November 8, 2011
From The Federation of Connecticut
Taxpayer Organizations, Inc.
Contact Susan Kniep, President
Website: http://ctact.org/
Email: fctopresident@aol.com
Telephone: 860-841-8032
From Institute for Truth in Accounting
http://truthinaccounting.org/
****************
Truth in Accounting Report names Connecticut a “Sinkhole”
state
The non-partisan Institute for Truth in Accounting has
identified Connecticut
as a “Sinkhole” state because it is one of five states in the worst financial
position in the country. http://connecticut.statebudgetwatch.org/
****************
As debt crisis looms at state level, Illinois identified as
a ‘sinkhole’ along with Connecticut, New
Jersey, Illinois, Hawaii, and Kentucky
By Terry Savage savage@suntimes.com
Download our Financial State of the States Report
11/4/2011
See Your State's Financial State of the State
at: StateBudgetWatch.org
U.S. debt has been downgraded, and a budget deal is left to a “supercommittee.” The world holds its breath to see if Greece, Italy,
Spain or Portugal will
default and destroy the Euro. China is letting its currency rise, making
exports more expensive. Americans have lost confidence in the economy amidst
bankruptcies and foreclosures.
What else could there be to worry about
in the world of money and finance? Well, there’s one more catastrophe waiting
to happen.
The disaster revolves around the
overwhelming, and mostly hidden, financial woes of many states.
Since states don’t have the option of
“printing money” — an option that gives some breathing room to the United States
and the European community — state budgets are coming to grips with huge
shortfalls. This, despite the fact that 49 of the 50 states
have balanced budget amendments.
According to a new report just released
at TruthinAccounting.org - http://truthinaccounting.org/ -
the states have used accounting
trickery to conceal a total of $1 trillion of outstanding bills. The report
identifies five “Sinkhole” states and five “Sunshine” states. Truth in
Accounting is a national, non-profit advocacy group dedicated to “promoting
honest, accurate and transparent accounting.”
Truth in accounting
This new report charges: “State
officials permit themselves the use of antiquated accounting principles — and
almost no rules with regard to budgets. The institute’s study found balanced
state budgets are largely a myth. This fantasy accounting, along with the
political math necessary to claim state budgets have been ‘balanced,’ is why
states with balanced budget requirements are accumulating very large debts and
deferred liabilities.”
Sheila Weinberg, founder and CEO of the
institute, says: “State officials say their budgets are balanced, but do not
include employee pension and health care obligations in their calculations.”
Eventually, these obligations will fall
on taxpayers. So instead of comparing states by overall debt, or just comparing
the amount of unfunded pension liability, this report compares states by the
“taxpayer burden.”
On that
basis, the report identifies Connecticut, New Jersey, Illinois, Hawaii, and Kentucky
as top debtors — each with more than $23,000 in debt per taxpayer. On the positive side, Wyoming, North Dakota, Nebraska, Utah and South
Dakota are considered “Sunshine States” — because
they have either a surplus or minimal taxpayer burden.
Illinois among the worst
The report explains that Illinois has
$55 billion worth of assets (defined as both financial assets, and also
including state parks, for example), but less than $19.6 billion is available
to pay $130.2 billion of bills as they come due. Each taxpayer’s financial
burden is $26,800.
How do they get away with it? In
addition to not including pension obligations tied to current compensation in
the annual budget, the report condemns Illinois because, according to the
report: “Illinois habitually delays issuing its year-end financial report until
after the next fiscal year’s budget process has been completed. That prevents
citizens and public officials from having important information, leading to
less-than-optimal public policy decisions.”
How will those gaps be filled? States
have already tried raising income taxes, sales taxes, corporate taxes, property
taxes, lotteries and, more recently, even legalizing gambling. But one way or
another it will come out of the pockets of workers and employers.
Accounting legerdemain
States are getting away with this financial
legerdemain, despite their balanced budget amendments. Here’s how the report
explains it:
“To put an end to budget shenanigans,
the institute has developed a budgeting system called ‘Full Accrual
Calculations and Techniques’. FACT based budgeting would require governors and
legislatures to recognize expenses when incurred regardless of when they are
paid. We believe that if FACT based budgeting had been used by state
governments over the past 50 years, the states would not be in the financially
high risk conditions they are now in.”
Or to put it in non-accounting language
we can all understand: A debt is a debt. Whether it is required to be paid now
or in the future, you still owe the money. And you must acknowledge that.
To do otherwise is to think that your
$5,000 Visa bill is not your debt, because your current required payment is
only $37. It all depends on what you count!
Making the move
This report is certain to be picked at
by doubters. For example, the burden of public aid in states like Wyoming and North and South Dakota
is certainly lower than in states with major metropolitan areas like Illinois and New
Jersey. Where do you want to live?
Ironically, many of the states with the
largest debt burden already have relatively high tax structures — meaning it
will be even more difficult to fill the gap. But they will try. And eventually
you could find the most productive people moving out of high-tax states to
those with lower rates.
Most famously, economist Arthur Laffer (of the Laffer curve, which
explained why higher tax rates eventually bring in lower revenues) actually
moved his family and business from high-tax California
to no-state-tax Tennessee!
That’s actual proof that higher taxes do have consequences — for those
individuals and businesses flexible enough to move.
This report pulls back the covers on
state debt burdens. Hiding state budget deficits will only make the problem
worse. We’re going to pay — one way or another, and one day or another. And
that’s The Savage Truth.
Terry Savage is a registered
investment adviser.
******************************
Also Read ……
Connecticut
ranks 50th in Truth in Accounting 50 State Study
Bridgeport’s
billion dollar burden
True
Bridgeport, Ct. Financial Burden is $1.4 Billion
Connecticut
“Financial State of the State”
Bridgeport
(CT) “Financial State of the City”
‘Spending
cuts’ — and like gimmicks — must end, says David M. Walker
Connecticut
does not have the funds to pay $63.5 Billion in commitments
Connecticut
“Financial State of the State” Report
Connecticut
state budget spells trouble for New Haven
2009
Connecticut Financial State of the State
2010 Bridgeport (CT) Financial State of the City
2010 Connecticut Financial State of the State
Connecticut CAFR
Connecticut
Comptroller
Truth
in Accounting Report names Connecticut a “Sinkhole” state
Connecticut
ranks 50th in Truth in Accounting 50 State Study
Bridgeport’s billion dollar burden
True Bridgeport,
Ct. Financial Burden is $1.4 Billion
Connecticut “Financial State
of the State”