Bills Filed to Address Diversions of Dedicated Funds

Within the past couple of weeks, several bills have been filed that would gradually end the longstanding accounting practice of using dedicated funds to certify the state budget. These special dedicated accounts are statutorily enacted for a particular purpose, but rarely are the funds completely used for those purposes.

A while back, Texas House Speaker Joe Straus echoed similar concerns on how the state budget could be more transparent and accountable to taxpayers. Speaker Straus even appointed an interim committee to study how the state could spend down these dedicated funds without causing a financial burden on itself. This unique accounting practice is known as fund consolidation and has been used over the past 20 years to balance the state budget. By law, the state comptroller must certify that the state budget is balanced. Last legislative session, $4.9 billion in fund consolidation was used in certifying the budget. These dedicated funds (more than 200) have accumulated huge balances over time.

Highlighted below are a few of the bills that have been filed so far.

• SJR 24 by Sen. Kirk Watson (D-Austin) – This bill proposes a constitutional amendment prohibiting the diversion of statutorily dedicated revenue. In addition, SJR 24 would require lawmakers to vote each time a diversion was made from any of the 200 dedicated funds – making it difficult for lawmakers to sweep the accounts in one vote.
  
  SB 175 by Sen. Craig Estes (R-Wichita Falls) – This bill would eliminate the diversion of funds from the sporting good tax, which by law is to support state parks. HB 162 by Rep. Lyle Larson (R-San Antonio) is similar to SB 175. Under the proposed state budget for 2014-15, the Texas Parks and Wildlife Department would have to close at least seven parks. This agency’s proposed level of funding can only maintain 84 parks.
   If SB 175 passed, it would eliminate any future funding crisis for the agency. 
   
• Other bills include HB 756 by Rep. Sarah Davis (R-Houston) and HJR 34 by Rep. Richard Raymond (D-Laredo) – HB 756 would transfer any dedicated funds unspent or unobligated back to the persons who paid the taxes, and HJR 34 would permit dedicated funds to be used for their intended purpose over a temporary period, expiring on January 1, 2016.

Below are three of the largest general revenue-dedicated funds from the 2012-13 budget period:

• System Benefit Fund:  $851 million – Fee paid by electric utility customers intended to help low income Texans defray electricity bills.
   
• Texas Emissions Reduction:  $645 million – Vehicle title and registration fees provide for clean air grants.
   
• Trauma Facility:  $388 million – Fines paid for drunken driving and other traffic violations for emergency services and trauma centers. 

Examples of dedicated funds that have been diverted from their dedicated purposes and are related to county government include:

• 9-1-1 Services – Provides grants and assistance to local governments through Regional Planning Commissions as they develop and implement regional plans and maintenance for 911 services.
   
• Indigent Defense – Funds are provided to the Texas Indigent Defense Commission, which provides grants to counties to help fund indigent defense. 
   
• Emergency Medical Services and Trauma Care System – Funds are designated to trauma facilities, county and regional emergency medical services and trauma care systems.

Other dedicated accounts affecting counties are shown in the baseline budget for the 2014-15 Biennium.

For more information on this article, contact Paul Emerson, TAC state financial analyst, at (800) 456-5974.