Business Finance

What is dedicated funding?

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2007-10-02 17:33:16

Dedicated funding is the allocation of funds for a program or

policy in a manner that removes the funding question from the

annual, biennial, or usual review and approval process of a

legislature, city council, or government body. Funding can be

dedicated by statute, in which case it is amenable to change the

next time the statutes are revised. Funding can be dedicated via

constitution or charter, in which case the funding is set until

either the constitution or charter is amended, or until a term of

dedication set in the constitution or charter is finished. There

are a number of reasons to dedicate funding. One is the desire to

insulate funding for a complex long-term policy from the vagaries

of annual or biennial review; another is the desire to alow direct

democracy to act via a referendum or public vote. There are many

good reasons not to allow dedicated funding. Multiple dedicated

funds tend to lower the amount available in the general fund, which

may make annual funding less stable over time. Dedicated funding is

also a way to avoid annual or biennial oversight of expenditures.

It is an open question as to whether dedicated funding "works".

Some argue that dedicated funding increases the amount available

for the program over time. However, there is also evidence that

dedicated funding attenuates the desire of the funding body, the

legislature or city council, to allocate other funds to the

program. In the private sector, the closest thing to a dedicated

fund would be an endowment for an organization, often tied in the

bequest to a specific purpose. In a business, a dedicated fund is

in theory an impossibility, in that all funds are subject to

management decision.

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