From the Pennsylvania Budget and Policy Center (http://www.pennbpc.org):
Republican members of the Pennsylvania House of Representatives, with the support of outside advocates, are moving to announce plans to borrow massively, perhaps up to more than $2 billion, from many of the 100 or so special funds that, along with the General Fund, are part of the state budget. Their justification for doing so is that, at the end of each year, many of these funds have a surplus. So it seems easy enough to shift those surpluses – money they are quick to say is “just sitting there not doing anything” – into the General Fund.
We’ve written a paper that examines the plan, both from a theoretical point of view, and then by looking at a number of state funds. It concludes that this plan is largely based on a misunderstanding of how government works in Pennsylvania and elsewhere. Adopting this kind of plan would be a mistake because:
Raiding special funds to fill the hole in the General Fund can only provide, at best, a one-year fix for the state’s persistent budget deficits. Without new recurring revenues, a deficit will return next year.
Money accumulates in the special funds for a number of good reasons. The money raided from these funds almost always must be repaid with interest. Thus, the state budget deficit will get deeper in future years.
Borrowing from these reserves can significantly undermine the ability of these special funds to carry out their purposes, as the fund balances play a critical role in ensuring that sufficient funds are available in emergencies or when bills come due.
Co-mingling the money from the state’s various special funds with the General Fund is a kind of fraud in that it takes money raised from bond issues approved by the voters or dedicated by the General Assembly for specific purposes and uses it to balance the General Fund.
In many cases these special funds are set up to ensure that some purposes of government are paid for not by the general public, but the people who especially benefit from them. (This, by the way, is a principle often proposed by conservatives who seek to privatize government services or the funding for them.)
Read the full analysis at https://www.pennbpc.org/why-we-shouldn%E2%80%99t-raid-special-funds-balance-general-fund.
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