Introduction
Tucson, AZ at the city-level has approximately $259 million of the taxpayer's money it is not
using, i. e. surpluses equal to $509 for
every man, woman and child in Tucson or $2,038 for a family of 4.
If the $259 mllion were returned to the people, the city would
have a huge surplus to refund to the taxpayers. Such a refund would help payoff
credit cards, create jobs, increase wages, increase city government revenues,
and dramatically increase the economy. Everyone wins.
The Tucson 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 county'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 county. The budget only
covers a portion of the financial resources.
Water
Utility Fund had a profit of $9.7 million,
and did you know it had cash-investment reserves/surpluses of $60.8 million?
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.
H.U.R.F
Fund had a profit of $5.0 million, and also
had a cash-investment reserve of $27
million.
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.
Public Housing Fund had a profit of $268 thousand. It had cash-investment reserves of
$2.3
million.
What are these surpluses we 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.
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?
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 city officials should do
The city
officials 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 city
officials should take into consideration the entire financial condition/status
of the city 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 city
holds the excesses/surplus, it will earn 4% to
5% on that money. If the city returns the money to the people it
will receive 16% in revenue because of the
increased economic activity. This is elementary economics.
Laws need to be changed
There are
laws that say 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.
If this
were accomplished, the city would have a huge surplus to refund to the
taxpayers. Such a refund would create jobs, increase wages, increase State and
city government revenues, dramatically increase the economy, and create the
greatest economic expansion in the history of the city. Everyone
wins.
If you want
to know the financial condition of your government(s), do not look in the
budget. Get the CAFR.
The Synergistic Magic of
Economics.
What
happens when the government holds the $259 million.
|
(In Thousands) |
Investment Income |
Per Capita |
Family of 4 |
|
|
The
government holds and investments the surpluses at 4.5%. |
11,653 |
23 |
92 |
|
Here
is what happens when the $259 million is returned to the taxpayers (the private
economy).
|
(In Thousands) |
Surplus Effect |
Per Capita |
Family of 4 |
|
|
The
surplus is returned to the taxpayers. |
258,950 |
509 |
2,038 |
|
|
Wages are
increased. |
129,475 |
255 |
1,019 |
|
|
City
government revenues increase. |
46,765 |
92 |
368 |
|
|
State
government revenues increase. |
58,457 |
115 |
460 |
|
|
Federal
government revenues increase. |
116,913 |
230 |
920 |
|
|
Total Benefits... |
|
1,201 |
4,805 |
|
In
addition, 5,846 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.
When governments lower taxes, government revenues
increase
Yes, this is
true. Why does President Bush want to lower taxes - to stimulate the economy so
the Federal government can earn more revenue. There are those in Congress who
say lowering taxes will result in deficit spending. This is absolutely false.
If anyone is interested in the proof for this principle, here is where it can
be found -
If
governments hold and invest the surpluses, they will earn about 4-5% on the
money. If the city government returns the money to the people, it will receive
about 16% on the money based on the increased economic activity. Elected
official do not understand economics.
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 2 million jobs were
lost and the economy, already in a recession, continues to
deteriorate.
As the above
economic impact chart shows, if the city returned the $259 million in surpluses
to the people the city economy would grow by $1,150 per capita. That is 2.7
times the amount the Federal government used to stimulate the U.S. economy.
Businesses net incomes could double or triple. This is elementary
economics.
There is no need for a
budget crisis, an economic recession or unemployment in Tucson.
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 Tucson 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
You can verify the data
yourself.
Get a
copy or download the FY 2002 CAFR (see below for the downloaded
address).
Go to and
read the first part of the following section on how to read the CAFR for
surpluses:
From the Exhibit A below, which
contains the page number, fund and surplus amount in the CAFR, compare the
amounts to the CAFR. [You will have to add up the amounts.]
You have
just proved to yourself the surpluses exist.
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 city officials (or all your city officials).
