fish and Game Preservation Fund and $29 million from the Harbors and Watercraft Revolving Fund.

While state spending since 1998 has fluctuated between 7% and 8.3% of personal income, the General Fund fluctuations have been the dominant factor, depending on the economy. Special fund expenditures have been relatively stable, but that could change in an anti-tax environment amenable to alternative funding sources.  

–Ken Broder


To Learn More:

State Parks Scandal: Honor System Used to Keep Track of $37 Billion in Public Funds (by Mike Rosenberg, San Jose Mercury News)

Lawmakers Want to Tap Special Funds to Prevent Shortfall (by Chris Megerian, Los Angeles Times)

Governor’s Proposed Special Fund Loans (State Legislative Analyst)

Overview of the Economy, Revenues, and Spending (State Legislative Analyst) (pdf)

Underfunded Parks Department Hiding Millions; Director Resigns (by Ken Broder, AllGov)

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