The website is using people's general ignorance about public finance and having reserves for things to be paid out in the future. For example, the website makes a big deal about all of Massachusett's Turnpike Authority's multi-billion dollar reserves. Well, they are holding $10 billion to pay off the "Big Dig" when finished (using bonds short term I believe). It is just an accounting game (governments can be both borrowers and lenders at the same time--what is relevant is how it all washes out). Other earmarked reserves have strong legal stipulations about their use, state governments in power would love to beggar the future to look good now (that is what bond funding does as well). There are important issues related to public finance (most of which I do not know much about) but misleading people about the easy stuff may get you demogogic cred but it is not helpful.
There are times to beggar the future in order to help the present. Once you take progressive taxation off the table, using bonds counter-cyclically is a pretty standard thing to do (note raidingearmarked cash reserves has the same net effect on a balance sheet but I am sure public finance/macroeconomists can tell you which is better stimulus).
Jim
"and they would have me sing of you, that you were just on loan. another flower in the basket of the master. but if i bite the tongue that speaks of you, and i change your room around, will i forget you, will i forget you any faster?"
--Juliet Turner
-----Original Message----- From: Steven [mailto:mailinglist at navari.com] Sent: Mon 1/5/2004 9:48 AM Subject: [lbo-talk] State Surpluses?
In summary, the primary arguments of the author are that:
(i) state and local governments are currently carrying large asset bases on
their balance sheets;
(ii) while many of these assets are public infrastructure or held for the
public trust, much of this asset base is extremely liquid (i.e. cash &
investments) and is pooled (see note below). The author refers to these
liquid assets as "surpluses".
(iii) these surpluses are not included in these [state or local] gov'ts'
annual budgets, but are included in a separate report called the
Comprehensive Annual Financial Report (CAFR);
(iv) while annual budget shortfalls may exist due to a shortage of revenues,
these surpluses may be liquidated in order to cover any current year
shortfall without affecting government's ability to function in the current
year (or future years assuming that the gov't can secure appropriate
revenues);
(v) politicians do not openly discuss these balance sheet surpluses when
annual budgets are debated. The public is therefore unaware of these
surpluses as well as the ability to liquidate these surpluses in order to
cover annual shortfalls.
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