A Lock Box for Dedicated Funds

State “dedicated” taxes created by law for the sole purpose of funding roads, bridges, the environment and transit should be spent as they were intended. If the government pledges to spend a special tax for a special purpose, it should honor that pledge. This hardly seems like a radical notion. But for many in Albany, it is.

Over the last ten years, governors and legislatures have diverted more than $4.0 billion in dedicated taxes and fees to the state’s General Fund. Diversions from public transit dedicated funds have led directly to massive cuts in New York City bus service and subway cleaning. Decades of diversions from the Highway and Bridge Trust fund have led to the deterioration of the state’s bridges — including the emergency closing and implosion of the Lake Champlain Bridge connecting New York to Vermont. Likewise, funds dedicated to the environment have been repeatedly plundered, leading to delays in building water filtration plants and securing vital watersheds and wetlands.

On top of robbing critical public infrastructure of investment, the diversion of state dedicated funds amounts to a gigantic bait and switch scam in which Albany passes new dedicated taxes and then spends the money to close the general budget deficit. The problem here is that only the state constitution can prevent the legislature from diverting dedicated funds. However, short of that, other actions can be taken to make taking dedicated funds more difficult.

Lock the Dedicated Funds Lock Box
1. Governor’s Locked Box: Governor Cuomo should issue an executive order creating a “Governor’s Locked Box” which prohibits the Division of the Budget from formulating a budget that includes diversions of dedicated funds or across the board cuts that amount to diversions of dedicated funds to the general fund. Additionally, the governor should pledge to veto dedicated fund diversions.

2. Create a Dedicated Fund Tracker and Report on the Division of the Budget website which reveals how much a budget or program bill would divert from each dedicated fund.

3. Eliminate dedicated funds, taxes and fees which no longer serve the purpose they were established for.

Breaking a Public Promise
Raiding dedicated funds is bad for a number of reasons:
· It’s wrong, and amounts to breaking a contract with the public to spend dedicated taxes as pledged in the law.
· It robs the public of a service or infrastructure citizens believe they are paying for.
· It amounts to back-door cost-shifting from one group of New Yorkers to another.
· It helps disguise the actual budget deficit, and amounts to borrowing and shifting costs to future generations who have to pay to rebuild bridges, roads, public transit and other public works.
· It decreases public confidence in government and fuels cynicism.
· It undermines public support for needed increases in dedicated fees or taxes, such as MTA dedicated taxes and the gas tax.

One result of dedicated fund diversions is that New York State’s transportation infrastructure is in a shambles. In late 2009, New York blew up the decrepit Crown Point Bridge over Lake Champlain, which had fallen into disrepair after repeated raids on the state’s Highway and Bridge Trust Fund.

Over the last ten years, more than $3.7 billion has been diverted from dedicated State funds and transferred to the General Fund. From State Fiscal Year 1999-2000 through February 2010, more than $2.9 billion was transferred from dedicated special revenue funds in sweeps and transfers to the General Fund. Of this, $1.8 billion, or 61 percent, was swept within the past three years.

In addition to the $2.9 billion transferred, more than $854 million was taken from the Environmental Protection Fund over the past ten years, including $275 million in SFY 2008-09 and $34.1 million in SFY 2009-10 through February 2010.

Recent Examples of the Diversion of Dedicated Funds
• Environmental Protection Fund: $854 million taken since 1999.
• Dedicated Highway and Bridge Trust Fund: $13 billion taken since 1991.
• Enhanced 911: $90 million taken in 2008.
• MTA Dedicated Funds: $160 million taken 2009/10.