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Introduction The State of Oregon at the State-level has approximately $11.04 billion of the taxpayer's money it is not using, i. e. potential surpluses equal to $3,147 for every man, women and child in Oregon or $12,590 for a family of 4. This does not include all the additional potential surpluses that exist in the school districts, cities, or counties in Oregon. The Oregon 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 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. 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.
Why does Residential Assistance have reserves of 16 years of expenditures? This is $74 million. Employment Services made a FY 2002 profit of $68 million but has a reserve of $284 million. Consumer Protection made a FY 2002 profit of $10 million but it has a reserve of $53 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.
SAIF Corporation (workers' compensation) had 67 years of reserves for its expenditures. This is $3 billion. Unemployment Compensation had net expenses of $143 million with a reserve of of $1.6 billion. That is 11 years. Housing and Community Developoment made a profit of $8 million, all of it from cash and investments of $641 million. These are only six (6) of the 43 or so funds listed in the report below that make up the $11.04 billion in potential surpluses. The State legislators should include previous years revenues not used in the budget process. 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. The State legislators should take into consideration the entire financial condition/status of the State in the budgetary process by including the fund balances in the CAFR as being a part of the budget as "previous years' revenues". This system is covered in the CAFR Budget System. If the 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.
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. If this were accomplished, the State would have a huge surplus to refund to the taxpayers. Such a refund would create 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 in the budget. Get the CAFR.
What are these surpluses you 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.
Potential surpluses are just the beginning As stated above Oregon's potential surpluses at the State-level for FY 2002 had reached $11.04 billion. But the $3,147 per capita is just the tip of the iceberg. It is what happens if that $11.04 billion is returned to each Oregon taxpayer on an equal basis that makes history. Using elementary economic principles found in every Econ 101 text book, after one year the refunds turn into total benefits of $6,924 per capita or $27,697 for a family of 4 and much more. Here is a chart that tells the whole story, but only for the major portion of State-level government, not the potential surpluses at the school districts, cities, or counties in Oregon. Their potential surpluses would be added to the amounts indicated below. Economic Impact Analysis Summary - Oregon CAFR Review - FY 2002
FIRST YEAR BENEFITS PER CAPITA
| Economic Principle |
|
Explanation |
|
Amount
(In Thousands) |
Per Capita |
Family of 4 |
| Actual Refund |
|
Total Potential Surpluses |
|
$ 11,038,008 |
$ 3,147 |
$ 12,590 |
| |
|
|
|
|
|
|
| Economic Output Multiplier (EOM) |
|
For every $1 of refund to the people the economic activity increases by $2. This is the increase in Gross State Product (GSP). Results in increased sales for local businesses. |
|
$ 22,076,016 |
|
|
| |
|
Increase in GSP - Sales |
|
18.10% |
|
|
| |
|
|
|
|
|
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| Economic Earnings Multiplier (EEM) |
|
For every $1 of refund to the people the wages paid to each household wage earner increases by $.50. |
|
$ 5,519,004 |
$ 1,5174 |
$ 6,295 |
| |
|
|
|
|
|
|
| Employment Ratio (ER) |
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For each $100,000 in increased economic activity, one additional job is created |
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220,760 jobs created |
|
|
| |
|
|
|
|
|
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| Increase in State Revenues means a Reduction in Taxes |
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All governments earn revenue based on the economic activity in their respective taxing jurisdiction. For every $1 of economic activity, the State receives revenue of approximately $.10. This increase in revenue should result in reduced taxes. |
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$ 1,545,321 |
$ 441 |
$1,763 |
| |
|
|
|
|
|
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| Increase in Local Revenues |
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For every $1 of economic activity, the local governments receive revenue of approximately $.08. |
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$ 1,766,081 |
$ 504 |
$ 2,014 |
| |
|
|
|
|
|
|
| Increase in Federal Revenues |
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The Federal government earns $.20 on every $1 in economic activity. |
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$ 4,415,203 |
$ 1,259 |
$ 5,036 |
| |
|
|
|
|
|
|
| |
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TOTAL BENEFITS THE FIRST YEAR… |
|
|
$ 6,924 |
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$ 27,697 |
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 State government returns the money to the people, it will receive about 20% 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 1 million jobs were lost and the economy, already in a recession, continues to deteriorate. As the above economic impact chart shows, if the State returned the $11.04 billion in surpluses to the people the State economy would grow by $6,295 per capita. That is 15 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 Oregon.