Bob Walkup,
Mayor, email_mayor@mail.ci.tucson.az.us Kathleen
Dunbar (Ward 3), ward3@ci.tucson.az.us Jose Ibarra
(Ward 1), jibarra@ci.tucson.az.us Fred
Ronstadt (Ward 6), ward6@ci.tucson.az.us Steve Leal
(Ward 5), ward5@ci.tucson.az.us Shirley Scott
(Ward 4), ward4@ci.tucson.az.us Carol West
(Ward 2), cwest@ci.tucson.az.us
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-Tucson-AZ-CY1.htm.
Exhibit A
The 2002
CAFR is located at:
http://www.ci.tucson.az.us/finance/
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 Tucson, AZ CAFR- FY 2002
CAFR Page |
List of
Investments By Fund (In Thousands) |
Surpluses |
Notes |
|
Governmental Funds: |
|
|
18 |
General |
17,991 |
|
18 |
Mass Transit |
|
|
|
Special Revenue Funds: |
|
|
67 |
Solid Waste Management
Fund |
5,538 |
|
67 |
Library Fund |
3 |
|
67 |
Public Safety Academy
Fund |
210 |
|
68 |
Convention Center
Fund |
2,372 |
|
68 |
H.U.R.F Fund |
26,985 |
|
68 |
Civic Contribution
Fund |
1,661 |
|
69 |
Human and Community Development
Fund |
169 |
|
69 |
Public Housing Fund |
2,339 |
|
69 |
Miscellaneous Housing Grant
Fund |
447 |
|
70 |
Other Federal Grants
Fund |
38 |
|
70 |
Non-Federal Grants
Fund |
58 |
|
|
Permanent Fund: |
|
|
|
Civic Endowment Fund |
|
|
|
Debt Service Funds: |
|
|
72 |
General Obligation Bond and
Interest Fund |
15,010 |
|
72 |
Street and Highway Bond and
Interest Fund |
11,108 |
|
72 |
Special Assessment Bond and
Interest Fund |
1,380 |
|
|
Capital Projects Funds: |
|
|
73 |
1994 Street and Highway
Improvement |
5,509 |
|
73 |
2000 Street and Highway
Improvement |
3,120 |
|
74 |
1984 General
Obligation |
884 |
|
74 |
1994 General
Obligation |
8,868 |
|
74 |
2000 General
Obligation |
28,630 |
|
75 |
Special Assessment
Construction |
|
|
|
Proprietary Funds: |
|
|
|
Enterprise Funds: |
|
|
23 |
Water Utility Fund |
60,755 |
|
23 |
Golf Fund |
382 |
|
|
Internal Service Funds: |
|
|
85 |
Fleet Services Fund |
2,856 |
|
85 |
Self Insurnace Fund |
28,508 |
|
|
Fiduciary Funds: |
|
|
|
Pension Funds: (1/2 the actuarial
excesses) |
|
|
66 |
Tucson Supplemental Retirement
System (TSRS) |
|
|
66 |
Arizona Public Safety Retirement
System - Police (6/30/02) |
20,301 |
|
66 |
Arizona Public Safety Retirement
System - Fire (6/30/02) |
13,032 |
|
88 |
Deferred Compensation
Fund |
|
|
88 |
Supplemental Retirement
Fund |
|
|
|
Agency Funds: |
|
|
90 |
Sewer User Fee Fund |
796 |
|
90 |
Employee Prepaid Insurance
Fund |
|
|
|
Total Surpluses
|
258,950 |
|
|
Per Capita
|
509 |
|
|
Family of 4
|
2,038 |
|
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.
Combining State and City Data:
This is what happens when
the State of Arizona and Tucson surpluses are combined:
Arizona-Tucson |
Per Capita |
Family of 4 |
Actual Refund
Amounts: |
|
|
State
|
2,275 |
9,098 |
City
|
509 |
2,038 |
Total
|
2,275 |
11,136 |
|
|
|
Total Economic
Benefits: |
|
|
State
|
5,037 |
20,148 |
City
|
1,171 |
4,683 |
Total
|
6,208 |
24,831 |
|
|
|
Total Jobs
Created: |
City Portion |
|
State
|
23,563 |
|
City
|
5,846 |
|
Total
|
29,409 |
|
This report was prepared
by: Gerald R. Klatt
www.cafrman.com Qualifications
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