Blog: Why the Trust Fund Lock Box is a Bad Idea

By Timb

Raising taxes is always tough, even more so in a recession. So tugging on the heart-strings of taxpayers has become the forward pass in the politicians playbook.

Can you really not spare a dime-a-drink to help disabled children? Is a dollar more per pack of cigarettes too much to ask to educate the future leaders of Maryland? How can you be against paying another $2.50 per month if it means saving the Chesapeake Bay?

The citizens of Maryland seem to forget that money is fungible, and the only guarantee that the money will go to where the politicians say it will is, well, the word of a politician.

Take the Bay Restoration Fund, for example. It was created in 2004 as “a dedicated fund to improve the environment and water quality of the Chesapeake Bay. This fund will be used to upgrade wastewater treatment plants, upgrade septic systems in the critical area & implement cover crop on agricultural land through an environmental surcharge fee.” The fund is entirely supported by the flush tax. In the last two years, $290 Million has been transferred from the Bay Restoration Fund into the General Fund (see BRFA charts below). This year, citing the depleted funds, the Governor is pushing to double the flush tax.

We obviously need more money to cover that deficit, but to say that the leaders you have elected to run this state are unable to budget money just looks bad. Doubling the flush tax allows the state to pour even more money into the general fund, while allowing taxpayers to feel like they are somehow saving the bay.

Maryland is the perfect environment for political bait-and-switch; most people have already forgotten about last year's alcohol tax deal. As the Maryland Public Policy Institute put it, “advocates used support for people with disabilities as a way to shame tax-hike opponents but then discarded the interests of people with disabilities at the last minute.” 

The original alcohol tax bill HB 121/SB 168 divided up proceeds from the tax:

•               33.95%  Maryland Medicaid Trust Fund

•               15%       Developmental Disability Support Fund

•               15%       Mental Health Care Fund

•               15%       Addiction Treatment, Prevention, and Recovery Support Fund

•               12.75%  General Fund

•               6.2%      State Tobacco Use Prevention and Cessation Fund

•               2.1%      Health Care Personnel Training Fund

However, after the parents of disabled children sat down with their legislators to implore that they support this tax, the bill was amended to put all the revenue into the general fund.

If a politician makes an impassioned speech about how he wants to raise your taxes so that the government can buy Dixon Ticonderoga #2 pencils instead of Staples brand, everyone will pull out their calendars to check how soon they can vote this guy out. On the other hand, if that politician raises taxes to save the children, then slips a line into the BRFA bill that transfers all that money to the general fund, and there happens to be a line in the budget to buy more expensive pencils, everyone will say “what a caring legislator… I too care about the children.” 

Levying taxes for heartwarming issues and subsequently spending that money on something else is just the way it’s done in Maryland; trust fund lock boxes would screw up this perfect system.

So when all the talking heads are pushing the flush tax, the alcohol tax, the cigar tax, and the gas tax, please remember, the lies are for your own good.

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BRFA 2011 – Budget Summary Provisions, and Recommendations – Department of Legislative Services: 

Transfers to the General Fund 

Maryland Health Care Commission Fund                   $  1,000,000

State Used Tire Cleanup and Recycling Fund              $    500,000

Forest or Park Reserve Fund                                      $    256,000

Maryland Not-For-Profit Development Center Fund     $    375,000

Board of Veterinary Medical Examiners Fund                $    150,000

Circuit Court real Property Records Improvement Fund   $ 10,000,000

State Insurance Trust Fund                                              $   2,000,000

Spinal Cord Injury Research Trust Fund                          $    500,000

State Board of Pharmacy Fund                                      $    237,888

State Board of Examiners of Psycholigists Fund          $      44,888

Bay Restoration Fund                                                $  90,000,000

Special Loan Programs Fund (Department of Housing and Community Development)                             $   2,200,000

Neighborhood Business Development Fund                    $   2,050,000

Homeownership Programs Fund                                     $   1,500,000

Waterway Improvement Fund                                      $   1,090,000

Transfer Tax – Program Open Space                             $100,082,247

BRFA 2010 – Budget Summary Provisions, and Recommendations – Department of Legislative Services:

Highway User Revenue                                              $ 499,758,381 

Bay Restoration Fund                                                       $ 200,000,000

University System of Maryland                                     $ 136,782,494 

Heritage Structure Rehabilitation Tax Credit Reserve Fund                           $  39,693,790

Circuit Court Real Property Records Improvement Fund     $  25,000,000

Injured Workers’ Insurance Fund                                     $  20,000,000

Waterway Improvement Fund                                     $  13,509,450

Injured Workers’ Insurance Fund (State Liability Reserve)     $   6,000,000

State Insurance Trust Fund                                              $   5,221,332

Neighborhood Business Development Fund                   $   6,828,687

Ocean Beach Replenishment Fund (Local)                   $   3,401,000

Charter Unit Fund (State Department of Assessments and Taxation)                            $   3,000,000

Oil Disaster Containment, Clean-Up, and Contingency Fund                                    $   2,200,000

Special Loan Programs Fund (Department of Housing and Community Development)                            $   4,676,565

Insurance Regulation Fund                            $   2,000,000

Vehicle Theft Prevention Fund                   $   1,824,924

Community Health Resources Commission Fund          $   1,800,000

Morgan State University                            $   2,454,801

Spinal Cord Injury Research Trust Fund          $   2,059,000

Land Trust Grant Fund                            $   1,500,000

Oil Contaminated Site Environmental Cleanup Fund         $   1,200,000

State Used Tire Cleanup and Recycling Fund  $   1,100,000

Tidal Wetlands Compensation Fund          $   1,000,000

Cash Management Improvement Fund          $      733,339

Horse Racing Special Fund                            $      602,800

Board of Physicians Fund                            $   1,527,619

Central Collection Fund                            $     500,000   

Maryland Correctional Enterprises Revolving Fund          $     500,000   

Injured Workers’ Insurance Fund (State Administrative Costs) $    500,000 

Maryland Health Care Commission Fund $     472,026

Community Legacy Financial Assistance Fund $    449,373

Board of Nursing Fund                            $      305,549

AND MANY MORE (see the link at top)

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