An in depth analysis of WHY YOU ARE WRONG

Monday, April 20, 2009

Budget Fraud In Illinois

I want to say to start with that I am not a resident of Illinois, and I have very little direct knowledge of it's bugetary or accounting processes. I mostly brought it up because almost all state and local governments are "surprising" taxpayers with billions, if not trillions in liabilities that were never honestly revealed to taxpayers. I am also not an accountant.

Almost every state in the nation has a constitutionaly mandated balanced budget, which were almost surely enacted to prevent current citizens from heaping future unpaid liabilities on future taxpayers. Yet almost every state has created a web of unfunded liabilities through mechanism's aimed at hiding their true size. Red flag areas usually include -- insanely optimistic state pension fund projections which enable very low annual contributions; off budget entities( think Fannie Mae) such as turnpike, construction or prison "authorities" which issue debt with implied government backing and various "trust funds" with no real money in them.

"Citing an $11.5 budget deficit over the next two year in his budget address Illinois new governor, Pat Quinn, called for a 50% increase in the income tax rate and for cuts in state government spending. But would the Governor’s budget be truly balanced?

Two features of his budget lead me to believe the answer is no. The first is that he would lower this year’s contributions to pension systems by nearly $2.9 billion. He is assuming that Illinois will save billions of dollars in coming decades by cutting retirement benefits for new state employees. This is like someone planning to spend less in the future, so he will hold off paying his past bills for a while.

The other troubling feature of Gov. Quinn’s budget is the sweeping of special-purpose funds. Only in state government does moving money from one account to another count as revenue. This shell-game is played, because only six state funds are included in the state balanced budget requirement. Therefore if a “non-budgeted” fund has excess cash that it is accumulating for its “special-purpose,” then these funds can be moved to balance the “budgeted funds.” The personal analogy here is if you moved money from your savings account to your checking account."

Scams of this type are the reason real federal liabilities are about 4X larger than stated and are the main reason for the trillions in "surprise budget" shortfalls taxpayers accross the country now face.

Accounting is I think supposed to be about truth. Only by operating with numbers that are as truthful and accurate as posible can voters make informed decisions about government spending and taxes.

"To pretend he is balancing the budget the Governor is only including the amount he wants to pay into the pension plans. The amount is based on the money he wants to spend elsewhere in the budget, not the amount the pension and retirement health care plans’ actuaries calculated. To truly balance the budget the Governor must consider these costs as they are incurred, instead of continuing the shenanigans that just push these costs on to future taxpayers."

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