Governor Dannel Malloy is attempting valiantly to upgrade Connecticut’s ancient union encrusted educational establishment. Naturally, he ran into problems with those in the state who defend the status quo, Connecticut’s powerful teacher’s union among them. In a politics of narrow interests, settled opinion is king, because those who have secured their interests, sometimes at the expense of the general good, are understandably reluctant to surrender the golden favors showered upon them by a bought government. God help the man who unsettles settled opinion.
Mr. Malloy has proposed to attach teacher tenure to measurable performance, according to Zach Janowski. As in most businesses, including the sports arena, those who do not measure up will be let go. Among those ardently defending the status quo is once radical Big Thinker Jonathan Pelto, whose associations with teacher unions are warm and cordial. These days, whenever Mr. Pelto attempts to throw his two cents into the conversational ring, he is vigorously assaulted by one or another fervid Malloyalist.
Most recently, gubernatorial Senior Advisor Roy Occhigrosso, dubbed by humorist Colin McEnroe “The Hammer”, took off after the inoffensive Mr. Pelto following a critical piece Mr. Pelto had written on his blog, “Wait, What?” Concerning one of Mr. Pelto’s recent productions, Mr. Occhiogrosso responded, “Jonathan’s screeds have become increasingly delusional as time has gone on. He’s an unstable individual, who’s bitter that he didn’t land a job in the Administration. Although I’m hard pressed to see why anyone would hire him to do anything, he does describe himself as a ‘consultant.’ Is someone paying him to peddle information that’s not true?” One detects in Mr. Occhigrosso’s snake spittle the venom of a competitor. Mr. Pelto and his “screeds” have been rattling around in Democratic politics for about thirty years, during which time he has managed to sound like the choral leader of the Chorus of Crying State Unions (CCSU). But if during this time he had exhibited signs of instability, delusion and bitterness, someone other than Mr. Occhiogrosso would have noticed and perhaps had him committed, as Mr. Occhiogrosso evidently is, to the Malloy administration.
Upon joining the Malloy administration as a senior adviser, Mr. Occhiogrosso resigned as partner in charge of the Hartford office of the Global Strategy Group, a national polling and communication strategy group with a stable of political, corporate and non-profit clients.
Mr. McEnroe, unfailingly effervescent, noted that while Mr. Occhiogrosso’s boss, Mr. Malloy, was “an edgy guy himself… Occhiogrosso — and I say this with love — is proof of the maxim that when you're holding a hammer, everything looks like a nail. Roy isn't holding a hammer. He is one. It's as if Newt Gingrich went looking for someone to soften his angry, aggressive side and hired Bill O'Reilly.”
Oddly enough, Mr. Pelto and Mr. Occhigrosso started their political lives on the same side of the progressive barricade. In one of his earlier incarnations, Mr. Occhiogrosso was associated with a UConn Health Center union. His ideological nursemaid was Leo Canty, the Second Vice President of the American Federation of Teachers in Connecticut and a member of AFT Local 3837, University Health Professionals. Mr. Canty, also the Vice President of the Hartford Labor Council, described himself in his campaign literature when he ran for state Representative in the 15th district as “a strong progressive politics activist.”
The real difference between Mr. Pelto and Mr. Occhiogrosso lies in who rather than what they serve. The cleavage apparent between them turns on two questions: Should tenure be used to protect incompetence, and to what extent should some of the functions of public education be privatized?
The partial privatization of a sclerotic public education fiefdom is the great bugaboo of those who would preserve the status quo, however harmful its effects on the public good. In this regard, Mr. Pelto is determined that no progress in this direction should be made. Mr. Occhiogrosso and Mr. Malloy presently appear undecided how they may best exploit the possibility of a partial, carefully controlled privatization of the public education behemoth. Teacher tenure appears to be on the ropes, but Connecticut’s powerful teacher unions have friends inside important General Assembly committees. In the past, it may be recalled, unions have been adept at rope-a-dope feints and surprising recoveries.
Showing posts with label Janowski. Show all posts
Showing posts with label Janowski. Show all posts
Wednesday, February 29, 2012
Wednesday, August 3, 2011
The Surplus State
Zach Janowski, the Yankee Institute investigative reporter singled out by incompetent SEBAC leaders in their baseless complaint to the attorney general’s office as a “so called” investigative reporter, has disclosed in his latest report that Connecticut has collected “$1.1 billion more taxes than expected last fiscal year, the same day that Gov. Dannel Malloy’s $900 million retroactive income tax increase went into effect.”
