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Life is sweet indeed in Special Fund World

California’s monumental budget gap of $26.6 billion or so exists only in the state’s general fund – the repository of revenues from income, business, sales and other “general” statewide taxes.

Gov. Jerry Brown has waxed apocalyptic more than once about the almost stupefying dimensions of this chasm between spending commitments and available cash.

“Really a huge challenge, unprecedented in my lifetime,” the 72-year-old Democratic governor said at one of his budget conferences last fall.

Remember, though: Brown is only talking about the state’s $85 billion general fund.    

Everything is Fat City over in the $35 billion part of the budget that’s labeled “special funds.”

These are not $35 billion worth of programs paid for with money that is singular, distinct or extraordinary. Nor does the nomenclature have anything to do with special needs.
Special fund programs are paid for by those who, putting it most politely, are served by those programs.

 That can be an accountant or a cement manufacturer or the host of businesses whose operations cause them to fall under the jurisdiction of, say, the Air Resources Board and pay the board fees for the privilege of having regulations promulgated that cause less yuckiness in the atmosphere and less profit for their California enterprises.

Life in Special Fund World is sweet – particularly in relation to the fiscal Ninth Ring of the General Fund.

There’s a reason former Gov. Arnold Schwarzenegger made the three-Fridays-a-month furloughs apply to all departments, special or general funded.

The fear was that applying furloughs only generally would spark an exodus making Moses seem like a piker from affected departments to luscious special fund departments.

If further evidence is needed of exactly how flush things are in the 30 percent of the budget that is “special,” the Democratic governor recently was able to rake off $830 million from 48 special fund accounts without, he says, hampering the day-to-day operations of the entities paid for with the money.

This $830 million in borrowing from Special Paul to pay General Peter involves only “reserves,” Brown said in a press release describing the transaction, which must be approved by the Legislature.

The loans, theoretically paid back in the fiscal year beginning July 1, 2013, are needed to bring the Democratic governor’s budget back into balance after his rejection of a proposed $1.2 billion sale of 11 state office buildings approved in 2009 by Schwarzenegger and the Legislature.

Examining a special fund microcosm, consider the regulatory bureaus and boards of the Department of Consumer Affairs.

There are 40 of these entities listed in a summary of their financial condition by Brown’s Department of Finance.

The Democratic governor proposes relieving 16 of these regulatory bodies of most of their reserves. He would lift a high of $17 million from the Board of Registered Nursing and a low of $1 million each from the Board of Accountancy and the Board of Optometry.

A little over $65 million total would be siphoned from various boards and bureaus.

For its part, the department thinks Brown’s plan is jake.

“We’re fully supportive of the loans,” said Russ Heimerich, a department spokesman.

“We have to do our part to help the general fund and we don’t expect any effect on our daily operations because the money comes out of reserves.”

Just to clarify: That would be “reserves.” Not “retrenching,” “restructuring,” “rescissions” or “reductions.”

Brown wants to take $11 million of the spare money lying around the Board of Barbering and Cosmetology.

The board, created in 1927, licenses and regulates not only barbers and cosmetologists but estheticians, electrologists, manicurists and their workplaces.

Among the accomplishments the board lists in its annual report for the 2008-09 fiscal year is translating some of its publications into Vietnamese and Spanish and switching to a standardized written exam used nationally.

According to the Democratic governor’s budget documents, the board is expected to receive $4.7 million in fines and penalties during the fiscal year beginning July 1. Nearly $4.9 million will be collected from issuing new licenses. Another $9.5 million from renewals.

And $119,000 will be earned from the board’s investment of its surplus money.

Not to belabor the point: The board’s SURPLUS money. As opposed to, say, SHORTFALL.

All told, the board is expected to pocket nearly $31 million in revenue.

Although the board is autonomous, the department handles much of its administrative functions. That costs a projected $18.3 million in the forthcoming fiscal year.
Doing the math equals roughly $12.6 million to spare.

Brown borrows $11 million, still leaving $1.6 million in mad money for the board.

Of the 14.8 million Californians who filed income tax returns in 2008, 42,517 had adjusted gross income of $1 million or more, according to the Franchise Tax Board’s 2009 annual report.

The Medical Board, which regulates doctors as well as midwives and opticians, is projected to collect nearly $45 million in renewals during the next fiscal year. It will also boast a reserve of $23 million with an expected $202,000 from investing its surplus money.

Only 611,318 Californians reported adjusted gross income of $200,000 or more in 2008, the tax board says.   

Brown wants $9 million of the board’s reserve for the general fund.
But the medical board’s wad is walking around money compared to the Bureau of Automotive Repair which in its 2008-09 annual report reported reserves of $85.4 million, more than $56 million of the total in its “Vehicle Inspection and Repair Fund” and “High Polluter Repair or Removal Account.”

The annual report notes that the $29.3 million reserve in the “Enhanced Fleet Modification Subaccount” is sufficient to last 85.1 months – a little over seven years for those keeping score at home.

Brown does not wish to carjack any of the bureau’s money in his budget plan.

But he does take $5 million of the Acupuncture Board’s $8 million reserve and  $5 million of the $7 million reserve in the Professional Engineers’ and Land Surveyors’ Fund.
The Board of Registered Nurses, which, as mentioned previously, Brown would divest of $17 million, is expected to receive nearly $7 million in fees from newly licensed nurses and $24.7 million from renewals of existing ones.

Some $15.5 million will still be left after the end of the current fiscal year on June 30. Adding that to new revenue, the board’s coffers will swell to $48.4 million less $28.4 million to the department for administrative costs, leaving $20.1 million at Brown’s disposal.

Oddly, the Board of Accountancy, created in 1901, is projected to have a $19 million reserve in the next fiscal year but Brown wants to tap it for only $1 million.

Perhaps that’s because the accountancy board, like a number of its brethren licensing agencies, has been “borrowed” from before.

As of May 2010, the general fund owes the accountancy board $20.2 million for “loans” approved in 2002, 2003 and 2008.

However, unlike many other state regulatory agencies, when the accountancy account ranneth over last year, its board members elected to share the wealth
.

At its March 2010 meeting, the board unanimously approved a four-year reduction in license renewal fees from $200 to $120.

The lower renewal rates are supposed to take effect July 1.

Lucky break the board is a happy member of the special fund family.


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