What is dedicated funding?

Answer 1

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.