A LEGAL MEMO
User generated revenue sources earmarked for deposit in the Off-Highway Motor Vehicle Recreation Trust Fund (OHV Trust Fund) – including off-highway vehicle registration fees, off-highway vehicular recreation facility use fees, and off-highway use fuel taxes – cannot be redirected to general fund purposes. California case law is very clear that trust fund revenues cannot be redirected to non-trust purposes including transferring those revenues to the general fund. In addition, such funds cannot be loaned to the General Fund if the loan will result in the Division of OHV Recreation from completing its mission as defined by the Public Resources Code.
In 1971 the Legislature established the Off-Highway Vehicle (OHV) Program in Chapter 1.25 of Division 5 of the Public Resources Code (commencing with Section 5090.01) to manage off-highway recreation in a manner that also protects California’s natural and cultural resources. To implement all aspects of the OHV program, the Division of OHV Recreation (Division) was created within the Department of Parks and Recreation (DPR). Then the Off Highway Motor Vehicle Recreation (OHMVR) Commission (Commission) was created to allow public input and provide policy guidelines for the OHMVR Program.
The Division is responsible for the planning, acquisition, development, and management of the eight State Vehicle Recreation Areas (SVRAs), and a statewide financial assistance program. OHV revenues support law enforcement, operations and management, education and safety, environmental protection, and repair and restoration. The Division is also responsible for completing and periodically updating a strategic plan for the Off-Highway Motor Vehicle Recreation (OHMVR) Program.
Unlike other California State Parks, the Off-Highway Vehicle (OHV) community agreed not to use general fund dollars to operate and maintain their system of recreational areas. The OHV Division of California State Parks is funded exclusively by taxes paid on gasoline used recreating off-highway, red and green sticker registration fees and entrance fees to the State Vehicular Recreation Areas (SVRA’s).
Financially the Division of OHV Recreation is completely supported by the OHV community. The thought was that the Division would be insulated from money woes caused by historically unsustainable state deficits. That assumption proved to be nothing more than wishful thinking. Today almost $200 million of OHV Trust Fund monies have been taken in the form of loans to the General Fund and have not been repaid.
During budget deliberations last year there were hints that the budget committee was contemplating a move to permanently take OHV funds. In February the budget committee considered a proposal to make the OHV Trust Fund “fungible.” The fungible items would consist of entrance fees and gasoline tax used by off road vehicles, about 80% of the OHV fund. Taking away that amount would have resulted in the closure of many of the eight state OHV parks.
In the end the budget bill was passed and signed by the governor. It permanently diverted a portion of the fuel tax money to the general fund by amending Revenue and Taxation Code Section 8352.6 transferring fuel tax to the OHV Trust Fund by adding subsection (a)(2)
“The Controller shall withhold eight hundred thirty-three thousand dollars ($833,000) from this monthly transfer, and transfer that amount to the General Fund.”
This transfer of almost $10 million dollars a year of fuel taxes related to off highway use into the general fund will last forever unless this provision is repealed. The budget committee also “borrowed” $21 million from the OHV Trust Fund.
The almost $31 million that was taken from the OHV Trust Fund is less than what was being contemplated, but it is still a significant amount especially because the $10 million a year transfer of fuel tax money to the general fund will go on from year to year with no cutoff date. When past “loans” are taken into account, the mission of the OHV Division of State Parks and Recreation has been severely impacted and the future of the program is in jeopardy. Now the permanent transfers have made the situation extremely dire.
The perception among off road advocates is that over the years the OHV Trust has been used as a slush fund by politicians and a source of easy money when other sources run dry. They do this even though the law is very clear that special funds like the OHV Trust Fund are protected from diversion.
2 THE LEGISLATURE IS PROHIBITED FROM PERMANENTLY TRANSFERRING MONEY DIRECTED TO THE OHV TRUST FUND TO THE GENERAL FUND
In order to understand whether the budget bill withholding fuel tax money from the monthly transfer to the OHV Trust Fund and transferring it to the General Fund is permitted we must first look at California case law and later we will look at the State Constitution. When looking at California case law we look at the language the court uses in arriving at its decision. In this way we determine California law as decreed by the courts.
