Hello TIA Supporter,
Bizarre surprises pop up at every turn when diving into the annual financial reports of different governments. It feels like embarking on a treasure hunt but with little reward.
According to their recent budget escapades it's accounting acrobatics that continue to be the norm to keep Governor Newsom and Mayor Adams in the clear.
But, Truth in Accounting has caught onto the act and we are sounding the alarm for integrity and transparency in government accounting.
As for California, according to CalMatters, "The size of the budget deficit is up for debate: Newsom put the number at $38 billion while the analyst's office says Newsom's own math suggests the hole is deeper — $58 billion — for the 2024-25 fiscal year, which starts July 1."
[TIA Sidenote: Why is there such a significant number discrepancy? Wouldn't best practices dictate these calculations be standardized with strict accounting standards like those the SEC requires of corporations?]
And it gets better. According to David Crane at Govern for California, Governor Newsom has resurrected a 2009 budget gimmick: a budgetary maneuver that moves $1.6 billion worth of payroll expenses due on the last day of the fiscal year, June 30, to the next day, July 1. The result is a net decrease in spending, a cut without actually cutting anything. Read the full article here.
[TIA Sidenote: this accounting trick gives political cover to a spending problem and California isn't the only offender.]
Now, onto some New York City budgeting fun.
Look at clips from this article titled "How Adams Played City Budget Numbers, Conjuring a Crisis" from the independent news source The City.
- "The mayor says his late-2023 program cutbacks were simply good management. Financial watchdogs say strategic projections of dire shortfalls tied to migrant aid created a distorted picture of city finances."
- "The key decision in November that made the forecast so dire was to not update projections for either tax revenues or spending. That resulted in a whopping $7 billion gap to be closed for the fiscal year that begins July 1. "It was an error, and they did this consciously," said Louisa Chafee, director of the IBO. "It was a choice they made." [TIA sidenote: Better accounting standards would eliminate those "conscious choice errors." It should concern everyone when government makes an error by conscious choice.]
- “The Citizens Budget Commission issued a report that showed 80% of the savings would not actually affect operations, with much of the reductions coming from accounting maneuvers like recognizing underspending or booking savings from jobs that had not been filled." [TIA sidenote: notice the term accounting maneuvers. Accounting standards matters and taxpayers expect their government to have the strictest standards]
- "It is critical to underscore the need for a better approach to budgeting that is based on a more accurate and shared set of facts,’ Council Speaker Adrienne Adams and Council Finance Chair Justin Brannan said in a joint statement." [TIA sidenote: we couldn't agree more! #Factbasedccounting]
- "Former Speaker Melissa Mark-Viverito predicted the scenario would make it more difficult to enact a budget. ‘You've just created and exacerbated the bad will because now they can't trust what the mayor says,’ she told Politico."
Read the full article here. [TIA sidenote: Passing our model legislation would stop this nonsense so spending could be prioritized for the people over politics and that would go a long way in building back trust.]
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Bravo to those people for calling this accounting nonsense out!
TIA will work to enlighten them on the accounting solutions that could help them dodge the pitfalls of these fiscal smoke and mirrors.
Imagine if our government had accounting rules as strict as the SEC requires of corporations. Isn't it curious that the SEC tightens the reins on corporations for transparency, but the government wants a free pass. Is that why many government entities are pushing against the Financial Data Transparency Act so hard? It appears that the idea of making government financials more transparent and standardized, which the SEC requires for publicly traded companies, seems chilling and untenable to elected officials.
Is it complacency, complicity, or just a long-running conspiracy? You decide.
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Five Cities Early Release
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New York City gets an F [contact elected officials here]
$177.6 billion in the hole/$61,800 per Taxpayer Burden™
San Francisco gets a D [contact elected officials here]
$2.4 billion in the hole/$8,800 per Taxpayer Burden™
Los Angeles gets a C [contact elected officials here]
$2 billion in the hole/$1,500 per Taxpayer Burden™
Chicago gets an F [contact elected officials here]
$38.4 billion in the hole/$42,900 per Taxpayer Burden™
Dallas gets a D [Contact elected officials here]
$3.7 billion in the hole/$9,600 per Taxpayer Burden™
The TIA team is actively reaching out to mayors and council members, sharing the reports findings and guiding them toward effective and practical solutions for the fiscal challenges facing them and the taxpayers. Please follow our lead and tell them to adopt our recommendations or legislation. If they don't hear from us nothing will change.
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Because of your continuous support on this vital yet mostly overlooked accounting matter, we're thrilled to announce that we will once again feature the names of our annual supporters in our next report.
If you haven't contributed to the TIA "better accounting movement," seize this opportunity to make a difference!
By donating now, your name or company name can be displayed in the report, showcasing your commitment to sensible, non-partisan financial reforms. The more names we have, the stronger our movement becomes!
Join us in making a positive impact today.
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"You can't help people if you can't manage the money." - Mark Funkhouser
Set against the backdrop of the Financial State of the Cities report, this educational conversation will dive into the fiscal condition of the 75 largest cities nationwide.
Our distinguished guest, Mark Funkhouser, has a Ph.D. in Public Administration and Urban Sociology from the University of Missouri-Kansas City and is an expert in performance auditing, municipal finance, process improvement, and analytical skills. He serves as President of Funkhouser & Associates, a consulting firm specializing in government operations and public finance. He has many years of experience helping public officials and their private sector partners create better, more fiscally sustainable communities. You can find his insights and opinions on effective governance through a regular column in Governing.com and Governing Magazine, and now through Forbes, Route Fifty, and his monthly newsletter. He is passionate about promoting honest, competent, and trustworthy government and has received multiple honors and awards for his contributions to the field. We are privileged to discuss with him the findings in our report, which center around the effect of COVID-19 relief money, the increase of tax revenue after the lockdown, and how stock market volatility impacts all of our cities.
We look forward to hearing his suggestions regarding the measures struggling cities can adopt to regain fiscal health. And how can already robust cities enhance their resilience further?
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