Although the Malloy administration failed to reach by some $400 million the $2 billion in cost savings measures it initially had demanded from SEBAC, the coalition of state unions authorized to negotiate contracts with the administration, the tax increases the administration imposed upon nearly everyone in the state as a part of its “shared sacrifice” effort has, perhaps unsurprisingly, yielded an “unexpected” surplus.
The Malloy surplus, made possible in part by an ex post facto income tax charge, should not astonish those commentators in the state who have previously reported on state budgets. Surpluses were common in the budget years following the imposition of the Lowell P. Weicker Jr. income tax.
The predictable announcements of surpluses during these years of plenty followed an almost religiously observed rite, beginning with an declaration of a possible deficit, followed by an agonizing appraisal of the likely damage done to Connecticut’s fragile social services net should the legislature be so unwise as to insure savings necessary to balance their budget through prudent cuts, followed by a last minute announcement that an unanticipated surplus had magically materialized, obviating the need for cuts and permitting legislators to return to their districts and there proceed to hand out state distributed goodies before their next election.
This budget year, the usual dance varied, but not much, from the usual formula.
Mr. Malloy, the first Democratic governor in more than 20 years, had been wafted into office on a promise that as governor he would not resort to the same discreditable budget persiflage as his predecessors – two Republican governors and another, Mr. Weicker, of indeterminate party status -- all of whom had produces surpluses to avoid raising taxes or cutting costs.
GAAP would be instituted, Mr. Malloy vowed during his campaign, to prevent wily politicians from drawing revenue from future budgets and dragging them into the current year, while at the same time pushing costs into succeeding budgets. The state’s current Comptroller, Kevin Lembo, recently advised that the state’s antique computer system is not prepared to handle such accounting changes; which is all very well and good -- because Mr. Malloy had postponed implementation of the new accounting procedures for a couple of years. And there is no need to fudge figures in any case, because wily Democratic legislators – Big surprise here! – had embedded into the Malloy budget an artificial surplus that would relieve the pressure put upon them to cut costs.
All this spelled frustration for Republicans and others who were trying unsuccessfully to force Democrats who control the legislature to cut costs by denying them revenues. The presence of red ink in a budget usually is a persuasive spending disincentive for rational legislators. But time-serving progressive ideologues committed to wealth transfers from productive workers in the private marketplace to unionized state workers are addicted to reflexive spending. So long as the General Assembly’s table sags with surpluses, crapulous senators and house members will continue to feast on fare taken from the more modest tables of productive workers. Surpluses, which are tax overcharges, are anti-stimulants for anyone who is not a tax consumer. While prudent tax cuts – a prospect far beyond the intention of the average spendthrift politician – stimulate the economy, wealth transfers stimulate the ungovernable appetite of spendthrift politicians who, unlike the fascists of a bygone day, lack in a functioning democracy the means of making the trains run on time.
A handful of legislators in the General Assembly, Sen. Joe Markley of Southington among them, get all this.
“The enormous tax hike,” said Sen. Joe Markley of Mr. Malloy’s tax boost, “was the sad result of our addiction to spending, which we still haven’t kicked. The bigger the tax increase, the more dire its affect will be on our state economy. I’d love to see Malloy call us back and undo some of the new taxes in light of this surplus, but I don’t expect it – big-government types generally celebrate such surpluses, rather than feel ashamed of them.”
A few more Markleys in the General Assembly may save Connecticut the embarrassment of a rapid decline, followed by default.
Although the Malloy administration failed to reach by some $400 million the $2 billion in cost savings measures it initially had demanded from SEBAC, the coalition of state unions authorized to negotiate contracts with the administration, the tax increases the administration imposed upon nearly everyone in the state as a part of its “shared sacrifice” effort has, perhaps unsurprisingly, yielded an “unexpected” surplus.
The Malloy surplus, made possible in part by an ex post facto income tax charge, should not astonish those commentators in the state who have previously reported on state budgets. Surpluses were common in the budget years following the imposition of the Lowell P. Weicker Jr. income tax.
