The Illinois House last week approved a bill that would allocate $817 million to human-services programs and higher education.
Proponents said the bill will not make the state’s financial problems worse since the cash is available to cover the spending for the rest of the fiscal year that ends June 30.
The reason the money is available is the complex (some would say convoluted) way state finances operate.
Q. So where is the money coming from?
A. Essentially it is state income tax revenue. Specifically, it is coming from two funds set up in 2011 when the temporary income tax increase was enacted. The funds were specifically created to help human services and education. Each gets a tiny part of income tax revenue as it comes into the state. Money is deposited into the funds automatically. Since income taxes continually come into the state, the two funds continually get additional money.
However, the money can’t be spent until the legislature authorizes it, which is what the House did last week. Supporters argued the money was just sitting in state accounts collecting dust and could only be used for education and human services.
Q. Isn’t it unusual to set aside money like that?
A. No. People may think that all of the tax revenue collected by the state goes into one big pot from which bills are paid, but that isn’t the case. It is often distributed to different funds for specific purposes.
For example, even before those two special funds were created, a portion of income tax revenue was set aside in a fund to cover tax refunds owed to taxpayers after they file their tax returns. A significant portion is also set aside in a fund that is then distributed to local governments as their share of income taxes.
That sort of split isn’t limited to income taxes. Most revenue from liquor taxes goes into the state’s basic check-writing account, but the portion that comes from a 2009 liquor tax increase is deposited into a fund that pays for capital projects.
Q. So how many funds are there in the state?
A. A report by the Commission on Government Forecasting and Accountability from 2013 (the last year COGFA looked at the issue) listed 869 funds. That includes 173 funds that were created since 2007 when a report on state funds was previously issued.
Q. Why are there so many funds?
A. Essentially to ensure that money collected for a specific purpose ends up being spent on that purpose.
For example, the state regulates any number of occupations. Members of those occupations pay licensing fees that are supposed to offset the costs of the state administering the occupation and disciplining the bad apples among them. Obviously, the people paying for the licenses want to ensure their fees are paying for those costs and not being diverted for some other purpose. One way to do that is to create a fund to collect the fees that are paid.
The same holds true for special fees assessed for some activities and even some taxes. Perhaps the most notable are motor fuel taxes that are deposited into a special fund that is supposed to be used for transportation-related purposes.
Q. Are those funds off limits for other purposes?
A. They haven’t been. Lawmakers have tapped into the funds in the past through a process known as fund “sweeps.” They’ve taken money out of the special accounts and put it into the state’s main account that pays most bills. A notable example of that occurred in the spring of 2015 when the legislature approved sweeping $1.3 billion out of special funds to help plug a hole in the state budget. Lawmakers argued that the money they were taking out of the funds was surplus and not necessary for the funds to cover their expenses.
The amounts taken ranged from $250 million swept from the state’ Road Fund to $193,000 from the Real Estate Audit Fund. In all, money was taken from 104 special state funds.
While the process gives lawmakers a comparatively easy way to come up with money to cover state expenses, it isn’t popular with the people who pay into those funds or who benefit from them. It helps explain the constitutional amendment that was on the ballot last fall to prohibit lawmakers from raiding funds that were created for transportation purposes and using the money for other things. The amendment requires that transportation-related taxes and fees be used for transportation expenses. It was approved overwhelmingly.
Q. Has anyone suggested getting rid of the special funds?
A. Yes. There are occasional calls to eliminate the separate funds and just throw all state tax and fee collections into one big pot that will then be used to cover all state expenses as needed. The idea has never gotten far.
“Behind every one of these funds is some group that (benefits),” said COGFA executive director Dan Long. “That’s why it’s so hard to get rid of any of these funds. The Road Fund is a good example. The road builders and trades really get upset when they transfer money out of the Road Fund. To the extent they got that initiative put on the ballot so you can’t do it anymore.”
— Contact Doug Finke: firstname.lastname@example.org, 788-1527, email@example.com.
01-All No Sub,02-Pol,03-HL 3,04-Pens 3,16-Econ,Em TFIC,HE Blog,HE Coalition
via News – The State Journal-Register http://ift.tt/1FxXeUz
April 8, 2017 at 02:21PM