Money meant for specific needs is often
diverted for other uses.
By
Jason Embry
AMERICAN-STATESMAN STAFF
Sunday, August 13, 2006
Like water through a
vast maze of pipes and valves, about $142 billion flows through the
Texas state bookkeeping works during a two-year budget cycle,
eventually filtering out to the agencies and programs that keep the
state running.
More than a
decade ago, state lawmakers figured out how to attach a spigot to
the system, a little-noticed device that has allowed them to drain
off money before it reaches its intended destination.
Dr. Kirk Lewis repairs a dog's eyelid
after a neutering at the Animal Trustees of Austin
clinic. Texas has collected millions for spaying and
neutering services by selling $30 'animal friendly'
license plates, but lawmakers routed just $500,000 to
the program for the next two years.
Generally that money is allowed
to pour into reserve accounts, forming a pool of cash
the state dips into if tax revenue ebbs or pressing
needs arise. Much of it simply accumulates unspent. When
the state's current budget cycle ends on Aug. 31, 2007,
the state comptroller's office has estimated, about $2.7
billion of such siphoned funds could carry over to the
next budget.
The custom involves so-called dedicated
accounts, money the state presumably collects to spend on specific
purposes, such as the 65-cent electric bill surcharge created to
help low-income Texans pay their electric bills, or the $30
collected for each "animal friendly" license plate that's supposed
to fund spay/neuter programs.
Over the years, lawmakers have created about
200 such funds, and they now make up about $5.6 billion — about 4
percent — of the state budget.
The public is generally left to
believe that the dedicated money goes where it was intended.
But often that is not true.
Legislators have become accustomed to siphoning off dedicated funds,
a practice even one powerful state senator said looks "rather
dubious."
The custom began when Democrats controlled
the Legislature and has continued under Republicans. And it's
entirely legal, thanks to a law passed in 1991.
Lawmakers say they need the budget
flexibility to respond to changing needs and avoid painful cuts in
services or tax increases.
But the
practice is drawing mounting criticism from advocates who say the
state is collecting fees under false pretenses and shortchanging
some of the programs to which it originally dedicated the money.
"Texans
deserve to have all of their fees used as promised,"
said Ramón Alvarez, a scientist with Environmental Defense, a
nonprofit advocacy group.
The continued deterioration of state parks, one
victim of diversion, has drawn the most attention lately.
But a review of state budget records shows that
the practice is widespread. And a
closer examination of five dedicated accounts shows that when the
money is diverted, officials shortchange services or increase fees.
Emissions quandary
In 2001, lawmakers facing federal pressure to
clean up the air needed to do something to reduce nitrogen oxide
emissions in Texas cities. They decided to give money primarily to
businesses to replace older trucks, locomotives and other equipment,
or to upgrade the engines inside them.
Texans pay a title transfer fee of up to $20 on
any vehicle to fund the program. The state also raises money through
registration and inspection surcharges for commercial vehicles and
through a fee on the sale or lease of off-road diesel equipment.
Of the fees collected, legislators appropriated
$257 million for the program in the current two-year budget, which
Comptroller Carole Keeton Strayhorn's office estimates will leave
$314 million sitting in the account at the end of this budget cycle.
The state has until 2010 to meet the federal
government's emission guidelines, and officials say it's too early
to tell whether that will happen. But what is clear is that there is
more demand for the money than what's available. In 2005, the Texas
Commission on Environmental Quality received $100 million worth of
grant requests that it could not fund because the Legislature had
not authorized it to do so.
Alvarez said he cannot see how the state will meet
its guidelines by 2010.
"There are different things you could spend the
money on, and of course you want to spend it in a smart way,"
Alvarez said. "But there is definitely a relationship here that the
more money you spend, the more reductions you get."
New budget rules
Because the
state constitution forbids deficit spending, the state comptroller
must predict how much cash will come in from the taxes and fees
Texas charges its residents and certify that there should be enough
money to fund the budgets approved by legislators every two years.
Until the 1990s, scores of small,
dedicated funds tucked into the budget were off-limits and could not
be counted in the comptroller's revenue predictions.
But over time, lawmakers have shifted some of them
to the general revenue fund, where the money is available for any
use, or at least allowed the fund balances to be counted when the
budget is certified.
The more money that piles up in the dedicated
funds, the easier it becomes to balance the state's books,
especially in tight budget times.
In 1991, lawmakers passed a
law explicitly saying that unspent balances in dedicated accounts
could be used to certify other areas of the state budget.
The amount of unspent money in dedicated accounts
has grown since then, officials say, as more accounts have been
created, some fees have produced more cash than expected and
lawmakers have decided for various reasons not to spend all the
money.
Senate Finance Committee
Chairman Steve Ogden, R-Bryan, said lawmakers hold back some of the
money for three main reasons.
First, they want to spend only as much as a
program needs. Second, there is sometimes uncertainty about how much
money a fee will generate, and they don't want to spend more than
they have. And third, sometimes they need the money to balance the
rest of the budget.
In 2003, the Legislature, fresh off a no-new-taxes
campaign that helped propel the Republican Party into full control
of state government, faced a $9.9 billion shortfall and "any little
standing pool of money, somebody got a sponge and started working on
it," Deputy Comptroller Billy Hamilton said.
Heading into the 2005 legislative session,
Strayhorn projected that state general revenue would grow by $6.4
billion but that lawmakers would need $6 billion just to continue
the scaled-back programs they funded two years earlier. So the
budget remained tight with Medicaid cost increases, public education
and property tax cuts commanding lawmakers' attention.
It wasn't until after lawmakers wrote their budget
that talk surfaced of a large surplus that would help fund property
tax cuts as part of a court-ordered overhaul of the state's school
finance system.