The predictable announcements of surpluses during these years of plenty followed an almost religiously observed rite, beginning with an declaration of a possible deficit, followed by an agonizing appraisal of the likely damage done to Connecticut’s fragile social services net should the legislature be so unwise as to insure savings necessary to balance their budget through prudent cuts, followed by a last minute announcement that an unanticipated surplus had magically materialized, obviating the need for cuts and permitting legislators to return to their districts and there proceed to hand out state distributed goodies before their next election.
This budget year, the usual dance varied, but not much, from the usual formula.
Mr. Malloy, the first Democratic governor in more than 20 years, had been wafted into office on a promise that as governor he would not resort to the same discreditable budget persiflage as his predecessors – two Republican governors and another, Mr. Weicker, of indeterminate party status -- all of whom had produces surpluses to avoid raising taxes or cutting costs.
GAAP would be instituted, Mr. Malloy vowed during his campaign, to prevent wily politicians from drawing revenue from future budgets and dragging them into the current year, while at the same time pushing costs into succeeding budgets. The state’s current Comptroller, Kevin Lembo, recently advised that the state’s antique computer system is not prepared to handle such accounting changes; which is all very well and good -- because Mr. Malloy had postponed implementation of the new accounting procedures for a couple of years. And there is no need to fudge figures in any case, because wily Democratic legislators – Big surprise here! – had embedded into the Malloy budget an artificial surplus that would relieve the pressure put upon them to cut costs.
All this spelled frustration for Republicans and others who were trying unsuccessfully to force Democrats who control the legislature to cut costs by denying them revenues. The presence of red ink in a budget usually is a persuasive spending disincentive for rational legislators. But time-serving progressive ideologues committed to wealth transfers from productive workers in the private marketplace to unionized state workers are addicted to reflexive spending. So long as the General Assembly’s table sags with surpluses, crapulous senators and house members will continue to feast on fare taken from the more modest tables of productive workers. Surpluses, which are tax overcharges, are anti-stimulants for anyone who is not a tax consumer. While prudent tax cuts – a prospect far beyond the intention of the average spendthrift politician – stimulate the economy, wealth transfers stimulate the ungovernable appetite of spendthrift politicians who, unlike the fascists of a bygone day, lack in a functioning democracy the means of making the trains run on time.
A handful of legislators in the General Assembly, Sen. Joe Markley of Southington among them, get all this.
“The enormous tax hike,” said Sen. Joe Markley of Mr. Malloy’s tax boost, “was the sad result of our addiction to spending, which we still haven’t kicked. The bigger the tax increase, the more dire its affect will be on our state economy. I’d love to see Malloy call us back and undo some of the new taxes in light of this surplus, but I don’t expect it – big-government types generally celebrate such surpluses, rather than feel ashamed of them.”
A few more Markleys in the General Assembly may save Connecticut the embarrassment of a rapid decline, followed by default.
Sunday, July 31, 2011
Yankee Institute vs SEBAC, Final Round
Attorney General George Jepsen having investigated a charge made to his office by SEBAC, a coalition of unions the membership of which soon will be voting either to adopt or reject Plan A 2, that the Yankee Institute had used state the state’s e-mail system to communicate with union workers, the attorney general found that the charges against the institute were false. The comprehensive investigation by two state agencies, the attorney general’s office and the state Auditors of Public Account, Mr. Jepsen wrote in his finding, “did not show that the state e-mail system was improperly accessed or compromised in violation of state laws or policies.”
“As part of our inquiry,” Mr. Jepsen wrote, “we reviewed the e-mails sent to state employees and provided by SEBAC. The first e-mail, containing the subject line 'VOTE No twice on concessions… pass it on' was sent on May 24, 2011 at 8:07 pm from 'Lawrence Jones' to a state employee. The second e-mail, containing the subject line ‘http//votenotoconcessions.com,’ was sent to a state employee on June 13, 2011 at 8:07 pm from 'Daniel Luciano.' Neither Lawrence Jones nor Daniel Luciano is listed on the state’s central financial and administrative computer system (CORE-CT) as a state employee. Neither of these two e-mails originated from State of Connecticut internet protocol (IP) addresses. Each originated outside the state e-mail system and reflected a Yahoo e-mail address. The e-mails were sent to IP addresses leased by the State of Connecticut. State information systems security personnel informed us that the e-mails were not sent from within the state system, and there was no evidence that the safeguards in place to protect the state’s network from hackers or other intrusions were compromised or altered to permit or facilitate the transmission of these e-mails.”
