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Introduction
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 Effect |
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.
Examples
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:
http://www.state.la.us/osrap/CAFR-2.htm
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: |
|
|
Enterprise: |
|
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 |
|
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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.
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