Ohio Has At Least $32.09 Billion In Surpluses of the Taxpayers Money it is not using.

  FY 2003 Report Home Page Flags courtesy of Robesus Inc.



The State of Ohio at the State-level has approximately $32.09 billion of the taxpayer's money it is not using, i. e. surpluses equal to $2,809 for every man, woman and child in Ohio or $11,238 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Ohio.

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.

For example, the State of Ohio Enterprise Funds are funds that charge the public for goods and services and are not considered part of the budget. They had an unused fund balances of $1.78 billion. This $1.78 billion should be returned to the people.

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 $32.09 billion.

  (In Thousands) Investment Income   Per   Capita Family of 4    
  The government holds and investments the surpluses at 4.5%. 1,443,910 126 506  

Here is what happens when the $32.09 billion is returned to the taxpayers (the private economy).

  (In Thousands) Surplus
Per   Capita Family of 4    
  The surplus is returned to the taxpayers. 32,086,888 2,809 11,238  
  Wages are increased. 16,043,444 1,405 5,619  
  State government revenues increase. 6,417,378 562 2,248  
Local government revenues increase. 5,133,902 450 1,798  
  Federal government revenues increase. 12,834,755 1,124 4,495  
  Total Benefits...   6,349 25,398  

In addition, 641,738 jobs are created. 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 $32.09 billion in surpluses to the people the State economy would grow by $5,619 per capita. That is 13 times the amount the Federal government used to stimulate the U.S. economy. Businesses net incomes could double or triple. This is elementary economics.


The most important item in the CAFR is Workers' Compensation, an Enterprise Fund and not part of the budget. The State had been trying to operate the fund as an insurance company operates. The government is not an insurance company. The government should be non-profit and use pay-as-you-go systems for its expenditures.

The Workers' Compensation Fund has a fund balance of $18.25 billion. Its net expenses are only $1.33 billion. That represents a reserve of 14 years.

The State has provided huge premium reductions and refunds to employers. The public has been take twice in this premium reductions and refunds scheme of things.

Business do not pay taxes, fees, assessments, fines, etc. They only write the checks for these items. What is net income? It is income after all expenses, ALL EXPENSES. The customer pays for these items because it is in the price that you pay for these goods and services. If the business paid these without charging the customer, there would be no net income. So the $20+ billion last year was paid by the people but benefit the businesses. So the public is paying workers' compensation twice. This is wrong.

Community and Economic Development, a Special Revenue Fund and part of the budget, made a profit of $35.9 million. But it also had cash and investment reserves of $754 million.

Natural Resources, another Special Revenue Fund and part of the budget had net expenditures of $3.2 million. It also had cash/investment reserves of $202 million. That represents 63 years of reserves.

Clean Ohio Program, another Special Revenue Fund and part of the budget, had net expenditures of $20 million and had cash/investment reserves of $109 million. That is 5 years of reserves.

These only represent four of the 84 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 Ohio CAFR- FY 2003