Mr. Jepsen is to be lauded for not having allowed the leaders of SEBAC to use his office as a political tool for the purpose of discrediting the institute on false charges that, had they been sustained, might have succeeded in drawing public attention away from SEBAC’s botched attempt to convince rank and file union members to vote in favor of Governor Dannel Malloy’s doomed Plan A.
The same union leaders who falsely accused the institute of illegalities recently unilaterally changed union by-laws so that a previous vote on Plan A would once again be voted upon under circumstances more favorable both to Mr. Malloy and SEBAC negotiators, causing one commentator – yours truly – to note that SEBAC, having found it impossible under the old by-laws to fix a vote, had discovered a way to fix the voting process to its advantage. This kind of transparent attempt to fix a vote could only succeed if union leaders were to spew out a cloud of skunk scent to distract public attention from their own dramatic failings. The Yankee Institute, and more especially Zach Janowski, the institute’s investigative reporter, were convenient scapegoats upon which SEBAC leaders sought unsuccessfully to pin their own too obvious failings.
SEBAC’s objections to Mr. Jepsen’s finding were amusingly predictable. Leaping over the results of Mr. Jepsen’s exhautive examination, SEBAC lamented that the architecture of the state’s e-mail system “is apparently arranged so that outside groups can get around inadequate software restrictions and distribute emails through the system without being in violation of computer hacking laws -- and apparently without even being subject to detection” – and never mind that Mr. Jepsen found no instance of the state’s email having been hacked by the institute. SEBAC then noted that the institute’s political interests include “producing painful job cuts and ‘downsizing’ state government, which is really just code for privatizing public services.” In fact, Mr. Cullen has noted that the institute favored Plan A – the very same plan promoted by SEBAC union leaders – over Plan B, which recently has been implemented by Mr. Malloy and includes painful cuts. No doubt the institute, along with many governors and legislators, favors the privatizing of public services as a means of controlling unsustainable costs. SEBAC’s objection to the institute’s view on privatization might have been more justly urged in a letter to the editor; SEBAC thought it rose to the level of a crime and engaged the attorney general as an instrument to harass and punish an organization for having taken advantage of its constitutional right disagree with the leaders of SEBAC.
Yankee Institute Director Fergus Cullen commented following Mr. Jepsen’s finding, “Making reckless accusations without a shred of evidence damaged the union's credibility. Rank-and-file state employees deserve better for their dues than the stunning incompetence of union staff throughout the concessions ratification process."
Mr. Cullen made his comment but a few hours before he had been told by Trinity College that the institute was being given the boot or, as Mr. Cullen, whose sense of humor is unfailing even in trying circumstances, preferred to put it – being expelled – from the Trinity College campus in Hartford where, for the past 13 years, the institute has stoutly defended educational institutions, private enterprise and constitutional rights more often miss-cited than observed by its detractors. It is not known what part SEBAC or union friendly legislators may have played in the institute’s unexpected expulsion from Trinity.
“As part of our inquiry,” Mr. Jepsen wrote, “we reviewed the e-mails sent to state employees and provided by SEBAC. The first e-mail, containing the subject line 'VOTE No twice on concessions… pass it on' was sent on May 24, 2011 at 8:07 pm from 'Lawrence Jones' to a state employee. The second e-mail, containing the subject line ‘http//votenotoconcessions.com,’ was sent to a state employee on June 13, 2011 at 8:07 pm from 'Daniel Luciano.' Neither Lawrence Jones nor Daniel Luciano is listed on the state’s central financial and administrative computer system (CORE-CT) as a state employee. Neither of these two e-mails originated from State of Connecticut internet protocol (IP) addresses. Each originated outside the state e-mail system and reflected a Yahoo e-mail address. The e-mails were sent to IP addresses leased by the State of Connecticut. State information systems security personnel informed us that the e-mails were not sent from within the state system, and there was no evidence that the safeguards in place to protect the state’s network from hackers or other intrusions were compromised or altered to permit or facilitate the transmission of these e-mails.”
