Virginia Has At Least $10.85 Billion In Surpluses of the Taxpayers Money it is not using.

  FY 2003 Report Home Page Flags courtesy of Robesus Inc.



The Commonwealth of Virginia at the Commonwealth-level has approximately $10.85 billion of the taxpayer's money it is not using, i. e. surpluses equal to $1,492 for every man, woman and child in Virginia or $5,968 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Virginia.

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 Commonwealth'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 Commonwealth. 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 Commonwealth. 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 Commonwealth 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.

Note: Although there are other reasons the State of Washington has surpluses, they still use the balance brought forward in their budget process.

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, there are two of the Commonwealth of Virginia Special Revenue Funds (Governmental Funds), part of the budget, that illustrate the problem. Dedicated and Other are the two.

Dedicated budgeted for a fund balance of $115,123 (in thousands). It had an actual fund balance at year end of $181,309. The $181,309 will probably not be considered in the next year's budget.

Other budgeted for a fund balance of $110,222 but had an actual fund balance of $308,697.

Both of these fund balances, $181,309 and $308,697, will probably not be considered in the next year's budget. If there is a "budget deficit" ask about these funds not being considered or used.

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 Commonwealth, 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 Commonwealth 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 Commonwealth 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 Commonwealth holds the excesses/surplus, it will earn 4% to 5% on that money. If the Commonwealth 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 Commonwealth 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 Commonwealth and local government revenues, dramatically increase the economy, and create the greatest economic expansion in the history of the Commonwealth. 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 $10.85 billion.

  (In Thousands) Investment Income   Per   Capita Family of 4    
  The government holds and investments the surpluses at 4.5%. 488,427 67 269  

Here is what happens when the $10.85 billion is returned to the taxpayers (the private economy).

  (In Thousands) Surplus
Per   Capita Family of 4    
  The surplus is returned to the taxpayers. 10,853,944 1,492 5,968  
  Wages are increased. 5,426,972 746 2,984  
  Commonwealth government revenues increase. 2,170,789 298 1,194  
Local government revenues increase. 1,736,631 239 955  
  Federal government revenues increase. 4,341,578 597 2,387  
  Total Benefits...   3,372 13,487  

In addition, 217,079 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 Commonwealth returned the $10.85 billion in surpluses to the people the Commonwealth economy would grow by $2,984 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.


The Commonwealth Transportation, a Special Revenue Fund, made a profit of $24 million. It also had reserves (cash and investments) of $1.3 billion.

The Dedicated Fund, a Special Revenue Fund, had net expenses equal to 71 years of cash/investment reserves. Other Fund, a Special Revenue Fund, had net expenses equal to 257 years in reserves.

Commonwealth Health Research Board, a Permanent Fund, made a profit of $295 thousand. But it also had cash and investment reserves of $25 million and actual expenditures of $1.2 million. The reserves represent almost 21 years of expenditures.

These only represent four of the 77 funds shown below that had cash and investment reserves not being used.

What to do?

Unless the budget flaws are corrected and the entire Commonwealth 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 Commonwealth of Virginia CAFR- FY 2003

CAFR Page List of Investments By Fund (In thousands) Surpluses Notes
  Governmental Funds:    
50    General 718,072  
     Special Revenue    
50       Commonwealth Transportation 1,302,232  
50       Federal Trust 207,515  
50       Literary 62,134  
172       The Dedicated Special Revenue Fund 188,581  
172       The Other Special Revenue Fund 254,825  
172       VA Land Conservation Foundation Fund 2,307  
172       VA Historic Preservation Foundation    
172       VA State Parks Foundation 350  
     Debt Service:    
173       Primary Government 85,780  
173       VA Public Building Authority 92  
     Capital Projects    
173       Primary Government 59,133  
173       VA Public Building Authority 54,611  
  Permanent Funds    
174    Commonwealth Health Research Board 24,505  
174    Mental Health Endowment Funds    
174    Virginia Arts Foundation Fund    
  Proprietary Funds:    
58       State Lottery 660,896  
58       The Virginia College Savings Plan    
58       Pocahontas Parkway 60,735  
58       Unemployment Compensation 396,471  
186          The Department of Alcoholic Beverage Control 801  
186          Risk Management 36,965  
186          The Local Choice Health Care Program 11,954  
186          The Virginia Industries for the Blind 1,956  
187          The Consolidated Laboratory 2,038  
187          eVA Procurement System 266  
187          The Department of Environmental Quality 11,366  
187          Wireless E-911 Service Board 28,334  
187          The Virginia Museum of Fine Arts 685  
187          The Science Museum of Virginia 181  
187          Mental Health Local Funds 422  
188          The Division of Legislative Service 6  
188          The Virginia School for Deaf and Blind 2  
     Internal Service:    
202       Department of Information Technology 14,069  
202       Virginia Correctional Enterprises 5,827  
202       Health Care 43,290  
202       Division of Fleet Management 45  
203       Maintenance and Repair 6,632  
203       Virginia Distribution Center 762  
203       Risk Management 96,222  
203       Consolidated Laboratory 280  
203       Federal Surplus Property 397  
203       State Surplus Property 263  
203       Graphic Communications 179  
203       Property Disposal 134  
204       Engineering Services 173  
  Fiduciary Funds:    
162    Pension (1/2 actuarial surplus - June 30, 2002)    
216    Private Purpose:    
216    Investment Trust:    
217    Agency Funds    
  Component Units:    
72    The Virginia Housing Development Authority 1,320,594  
72    The Virginia Public School Authority 2,246,354  
72    University of Virginia 892,094  
72    Virginia Polytechnic Institute and State University 161,755  
72    Virginia Commonwealth University 393,622  
240       Virginia Economic Development Partnership 2,136  
240       Virginia Outdoors Foundation 1,278  
240       Virginia Port Authority 252,357  
240       Virginia Resources Authority 341,441  
241       Virginia Tourism Authority 1,150  
241       Virginia Tobacco Settlement Authority 13,475  
241       Tobacco Indemnification and Community       Revitalization Commission 82,881  
241       Hampton Roads Sanitation District Commission 96,306  
241       Virginia Biotechnology Research Park Authority 6,989  
241       Virginia Small Business Financing Authority 26,159  
241       Virginia School for the Deaf and Blind 2,151  
242       A.L. Phipott Manufacturing Extension Partnership 689  
242       Virginia Equine Center Foundation 2,208  
242       Certified Nursing Facility Education Initiative 337  
     Higher Education Institutions:    
242       College of William and Mary 79,388 1
243       Virginia Military Institute 26,853 1
243       Virginia State University 29,263 1
243       Norfolk State University 7,878 1
243       Mary Washington College 20,806 1
243       James Madison University 57,409 1
243       Radford University 40,871 1
243       Old Dominion University 45,555 1
244       George Mason University 65,846 1
244       Virginia Commonwealth University 85,425 1
244       Christopher Newport University 62,721 1
244       Longwood University 16,635 1
245       Southwest VA Higher Education Training Center 413  
245       Roanoke Higher Education Authority 310  
245       Innovative Technology Authority 7,448  
245       VA College Building Authority 121,659  
  Total Surpluses… 10,853,944  
  Per Capita…. 1,492  
  Family of 4… 5,968  

The amounts contained in the universities may contain Endowment and similar funds. These should be deducted from the potential surpluses.


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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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.