“The General Fund is the main operating fund of the State, consisting of moneys that are not required by law to be deposited into any other fund.” Special funds… “are used to account for resources that are legally restricted for particular functions or activities of government.” (California Medical Association v Brown (2011) 193 Cal. App. 4th 1449; 123 Cal. Rptr. 3d 647; 2011 Cal. App. LEXIS 380)
Historically courts have recognized self-funded state agencies which obtain their appropriations outside the budget act in the form of continuing appropriations mandated by statute. The special funds in the state treasury of self-supporting regulatory state agencies were held not affected by the adoption of the budget amendment of the Constitution or the budget bill. (Jamme v. Riley, (1923) 192 Cal. 126 [218 Pac. 578]; Keiser v. State Board of Control, (1923) 192 Cal. 129 [218 Pac. 1016; Board of Fish & Game Com. v. Riley, (1924)194 Cal. 37, 227 Pac. 774). In essence these special funds could not be reallocated in the annual state budget bill.
The case law at that time stated that the budget bill did not do away with all special funds and convert such funds into a part of the general funds of the state. “They are not state revenues in the sense that they may be used for any state purpose as long as the department is not in need of them and the justification for their collection is to make the department self-supporting. (See Riley v. Forbes, 193 Cal. 740 [227 Pac. 768].)” (Daugherty v Riley (1934) 1 Cal.2nd 298).
“A continuous, or continuing] appropriation, runs from year to year without the need for further authorization in the budget act.” (White v. Davis (2003) 30 Cal.4th 528, 538 [133 Cal. Rptr. 2d 648, 68 P.3d 74], quoting California Assn. for Safety Education v. Brown (1994) 30 Cal.App.4th 1264, 1282 [36 Cal. Rptr. 2d 404].
The OHV Trust Fund is a special fund funded by a continuing appropriation mandated by statute. California Vehicle Code 38225 (c) transfers all fuel tax revenue related to OHV use, OHV park use fees, and OHV registration fees into the OHV Trust Fund. This transfer is not subject to the annual budget act and runs from year to year. The question is whether the OHV Trust Fund is a trust whose moneys are protected from diversion for other purposes. The legislature diverted fuel tax money for fuel used off-road into the general fund in the annual budget act of 2012. This transfer is not a one time transfer and will continue forever unless it is revoked.
We can look at case law to determine whether this is legal. An early case that provides an answer to the question is Daugherty v Riley (1934) 1 Cal.2nd 298.
The Daugherty decision dealt with a special fund, the Corporate Commissions Fund, and the court had to decide whether an unrelated capital expenditure for a building not used by the division of corporations could be taken from that special fund by an act of law or should the money have come from the general fund.
The sole support of the division of corporations was revenue from fees for permits and licenses required by law to be issued as a prerequisite to the carrying on business in California. The revenues collected were imposed for the purpose of regulation and were permanently set aside for use by the Department of Corporations.
The question in Daugherty was whether the Corporation Commission Fund was a trust fund protected from transfer to a non-related purpose (a capital expenditure) by an act of law. The court said that the 1931 act (the capital expenditure) was not an appropriation for the benefit of the division of corporations. The court noted that an appropriation for a capital expenditure was chargeable only against the general fund or some other tax or general revenue fund and noted that the corporation commission fund is not such a fund.
“The 1931 act has not the earmarks of an appropriation for the benefit of the division of corporations. It appears to be an appropriation for a capital expenditure chargeable only against the general fund or some other tax or general revenue fund. (3) As has been seen the corporation commission fund is not such a fund. Its revenues are impositions for purposes of regulation only. When collected this revenue is permanently set apart under the continuing appropriation under section 28 of the Corporate Securities Act for the use of the department. In this respect the revenues are in the nature of a trust fund raised for a particular purpose in the exercise by the state of its police power. They are not state revenues in the sense that they may be used for any state purpose as long as the department is not in need of them and the justification for their collection is to make the department self-supporting.” (See Riley v. Forbes, 193 Cal. 740 [227 Pac. 768].)”(Daugherty, supra. p. 309).
The court held that: “That the act of 1931(the capital expenditure) was ineffectual as an appropriation measure …because it was an outright diversion of a special or trust fund raised for regulatory purposes to a capital expenditure or general tax purpose with no provision for its return, or for safeguarding it as an investment on behalf of the special fund; … In either or any event the amount expended under the purported authority of the 1931 act, to wit, the sum of $ 186,609.21, is in law still in the corporation commission fund.”