Mr. Jepsen is to be lauded for not having allowed the leaders of SEBAC to use his office as a political tool for the purpose of discrediting the institute on false charges that, had they been sustained, might have succeeded in drawing public attention away from SEBAC’s botched attempt to convince rank and file union members to vote in favor of Governor Dannel Malloy’s doomed Plan A.
The same union leaders who falsely accused the institute of illegalities recently unilaterally changed union by-laws so that a previous vote on Plan A would once again be voted upon under circumstances more favorable both to Mr. Malloy and SEBAC negotiators, causing one commentator – yours truly – to note that SEBAC, having found it impossible under the old by-laws to fix a vote, had discovered a way to fix the voting process to its advantage. This kind of transparent attempt to fix a vote could only succeed if union leaders were to spew out a cloud of skunk scent to distract public attention from their own dramatic failings. The Yankee Institute, and more especially Zach Janowski, the institute’s investigative reporter, were convenient scapegoats upon which SEBAC leaders sought unsuccessfully to pin their own too obvious failings.
SEBAC’s objections to Mr. Jepsen’s finding were amusingly predictable. Leaping over the results of Mr. Jepsen’s exhautive examination, SEBAC lamented that the architecture of the state’s e-mail system “is apparently arranged so that outside groups can get around inadequate software restrictions and distribute emails through the system without being in violation of computer hacking laws -- and apparently without even being subject to detection” – and never mind that Mr. Jepsen found no instance of the state’s email having been hacked by the institute. SEBAC then noted that the institute’s political interests include “producing painful job cuts and ‘downsizing’ state government, which is really just code for privatizing public services.” In fact, Mr. Cullen has noted that the institute favored Plan A – the very same plan promoted by SEBAC union leaders – over Plan B, which recently has been implemented by Mr. Malloy and includes painful cuts. No doubt the institute, along with many governors and legislators, favors the privatizing of public services as a means of controlling unsustainable costs. SEBAC’s objection to the institute’s view on privatization might have been more justly urged in a letter to the editor; SEBAC thought it rose to the level of a crime and engaged the attorney general as an instrument to harass and punish an organization for having taken advantage of its constitutional right disagree with the leaders of SEBAC.
Yankee Institute Director Fergus Cullen commented following Mr. Jepsen’s finding, “Making reckless accusations without a shred of evidence damaged the union's credibility. Rank-and-file state employees deserve better for their dues than the stunning incompetence of union staff throughout the concessions ratification process."
Mr. Cullen made his comment but a few hours before he had been told by Trinity College that the institute was being given the boot or, as Mr. Cullen, whose sense of humor is unfailing even in trying circumstances, preferred to put it – being expelled – from the Trinity College campus in Hartford where, for the past 13 years, the institute has stoutly defended educational institutions, private enterprise and constitutional rights more often miss-cited than observed by its detractors. It is not known what part SEBAC or union friendly legislators may have played in the institute’s unexpected expulsion from Trinity.
Saturday, June 4, 2011
Malloy s GAAP Falls Through The Gap: Trouble In Paradise
Much fuss was made during the gubernatorial campaign by former Mayor of Stamford Dannel (then Dan) Malloy concerning the adoption of Generally Accepted Accounting Principles (GAAP), the subject of Governor Malloy’s very first Executive Order.
The old way of accounting, which had given rise to budget finagling that allowed governors and legislators less scrupulous than Mr. Malloy to fudge budget figures, was supposed to give way to GAAP, an accounting process that would scrub politics of distasteful gimmickry.
“An implementer bill passed Tuesday by the House,” according to a story in CTNewsJunkie, “postpones the full implementation of GAAP until 2014 and eliminates the $1.5 billion deficit a transition to GAAP would create. But it also promises to spend about $100 million a year over the next 15 years starting in 2014 to pay down the $1.5 billion GAAP deficit and in order to ensure that deficit doesn’t grow it allocates about $75 million in fiscal year 2013 and $50 million in 2014.”
Zach Janowski, an investigative reporter for the Yankee Institute, has reported that if GAAP were operative right now, Mr. Malloy’s projected two year surplus would disappear altogether and be replaced by yet another wearisome deficit.
