Facing the most severe fiscal crisis in State history, House Democratic leaders said today they are seriously considering closing the accounts of the State's more than 200 special and revolving funds and transferring the money into the general treasury.

"We recognize that the programs financed by special and revolving funds will need operating money, but the objective is to force these programs to justify their existence to the satisfaction of the Legislature," said House Majority Leader Marcus Oshiro (D - Wahiawa, Whitmore). "We firmly believe that many of these funds have surpluses just sitting there. Those (surpluses) should be used to help the State out of this financial crisis."

Special funds are established by the Legislature, each with a specific purpose. Most are self-sustaining through revenues earmarked from clearly identified sources. Examples include the Hawaii Hurricane Relief Fund, the Tobacco Settlement Fund, and the Stadium Special Fund. Over the last 10 years, the Legislature has created about 10 special funds per year. The State Auditor reports that Hawaii currently has about 220 special and revolving funds.

Revolving funds are usually seeded with an appropriation from the State's general treasury. Fees or charges attached to activities financed by revolving funds serve to replenish the fund. An example would be a State loan program supported by a revolving fund that derives revenue as the loans are repaid.

A third type of funding vehicle is a State trust fund, but Oshiro said trust funds are not being addressed at this time. He added that some special and revolving funds might be difficult to touch because of federal requirements.

Last July, the State Auditor found that 70 special and revolving funds no longer met the criteria for which they were established and recommended the Legislature repeal or discontinue those funds. As of June 30, 2001, the cash balance in the 70 funds was $96 million, the Auditor said.

"We fully expect special fund beneficiaries to strongly oppose such an idea," Oshiro said. "But that’s what happens when you try to shake up the status quo. But if we're going to achieve some real government reform and efficiencies, we have to expect this and deal with it."

In a related move aimed at streamlining government, Oshiro said House Democrats are looking at consolidating State functions and programs and eliminate entire departments, if warranted.

"This is not a new idea -- there has always been support in the Democratic Caucus for streamlining government to avoid duplication of services and eliminate obsolete functions. But the stumbling block has always been concern over furloughs and layoffs, which would damage consumer confidence," Oshiro said. "But since September 11, there seems to be a new sense of urgency to move ahead on this longstanding matter."

House Democrats are putting the finishing touches on their legislative agenda for the upcoming session, which convenes January 16. Oshiro said the objectives outlined in last year's agenda, the initial year of the current biennium, were largely accomplished. And he said there continues to be strong support within the caucus to maintain the policy of fiscal moderation.

"The State Council on Revenues forecast in March will be key," Oshiro said. "Meanwhile, we must guard against any reckless or panic spending and keep investing in areas that will yield sustaining benefits, like education."

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