The State of Hawaii at the State-level has approximately
$4.40 billion of the taxpayer's money it is
not using, i. e. surpluses equal to $3,492
for every man, woman and child in Hawaii or $13,968 for a family of 4. This does not include
all the additional surpluses that exist in the school districts, cities, or
counties in Hawaii.
A below shows the results of the FY 2003 review.
What are these surpluses we refer to?
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
A Government Can Have a Budget
Deficits/Shortfalls and Financial Surpluses At The
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.
problems are focused in four areas:
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 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
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
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.
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
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.
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.
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.
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
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
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
"Collecting more taxes than is absolutely
necessary is legalized robbery" - Calvin
The Governor and the Legislators
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
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
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.
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
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.
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.
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
happens when the government holds the $4.40 billion.
||Family of 4
government holds and investments the surpluses at 4.5%.
is what happens when the $4.40 billion is returned to the taxpayers (the
||Family of 4
surplus is returned to the taxpayers.
government revenues increase.
government revenues increase.
government revenues increase.
addition, 88,066 jobs are created. This is why it is disastrous for governments
to hold excesses/reserves of the taxpayers money.
The economic impact analysis is further explained at
Economic Impact Analysis.
The business community suffers the most.
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 $4.40 billion in
surpluses to the people the State economy would grow by $6,984 per capita. That
is 16 times the amount the Federal government used to stimulate the U.S.
economy. Businesses net incomes could double or triple. This is elementary
Propriety Fund and not part of the budget, had net expenses of $10 million. It
also had cash/investments (surpluses) of $820 million. That represents 82 years
also a Propriety Fund and not part of the budget, made a net profit of $20
million. But it also had cash and investment reserves of $151
University of Hawaii, a Component Unit and not part of the budget made a profit
of $97 million. It had reserves of $570 million.
Hurricane Relief Fund, another Component Unit and not part of the budget, had
net expenses of $26 million. It had cash/investment reserves of $195 million.
That represents 7 years of reserves.
represent four of the 24 funds shown below that had cash and investment
reserves not being used.
What to do?
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
stopping a tax increase or a reduction in services will not solve the problems.
The problems will come back the next year.
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.
CAFR was obtained directly from the State of Hawaii.
Items not Included
following items are not included in the
amount of surplus shown:
-Buildings, roads, bridges, land (not for sale), and equipment.
compensation plans for employees. These are plans in which the employee
contributes to his/her retirement over and above the normal employee retirement
that is 100% supported by donations, bequests, gifts, endowments, etc. These
are not taxpayers money.
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.
which the revenues/contributions are 100% held for other individuals,
organizations or another government.
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'
-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 Hawaii CAFR- FY
Investments By Fund (In thousands)
|| Capital Projects Fund
|| Special Revenue Funds:
|| Natural Resources
|| Human Services
|| Economic Development
|| Hawaiian Programs
|| All Other
|| Debt Service Fund
|| Unemployment Compensation
|| Nonmajor Proprietary Fund
|| Pension Trusts (1/2 the actuarial determined
|| Private Purpose Trust Fund:
|| Agency Funds:
|| Tax Collections
|| University of Hawaii
|| Housing and Community Development Corporation of
|| Hawaii Health Systems Corporation
|| Hawaii Hurricane Relief Fund
||Family of 4
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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