CA CAFR: Parks Dept. ‘found’ $54 million, $2.3 billion more now ‘found;’ full $600 billion next?

For five weeks I journalistically hammered that California’s Comprehensive Annual Financial Report (CAFR) reveals $600 billion in surplus taxpayer assets, and the various local government agencies’ CAFRs are data-sampled to total $8 trillion in surplus assets.

Last week, the California Parks and Recreation Department was found to be hiding $54 million in assets; more than twice their claimed $22 million budget deficit. This disclosure of fiduciary malfeasance led to the department director’s resignation, and the firing of the second-in-command.

Today, the San Jose Mercury News reports a total of $2.3 billion more was “found” in 500 accounts.

Feel free to share the following:

Let’s summarize what we’ve documented so far about the data of California’s 2011 Comprehensive Annual Financial Report (CAFR) and what it means for the state’s 12 million households (22-minute television interview of my explanation here):

So the natural question is if the state’s withholding of $600 billion in our cash and investments does not fund pensions, address a budget deficit, or prevent devastation to infrastructure, how can we best restructure the purpose and use of OUR MONEY for optimal public benefits?

I see three obvious solutions in monetary reform, public credit/banking, and this reform of CAFR-disclosed trillions in surplus taxpayer accounts.

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  • jo6pac

    WOW what a suprise. I wonder how far it will go. I’ll send this off to my state reps and see what they have to say.

    • Carl Herman

      Cool, jo6pac. I recommend calling their office, making sure someone understands it, and then asking for your Senator and Assemblymember’s response of what he/she recommends to do about the $600 billion in surplus taxpayer assets. If you want to document it, I’ll post what happens :)

      I make this offer/invitation to anyone in California. I can be reached at: Carl_Herman@post.harvard.edu

      • jo6pac

        Thanks, I have busy Monday/Tuesday but will work on it Wed. I’ll get back to you if they even talk to me.

  • gozounlimited

    Getting Closer to San Diego ….. Congratulations!

  • EVmarc

    thanks Carl
    local TV news in Fresno
    had story of missing parks money and hinted something was wrong (like a crime maybe)
    couple days later oh no just incompetence
    money won’t be spent on parks even though law says must be
    brown and legislature fighting about who gets to steal it
    no point on the news that they are breaking the law
    the media just keeps putting it under the table
    Hay, Carl stay on this, maybe mainstream media will pick up
    those in CA govt who control CAFR only intent is to generate fees for their friends
    Catherine Austin Fitts 2006

    • http://jillstein.org victronix

      An excellent summary!

  • Will Gregory-

    Mr. Herman,

    Key quotes: “The people of California have a right to know how their fiscal accounts are managed.’
    ” But there are ways out.” “California is a prosperous state. It is political constraints that are crippling it.” ” Too many of California’s budget are protected by legislative decree or political muscle to allow balanced decisions in time of distress.”

    The two authors of this piece are ” highly astute economic observers” of the present economic scene in the U.S. . What is interesting, as they lament the demise of California’s cities and its economic decline as a state is that, neither gentlemen mention or even seem to be aware of the billions of dollars in the state of California’s own Comprehensive Annual Finance Report. Would it be worth a try to contact either Mr. Ferguson or Mr. Johnson to solicit their comments on this issue?

    Municipal bankruptcy: The lessons of California
    Its various governments are systemically set up to be financial disasters. But there are ways out.

    Stockton

    Members of the Stockton city council voted 6-1 in June to adopt a spending plan for operating under Chapter 9 bankruptcy protection. Above: The old Bank of Stockton building. (David Paul Morris / Bloomberg / July 30, 2012)

    By Thomas Ferguson and Robert A. Johnson

    July 31, 2012

    In California, the names of the latest victims are well known. San Bernardino, Stockton and Mammoth Lakes all filed for bankruptcy within the last few weeks. And Vallejo emerged from Chapter 9 protection just last year. The questions appear to be “Why all in California?” and “Who will be next?”

