Understanding Dedications in Budgetary Policy
Requirement of setting aside revenues in special funds for specified purposes, types of dedications like SGF diversions, REC dedications with examples, impacts of General Fund Equivalents, solutions to address dedications, and policy reasons behind them.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
E N D
Presentation Transcript
Budgetary Dedications Working with Special Funds, Fees and Mandated Costs Task Force on Structural Change in Budget and Tax Policy 8/12/2016
What is a Dedication A requirement that certain revenues are set aside in special funds which can only be used for specified purposes. Constitutional or statutory
Why should we care? $2.5 billion in dedications in FY17 budget Prevents true prioritization Some programs receive less scrutiny While fixing dedications would not necessarily create additional net revenue, it would provide flexibility needed to fund priorities
Types of Dedications Diversions of State General Fund (SGF) Fee Based Mandated Expenditures Need to treat each one differently
SGF Diversions Funds that would have otherwise gone into the State General Fund
REC Dedications (selected examples) Dedication FY 2017 Forecast (millions) Transportation Trust Fund (Fuels) $499 Lottery Proceeds Fund $171 DHH Provider Fees $135 Sales Tax/Telecomm for the Deaf $1
General Fund Equivalent Money locked up in a special fund or fee, but it is used to support General Fund Programs Example lottery, Medicaid, etc Eliminating General Fund Equivalents makes for a cleaner budget and creates greater budget flexibility
Solutions Simple solution- eliminate all of them Creates some issues Alternative: eliminate certain dedications Sunset all non-constitutional statutory dedications by specific date Review and reconsider constitutional dedications based on well-defined criteria that distinguish long-term state needs like transportation infrastructure and coastal protection
Policy Reasons for Dedications Necessary for the functioning of key budgetary mechanisms Budgetary Stabilization Fund ( Rainy Day Fund ) Budget Security and Redemption Fund (Bond debt) Force long term focus Transportation Trust Fund Coastal Protection and Restoration Fund Retirement trust funds
Fee Based Dedications Fees collected from certain groups to be spent on certain related programs Needs to be a connection between the fee and the expenditure or service provided May or may not be in a dedicated fund General solution is make sure fee based programs pay their true costs Require a small percentage of revenue to pay toward the General Fund to help pay for the overhead
Mandated Costs Can also be called Non-Discretionary Constitutional MFP and bond debt Dictated by Federal law or lawsuits Prisoner healthcare Retirement, employee healthcare, etc. Require long-term reforms to reduce costs
Potential Solutions from Other Organizations Increase from 5 percent to 10 percent the amount of dedicated funds that may be reduced during shortfalls and deficits. Consolidate similar dedicated funds, or convert select dedications to self-generated revenue sources Conduct an annual review of spending dedications, including examination of funds with recurring over-collections, to identify additional opportunities to reduce dedicated funding Use special funds and fee revenue to pay for a portion of the state s bond debt Move interest generated from special funds to the SGF
Conclusion The issue of dedications is broader than often contemplated. There are different types of dedications each with their own set of solutions. While there is no one silver bullet, there are ways to improve how the state handles dedications.