"I think history will say from that context that
those decisions (regarding dedicated accounts) were pretty good,"
Ogden said. "The budget did balance, we did have enough money to get
us out of the courthouse with regard to public school finance, and
we were pleasantly surprised to have a substantial amount of money
to cut property taxes."
Use of dedicated fee
balances to balance the budget is not going away, but it may be
curtailed.
"There's been a spotlight put on this
practice, which any objective person would say is rather dubious.
Plus, the state's not broke," Ogden said,
predicting that the Legislature will rely less on money in dedicated
accounts to balance its next budget.
Tapping into funds
Not all dedicated funds have been affected. The
current budget left undisturbed some dedicated revenue streams, such
as tuition and fees for higher education, and even let some programs
tap into their unspent reserves. But others have not fared as well.
In November, the Department of State Health
Services announced that it would increase the fees for obtaining
birth and death certificates to $22 and $20 from $11 and $9 to pay
for a five-year project transferring vital records from microfilm
and paper to electronic images.
Department officials project that the fee
increases will raise $2.8 million a year. But in 2005,
legislators had more than $18 million to allocate for the records
program, and they allocated just $6.7 million, according to
Strayhorn's office. In other words, the department raised fees by
$2.8 million per year while more than $11 million that was already
in the account was left unspent.
On an even smaller scale, Strayhorn's office
predicts there will be $2.2 million in an account for spaying and
neutering animals over the next two years, including money that
accumulated previously. The money is raised through a $30 license
plate that says "animal friendly" and pictures a cat and a dog. But
lawmakers put just $500,000 of that money into the program for the
next two years.
Animal Trustees of Austin's spay and neuter clinic
used to advertise free surgeries to sterilize animals from five
local ZIP codes that were deemed low-income, and it would pay for
those surgeries with money raised through the license plates. But
the state funding has stopped. Executive Director Missy McCullough
said she still provides free surgeries when they're requested, but
she can no longer afford to promote them because the demand would
quickly outpace the supply.
"I didn't renew my animal friendly license plate
this year because I'd just as soon not pay that $30 if it's not
going to really go where it needs to go," McCullough said.
Creating controversy
One of the most controversial decisions the
Legislature made regarding dedicated accounts in 2005 was not to
spend money collected through the System Benefit Fund.
The 2005 Legislature opted to redirect the fund, a
65-cent charge on electric bills that was born in 1999 to give
low-income residents a discount on their electric bills — about $13
per month in 2004. The program is not offered, and the fee not
collected, in Austin because the city's municipal residential
electric market is not deregulated. The program was created as part
of a push for electricity deregulation in 1999.
The staff of the Legislative Budget Board
recommended in early 2005 that the Legislature instead spend the
money on Medicaid, whose costs had grown 32 percent in five years.
The staff reasoned that 58 percent of the fund's recipients in 2004
received Medicaid benefits already, so it would help many of the
same people. In addition, since the amount of federal money that the
state receives increases with state spending on Medicaid, Texas
writers could tap into as much as $616 million in federal funding.
The Legislature stopped spending the money on the
electric discount program. Indirectly, it helped pay for Medicaid,
because that money was available for general spending if needed.
Last week, after some publicity about the fund's
shortfalls, Gov. Rick Perry sent a letter to the state Public
Utility Commission saying that the discount should be restored or
the state should stop collecting the fee.
Meanwhile, PUC figures show that the number of
disconnection notices sent out in deregulated areas because of a
lack of payment increased from 94,000 in March 2005 to more than
116,000 last March.
"The loss of the discount for low-income electric
consumers undoubtedly created something of a hardship," said Theresa
Gage, a commission spokeswoman. But she quickly added she had no
evidence that the loss of the discount directly contributed to the
increase in disconnections.
Feeling the pinch
Perhaps no agency has felt the sting of
underfunded revenue more than the Texas Parks and Wildlife
Department.
Sales taxes collected on sporting goods are
supposed to be spent on state parks — it's not a dedicated revenue
per se, but the money feeds into two parks-related dedicated
accounts. The sales tax now brings in about $105 million a year, but
for several years the amount of that money that can go to the parks
has been capped at $32 million. To take it one step further, the
Legislature decided to spend just $21 million of that money on parks
this year.
The Austin American-Statesman reported earlier
this year that 50 of the state's 114 parks have cut back on
services and operations and the parks department has cut about 150
jobs over the past five years. The 929 vehicles in the state parks
department are, on average, 10 years old and have 107,000 miles on
them.
But when parks officials were called before
budget-writers in 2005 to discuss their funding needs, "we didn't
hear any of that," said House Appropriations Committee Chairman Jim
Pitts, R-Waxahachie. Pitts said he and Ogden have met with parks
officials in recent weeks and are looking for ways to increase parks
funding.
A separate account, funded mostly with fees for
hunting and fishing licenses, exists to pay for game wardens,
stocking lakes and other wildlife programs. Strayhorn's office
estimates that when the current two-year budget cycle ends, about
$27 million will be sitting in the account unspent.
"I have sat up there on the dais and had
politicians say to me, 'Would you rather take care of the bighorn
sheep in West Texas or feed a hungry child?' " said Scott Boruff,
deputy executive director for operations at Parks and Wildlife. "Of
course, my answer is always, 'I'd rather feed a hungry child.' "
But, he added, "that's not the point. The point
is, if you buy a fishing license, part of your assumption is that
money is going to allow there to be fish wherever you go fishing.
And that the water is going to be clean enough that the fish aren't
all dead. And that the game wardens are going to make sure that
somebody else isn't going out there with a stick of dynamite and
blowing them all out of the water."
jembry@statesman.com; 445-3654