CAFR Page List of Investments By Fund (In Thousands) Surpluses Notes
  Governmental Activities:    
36    General Fund 1,554,628  
36    Job, Family and Other Human Services 277,781  
36    Education 67,433  
37    Highway Operating 931,361  
37    Revenue Distribution 388,159  
     Special Revenue:    
138       Community and Economic Development 753,717  
138       Health Fund 58,111  
138       Mental Health and Retardation Fund 89,264  
138       Highway Safety Fund 199,286  
138       Natural Resources Fund 201,947  
138       Wildlife and Waterways Safety Fund 73,393  
138       Local Infrastructure and Transportation Improvements       Fund 331,259  
138       Tobacco Settlement Fund 611,183  
138       Clean Ohio Program 109,309  
139       Higher Education Improvements Fund 260,294  
     Debt Service:    
156       Coal Research/Development General Obligation Fund 55  
156       Improvements General Obligations Fund 130  
156       Highway Improvements General Obligations Fund 55  
157       Development General Obligations Fund 268  
157       Highway General Obligations Fund 49,825  
157       Public Improvements General Obligations Fund 155  
157       Vietnam Conflict Compensation General Obligations       Fund 28  
157       Local Infrastructure Improvements General Obligations       Fund 133  
157       State Projects General Obligations Fund 1,509  
158       Highway Capital Improvements General Obligations       Fund 13,531  
158       Higher Education Capital Facilities General Obligations       Fund 16,025  
158       Common Schools Capital Facilities General Obligations       Fund 286  
159       Conservation Projects General Obligations Fund 48  
159       Economic Development Revenue Bonds Fund 6,515  
159       Infrastructure Bank Revenue Bonds Fund 562  
159       Revitalization Project Revenue Bonds 7,521  
159       Higher Education Facilities Special Obligations Fund 919  
159       Mental Health Facilities Special Obligations Fund 2,600  
160       Parks and Recreation Facilities Special Obligations Fund 169  
160       School Building Program Special Obligations Fund 482  
160       Ohio Building Authority Special Obligations Fund 46,067  
161       Transportation Certificates of Participation Fund 943  
     Capital Project Funds:    
176       Infrastructure Bank Obligations Fund 95,704  
176       Mental Health/Mental Retardation Facilities       Improvement Funds 47,411  
176       Parks and Recreation Improvements Fund 18,865  
177       Administrative Service Building Improvements Fund 1,941  
177       Youth Services Building Improvements Fund 26,876  
177       Transportation Building Improvements Fund 93  
177       Adult Correctional Building Improvements Fund 47,752  
177       Highway Safety Building Improvements Fund 10,221  
177       Ohio Parks and Natural Resources Fund 47,300  
178       Highway Capital Improvement Fund 128,443  
  Proprietary Funds:    
     Enterprise Funds:    
48       Workers' Compensation 18,246,527  
48       Lottery Commission 514,532  
48       Unemployment Compensation 1,274,163  
49       Ohio Building Authority 25,564  
49       Tuition Trust Authority 761,651  
49       Liquor Control 42,859  
49       Underground Parking Garage 2,832  
49       Office of Auditor of State 6,967  
  Fiduciary Funds:    
     Pension and Other Employee Benefit Trust Unknown  
     Private Purpose Trust-Variable College Savings Plan    
56    Investment Trust - STAR OHIO    
194       Holding and Distribution Fund    
194       Centralized Child Support Collections Fund    
194       Ohio Building Authority Fund 14,292  
195       Tax Refunds    
195       Payroll Withholding and Fringe Benefits Fund    
195       Retirement Systems Fund    
195       Other Fund    
  Discretely Presented Component Units    
60    School Facilities Commission 414,198  
60    Ohio Water Development Authority 1,103,127  
60    Ohio State University 929,316  
61    University of Cincinnati 383,991  
202    Arts and Sports Facilities Commission Fund 33,726  
214    SchoolNet Commission Fund 15,934  
203    Ohio University 144,069  
203    Miami University 259,994  
203    University of Akron 164,887  
203    Bowling Green State University 143,324  
203    Kent State University 306,564  
203    University of Toledo 147,319  
204    Cleveland State University 107,295  
204    Youngstown State University 44,451  
204    Wright State University 121,066  
205    Shawnee State University 19,167  
205    Central State University 10,189  
205    Medical College of Ohio 54,903  
205    Terra State Community College 4,341  
205    Columbus State Community College 69,284  
205    Clark State Community College 5,883  
206    Edison State Community College 2,749  
206    Southern State Community College 2,613  
206    Washington State Community College 1,300  
207    Cincinnati State Community College 47,261  
207    Northwest State Community College 4,576  
207    Owens State Community College 22,100  
  Related Organizations - Financial data not provided in FY 2003 Ohio CAFR    
120    Ohio Turnpike Commission (Data as of 12/31/02) 154,317 1
120    Petroleum Underground Storage Tank Release    Compensation Board    
120    Ohio Air Quality Development Authority    
120    Higher Education Facility Commission    
120    Ohio Legal Assistance Foundation    
  Total Surpluses… 32,086,888  
  Per Capita… 2,809  
  Family of 4… 11,238  

The data was obtained from the Ohio Turnpike Commission FY 2002 CAFR.


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



This report can be copied, reprinted, and/or electronically transmitted to others and/or printed in the news media. This report should not be used for commercial purposes.