A government's general fund is a pool of cash raised from taxes and can be spent wherever the government needs it. An enterprise fund is more specific. Enterprise fund money can only be spent on a specific purpose, such as parks and recreation. Most of the funding comes from fees related to the fund's mission.
Wisconsin's Liquor Fund is an example of an enterprise fund. It administers state liquor stores and warehouses, and finances its operations through money from alcohol sales. The state's Worker's Compensation coverage is an enterprise fund paid for by employers' workers comp insurance payments. Governments don't have to rely on fees to cover all the fund's spending. If necessary, a government can pay for some of the services with tax dollars. Most of the financing, however, is based on the fees or bonds backed by future fee payments.
Advantage of Funds
Tying fees and services together through an enterprise fund has advantages. Users and the general public can see how much it costs to provide particular services, and why the fees are set at a certain level. It's not always possible to balance fees and the cost of services perfectly, though. A fund may run in the red one year, which is a sign the government needs to raise fees. If the fund turns a profit, the money carries over to operations in the next fiscal year, and fees might drop.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.