Introduction

The State of Georgia at the State-level has approximately $18.76 billion of the taxpayer's money it is not using, i. e. surpluses equal to $2,192 for every man, woman and child in Georgia or $8,767 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Georgia.

If the $18.76 billion were returned to the people, the State would have a huge surplus to refund to the taxpayers. Such a refund would help payoff credit cards, create jobs, increase wages, business income would increase, increase State and local government revenues, dramatically increase the economy, and create the greatest economic expansion in the history of the State. Everyone wins.

Unemployment

The 2002 unemployment was not available. However, the table below demonstrates that if the $18.76 billion were returned to the people, 377,169 jobs would be created. I assure you there would be no unemployment in Georgia, but a labor shortage.

In addition, unemployment claims of approximately $861 million could be saved.

The Georgia review is shown in Exhibit A below in this report.

Simultaneous Budget Deficits/Shortfalls and Financial Surpluses

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 problem can be broken down into three 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.

2. The budget is current revenues minus current expenditures. Previous years' revenues are normally not considered in the current budget, but should be. In other words, the previous years' revenues are not recycled back to the current budget process.

The process for the Budget Fund in Georgia indicates that they do have a "Carry-Over from Prior Year"; however, we do not know whether it includes all the budgeted items, but we assume it does. In spite of this, we still have surpluses.

3. The budgeted funds and non-budgeted funds should have zero-based funding on a pay-as-you-go basis. 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.

Here are some examples:

Georgia Technology Authority made a profit of $7 million and also had a cash-investment reserve of $59.4 million.

Unemployment Compensation Fund had net expenses of $374 million and cash-investments of $1.5 billion. That is 4 years of reserves.

Environmental Facilities Authority made a profit of $83 million and also had a reserve of $318 million.

Workers' Compensation Fund had net expenses of $1.3 million and also had reserves of $176 million. That represents 132 years of reserves.

These are only four (4) of the 45 or so funds listed in the report below that make up the $18.76 billion in surpluses.

What Should be Done With the Surpluses?

Alan Greenspan, Chairman of the Federal Reserve, Told Us:

In his testimony to the Senate Humphrey-Hawkins Committee, Alan Greenspan, Chairman of the Federal Reserve, in late July 1999 gave us a clue on what he thought should be done when he stated:

“I'm of the old fiscal school that you raise revenues for basic government purposes and if you don't have those purposes you give the money back or you don't tax it... My experience is that private rates of return are significantly higher than the governments rates of return.”

What did he say?

• If a government collects too much from the people, the government should give it back.

• It is better to let the private sector use the money than governments. This we will prove beyond a reasonable doubt.

Government Surpluses are the taking of the peoples property without the right to take:

In a recent Wall Street Journal article, Mr. William P. Kucewicz, made in-depth observations and insights regarding the role of governments holding surpluses of the peoples money. We could never have said it as eloquently as he has:

"...Almost no one seems to note that a surplus at any level of government represents money that would otherwise be used for consumption or investment by those who earned the income in the first place. And to the extent that it's squirreled away by government and isn't used, say, to retire debt, it's a drain on the economy.

Also missing from the discussion is a basic question: Whose money is it, anyway? Government's moral legitimacy is derived from the people. This cornerstone of the classical liberal tradition presupposes that government's precursor is the individual, endowed with a natural liberty as a free moral agent...

...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." (Emphasis added.) (Mr. Kucewicz is editor of the global investment site www.GeoInvestor.com)

What the Legislators should do

The State 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 State legislators should take into consideration the entire financial condition/status of the State in the budgetary process by including the fund balances in the CAFR as being a part of the budget.

This system is covered in the CAFR Budget System.

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

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. The Georgia Constitution has been changed over 100 times. It can be changed again if need be to benefit the people.

If this were accomplished, the State would have a huge surplus to refund to the taxpayers. Such a refund would create 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 in the budget. Get the CAFR.

What are these surpluses you have been talking about?

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 and the income and amounts keep increasing.

The Synergistic Magic of Economics.

What happens when the government holds the $18.76 billion.

Here is what happens when the $18.76 billion is returned to the taxpayers (the private economy).

In addition, 377,169 jobs are created. This is why it is disastrous for governments to hold excesses of the taxpayers money.

Note: The economic impact analysis above is further explained at this location.

