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WASTEFUL BUDGETS - It was recently budget season for many state and local governments, especially in California, where the fiscal year ends on June 30th. You might have seen your local city council or state legislators discussing budget matters online or on TV. Often, they focus heavily on agencies funded by the General Fund (which comes from taxes like sales, property, and income tax) and barely mention agencies funded by Enterprise Funds. Enterprise agencies, like public utilities or municipal airports, operate a bit like businesses, using the money they collect to run themselves. Meanwhile, General Fund agencies receive money from central tax collection.
The problem is that enterprise agencies often lack proper financial oversight, leading to huge fee increases that go unnoticed. For example, Santa Barbara plans to raise water and wastewater rates by 10% each year from 2026 to 2028. The average cost to register a vehicle in California has gone up 66% from 2018 to 2024. And the fee to become a licensed engineer in California jumped from $125 to $175 in just one year. These rising costs, which outpace wage growth, mean that government fees are taking up a bigger share of household budgets.
But it doesn’t have to be this way. When I worked for a state budget office about 10 years ago, the Governor asked us to review enterprise agencies just as closely as we do General Fund agencies. This was a big shift. One agency was upset when we proposed cutting their budget to match what they actually spent in the past. They felt since they earned the money through fees, they should be able to spend it freely.
I explained that all government agencies, even those funded by fees, owe accountability to taxpayers. Taxpayers don’t care about the technical differences between fund types; they just want to know their money is being spent wisely. Setting a reasonable budget limit helps prevent wasteful spending. If an agency gets more money than it needs, a future leader could spend recklessly.
If overspending happens, it could lead to more fee increases to cover the costs. This is part of why we see such high rate hikes.
Eventually, the agency head called me back to apologize, saying no one had ever explained how their budget fit into the bigger picture of government accountability. Based on the reduced budget we’d proposed, they realized they had enough funds and didn’t need to cut services.
In the end, it’s important for policymakers and public administrators to perform their fiduciary duty in the stewardship of all public funds. Proper financial oversight starts with someone explaining these concepts to them.
(Ben Goldblatt is a government oversight expert and a Certified Fraud Examiner. He previously worked as a budget analyst for the state budget office in New Mexico where he helped balance the state budget. He was also a government banking portfolio manager at a national bank where he provided loans to government entities to finance infrastructure projects.)
