December 26, 2008

Money just sitting there, unripe for the taking

Filed under: Hawaii State Politics — Doug @ 11:20 am

The Star-Bulletin editorializes today about Governor Lingle’s plans to balance the budget by transferring money from various extra-General Fund accounts into the General Fund. But there is a catch.

Gov. Linda Lingle’s formula to avoid fiscal shortages would re-purpose $36 million designated for refunding beverage container deposits to consumers and recycling businesses, and another $9 million from cell phone surcharges collected for a network that pinpoints emergency call locations.

The biggest chunk of money – $40 million to cover expenses for the current fiscal year, and another $35 million for fiscal 2010 – would be drawn from the “rainy-day fund,” a reserve that comes from the state’s share of a tobacco settlement.


Transferring rainy-day money requires a two-thirds vote of the Legislature. Lawmakers should go along with the proposal even though it would leave a balance of only $15.7 million.

The two other transfers, however, present difficulties in view of a Supreme Court ruling [PDF] that says funds designated for specific purposes cannot be used otherwise. Legislators should, if necessary, rewrite the laws that set them up to conform with the ruling and consider abolishing some of them.

Amending the various laws creating special funds to conform with the ruling is much easier said than done. I am not a lawyer, but I have read the ruling and it would be difficult, maybe even impossible, to “un-ring” the bells that led the Court to rule as it did.

In a nutshell, the beverage container fund was established by the Lege, but (like the Insurance Regulatory Fund which was the subject of the recent ruling) the actual fees going into the fund are set by the Executive Branch. Meanwhile, the cell phone fund is explicitly defined as not being general fund revenue. Only the Legislature may impose taxes (which the ruling carefully defines and differentiates from user- and regulatory fees). Once fees are collected and deposited into a special fund, the ruling makes it pretty clear that special fund money can’t simply be transferred into the general fund without violating the separation of powers doctrine.

[The Court] blanch[es] at the State’s basic contention that a user or regulatory fee, if initially assessed as such, can be transferred to a general fund when the same assessment would have been invalid had it been assessed initially with the express understanding that the funds would be transferred to the general fund. If [the Court] adopted such a position, seemingly nothing would bar the legislature from dipping into the fees collected by any state regulatory agency that were deemed to be “in excess of the requuirements of the fund.”

So, unless the Constitution is amended to retroactively grant taxation powers to the Executive Branch [as if...], I see no legislative way to finesse these transfers in such a way that they could withstand judicial scrutiny. [I could be wrong, of course. If you know of a way, then, please, leave a comment.]

Prospectively, however, reconstituted special funds could be created and (once deposits are made) become available for transfer if the Lege (instead of the Executive) imposed the various fee structures of these new special funds. The legislative process to make that happen would be extremely tedious, politically volatile and, most importantly, would not help the current budget situation. i.e. The existing special fund balances will remain unavailable for transfer.

1 Comment »

  1. The Supreme Court’s decision may be limited to those funds collected by assessments determined by the executive branch. The deposit on beverage containers collected by retailers is set by the legislature (HRS 342G-102), as is the cell phone assessment for wireless enhanced 911 service (HRS 138-4). So, transfers from these funds would not seem to violate the separation of powers prohibition.

    However, the cell phone assessment may fail the equal protection test that the Supreme Court said the insurance fees passed. The wireless enhanced 911 board regularly dispenses proceeds from the assessment (now amounting to $22 million +) to defray various costs incurred by (mostly county) entities that receive 911 calls and dispatch first responders. But cell phone calls comprise 60% of the incoming traffic and no fee is assessed on those who place the other 40% of the calls (users of landlines. VOIP, etc.).

    There is no rational basis for discriminating against one group of “users” to the advantage of another. The wireless enhanced 911 board may submit legislation in 2009 to impose fees on ALL 911 callers but this suggests that fees already collected should only be used for cell phone-related 911 projects. This discrimination separately raises the issue of whether this fee is an unconstitutional tax inasmuch as it is being used to fund general government operations typically funded by tax revenues.

    Of course, there is no cell phone consumer group with the deep pockets of the insurance industry trade group necessary fund a law suit so it will take plain old legislative advocacy to address this issue.

    Comment by Ted — December 30, 2008 @ 10:31 am

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