Wednesday, August 5, 2009

State lawmakers diverting funds from dedicated accounts to general fund

By Peggy Fikac - Houston Chronicle Austin Bureau - Sunday, August 2, 2009
Dedicated funds diverted to state budget

The billions in levies originally were collected for specific programs

AUSTIN — Nearly $3.7 billion in levies collected for everything from fighting air pollution to helping low-income people with their electric bills to funding trauma care will instead help balance the state's upcoming two-year budget.

The money, for the most part, is collected through fees and fines that legally are dedicated for a particular purpose. If lawmakers do not spend the money on the dedicated purposes, however, the balances become available to spend on other programs.

“It's kind of like having your (household) budget laid out and spending part of your food money on entertainment, or vice versa,” said Dale Craymer, chief economist of the Texas Taxpayers and Research Association, who has worked for a state comptroller, two governors and as the Texas House fiscal analyst. “It's a backdoor way to undedicate the money.”

In some cases, unspent balances in dedicated accounts have grown to hundreds of millions of dollars over years.

For example, the System Benefit Fund has accrued more than $670 million. The program imposes a fee on electricity customers in competitive retail markets, including Houston, Dallas-Fort Worth and most of the Rio Grande Valley, to provide a May-September discount for low-income customers.

Other unspent balances include $331.3 million in the account that reimburses hospitals for uncompensated trauma care. The account is financed by extra fines on drivers for driving while intoxicated and other offenses. A total of $150 million will be allocated during the next two years from the fund, despite hospitals reporting about $225 million in uncompensated trauma care in fiscal 2009 alone.

“I would say it's very important to us that we get that funding, considering the post-hurricane period,” said Jim Parisi, Memorial Hermann's chief business development officer for the southwest market. “If you look at the increased demand for trauma at our Level 1 trauma center, our volumes are dramatically higher. From my perspective, the more money that the Legislature puts into the system, the more likely we'll have more hospitals participating in trauma care.”

An even larger $515.3 million balance will be held in the Texas Emissions Reduction Plan account after $271.7 million is spent on the program in the next two years.

The program, financed in part with a vehicle title fee, funds grants in targeted counties, including Harris and Bexar, to address polluting heavy vehicles and equipment. In the current two-year budget, the Texas Commission on Environmental Quality did not have the money to fund about 570 applications asking for $40 million for emissions reductions.

“We're generating funds for a good purpose. We're diverting the funds, without telling people, for general purposes. And then we say we're not taxing. Well, government is lying,” said Rep. Sylvester Turner, D-Houston, who called such levies amount to “a tax by misrepresentation.”

Criticism and defense

When it comes to the System Benefit Fund for low-income electric customers, the state will spend $258.9 million during the next two years, according to the state comptroller. It will be an increase from current spending, but Turner said it will be far from enough.

“It's just a sinister way of keeping money intended for the poor in the budget to certify the budget. It is a tax on the poor. And we are doing it because these are individuals that can't afford lobbyists and consultants,” Turner said.

Senate Finance Committee Chairman Steve Ogden, R-Bryan, said he understands the argument, but “if you are going to criticize that, then go tell me what other parts of the budget I'm supposed to cut. … The choice to complain about it is just hot air.”

Alternatives, he said, would be raising general taxes or dipping into the state savings account known as the rainy day fund, which budget-writers expect to need in the future.

“The long and short of it is, we have to do this in order to balance the budget,” Ogden said. “I guess this was the least objectionable of the four alternatives.”

The situation points up a major public policy issue, he said.

“Our tax and revenue system is pretty messed up, and a case can certainly be made for a major overhaul of our tax structure,” Ogden said.

Apart from the general revenue funds, lawmakers did make headway on reducing diversions from a separate account, the gasoline-tax-fueled highway fund — although $1.2 billion still will be diverted from road building.

Progress on the highway fund was among pluses cited by a spokeswoman for Gov. Rick Perry, who signed the budget into law and has spoken for spending dedicated fees for their intended purpose or eliminating them.

Rep. Warren Chisum, R-Pampa, former House Appropriations Committee chairman, described the unspent accounts as “kind of a safety net” to ensure the state comptroller can certify the budget as balanced.

“I think it's fiscally responsible. … It's not always prudent to spend all your money just because you collected it,” Chisum said. “It is a shell game, but you know, life's a shell game. We just can't deficit spend.”
Read more in the Houston Chronicle

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