    Although California’s problems are extreme, the state is hardly alone in financial difficulties. Towns and counties in Alabama, Illinois, Michigan, New Jersey, New Hampshire, New York, Pennsylvania and Rhode Island are all having trouble meeting their financial obligations. If these conditions continue to spread, the United States will be facing a crippling debt crisis at the state and local levels, which is where Americans receive much of what matters for their quality of life.

    This was a central point in a report released July 17 by the State Budget Crisis Task Force headed by former Federal Reserve Chairman Paul Volcker and former New York Lt. Gov. Richard Ravitch.

    Simply put, in the aftermath of the financial crisis emanating from Wall Street, the federal financial mess is bleeding over into state budgets in profound ways, adding enormous costs to already overburdened state coffers. That spillover, in conjunction with broader national crises in finance and healthcare, is overwhelming state and federal finances.

    California has added challenges that make the problem even trickier. It must maintain massive education, infrastructure and prison programs with limited ability to raise money. The prison expenditures are particularly onerous. The state prison population is more than 160,000, and Sacramento spends roughly $50,000 annually to house each inmate. Not surprisingly, California has the costliest prison system in the country.

    Despite the protests of powerful interest groups in the corrections business, California cannot afford to continue to crowd out other essential services to pay that group so handsomely. The state government must act now to overcome the prison interests’ lucrative campaign contributions to legislators — and outsize influence — and bring that sector back into line.

    Additionally, local governments are limited in the amount of revenue they can raise by notoriously strict property tax caps set by Proposition 13. The state’s capacity to raise money also is hindered by its stagnant political system, which sets up the dynamic in which the only answers to an economic shock or shortfall are to vigorously restrict services or sell them off. Too many elements of California’s budget are protected by legislative decree or political muscle to allow balanced decisions in times of distress.

    Taken together, California’s state and local governments are systemically set up to be financial disasters. That’s why California is an outlier nationally in the fiscal crunch and why it has become ground zero for municipal debt crises and bankruptcies. California is a prosperous state. It is the political constraints that are crippling it.

    But other states, like New York and Illinois, should pay attention. If they don’t take action, the extremes of California will ultimately become a reality in those states too.

    So what can be done? We can start by asking why the Federal Reserve cannot refinance municipalities to preserve essential services at interest rates comparable to what it gave to rescue the insolvent banks that created this mess. And it is high time officials moved boldly to force the banks to break off the chain of disastrous swap contracts that have cost local authorities and states so much money.

    Another key point to keep in mind is the importance of strong regulatory policies. In a world in which financial institutions can receive zero-interest loans from the Federal Reserve and then lend out the capital at much higher interest rates, the opportunities for financial mischief are plentiful.

    For years, bankers have used municipal bonds from California and elsewhere as playthings. Wall Street has consistently helped elected officials mask budgetary problems with complex derivatives that create the appearance of cash flow today by selling years of future revenue. The only purpose for these securities is to deceive the public and create fees for the financial firms.

    Financial chicanery in these realms is demoralizing, harmful, expensive and dangerous. California experienced this type of treachery firsthand in the 1990s when Orange County declared bankruptcy after being sold highly risky securities by Merrill Lynch. That’s why it’s important to listen to the Vocker-Ravitch task force’s call for reforming budgetary systems in the states to make them accountable and transparent and expose financial scams to deter their widespread use. The people of California have a right to know how their fiscal accounts are managed.

    Thomas Ferguson is a professor of political science at the University of Massachusetts, Boston; Robert A. Johnson is executive director of the Institute for New Economic Thinking. Both are senior fellows at the Roosevelt Institute.

    • Carl Herman

      Thanks for this, Will. Feel free to contact those authors. The ones I’ve contacted with the first few articles have responded to me with silence.

  • http://jillstein.org victronix

    August 3, 2012
    Audit finds no other hidden assets in California budget
    http://blogs.sacbee.com/capitolalertlatest/2012/08/audit-finds-no-other-hidden-assets-in-california-budget.html

    Overview here — http://www.dof.ca.gov/special_fund_balance/

    It was all just a mix-up . . .

 

 

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