Can’t help

You may have noticed various headlines about hidden funds the state was holding for parks. Usually, when we talk about the state budget, we are referring to the general fund which is the operating budget for the state.  However, many other funds have been created for specialized purposes.  Some have earmarked taxes that feed them, e.g., the gasoline tax for transportation. Transportation is the biggest area of such non-general fund budgets.  But there are many other funds – some containing a few thousand dollars.

When the general fund gets into trouble, the state borrows from the other funds. It puts an IOU into those funds and moves the cash into the general fund. This internal borrowing keeps the state from running out of cash but it sometimes – when it goes far enough – interferes with whatever activities the special funds are supposed to finance. You can’t spend IOUs on those activities.

Fifty-four million dollars was discovered in special funds for parks that seemed to have escaped notice of park authorities – and there have been resignations in the wake of the scandal.  The state threatened to close various parks in a budgetary move and local fundraising kept some open.  So folks are angry that they gave money when the state had funding after all. (See the photo above of such a fundraising effort.)

Beyond that, the scandal can’t help the governor in his urging of voters to agree to a temporary tax increase in November.  There has since been an audit of the state which found other similar problems.

Here are two things to keep in mind:

1) We are talking millions – not billions. Many folks can’t deal with big numbers but the amount does matter.  The state is not going to solve its fiscal problems with audits and hidden funds.

2) That said, the park closure threat – which goes back to the Schwarzenegger era – was made to dramatize the state’s fiscal problems rather than as a real money saver.  It was a visible cut in services that would affect many Californians and get their attention.  Now it has got their attention, but not in the way anticipated.

3) The fact that funds were not accounted for is connected with the more general issue of state accounting that this blog has noted in the past.  There are mysterious differences routinely – not hidden – between the budget as seen by the legislature and presented by the Dept. of Finance and the cash statements of the state controller.  Footnotes make vague reference to cash vs. accrual but there is normally no published reconciliation.  And the state’s accrual practices are, well, flexible.  For example, in one year, the state budget’s payroll expenditures were officially reduced by moving payday from June 30 to July 1.  In true accrual accounting, that should have had no effect on the figures.  But it did in California’s version of accrual.

A recent article on the park, etc., fund scandal is at:
http://www.latimes.com/health/la-me-state-funds-20120804,0,5328933.story