Is Earmarking the Best Way to Fund Projects?

Source: Katherine Barrett & Richard Greene, Governing, October 1, 2013

It’s not black and white, but understanding the pros and cons increases your chances of coming to the right answer for a particular project. … There are many issues in government management where things aren’t black and white, where gray is the color of the day. One particularly important field in which answers often live in the gray zone is in the funding of projects. Should they be financed with direct, designated flows of cash or is it better to have as many projects as possible use monies from the general fund? The former route—in which a project’s funds are dedicated, often from a special revenue stream—has the advantage of guaranteeing consistent funding. This so-called earmarked fund protects or buffers a program from the powerful wind of a changing political climate.

… At the state and local level, we’re not talking about pork when we refer to earmarking funds for services that potentially benefit the population as a whole. It’s a financing tool rather than a political one, and it’s transparent.

There is nowhere that the state version of earmarking has been taken to as dramatic an extreme as Alabama, where the general fund makes up only about 16 percent of total state generated dollars. The majority of tax revenues flow into different earmarked pots, the largest one being for education, which automatically gets the state’s income and sales taxes….