Work put into tracking special funds leads to nixing of some for naught

One stroke of the pen. That’s all it takes to undo a very large amount of work. Today we will follow the saga of House Bill 2427 in this past legislative session.

Our government is replete with “special funds,” little pots of money that are formed for particular purposes. Sometimes these funds have very legitimate functions in our government, but there are also funds that sit around doing very little. One might think those idle funds could easily be axed and the money plopped back into our general fund system so it would be easier for all of us to keep track of how much money our state government has or doesn’t have.

To that end, the legislative auditor was given a mandate to hunt down and review these special funds periodically and report to the Legislature on those funds that do not meet statutory criteria for continued existence as a special fund.

So our story starts with Auditor’s Report 14-01, which identified 11 special funds, and House Bill 2427 was drafted to get rid of them.

The House Finance Committee then heard and reported the bill out. Some of the proposed repeals survived, some didn’t, and one fund, not identified in the previous version, was added to the list. The bill now proposed to repeal seven special funds.

The Senate Ways and Means Committee then heard and reported the bill out. As before, some of the proposed repeals survived and some didn’t, and quite a few more were added to the list. The bill now proposed to repeal 17 special funds.

One of the funds added to the list was the Center for Labor Education and Research (CLEAR) Revolving Fund. It turned out that the auditor reviewed the CLEAR fund in 2009 and found that it met the statutory criteria for staying alive as a special fund. But when the Senate proposed to add CLEAR to the bill, University of Hawaii representatives testified on the bill because a number of the funds were related to the university. In particular, the CLEAR facility was located at UH-West Oahu, and officials of that campus testified that they are OK with scrapping the CLEAR fund.

As with many other bills that had been amended in the course of the legislative process, a House-Senate conference committee was appointed to reconcile the House and the Senate versions of the bill. The conference committee met and then reported out an amended version that looked pretty much like the Senate version.

As before, the bill proposed to repeal 17 special funds, and CLEAR was one of them. Up to the Governor’s Office it went.

Bam! The bill was vetoed.

“This bill is objectionable because it repeals the (CLEAR) Revolving Fund,” said the veto message. “While this Revolving Fund has a relatively low balance, it serves its statutory function by collecting all fees and charges associated with the operations of (CLEAR) and using such moneys to defray its operating costs. I believe that these revenues should be retained and used by (CLEAR) instead of being deposited into the General Fund.”

Actual number of special funds repealed: Zero. All of those who put time and energy into this bill or the effort leading to it have nothing to show for that effort.

In theory, the same bill can be reintroduced next session, and it should be able to pass and be signed as long as it leaves CLEAR alone. In practice, however, there will be new faces next session, and different leaders, who may want different things.

In the meantime, however, can’t we get some partial results? Some of the special funds were created administratively (not by statute), so can’t we ax them administratively? Wouldn’t that be showing leadership?

Or is that too much to ask?

* Tom Yamachika is the interim president of the Tax Foundation of Hawaii.