Louisiana Has At Least $9.65 Billion In Surpluses of the Taxpayers Money it is not using.

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The State of Louisiana at the State-level has approximately $9.65 billion of the taxpayer's money it is not using, i. e. surpluses equal to $2,152 for every man, woman and child in Louisiana or $8,606 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Louisiana.

The Exhibit A below shows the results of the FY 2003 review.

What are these surpluses we refer to?

Government surpluses, as used in this report, are funds that are not required or needed for the operation of all government operations, funds, accounts, agencies, etc., directly or indirectly, for the year(s) covered by the budget which is usually one year. Theoretically, at the end of every fiscal year, governments should have little or no cash/investments on hand. But what we have found is that most governments have huge amounts of cash and investments on hand at the end of the fiscal year. And somehow these cash and investments are not being recycled back through the budget process the next year, but are being held year-after-year.

A Government Can Have a Budget Deficits/Shortfalls and Financial Surpluses At The Same Time.

This is the most deceiving topic that governments, politicians, and the news media have conveyed to the public about governmental financial matters. In realty, a government can simultaneously have a budget shortfall and a financial surplus of the taxpayers' money.

The problems are focused in four areas:

1. The budget only covers a small portion of the State's financial condition. There are a group of funds not part of the budget process. The complete list of funds and budgetary requirements are found in the Comprehensive Annual Financial Report (CAFR). This report depicts the complete financial status of the State. The budget only covers a portion of the financial resources of the government.

A Little Background:

The CAFR usually has four categories.

Governmental Funds
Proprietary Funds
Fiduciary Funds
Component Units

Governmental Funds involve activities of the government including most basic services such as environmental resources, general government, transportation, education, health and human services, and protection of persons and property. Most of the cost of these activities are financed by taxes, fees , and federal grants.

Proprietary Funds are used when a government charges customers for the services it provides, whether to outside customers or to other agencies with the state. For example, Enterprise Funds, a component of proprietary funds, are for activities that provide goods and services to outside (non-government) customers, which includes the general public. Fees, charges for services or goods, assessments, fines, licenses, etc. are the major revenue sources.

Fiduciary Funds are activities in which the state acts as a trustee or fiduciary to hold resources for the benefit of others. These funds are pension trust funds, investment trusts, and agency funds (which are for assets held for distribution by the government as an agent for other governmental units, other organizations, or individuals).

Component Units reportedly are legally separated organizations for which the government is financially accountable. Usually fees, charges for services or goods, assessments, fines, penalties, licenses, etc. are the major revenue source.

The budget, as commonly known to the public, only involves the Governmental Funds and may not even include all of the governmental-type funds. The remainder of the Funds shown above are not part of the budget and are commonly called "off-budget" items.

2. Next year's budget consists only of next year's estimated revenues and next year's estimated expenditures. Previous years' revenues not used (spent) are normally not considered in the next year's budget, but should be. In other words, the previous years' revenues (as shown in the CAFR) are not recycled back to the budget process.

Historically, a budget consists of three parts: 1) Funds brought forward (funds not previously spent); 2) Next year's estimated revenues; and 3) Next year's estimated expenditures.

But somewhere along the way the funds brought forward category was lost. In accounting, the previous years' revenues are no longer called revenue but have been converted to Cash and Investments. Since they no longer called Revenues governments have forgotten about them to the public. They are there but not considered in the budget process, but should be.

3. The budgeted items and non-budgeted items (off budget) should be budgeted to zero (usually referred to as zero-based budgeting). In addition, the government should be on a pay-as-you-go basis, no reserves for future years. What this means is that you budget to have a zero fund balance. If you plan to spend $100 you budget for $100 with no excess or reserve allowed.

4. Budgeted expenditures should be last year's expenditures (as shown in the CAFR) with an adjustment for increase in requirements (costed out) or reductions in requirements. In most cases the CAFR expenditures are not considered in the next year's budget because the CAFR in many cases is published after next year's budget is considered and sometimes approved.

Running Surpluses is Stealing

Although taxation is legitimate, running a government surplus isn't. It represents a taking by the state, because it exceeds the government's contract with the community. It is no different than if a federal agency were to take a person's land or possessions without just compensation (an activity barred by the Fifth Amendment). Excess taxation isn't what the people bargained for.

In presuming entitlement or authority not ceded by the community, the state abrogates its moral pact with those it governs. Its power is no longer derived from the people, whose rights to liberty and property it boldly denies.

The Governor and the Legislators

The Governor and the legislators should include in the next year's budget the previous years revenues not spent as indicated by the CAFR. These were once a revenue and should still be considered revenue for budgetary purposes.

Also, they should consider a zero-balance budget concept for all budget and non-budgetary items in the CAFR including the College and Universities and the Component Units.

Budgeted expenditures (for the budget) should be last year's expenditures (from the CAFR) adjusted for demonstrated requirement changes in project, program or services. An increase in requirements should include the costs of these additional requirements. Conversely, a decrease in requirements should result in a decrease in costs associated with the decreased requirements.

The Governor and legislators should take into consideration the entire financial condition/status of the State in the budgetary process by including all of the funds in the CAFR as being a part of the budget.