In essence the court is saying that a special fund set up for a particular regulatory purpose supported by fees on those being regulated cannot be diverted to the general fund or to some other non-related purpose. Clearly this is what is happening to the OHV Trust Fund which is a user supported special fund designed to regulate off highway recreation.
In a fairly recent case, California Association for Safety Education v. Kathleen (1994) 30 Cal.App.4th 1264, the court addressed the requirement that a trust fund in order to be a protected special fund has to be funded by a continuing appropriation. The question was whether the court could require the general fund to transfer money to the Drivers Training Penalty Assessment Fund (DTPAF). The statutory scheme included penalties for motor vehicle violations that went into the general fund and then in the annual budget act were transferred from the general fund into the DTPAF to reimburse schools for driver training classes.
“The applicable statutes do not expressly create a trust fund, designate a trustee to administer it, or establish rules to govern its administration…. Nor do these statutes or their history indicate that money in the Fund is held in trust, devoted exclusively to driver training reimbursement or not available for any other purpose.” (California Association for Safety Education, supra.)
“Cases in which the courts’ have deemed money in special funds to be in the nature of trust funds have involved statutes that create state agencies that the Legislature intends to be self-sufficient. To this end the agencies are authorized to collect and immediately spend the money they collect. Often the legislature expressly devotes money to the agency’s support. . (See, e.g., Riley v. Forbes (1924) 193 Cal. 740, 744 [227 P. 768]; Riley v. Thompson (1924) 193 Cal. 773 [227 P. 772]; Daugherty v. Riley (1934) 1 Cal. 2d 298 [34 P.2d 1005]; see 19 Ops.Cal.Atty.Gen. 220 (1952).)” (California Association for Safety Education, supra.)
The court in California Association for Safety Education held that “because the money appropriated to the DTPAF under section 41304 is limited to amounts appropriated in the annual Budget Act, it cannot be considered a trust fund”. (California Association for Safety Education, supra). In effect, it was not a continuing appropriation. Therefore, the funds could be used for other purposes and were not required by law to be diverted to the DTPAF for reimbursement for driver training.
The OHV Trust fund satisfies all the elements identified in Daugherty. The funds are used to set up and fund an independent state agency, the Division of OHV Recreation, to create and maintain the OHV parks to the highest environmental standards and provide grants and cooperative agreements for the same purpose. Public Resources Code 5090.02(b) defines the purpose of the legislation: Effectively managed areas and adequate facilities for the use of off-highway vehicles and conservation and enforcement are essential for ecologically balanced recreation.
The OHV Trust Fund is a creature of the legislature. The Division of OHV Recreation is a state agency supported entirely by fees and taxes paid by OHV riders to regulate and ensure ecologically sustainable off road recreation. The division’s mission is defined as caring for OHV lands to assure quality OHV recreational experiences, while maintaining the highest standards of sustainability and environmental protection. In short, “the revenues are in the nature of a trust fund raised for a particular purpose in the exercise of the state of its police power” to regulate and police off highway recreation. See: Daugherty.
None of the money is appropriated from the state budget. See: California Association for Safety Education.
In addition, the statutory authority is unambiguous. Vehicle Code 38225 (c) transfers all fuel use tax revenue for fuel used off road, OHV park use fees, and OHV registration fees into the OHV Trust Fund and directs how that money shall be spent. The Legislature specifically created the OHV Trust Fund in Vehicle Code Section 38225 which directs that money thus transferred shall be allocated according to Section 5090.61 of the Public Resources Code. Public Resources Code Section 5090.61describes how the money is to be allocated among the State OHV Parks Department and for grants and cooperative agreements.
Legislation passed in 1994 amended Vehicle Code Section 38225 changing the name of the OHV fund to the OHV trust fund and requiring temporary transfers (loans) to be repaid within two years. This was done in SB 3717 which was chartered and signed by the governor. “When we attempt to interpret a statute, we attempt to determine the legislative intent so as to effectuate the proper purpose of the law”. Burder v. Showder (1992) 4 Cal.4th 556. 562, 7 Cal.Rptr.2nd 298.
In order to understand legislative intent we need to look at what the legislature was thinking when it passed the bill. The legislative analysis incorporated in the final bill that was enacted stated that the bill was introduced to protect off-highway vehicle revenues from diversion during the budget process. It is clear that the legislative purpose in amending the statute was to protect OHV revenues from diversion. Up to that time millions had been taken out of the OHV trust fund in loans and never paid back.