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 and an additional 1 million jobs were lost and the economy, already in a recession, continues to deteriorate.

As the above economic impact chart shows, if the State returned the $18.76 billion in surpluses to the people the State economy would grow by $4,406 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.

There is no need for a budget crisis, an economic recession or unemployment in Georgia.

Excuses

For a list and response to the various excuses provided by governments for holding excesses of the taxpayers money, please go to this link.

Forget the excuses. We are talking about giving the money back to the people because it is surplus to the immediate needs of the government. Is there a law in Georgia that says the surpluses cannot be returned to the people either through refunds or tax/revenue reductions? If there is, it should be repealed. We do not need a communist governmnt in the U.S.

What you can do

Tell a friend or relative about this report.

Did you know that if you tell 5 people about this report and ask them to tell 5 more people, that in only 8 iterations, 390,625 people will be notified?

Contact your State representative (or all your State representatives).

Send them an email, send them a copy of this report, and ask them to provide you with their results of analyzing the CAFR. If you only want to provide a link to this report, the link is http://www.cafrman.com/Articles/Art-GA-S1.htm.

Locating Your State Representative

Locate Your State Elected Officials Here:

Exhibit A

The 2002 CAFR is located at:

http://www.audits.state.ga.us/internet/sgd/cafr_main.html

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.

How to Review the CAFR.

Here is the simple way to review the CAFR.

Now, do this for every item listed in the Exhibit A below. You have just proved to yourself that the surpluses exist.

  Review of The State of Georgia CAFR- FY 2002

CAFR Page	List of Investments By Fund	Potential Surpluses	Notes
	Governmental Activities:
22	General Fund	4,468,599,011
22	Georgia State Financing and Investment    Commission	1,852,162,160
102	Debt Service	228,453,750
	Capital Projects:
102	Georgia Building Authority (Hospital)	3,791,708
103	Georgia Building Authority (Markets)	280,224
103	Georgia Building Authority (Penal)	1,802,745
103	Georgia Education Authority (University)	2,493,415
103	Permanent Fund	13,500
	Proprietary Funds:
	Enterprise Funds:
26	Georgia Technology Authority	59,380,791
26	Higher Education Fund	814,548,234
26	State Employees' Health Benefits Plan	666,285,457
26	Unemployment Compensation Fund	1,521,122,080
	Internal Service Funds:
112	Department of Administrative Services	4,004,737
112	Georgia Building Authority	12,501,296
112	Correctional Industries Administration	8,961,463
112	Merit System of Personnel Administration	2,184,515
113	Removal of Hazardous Materials	496,617
113	Risk Management:
114	Liability Self-Insurance Reserve Fund	261,833,429
114	Property Insurance Fund	18,112,525
114	State Employees' Assurance Department	752,931,000
115	Georgia State Indemnification Commission	1,058,394
115	Supplemental Pay Fund	5,372,875
115	Teacher Indemnification Fund	223,439
115	Unemployment Compensation Fund	4,653,947
115	Workers' Compensation Fund	176,310,868
	Fiduciary Funds:
	Private Purpose Trust
138	Auctioneers Recovery Fund	324,657
138	Keds Corporation Settlement Fund	64,999
138	Real Estate Recovery Fund	1,879,063
138	Subsequent Injury Trust Fund	16,971,374
91	Employees' Retirement System (1/2 the actuarial       determined surpluses-6/30/2001)	96,684,500
	Investment Trust :
64	Georgia Fund 1	3,885,133,051
65	Georgia Extended Asset Pool	987,843,191
66	Regents Investment Pool	106,057,046
36	Agency:
	Component Units
38	Development Authority	48,974
38	Environmental Facilities Authority	317,783,400
38	Housing and Finance Authority	1,169,931,562
38	Lottery Corporation	359,382,000
38	Ports Authority	48,166,000
39	Public Telecommunications Commission	12,980,746
39	Road and Tollway Authority	703,821,158
39	Stone Mountain Memorial Association	17,425,739
39	Student Finance Authority	4,867,066
39	World Congress Center Authority	48,502,523
39	Nonmajor Component Units	116,336,146
	Total Potent Surpluses…	18,761,781,375
	Per Capita…	2,192
	Family of 4…	8,767

Note: For those familiar with governmental accounting, for potential 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 www.cafrman.com Qualifications

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