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.
What you can do 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 State representative (or all your State representatives). 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-OR-S1.htm.
Locating Your State Representative
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Locate Your State Elected Officials Here: |
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Exhibit A The 2002 CAFR is located at: http://scd.das.state.or.us/publications.htm
Review of The State of Oregon CAFR- FY 2002
| CAFR Page |
List of Investments By Fund (In thousands) |
Potential Surpluses |
Notes |
| |
Governmental Funds and Activities: |
|
|
| 28 |
General |
|
|
| 28 |
Health and Social Services |
343,934 |
|
| 28 |
Public Transportation |
521,949 |
|
| 29 |
Environmental Management |
200,370 |
|
| |
Special Revenue: |
|
|
| 108 |
Agricultural Resources |
15,594 |
|
| 108 |
Business Development |
66,839 |
|
| 108 |
Community Protection |
35,670 |
|
| 109 |
Consumer Protection |
52,690 |
|
| 109 |
Educational Support |
65,302 |
|
| 109 |
Employment Services |
284,216 |
|
| 109 |
Nutritional Support |
294 |
|
| 109 |
Residential Assistance |
74,171 |
|
| 109 |
Other Special Revenue |
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17,792 |
|
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Debt Service: |
|
|
| 110 |
Revenue Bond Fund |
76,024 |
|
| 110 |
Certificates of Participation |
36,793 |
|
| 110 |
General Obligation Bond |
4,527 |
|
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Capital Projects: |
|
|
| 110 |
Capital Projects |
73,264 |
|
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Permanent Fund: |
|
|
| 111 |
Education Endowment |
228,197 |
|
| 111 |
Housing Guarantee |
15,680 |
|
| 111 |
Other Permanent |
12,712 |
|
| |
Proprietary Funds: |
|
|
| |
Enterprise Funds: |
|
|
| 36 |
Housing and Community Services |
641,478 |
|
| 36 |
Veterans' Loan |
838,727 |
|
| 36 |
Lottery Operations |
272,266 |
|
| 37 |
Unemployment Compensation |
1,598,155 |
|
| 37 |
University System |
637,467 |
|
| |
Nonmajor Funds: |
|
|
| 118 |
Energy Loan |
72,216 |
|
| 118 |
Water Resources |
3,767 |
|
| 118 |
Business Development |
6,192 |
|
| 119 |
Special Public Works |
63,029 |
|
| 119 |
State Hospitals |
9,357 |
|
| 119 |
Liquor Control |
18,310 |
|
| 119 |
Veterans' Home |
527 |
|
| 119 |
Water |
|
48,627 |
|
| 119 |
Other Enterprise |
38,265 |
|
| |
Internal Service: |
|
|
| 128 |
Central Services |
286,456 |
|
| 128 |
Legal Services |
11,485 |
|
| 128 |
Banking Services |
1,995 |
|
| 129 |
Audit Services |
1,350 |
|
| 129 |
Forestry Services |
3,412 |
|
| 129 |
Other Internal Service |
6,871 |
|
| |
Fiduciary Funds: |
|
|
| |
Pension: |
|
|
| 138 |
Public Employees Retirement |
|
|
| 138 |
Postemployment Healthcare |
|
|
| 138 |
Deferred Compensation |
|
|
|
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Private Purpose Trust: |
|
|
| 140 |
Common School |
732,479 |
|
| 140 |
Other Private Purpose Trust |
35,308 |
|
| |
Investment Trust |
|
|
| |
Agency Funds |
|
|
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Discretely Presented Component Units: |
|
|
| 48 |
SAIF Corporation |
2,987,722 |
|
| 48 |
Oregon Health and Science University |
596,529 |
|
| 48 |
Children's Trust Fund of Oregon |
|
|
| |
Total Potential Surpluses… |
11,038,008 |
|
| |
Per Capita… |
3,147 |
|
| |
Family of 4… |
12,590 |
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Note: For those familiar with governmental accounting, for potential surpluses we basically used GFOA Balance Sheet Account Classification Codes 101, 102, 103, 151, 153, 170 and 181.
This report was prepared by:
Gerald R. Klatt
www.cafrman.com BACK TO TOP
This report can be copied, reprinted, and/or electronically transmitted to others and/or printed in the news media. This report should not be used for commercial purposes.
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