So, its rather a good thing – from the point of view of politicians less scrupulous than Mr. Malloy, that GAAP has, so to speak, fallen through a legislative gap.
Ben Barns, Mr. Malloy’s budget director, adamantly denies that GAAP is being delayed: “We’re not delaying the implementation of GAAP, we’re beginning to amortize the cumulative unfunded GAAP liability starting in two years. We are moving as quickly as practical to implement GAAP. We’re intending our budget be balanced on a GAAP basis from inception through final audit starting with 2012. So I think the notion that we’re delaying GAAP is completely unfounded. It’s not the case.”
House Minority Leader Lawrence Cafero begs to differ. GAAP was Mr. Malloy’s “cause celeb” in January when he took office; he signed an executive order that said “I’ll try to do my best to implement GAAP”; in February, Mr. Malloy made GAAP a conspicuous part of his budget proposal, vowing that a portion of the surplus would be used to cover the cost of the transition to GAAP, Mr. Cafero said. Following the postponement of the transition until the next biennium, “All we know now,” Mr. Cafero said, “is that we have a governor who says one thing and does another.”
The General Assembly has put forward a 15-year plan to eliminate the accumulated GAAP deficit of $100 million. That reform is bound to collide with a General Assembly that has over the years grown comfortable with a smoke and mirrors budgeting that allows politicians to hide dying bodies under the rug.
And Connecticut itself may be a dying body, according to a report recently issued by the Institute for Truth in Accounting and the Comeback America Initiative.
The fundamental accounting difference between GAAP and Connecticut’s current modified cash accounting (MCA) is that revenue is recorded when earned in GAAP; Connecticut, utilizing MCA records revenue when cash is received.
“What they try to do under this political math,” said Sheila Weinberg, founder and CEO of the Institute for Truth in Accounting, is push any revenues into a current year budget and push any expenses out of it. “It’s just manipulation of the numbers. That’s what got the corporations in trouble. A lot of corporate leaders are sitting in jail just for games like this.”
The number fudging merely obscures but does not settle underlying problems.
“While Connecticut reported total assets of $29.7 billion,” Connecticut Budget Watch reported, “the Institute’s review of the state’s 2010 financial report revealed that there are $44 billion of off-balance sheet retirement obligations. More than $18.7 billion of the State’s assets cannot be easily converted to cash to pay state bills of $74.5 billion as they come due. These assets consist of capital assets, including infrastructure, buildings and land, and assets the use of which is restricted by law or contract. The State does not have the funds needed to pay for $63.5 billion of state obligations.
Each taxpayer’s share of this financial burden equals $49,000.
To put it in simple terms, Connecticut has spent far more than it has collected in tax revenue. As a result, every taxpayer in the state now owes the state $49,000. When state assets are sufficient to pay off the obligations – and not before – the Connecticut’s books will be in balance. In addition, one of the methods the Malloy administration has settled upon to partially redress the imbalance, retroactive tax collections, may be unconstitutional, according to former Comptroller General of the United States David Walker, the founder and CEO of the Comeback America Initiative.
“It is not normal or advisable to have retroactive tax increases,” Walker said. “Retroactive increases have been successfully challenged in court. If such an increase is challenged legally, there will be both budget and accounting implications.”
Mr. Malloy’s spokesman, Juliet Manalan, said, “The Governor is not concerned that the budget will be challenged on Constitutional grounds.”
The state’s asset shortfall and $63.5 billion in state obligations ought to be an issue of greater concern.
The old way of accounting, which had given rise to budget finagling that allowed governors and legislators less scrupulous than Mr. Malloy to fudge budget figures, was supposed to give way to GAAP, an accounting process that would scrub politics of distasteful gimmickry.
“An implementer bill passed Tuesday by the House,” according to a story in CTNewsJunkie, “postpones the full implementation of GAAP until 2014 and eliminates the $1.5 billion deficit a transition to GAAP would create. But it also promises to spend about $100 million a year over the next 15 years starting in 2014 to pay down the $1.5 billion GAAP deficit and in order to ensure that deficit doesn’t grow it allocates about $75 million in fiscal year 2013 and $50 million in 2014.”