This year when the budget committee took a substantial part of gas tax revenues used by off-highway vehicles and redirected it to the general fund, it was breaking new ground in terms of diverting special fund revenues. These monthly transfers run from month to month and year to year with no time limit. It is in effect a continuing appropriation from a special fund although technically a transfer initiated before the transfer into the special fund.
This continuing re-appropriation had never before been attempted in California. Daugherty involved a one-time transfer from the special fund in the form of an appropriation for an unrelated capital expenditure. The impact of this continuing transfer of fuel tax for fuel used by off-road vehicles from the OHV Trust Fund to the General fund could run into the loss of hundreds of millions of dollars in just a few years or so.
It is clear that under California law the legislature cannot take trust fund monies and divert them to the general fund except temporarily in the form of loans. The transfer of fuel taxes, registration fees and facility use fees are all protected from transfer to the general fund no matter when they are transferred. They all represent special fees paid by the OHV community.
“It would appear to be self-evident that the legislature may not on the one hand set up a department to authorize, regulate and supervise business transactions large and small, imposing fees upon those affected for the purpose of carrying out the purposes of the law and on the other hand permanently divert the funds thus raised and constituting the life blood of the department to the general fund or other general tax purpose.” (Daugherty supra p. 309).
This is especially true when the transfers adversely affect the ability of the Division to accomplish its goals. The Division is starved for funds and expects to experience even more serious money shortages in the future. It is impossible to access the viability of the OHV program, but the consensus is that it is under threat and financial shortages will only get worse in the coming years. These diversions are preventing the Division from accomplishing its mission as laid out by provisions of the Public Resources Code and related regulations. They are clearly illegal.
In addition to the monthly transfer of fuel taxes used in off highway vehicles, the legislature has directly raided OHV Trust Fund monies in the form of loans that have never been repaid. Almost $200 million has been taken. It does not appear that the legislature has any intent to pay back this money since it has never done so in the past. The loans are in effect money transferred from the trust fund to the general fund. These permanent transfers are illegal under the criteria laid out in Daugherty and should be returned. They too are a huge financial drain on the Division contributing to a failure to accomplish its mission.
3. THE CALIFORNIA CONSTITUTION PROTECTS OHV TRUST FUND MONEYS FROM BEING DIVERTED INTO THE GENERAL FUND
The OHV trust fund money is protected from diversion into the general fund. The diversion happened when the legislature amended Revenue and Taxation Code Section 8352.6(2) to withhold and transfer $833,000 a month into the general fund. This transfer of fuel tax money used by off road vehicles from the OHV trust fund to the general fund is unconstitutional. Pursuant to the California Constitution the amendment is a special law which is invalidated by the general law. In Daugherty supra, the court cited the subdivision (b) of Section 25 of Article IV of the Constitution to hold that fees raised for regulatory purposes couldn’t be used for capital improvements unrelated to the regulatory purpose.
This section has since been repealed and renumbered section 16 (a) “All laws of a general nature have uniform operation. (b) A local or special statute is invalid in any case if a general statute can be made applicable.”
In Daugherty, supra, the court held as follows: “To hold that the legislature could provide fees for regulatory purposes under the police power and then devote the money so received to capital expenditures for a foreign purpose would be to declare that the legislature could thus raise money by a special tax in contravention of section 25 of article IV of the Constitution. This course of legislative conduct cannot be justified.” (Daugherty, supra,p.310).
“The appropriation violated the special law provision of the California Constitution by effectively imposing a higher general tax burden on payers of corporation commission fees. (Daugherty, supra, 1 Cal.2d at p. 310 [applying Cal. Const., art. IV, former § 25, now Cal. Const., art. IV, § 16, subd. (b) ["[a] local or special statute is invalid in any case if a general statute can be made applicable”];” (California Medical Association v Brown, supra).
The diversion of OHV fuel tax money from the OHV trust fund moneys to the general fund is a special tax in contravention of section 16(b) of article IV of the Constitution and cannot stand. See: Daugherty. It imposes a higher tax burden on off road riders whose fees support the OHV Trust Fund.
