When Balanced Budgets Aren’t Really Balanced

hide_the_peaby James A. Bacon

The politics of fiscal implosion are ugly. Just look at what’s going on in Petersburg and Richmond.

  • Confronted with a massive budget deficit last year in contravention of the state constitution and the prospect of a deficit in the year ahead, Petersburg City Council bravely agreed to cut the compensation of the city’s 600 employees — but carved out exemptions for senior city officials and themselves.
  • Another trustee has resigned from the board of the city of Richmond’s severely under-funded retirement fund, which has been embroiled in governance issues over who calls the shots over investment decisions.
  • City of Richmond officials say they have nearly completed their comprehensive annual financial report for 2015 — seven months late! The city has not completed the required report on time since 2014. City officials blame IT issues.

That’s just in the Richmond region, which I am familiar with because I read the Richmond Times-Dispatch as my daily newspaper. Who knows what’s happening elsewhere? While Virginians pride themselves for their fiscal rectitude, it is increasingly clear that some jurisdictions don’t hew to standards much higher than Chicago, Cleveland or Detroit.

In theory, the state constitutions requires the state government and each political jurisdiction to balance its budget each year. Virginians should be concerned that Petersburg failed to do so in fiscal 2016, that it shows every sign of failing to do so again in fiscal 2017, and that there appears to be no sanction or penalty in sight. Likewise, we should be concerned of the various tricks the state and its localities can use, if so inclined, to hide long-term structural budget deficits. Here are three:

  • Under-fund employee pensions. The Commonwealth drastically under-funded the Virginia Retirement System in the last recession, although it is now doing penance by accelerating repayments. The City of Richmond has under-funded its government-employees pension, which it operates independently of the VRS.
  • Slow pay creditors. This tactic comes straight out of the Illinois Fiscal Irresponsibility Playbook. Petersburg, it has been revealed, delayed payments of millions of dollars not only to the VRS but schools and the regional jail.
  • Defer maintenance. Rather than properly maintain roads, streets, buses, water systems, sewer systems, school buildings and the like, save money by scrimping on maintenance, even if it means even higher costs down the road.

To what extent do local governments rely upon these and other budgetary sleights of hand to balance their budgets? Nobody knows. Let me rephrase that: The public doesn’t know.

The bottom line here is that citizens cannot take at face value that their local governments are truly balancing their budgets. Some might be. I have faith that my home county of Henrico, whatever its other failings, runs a tight fiscal ship and doesn’t play bookkeeping games. But I don’t know it for a fact. Speaking generally, not specifically about Henrico County, government administrators are subject to the temptation of hiding bad news. And in most cases, local elected officials are either too timid or too untutored to ask tough, probing questions about how money is being spent.

Citizens unite! There are active taxpayer groups in Arlington, Fairfax County and Virginia Beach that I know of. I hope and pray that there are others of which I remain ignorant. Rather than fight lonely fights, they need to pool resources and expertise. I invite like-minded citizens to join Bacon’s Rebellion to create a platform to share knowledge and hold state and local governments more accountable than our elected officials seem able to do on their own. If anyone is interested in such a collaboration, please contact me at jabacon[at]baconsrebellion.com.

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4 responses to “When Balanced Budgets Aren’t Really Balanced

  1. I’d consider Henrico to be one of the better fiscally-operated counties in Virginia – i.e. “The Henrico Way” and as such probably would be a good model to espouse for other counties especially so in the areas alluded to.

    The “other” area that can be telltale on how scrupulous a county or municipality (300+ in Va) is in their finances – is addressing the GAAP category known as ” Postretirement Benefits Other Than Pensions” which is a liability that used to be represented as cash-basis annual payments but now has to meet newer GAAP standards to represent it as a long term liability that has to be funded.

    I note that just a handful of Va jurisdictions have actually taken steps to address that liability – by joining the Va Pooled OPEB Trust to mitigate that liability.

    http://valocalfinance.org/services/pooled-opeb-trust-services/

    Now the interesting thing is that Henrico actually was a partner with Fairfax to create this pool.

    Henrico has an impressive one stop shop public data portal that includes all their budget, comprehensive financial statements, audits, and more.

    Trying to remember but some organization actually did rate Va counties and municipalities on their financial transparency and as I recall Henrico was rated high – probably was reported in BR …in 2010 or so

    ” Government Transparency in Virginia How Localities Compare”

  2. “There are active taxpayer groups in Arlington, Fairfax County and Virginia Beach that I know of. ”
    Can you share the contact info of the VB one?

  3. It’s a decent tool but it’s not going to satisfy the folks looking for things like are they funding their pension obligations or paying their debts on time, etc much less why they spend money for things some taxpayers would not …etc…

    Like the school systems – most counties do not want to provide soup to nuts transparency for fear that it will give ammunition to those who don’t like taxes nor govt to start with!!!

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