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Cooking the state books

The games politicians play while balancing the California budget

By Reed L. Royalty
Monday, August 18, 2008


When or if Gov. Arnold Schwarzenegger and the Legislature proudly announce that California has a balanced state budget, don't believe it. It will be the result of some or all of these fraudulent practices that are common in government.

•Raising the sales tax "temporarily" for three years, as has been proposed by Gov. Schwarzenegger. There's almost no such thing as a temporary tax. Bureaucrats, who are smarter at these things than we are, will work tirelessly to extend it indefinitely. And of course state government will "need" the additional revenue more in three years than it does now.

•Taxing an unpopular minority: rich people, smokers, energy companies. A classic case of what Lord Acton called "the tyranny of the majority."

•Calling reductions in budget requests "cuts," even though the amount appropriated exceeds last year's totals.

•Counting borrowed money as "revenue." Or borrowing money from a "rainy day" account and calling it revenue.

•Shifting expense from this year to next year by paying bills late. Or by moving paydays from the last day of the month to the first day of the following month, thereby moving half a month's payroll expense into next year.

•Moving collection of certain taxes from early next year to late this year, so they can be counted as revenue this year.

•Overestimating revenue. When it comes in lower, calling it an "unexpected shortfall that is beyond our control."

•Underestimating expense. When it comes in higher, blame it on "unexpected costs for emergencies beyond our control."

•Shifting back and forth between cash accounting (i.e., money on hand) and accrual accounting (counting income or expense at the time incurred, regardless of when received or paid out).

•Borrowing from the future to pay for the present by issuing bonds to pay for ongoing expenses (rather than for the durable infrastructure projects for which bonds are intended). Voters were party to such a scheme by approving Gov. Schwarzenegger's Proposition 57 in the March 2004 election. Did it get the state out of debt, as the governor promised? Nope. Got us farther in.

•Selling one government facility to another, and financing the sale with general obligation bonds. That way taxpayers pay twice for the same facility. Gov. Schwarzenegger's variation: issue bonds backed by future state lottery revenue.

•Giving public employees increased pension and health benefits that are beyond taxpayers' means today (counting on future taxpayers to pay the bills) instead of requiring that such benefits be pre-funded immediately with cash investments.

•Transferring money from local programs to the state to make the state deficit look smaller. Redevelopment districts and voter-approved Proposition 10's tobacco taxes for children and families have been targeted already this year.

Almost any of these shell games would land a private businessperson in jail. Why do we hold businesses and individuals to higher standards than we do our elected officials?


Reed L. Royalty is President, Orange County Taxpayers Association
Published in the Orange County Register

Last Updated: Sep 11, 08

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