Tucson, AZ Has At Least $259 Million In Surpluses of the Taxpayers Money it is not using.

  FY 2002 Report Home Page

 

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?

  • 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 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
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