Idle Agriculture Funds

by Tom Yamachika, President, Tax Foundation Hawaii

Last week, we started looking at reports of agencies that have administratively established special funds.  These funds are pots of money that are not created by statute so that only the expending agency, and not necessarily the Legislature (which is supposed to be overseeing all state expenditures), knows the details.  We examined some Department of Education funds last week.  This week we look at the Department of Agriculture and Biosecurity.  Their report to the Legislature is here.

Page 11 of the report discusses the Agricultural Loan Revolving Fund.  The fund is used to make loans to farmers and ranchers and to assist them in securing credit from private lenders.  The expenses from the fund would be moneys loaned out and some administrative costs.  The revenues would be for loan repayments.  The fund now has $11.8 million in it now.  Over the past few years, its expenses have averaged about $1 million, and the revenues it brings in are around $2 million annually.  The Department is projecting that future revenues will be about $1.5 million per year and its future expenses will be $5 million per year, so the fund will be less than $1 million by the end of fiscal 2028. 

Excuse me?  By what miracle is this agency going to be able to quintuple the amount it now loans out AND reduce the repayments it is now getting?  Don’t these financial wizards know that if you loan out more money, you are expecting to be repaid more money over time?  Sorry, but the math doesn't work here.

On page 12, the report discusses the Pest Inspection, Quarantine, and Education Fund.  The fund receives legislative appropriations, and it also receives fees when shippers pay for agricultural or quarantine inspections.  If you brought your dog from the mainland, for example, the cost of the canine quarantine would go into this fund.  The fund’s expenses include the expenses of inspection, including remedial action when they find something.  (Okay, we found a brown tree snake.  Now what do we do with it?)

The amount of revenues and expenses in this fund has fluctuated a bit, normally around $5-6 million, but we ended fiscal year 2025 with $8 million and the Department is expecting that balance to rise steadily to $15.2 million by the end of fiscal year 2028.  If that’s true, do we need to be keeping all of that money when funds are sorely needed elsewhere?

Pages 13 and 19 relate to non-agricultural parks and agricultural parks, respectively.  The two funds receive rental income from letting space in the parks, and spend money on operating and maintaining the parks.  The revenues and expenses reported in these fund show that revenues are comparable to but consistently exceed expenses, so the year-end cash balance of the funds grow steadily.  The ending unencumbered cash balance of both funds at the end of fiscal 2025 was about $2.8 million per fund. 

As with the DOE funds reviewed last week, it’s questionable why these funds need to be segregated from the other appropriated funds of the agency.  If it’s management information they want, they are obviously free to use cost center accounting so the agency knows the financial strength of each program and can report on it while preserving legislative oversight and accountability.

And the Department would be less likely to leave millions of dollars lying around, like it does now.

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