The transfer of fuel taxes used by off-highway vehicles from the OHV Trust fund to the general fund is a special law invalidated by the general law creating the Division of Off-Highway Recreation and directing the use of OHV Trust Fund resources. In essence, the diversion of fuel taxes to the general fund is in direct conflict with Chapter 1.25 of Division 5 of the Public Resources Code directing the use of OHV trust funds. It is a special tax in contravention of section 16(b) of article IV of the constitution.
Subdivision (c) of Revenue and Taxation Code Section 8352.6 states that it is the intent of the legislature that transfers from the Motor Vehicle Fuel Account to the Off Highway Trust Fund shall reflect the full range of motor vehicle use off highway and motorized off road access to other recreational opportunities. The diversion of fuel tax revenue to the general fund is in direct contradiction to Revenue and Taxation Code Section 8352.6 (c). Fuel tax is one source of funding directed to the OHV Trust Fund by Vehicle Code section 38225.
The transfer of fuel tax funds related to off highway use to the general fund is unconstitutional because it is a special tax which is invalidated by the general law. Also, the transfer of off-highway vehicle registration fees and off-highway vehicular recreation facility use fees are also protected from transfer to the general fund by the same provision in the state constitution.
3. FUEL TAXES TRANSFERRED TO THE OHV TRUST FUND ARE NOT FUNGIBLE: FUEL TAXES USED BY OFF HIGHWAY VEHICLES ARE APPROPRIATED FOR THE BENEFIT OF A SPECIAL FUND AND CANNOT BE TRANSFERRED TO THE GENERAL FUND. THE SAME IS TRUE FOR REGISTRATION FEES AND OFF-HIGHWAY VEHICLE RECREATION FACULTY USE FEES
It has been asserted by the legislative Analysis Office that fuel taxes transferred to the OHV Trust Fund are fungible and therefore can be diverted to the general fund. This argument is fallacious. Fuel taxes transferred to the OHV Trust Fund are not fungible and even if they are declared fungible by the Legislative Analysis Office, they cannot be transferred to the General fund because all trust fund revenues, including fuel taxes collected from fuel used by off-road vehicle, are protected from diversion by California case law and the California Constitution.
In 2007 during debates for Senate Bill 742 changes were made to various provisions of the Public Resources Code and the Vehicle Code related to the Off-Highway Vehicle Program. In addition to other changes, registration fees doubled from $25 to $50 every two years, a hardship for people with large families.
Advocates for the off-highway vehicle community agreed to the higher registration fees in return for assurances that trust fund money would be protected from diversion. That didn’t happen and now advocates say that it appears that SB 742 was passed to create funding that was later harvested to rescue the general fund.
In the end the lawmakers didn’t mean what they said and have decided that fuel tax money for off-highway use is fungible. This is a misreading of how fuel taxes are raised and spent as decreed in the Revenue and Taxation Code and case law in California.
In California fuel taxes are generally collected at the refinery or terminal level and distributed to benefit the users of the fuel being taxed. Fuel taxes do not go into the general fund like income and sales taxes. Instead, they go into the Aeronautics Account, Harbors and Watercraft Revolving Fund, Department of Food and Agriculture Fund, Off-Highway Vehicle Trust Fund and Highway Users Tax Account.
The Legislative Analyst’s Office argument that fuel taxes are fungible and that they can be taken from the OHV Trust Fund and transferred into the General Fund ignores the fact that the legislature carves up fuel tax revenues using clearly defined parameters and transfers fuel taxes related to off highway vehicle use into the OHV Trust Fund. Fuel tax which is transferred to other funds is based on who uses the fuel with the balance transferred to the Highway User Account.
Taxes that go into the General Fund are fungible and can be used for any purpose, but fuel taxes on fuel used by off-road vehicles has to be transferred into the OHV Trust Fund and cannot be diverted to non-trust purposes. California law is very clear that those revenues are protected from being diverted to the general fund. Fuel taxes are directed to pay for the transportation needs of the ultimate purchasers of the fuel and until now have never been permanently transferred to the general fund. Why then did the budget committee take fuel taxes directed to the OHV Trust Fund and redirect them to the general fund? Was it just force of habit raiding the OHV Trust Fund taken to a new level?
Closer to home, the Highway Users Tax Account is funded by fuel tax. Revenue and Taxation Code Section 8353 transfers the balance remaining in the Motor Vehicle Fuel Account into the Highway Users Tax Account in the Transportation Tax Fund. This is a mixed fund because it is also funded by registration fees as well as fuel used on the roads and highways.
