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Accounting tricks

Everyone knows that the current budget shortfall means the Lege will be searching for cutbacks and new revenue sources. But there is a third option, too, one that doesn’t usually get much attention but which has certainly been done before: Accounting tricks. Delaying payments, sometimes as little as a day, to push them into the next fiscal year, is the main trick in the bag.

The state’s accounting tricks really came into their own in 1991, during yet another budget crunch — one so bad that lawmakers approved a new tax bill, some “efficiencies” in existing programs, the state lottery and hundreds of millions of dollars in “smoke and mirrors” budgeting that moved costs out of the troubled period and into a future budget. They delayed state payments to local school districts by a day, “saving” an astonishing amount of money. They held money that was destined for state highways, along with other payments that would ordinarily come due in the last days of a biennial budget.

A few years later, lawmakers “repaid” the money they’d borrowed from themselves, adding an extra payment to, for instance, the Foundation School Program, to make up for the payment they “borrowed” from the previously cash-strapped budget.

[…]

Delaying the school payment by a day would chop $1.4 billion from the total, without the political pains of a new tax or spending cuts. Delaying payments to the employee and teacher retirement systems, Medicaid payments and transfers of gasoline taxes into the state highway fund — all will be on the table.

As the story notes, some of the old tricks won’t work any more, but quite a few of them are still available. The main downside to all this, of course, is that by putting off payments from one budget cycle to the next, you’re artificially increasing expenditures for the next biennium, just as you reduce them for this one. If we’re still facing a shortfall in 2013 – and given the structural deficit caused by the irresponsible property tax cuts of 2006, we almost surely will be – it’ll be that much more difficult to deal with it.

By the way, if you don’t like this kind of accounting sleight of hand, please be aware that the reason for it is the artificial requirement that the books need to be in balance as of a certain date. If the state were allowed to carry a balance forward into the next fiscal year – that is to say, if it were allowed to run a deficit – none of this would happen. The effect would still be the same – lawmakers would either gamble that the finances in the coming years would be good enough to wipe out the remaining amount due, or they’d be forced to take concrete steps to make it happen – there would just be less chicanery about it. For better or worse, this is the way we prefer to deal with it.

And I must say, I’ll take a dozen accounting tricks any day over hair-brained privatization schemes and the hundreds of millions they claim to save but never actually do.

The most touted budget-shrinking initiatives have rarely lived up to the political hype of providing better state services for less. And the promised savings have often proved elusive.

Consider, for example, the 2005 legislation that mandated the consolidation of 27 agency data centers that house mainframes and servers. The data center consolidation was sold as a money-saver – $178 million over seven years – that would also improve operations and security.

The project, which is being run by IBM Corp. under an $863 million contract, has been mired by delays, equipment failures and service complaints. The contract is being amended, and IBM is said to have asked for as much as another $500 million to complete the task.

Then there is the sweeping 2003 legislation that aimed to save $1.1 billion in health and human services spending in 2004-05.

About half of the actual $927 million in savings from that legislation came from policy changes that trimmed the rolls of health care programs, including the Children’s Health Insurance Program.

“The last time when we cut the budget, we did not do it by operating a more efficient government. We did it by not offering services,” said Eva DeLuna Castro , a budget analyst with the Center for Public Policy Priorities , which advocates for low-income Texans.

This is one of those places where having experience in the business world ought to be an asset as a legislator, but as that usually means possessing deal-making skills and having connections, it rarely works out that way. Frankly, a Lege full of Dilberts would have done a much better job assessing the baloney that IBM and Accenture managed to sell us. The good news, I suppose, is that there don’t seem to be any such plans being floated at this time. The bad news is that it’s still early days, and the allure of Great Big Savings at the invisible hand of the privatization fairy is just too tempting for a lot of folks in Austin to resist. EoW has more.

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2 Comments

  1. […] it’s another accounting trick, since changes to the curriculum will require different textbooks. The money will be spent, […]

  2. […] the amount recommended by the state. One reason they need such a cushion is because a standard accounting trick the state employs when it needs a little slack to balance its budget is delaying payments to other […]

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