This system is covered in the CAFR Budget System. This system needs to be implemented in all governments.

If the State holds the excesses/surplus, it will earn 4% to 5% on that money. If the State returns the money to the people it will receive 20% in revenue because of the increased economic activity. This is elementary economics.

Laws need to be changed.

Every thing done by governments is by law. There are laws that state this or that regarding the use of some of the funds. Man made the laws, man can change the laws. How much effort would it be to include at the end of every law "...or if considered excess or not needed for the current operation that the funds will be refunded to the taxpayers?" See how easy it is.

At one time every law had its place, but things change. The laws need to be reviewed for change to meet the current needs of the government and the people to release these funds for use/refunded.

If this were accomplished, the State would have a huge surplus to refund (rebate or tax reductions) to the taxpayers. Such a refund would create considerable wealth and jobs, increase wages, increase State and local government revenues, dramatically increase the economy, and create the greatest economic expansion in the history of the State. Everyone wins.

If you want to know the financial condition of your government(s), do not look at the budget. Get the CAFR.

The Synergistic Magic of Economics.

What happens when the government holds the $9.65 billion.

  (In Thousands) Investment Income   Per   Capita Family of 4    
  The government holds and investments the surpluses at 4.5%. 434,033 97 387  

Here is what happens when the $9.65 billion is returned to the taxpayers (the private economy).

  (In Thousands) Surplus
Per   Capita Family of 4    
  The surplus is returned to the taxpayers. 9,645,181 2,152 8,606  
  Wages are increased. 4,822,591 1,076 4,303  
  State government revenues increase. 1,929,036 430 1,721  
Local government revenues increase. 1,543,229 344 1,377  
  Federal government revenues increase. 3,858,072 861 3,442  
  Total Benefits...   4,862 19,450  

In FY 2002 unemployment was 123,000. If the $9.65 billion was returned to the people, 192,904 jobs are created. There would be a labor shortage in Louisiana. This is why it is disastrous for governments to hold excesses/reserves of the taxpayers money.

Note: The economic impact analysis is further explained at Economic Impact Analysis.

The business community suffers the most.

Before the 9-11 tragedy, President Bush and Congress provided tax rebates which averaged $427 for every American. This was to create an additional $60 billion in consumer (economic) spending, turn the economy around and create jobs for the unemployed. However, 9-11 change that.

As the above economic impact chart shows, if the State returned the $9.65 billion in surpluses to the people the State economy would grow by $4,303 per capita. That is 10 times the amount the Federal government used to stimulate the U.S. economy. Businesses net incomes could double or triple. This is elementary economics.


Now I want you to read this carefully. Louisiana has 162 Special Revenue Funds. These are usually part of the budget. Of these 162 funds 135 of them had no expenses. Other words, no activity in these funds for FY 2003. Yet, they had $1.1 billion in cash and investments just sitting there doing nothing but earning interest.

Louisiana Education Quality Trust Fund, a Governmental Fund, made a profit of $13 million. It had no expenses but it had cash and investment reserves of $870 million.

Medicaid Trust For The Elderly, a Governmental Fund, made a profit of $63 million. It had no expenses but it had reserves of $909 million.

Unemployment Trust Fund, an Enterprise Fund and not part of the budget, had net expenditures of $49 million. It cash/investment reserves of $1.5 billion. That is 31 years of reserves.

Louisiana Economic Development Corporation, a Component Unit and not part of the budget, had expenses of $7.7 million. It also had cash/investment reserves of $105 million. That represents 14 years of reserves.

These only represent five of the 58 funds shown below that had cash and investment reserves not being used.

What to do?

Unless the budget flaws are corrected and the entire State finances are used in the budget process, the problems that created the surpluses will continue to exist. The budget deficits reported by the Governor and legislatures will be used year after year for the excuses for tax increases and/or to reduce needed services.

Just stopping a tax increase or a reduction in services will not solve the problems. The problems will come back the next year.

I have provided the details of the surpluses and explained the ways the surpluses are accumulated. The data is accurate because it comes directly from the government's own financial statement, the CAFR. You must provide the where-with-all to convince the Governor and legislatures that the surpluses exist and what should be done about it. I live in Arizona. It is not my money that is at stake.

Exhibit A

The 2003 CAFR is located at:


Items not Included

The following items are not included in the amount of surplus shown:

-Buildings, roads, bridges, land (not for sale), and equipment.

-Deferred compensation plans for employees. These are plans in which the employee contributes to his/her retirement over and above the normal employee retirement contribution.

-Any fund that is 100% supported by donations, bequests, gifts, endowments, etc. These are not taxpayers money.

-For Colleges and Universities. All endowment and similar-type funds should not be included as surpluses. Sometimes these funds are combined with other college/university funds. We are interested in surpluses, so in these cases the total amount should not be included.

-Funds in which the revenues/contributions are 100% held for other individuals, organizations or another government.

-Funds that are required by law in which a bank, financial institution, insurance companies, etc. are required to deposit with the government a certain amount for insurance against the entity going bankrupt. These are not taxpayers' money.

