BONDS A ZERO-SUM SHORTCUT; ONLY PUBLIC PRESSURE CAN PREVENT IMPROPER SPENDING.

Byline: GARY M. GALLES

LOS Angeles local governments have been undergoing a crisis of confidence this past month, with repeated ``bait and switch'' charges of attempted diversions of bond measure funds to different purposes than those advertised.

Millions of the LAUSD's Proposition BB ``school repair'' funds were going to finance the Belmont Learning Center, and $6.5 million of Proposition K ``L.A. for Kids'' park funds were considered for diversion to settle a Hanson Dam lawsuit and shore up a Potrero Canyon hillside, instead.

And these ``bonddoggles'' reminded Angelenos that funds from recent Propositions 2, 4, G, M and N haven't gone where they were promised either.

While these obviously political diversions of taxpayer money seem outrageous because they are so blatant (although distracted voters soon forget, which is why politicians continue what is therefore a successful route to their pocketbooks), they are far from uncommon.

The same sorts of diversions happen in many other areas of public policy, including lottery funds for education, humanitarian foreign aid, food stamp and other in-kind transfer programs, etc.

And in each of these areas, the reason is the same: Earmarked expenditures replace dollars that would have otherwise been spent in these areas, freeing up those dollars to be spent however its recipients decide.

Remember how lotto was going to supplement education funds?

What has happened instead is that politicians, taking into account those additional funds, have reduced their budgetary support for education. The dollars released are then available to be spent however Sacramento decides, just as if lotto proceeds went directly into California's general fund.

As Patrick Pierce and Don Miller conclude from a study of education funding in all 50 states, ``Regardless of the state, the educational spending rate declined once a state lottery went into operation.''

The same sort of diversion also has often converted humanitarian foreign aid - for food, medical supplies and development projects - into both wasteful spending and weapons in many poor nations. The humanitarian aid frees up the resources to be spent wherever the receiving government chooses. All too frequently, that humanitarian aid has thereby been converted to other uses, including military spending, often to terrorize the citizens we intended to help with the aid.

The food stamp program, as well as many other in-kind transfer programs, suffers the same fate. Virtually every public finance text demonstrates that in the words of one, ``the subsidy is equivalent to a cash transfer for almost all recipients.''

Why? Because the vast majority of recipients would have purchased more food than their food stamp allotments, even if they were given cash. The food stamps then simply replace money that recipients would have spent on food anyway, freeing up that cash to use however they choose (and for recipients who would have spent less than their allotments, there is an active black market where they can exchange any ``excess'' food stamps directly for money).

In every one of these cases, the fungibility of money - its ability to be redirected in any direction - results in earmarked funds being diverted to whatever uses their recipients desire, undermining most if not all of the purpose in earmarking the funds in the first place.

In fact, the only way to assure added resources in the direction desired is by adding more earmarked spending than the total that would otherwise have been spent; but that raises the question of whether money that would not otherwise have been spent is being spent well.

As a result, other than the blatant manner in which current bond fund diversions have been considered, it should not be a surprise that bond measure funds haven't always gone where they were promised.

Regardless of how those funds are generated, their actual disposition will be decided politically. That is why political pressure from offended citizens is the only current means of increasing how much earmarked funding actually goes where it was promised, and why the current ``bonddoggle'' flap needs to be remembered the next time Angelenos face another bond issue.