Nevada Has At Least $3.56 Billion In Surpluses of the Taxpayers Money it is not using.

  FY 2003 Report Home Page Flags courtesy of Robesus Inc.



The State of Nevada at the State-level has approximately $3.56 billion of the taxpayer's money it is not using, i. e. surpluses equal to $1,530 for every man, woman and child in Nevada or $6,119 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Nevada.

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. Normally, 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.

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.

The State of Nevada does use the balance brought forward in their budgeting process. But there are the other reasons that they have surpluses.

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 $3.56 billion.

  (In Thousands) Investment Income   Per   Capita Family of 4    
  The government holds and investments the surpluses at 4.5%. 159,784 69 275  

Here is what happens when the $3.56 billion is returned to the taxpayers (the private economy).

  (In Thousands) Surplus
Per   Capita Family of 4    
  The surplus is returned to the taxpayers. 3,556,258 1,530 6,119  
  Wages are increased. 1,778,129 765 3,060  
  State government revenues increase. 711,252 306 1,224  
Local government revenues increase. 569,001 245 979  
  Federal government revenues increase. 1,422,503 612 2,448  
  Total Benefits...   3,457 13,830  

In FY 2003 unemployment was 59,300. If the $3.56 billion was returned to the people, 71,015 jobs are created. There would be no unemployment in Nevada, but a labor shortage. 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 $3.56 billion in surpluses to the people the State economy would grow by $3,055 per capita. That is 7 times the amount the Federal government used to stimulate the U.S. economy. Businesses net incomes could double or triple. This is elementary economics.


State Highway, a Governmental Fund, had net expenses of $27 million and cash/investment reserves of $191 million. That is 7 years of reserves.

Unemployment Compensation, an Enterprise Funda and not part of the budget, had net expenses of $37 million. It also had cash/investment reserves of $441 million. That is 12 years of reserves.

Reglatory Fund, a Special Revenue Fund and part of the budget, had net expenditures of $1.1 million and reserves of $10 million. That is 9 years of reserves.

Workers Compensation and Safety, another Enterprise Fund and not part of the budget made a part of $1.4 million. It also had reserves of $35 million.

Information Services is an Internal Service Fund and not part of the budget. Internal Services Funds are funds that provide services to other State governemnt departments and organizations. Information Services had net expenses of $1.5 million and reserves of $8.7 million. That represents 6 years of reserves.

These only represent five of the 51 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 Nevada CAFR- FY 2003

CAFR Page List of Investments By Fund Surpluses
  Governmental Funds:  
37    General Fund 420,489,820
37    State Highway 191,294,358
37    Municipal Bond Bank 1,086,447,126
38    Cons Bond Interest and Redemption 182,472,729
38    Stabilize the Operations of State Government 1,340,970
     Special Revenue Funds:  
101       School Improvement 262,260
101       Employment Security 26,032,035
101       Regulatory 10,330,294
101       Legislative 5,152,657
101       Higher Education Capital Construction 8,701,705
102       Cleaning Up Petroleum Discharges 5,658,695
102       Hospital Care to Indigent Persons 20,323,939
102       Tourism Promotion 2,667,212
102       Offender's Store 1,746,423
102       Tobacco Settlement 165,735,210
102       Contingency 6,160,893
103       Care of Sites for Radioactive Disposal 20,616,301
103       Natural Resources 35,828,026
103       Gift  
103       Miscellaneous Funds 25,182,437
     Debt Service:  
99       Highway Revenue Bonds 5,483,602
     Capital Projects Funds:  
109       Parks Capital Project Construction 185,808
109       CIP-Motor Vehicles 665,937
109       CIP-Human Resources 3,439,422
109       CIP-University System 73,395,270
109       CIP-General State Government 20,490,698
109       CIP-Prison System 17,143,545
110       CIP-Military 1,596,179
110       CIP-Wildlife 1,114,244
110       CIP-Assistance to School Districts 2,329,714
110       CIP Miscellaneous 250
     Permanent Funds:  
110       Permanent School Fund 122,823,385
110       Henry Wood Christmas  
  Proprietary Funds:  
     Enterprise Funds:  
45       Housing Division 513,134,917
45       Unemployment Compensation 440,587,927
     Enterprise Funds:  
115       Workers' Compensation and Safety 35,473,183
115       Insurance Examination 494,686
115       Gaming Investigative 5,612,346
115       Forestry Nurseries 252,294
116       Prison Industry 2,831,584
116       Nevada Magazine 71,637
116       WICHE Student Loans 193,852
116       Marlette Lake Water System 37,001
116       Water Project Loans 62,704,671
     Internal Service Funds:  
123       Self-Insurance 8,905,235
123       Buildings and Grounds 2,411,883
123       Motor Pool 1,474,060
123       Communications 317,969
124       Insurance Premiums 3,590,488
124       Administrative Services 393,015
124       Personnel 1,585,593
124       Purchasing 497,908
124       Information Services 9,730,932
124       Printing 835,424
  Fiduciary Funds:  
     Pension Trust Funds:  
131       Public Employees' Retirement Unknown
131       Legislators' Retirement Unknown
131       Judicial Retirement Unknown
     Investment Trust Funds:  
132       Local Government Investment Pool  
132       Nevada Enhanced Savings Term  
     Private Purpose Funds:  
132       Higher Education Tuition Trust  
132       Prisoners' Personal Property  
     Agency Funds:  
135       Intergovernmental  
135       State Agency Fund for Bonds  
135       Motor Vehicle  
135       Child Support Disbursement  
135       Child Welfare Trust  
135       Restitution Trust  
135       Veterans Custodial  
135       State Payroll  
  Component Units:  
     Nevada River Commission Unknown
     University System Unknown
  Total Surpluses… 3,556,258,147
  Per Capita… 1,530
  Family of 4… 6,119

In FY 2002 there were two Component Units, the Nevada River Commission and the Univesity System. These Component Units are not part of the FY 2003 CAFR and therefore not part of the above computations.


The Nevada River Commission had surpluses of $94,976,000 and the University System had surpluses of $436,028,000.


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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