-Retirement/Pension Funds - only included are 1/2 of the actuarially determined excesses, the taxpayers portion. The other 1/2 is the government employees portion.

  Review of The State of Louisiana CAFR- FY 2003

CAFR Page List of Investments By Fund (In Thousands) Surpluses
  Governmental Funds:  
29    General 183,607
29    Bond Security and Redemption Fund 269,937
29    Louisiana Education Quality Trust Fund 869,670
29    Medicaid Trust For The Elderly 909,247
115    Special Revenue Funds - 162 funds 1,394,056
     Debt Service Funds:  
115       Parish Royalty Sinking Fund  
115       Transportation Infrastructure Model For Economic       Development 522,769
115    Capital Outlay Escrow Fund 508,391
     Permanent Funds:  
115       Education Excellence Fund 505,737
115       Fuller-Edwards Arboretum Trust Fund 185
116       Health Excellence Fund 377,116
116       W.R. Irby Bequest Fund  
116       Lifetime License Endowment Trust Fund  
116       Tops Funds 376,396
  Proprietary Funds:  
33       Louisiana Lottery Corporation 180,559
33       Unemployment Trust Fund 1,538,195
        Nonmajor Enterprise Funds:  
118          Boards and Commissions 26,151
118          Drinking Water Revolving Loan Fund 3,876
118          Louisiana Correctional Facilitates Corporation 5,803
118          Louisiana Federal Property Assistance Agency 793
118          Louisiana Office Building Corporation 3,636
119          Louisiana Opportunity Loan Fund 1,415
119          Louisiana Property Assistance Agency 1,943
119          Municipal Facilities Revolving Loan Fund 67,364
119          Office Facilities Corporation 65,995
119          Prison Enterprises 1,535
119          Public Safety Services Cafeterias 942
119          Donald J. Thibodeaux Training Complex 2,894
     Internal Services:  
124       Administrative Services 1,449
124       Administrative Support 271
124       Central Regional Laundry 347
125       Flight Maintenance Operations 339
125       Jackson Regional Laundry  
125       Office of Telecommunications Management 1,491
  Fiduciary Funds  
37    Pension Trust Funds  
37    Investment Trust Fund:  
37       Louisiana Asset Management Pool  
37    Private Purpose:  
37       Louisiana Education Tuition and Savings Fund  
     Agency Funds  
134       Debt Service Reserve Fund 4,711
134       Escrow Fund 167,584
134       Free School Fund 18,738
134       Future Medical Care Fund 11,028
134       Insurance Trusts 90,020
  Component Units:  
40    Louisiana State University System 428,474
40    University of Louisiana System 262,138
40    Southern University System 35,289
40    Community and Colleges System 133,653
41    Board of Regents 1,521
41    Greater New Orleans Expressway Commission 48,913
41    Louisiana Stadium and Exposition District 32,817
41    Orleans Levee District 37,520
41    Tobacco Settlement Financing Corporation 166,995
     Nonmajor Component Units:  
138       Boards and Commissions 31,905
138       Capital Area Human Services District 2,363
138       Greater Baton Rouge Port Commission 20,692
138       Jefferson Parish Human Services Authority 1,146
138       Kenner Naval Museum Commission 2
139       Agricultural Finance Authority 627
139       Cancer Research Center 2,862
139       Louisiana Economic Development Corporation 104,674
139       Louisiana Housing Finance Agency 78,444
139       Louisiana Naval War Memorial Commission 369
139       Louisiana Public Facilities Authority 11,345
139       Millennium Port Authority 146
140       Other Levee Districts 113,955
140       Sabine River Authority 15,141
  Related Organizations-Financial data not included in this report.  
     Ascension-St. James Airport and Transportation Authority  
     River Parishes Transit Authority  
     Castor Creek Reservoir District  
     St. Bernard Harbor and Terminal District  
     South Tangipahoa Parish Port Commission  
     North Terrebonne Parish Tidewater Management and    Conversation District  
     South Terrebonne Parish Tidewater Management and    Conversation District  
     Grand Isle Independent Levee District  
     River Region Cancer Screening and Early Detection District  
     Louisiana Airport Authority  
     Ernest N. Morial New Orleans Exhibit Hall Authority  
     Chaplin Lake District  
     Allen Parish Reservoir District  
     Grand Bayou Reservoir  
     Seventh Ward Neighborhood Development District  
     Terrebonne Levee and Conversation District  
     Twelfth and Thirteenth Wards Neighborhood Development    District  
     Fourteenth and Sixteenth Wards Neighborhood Development    District  
     Associated Branch Pilots of the Port of Lake Charles  
     Associated Branch Pilots of the Port of New Orleans  
     Crescent River Port Pilot's Association  
     New Orleans Steamship Pilots Association  
  Total Surpluses… 9,645,181
  Per Capita… 2,152
  Family of 4… 8,606

Note: For those familiar with governmental accounting, for surpluses we basically used GFOA Balance Sheet Account Classification Codes 101, 102, 103, 151, 153, and 170.

USAF Image

This report was prepared by:
Gerald R. Klatt
Lieutenant Colonel, USAF, Retired



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