Zach Janowski, an investigative reporter for the Yankee Institute, has reported that if GAAP were operative right now, Mr. Malloy’s projected two year surplus would disappear altogether and be replaced by yet another wearisome deficit.
So, its rather a good thing – from the point of view of politicians less scrupulous than Mr. Malloy, that GAAP has, so to speak, fallen through a legislative gap.
Ben Barns, Mr. Malloy’s budget director, adamantly denies that GAAP is being delayed: “We’re not delaying the implementation of GAAP, we’re beginning to amortize the cumulative unfunded GAAP liability starting in two years. We are moving as quickly as practical to implement GAAP. We’re intending our budget be balanced on a GAAP basis from inception through final audit starting with 2012. So I think the notion that we’re delaying GAAP is completely unfounded. It’s not the case.”
House Minority Leader Lawrence Cafero begs to differ. GAAP was Mr. Malloy’s “cause celeb” in January when he took office; he signed an executive order that said “I’ll try to do my best to implement GAAP”; in February, Mr. Malloy made GAAP a conspicuous part of his budget proposal, vowing that a portion of the surplus would be used to cover the cost of the transition to GAAP, Mr. Cafero said. Following the postponement of the transition until the next biennium, “All we know now,” Mr. Cafero said, “is that we have a governor who says one thing and does another.”
The General Assembly has put forward a 15-year plan to eliminate the accumulated GAAP deficit of $100 million. That reform is bound to collide with a General Assembly that has over the years grown comfortable with a smoke and mirrors budgeting that allows politicians to hide dying bodies under the rug.
And Connecticut itself may be a dying body, according to a report recently issued by the Institute for Truth in Accounting and the Comeback America Initiative.
The fundamental accounting difference between GAAP and Connecticut’s current modified cash accounting (MCA) is that revenue is recorded when earned in GAAP; Connecticut, utilizing MCA records revenue when cash is received.
“What they try to do under this political math,” said Sheila Weinberg, founder and CEO of the Institute for Truth in Accounting, is push any revenues into a current year budget and push any expenses out of it. “It’s just manipulation of the numbers. That’s what got the corporations in trouble. A lot of corporate leaders are sitting in jail just for games like this.”
The number fudging merely obscures but does not settle underlying problems.
“While Connecticut reported total assets of $29.7 billion,” Connecticut Budget Watch reported, “the Institute’s review of the state’s 2010 financial report revealed that there are $44 billion of off-balance sheet retirement obligations. More than $18.7 billion of the State’s assets cannot be easily converted to cash to pay state bills of $74.5 billion as they come due. These assets consist of capital assets, including infrastructure, buildings and land, and assets the use of which is restricted by law or contract. The State does not have the funds needed to pay for $63.5 billion of state obligations.
Each taxpayer’s share of this financial burden equals $49,000.
To put it in simple terms, Connecticut has spent far more than it has collected in tax revenue. As a result, every taxpayer in the state now owes the state $49,000. When state assets are sufficient to pay off the obligations – and not before – the Connecticut’s books will be in balance. In addition, one of the methods the Malloy administration has settled upon to partially redress the imbalance, retroactive tax collections, may be unconstitutional, according to former Comptroller General of the United States David Walker, the founder and CEO of the Comeback America Initiative.
“It is not normal or advisable to have retroactive tax increases,” Walker said. “Retroactive increases have been successfully challenged in court. If such an increase is challenged legally, there will be both budget and accounting implications.”
Mr. Malloy’s spokesman, Juliet Manalan, said, “The Governor is not concerned that the budget will be challenged on Constitutional grounds.”
The state’s asset shortfall and $63.5 billion in state obligations ought to be an issue of greater concern.
Wednesday, September 8, 2010
The New Nobility
In the Early American Republic of blessed memory, such eminences as George Washington declined titles, much in use in England at the time. The moderns, as Zach Janowski demonstrates in “Raising Hale,” have no such compunctions. In the 36-member Senate, there are 36 titled officials. In the more modest House, “only two out of three members gets a fancy title” – and an extra stipend to boot. The House listing by dollar is here, and the Senate listing here.
Mr. Janowski unwittingly has presented a strong argument for a unicameral legislature. Such an organ of popular representation would be less titled, more broadly representative and more responsible to the sort of people Washington thought were virtuous, economical and modest.
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