After years of the legislature raiding the Highway Users Tax Account the voters passed a constitutional amendment protecting the fund. Article XIX was added to protect funds in the Highway Users Tax Account from being used reduce the deficit. Article XIX expressly states that the Highway Users Tax Account is a trust fund and protects the money from being diverted to purposes not authorized in the Article unless the diversion for other transportation purposes is approved by the voters directly by initiative. See: Professional Engineers v Wilson (1998) 61 Cal.App.4th 1013.
The court’ opinion in Professional Engineers was based on Article XIX of the state Constitution. The court was considering whether $77 million taken from the State Highway Account (SHA) to reimburse the General Fund to pay for part of the bond debt on two rail bond measures was constitutional. The court held that the portion of the $77 million transfer traceable to the “gas tax” violates article XIX, section 4 of the state Constitution.
And article XIX, section 4 of the state Constitution, provided as follows:
“Revenues allocated pursuant to Section 3 may not be expended for the purposes specified in subdivision (b) of Section 1, except for research and planning, until such use is approved by a majority of the votes cast on the proposition authorizing such use of such revenues in an election held throughout the county or counties, or a specified area of a county or counties, within which the revenues are to expended. The Legislature may authorize the revenues approved for allocation or expenditure under this section to be pledged or used for the payment of principal and interest on voter-approved bonds issued for the purposes specified in subdivision (b) of Section 1.”
Article XIX, section 1 of the state Constitution, provided in part:
“Revenues from taxes imposed by the State on motor vehicle fuels for use in motor vehicles upon public streets and highways . . . shall be used for the following purposes:
(a) The research, planning, construction, improvement, maintenance, and operation of public streets and highways . . . .
(b) The research, planning, construction, and improvement of exclusive public mass transit guideways (and their related fixed facilities), . . . but excluding the maintenance and operating costs for mass transit power systems and mass transit passenger facilities, vehicles, equipment, and services.”
The court concluded that the effect of Constitutional provisions article XIX, §§ 1(b), 3 and 4 is to forbid the use of motor vehicle fuel tax revenues for mass transit guideway projects related to rail transportation except for research and planning unless the money is spent on a project which has been approved by the voters in an election in the area in which the project is to be built. It also concluded that here had been no showing that voters in any county or counties or specified area, within which the gas taxes were to be spent for mass transit guideway purposes, had approved such expenditure in an election, as required by article XIX, section 4.
In other words, the court concluded that unless local voters approved of a local project, section 4 in article XIX controlled whether SHA moneys could be used for mass transit guideway projects, and without voter approval the diversion of SHA moneys to reimburse the general fund for bond debt on rail bond measures for guideway projects money traceable to the SHA could not be used for this purpose.
It is clear that those monies are protected from being transferred to the General Fund by Article XIX except as specifically permitted by the article. As can be seen in this case fuel tax revenues are not fungible and spending is restricted by Article XIX which also declares that the Highway Users Tax Account is a trust fund.
Trust fund moneys are protected from diversion to non trust purposes. In short, the OHV Trust Fund fuel tax money is protected from diversion to the General fund just like the Highway Users Tax Account which is also a trust fund protected by California case law and the state constitution. In both cases the legislature is precluded from directing it to projects that are unrelated to the purposes of the trust.
The state has a fiduciary duty to ensure that trust funds are directed to the purposes of the trust. The Harper Collins Dictionary of American Government and Politics by Jay M. Shafritz published in 1992 defines trust fund in the federal context as: “Funds collected and used by the federal government for carrying out specific purposes and programs according to the terms of a trust agreement or statute, such as the social security and unemployment trust funds. Trust funds are administered by the government in a fiduciary capacity and are not available for the general purposes of the government.” This definition equally applies to state trust funds created by the state legislature.
The Trust Fund is sustained by three revenue streams and has been carefully constructed over the last 40 years. The effect on any one of the revenue streams severely limits the ability for the program to be successful over the long term. Coupled with the legislature’s dramatic and regular removal of large amounts of money (couched as loans but never paid back) from the OHV Trust Fund it has now established a dysfunctional existence for the Core Program objectives preventing the OHV Program from achieving its mission.
Under California law all sources of OHV Trust Fund moneys including off-highway vehicle registration fees, off-highway vehicular recreation facility use fees, and off-highway use fuel taxes are protected from diversion by the Legislature for non-trust purposes. The diversion of $833,000 a month of fuel tax money for fuel used off road from the OHV Trust Fund into the General Fund is clearly illegal.
4. THE LEGISLATURE IN THE BUDGET ACT CANNOT TAKE LOANS FROM THE OHV TRUST FUND TO THE BENEFIT OF THE GENERAL FUND WHEN THE LOANS PREVENT THE DIVISION FROM ACCOMPLISHING ITS PURPOSES
The diversion of OHV Trust Fund monies in the form of loans which render the Division of OHV Recreation unable to accomplish its purpose are not permitted under California law. Government Code Section 16310 permits loans from a special fund to the general fund if the general fund is exhausted but only if the loan will not interfere with the object for which a special fund was created. Current Government Code Section 16310(a) states that … this section (authorizing loans from a special fund to the general fund) does not authorize any transfer that will interfere with the object for which a special fund was created.
In California Medical Association v Brown (2011) 193 Cal. App. 4th 1449; 123 Cal. Rptr. 3d 647; 2011 Cal. App. LEXIS 380, the court had to decide the legality of a $6 million loan made from the Contingent Fund (Contingent Fund) of the Medical Board of California (Medical Board) to the state General Fund to help balance the state’s fiscal year 2008-2009 budget. The court noted that Government Code section 16310 authorizes loans from special funds to the General Fund if the General Fund is exhausted and the loan does not interfere with the object for which the special fund was created. The section also requires that all moneys so transferred shall be returned to the funds or accounts from which they were transferred as soon as there are sufficient moneys in the General Fund to return them.
Government Code Section 16310 is the relevant section to look at to decide whether loans from the OHV Trust Fund to the General Fund are legal. When as a result of these loans, the Division of OHV cannot fulfill its purpose, those loans should be repaid.
At this time there are not sufficient funds for the Division to fulfill its purpose and previous loans must be paid back until there is enough money in the OHV Trust Fund to allow the Division to fully manage off-highway recreation in a manner that expands and maintains recreational opportunities while protecting California’s natural and cultural resources.
The legislature should adhere to the law and repeal the amendment to the Revenue and Taxation Code that transfers fuel tax money related to off road recreation to the general fund and pay back all previous loans before taking out any new ones. This backlog of unpaid loans is preventing the Division from fulfilling its purpose.
A substantial segment of California citizens enjoy off highway recreation or use off highway vehicles to get to other forms of recreation and they are not happy with the way that their money is being re-appropriated. The OHV fund is the only state parks program that is self-funded and it is the model for the way government programs should be run. Off road enthusiasts do not support funds being raided or re-allocated and believe that 100% of the OHV fees they pay should go directly to the OHV fund to be used for OHV purposes only.
Advocates believe that the OHV fund should not be treated as a slush fund for cash hungry politicians to re-allocate general fund money to their own special interest projects. In short OHV enthusiasts feel that they are being discriminated against in favor of big money interests who supply the politicians with campaign contributions in return for their support. Then these same politicians take money from the OHV trust fund when programs for education, the poor and the elderly get slashed as a result of those big money diversions.
With hundreds of millions of dollars in unpaid loans and the latest permanent and ongoing taking of OHV funds, off road enthusiasts are feeling the pinch. The general fund is supported with income and sales taxes paid by all the Californians. The diversion of OHV Trust Fund moneys to the General Fund is a second tax exclusively paid by off road enthusiasts on top of taxes they pay to the General Fund. These taxpayers are angry and will not put up with politics as usual unless something is done to address their grievances.
Due to hundreds of millions of dollars in unpaid loans and the latest transfer of almost ten million dollars a year from moneys that should have gone to the OHV Trust Fund, the mission of the OHV Program is in jeopardy. The transfers are interfering with Core Program objectives preventing the OHV Program from achieving its purpose. The loans must be paid back and the latest transfer must be revoked before the OHV Program can meet its objectives.
Epilogue – In May 2012 the Assembly Budget Committee voted to take more fuel tax money for fuel used by off-road vehicles that by law should have gone into the OHV trust fund and instead transferred it to the Department of Parks and Recreation to make up for perceived shortfalls caused by the state deficit. It looks like they have found a reliable source of funding by using this new found loophole to raid our OHV Trust Fund. It appears that they are trying to starve us of funds. When will this ever stop?