CAFR repost

I posted this in GQ on 9-21. I got practically no response:

I’ve just been exposed to Walter J. Burien and his incredible information concerning Comprhensive Annual Financial Reports (CAFR) of governmental entities.
To put it very very simply, he claims that government entities (such as the fed, state governments, county, and city governments) keep 2 sets of books. One set is the set that they use to show us taxpayers that they use to justify tax increases, the other set of books, (claims Burien), shows the truth of the real income and liquid assets that these governments have.

He generally claims that most governments in this country are so wealthy that they could stop taxing us for the next couple of decades.

Here are a couple of links:


and (click upon the December 11 show to hear an interview with Walter Burien)

Is anyone out there in SDMBland familar with this stuff? Is it really true? Opinions?

Contestant #3

I’m a little unclear about what you’re asking here. Of course all American government units of any size publish a CAFR. Among other things, people like me wouldn’t loan money to them if they didn’t.

But this Burien guy seems to be saying that some big suppression job is going on while acknowledging that CAFRs are freely available on the internet. Heck, he even links to them.

His story makes some pretty clear errors regarding cash management and asset management issues. One has to be pretty careful when looking at a cash flow statement. For example, if a State issues a $2B General Revenue bond issue, that counts as a “gross cash receipt.” Even if the entire $2B goes to retire maturing General Obligation bonds, in which case the net amount to the State is 0.

To talk about any specific allegation he makes, I’d obviously have to see the source material. The examples were from ’89, long before these things were on the net.

If you have any questions about a web-published CAFR, let me know and I’ll do my best to answer them. This financial statement stuff is not easy, and I’d be glad to help.

As a starting point, here’s New Jersey’s ’98 CAFR.

Livin’ on Tums, Vitamin E and Rogaine

Another point is that all government entities have their books audited by an independent CPA. The audited CAFR is then make available.

As a further control, every CPA firm is reviewed every other year by an outside CPA firm.

“Violence is the last refuge of the incompetent” Isaac Asimov

I love when someone asserts that ‘the government’ is doing something, as if ‘the government’ is some sort of unified entity.

Can you imagine the political hay if the Dems found out a Republican administration was cooking the books? Or vice versa?

And at what level are the books being cooked? Does the guy have any idea just how HUGE the federal executive branch alone is? Where does the cooking start?

The fun with conspiracy assertions is that you can always claim the truth is covered up by the conspiracy… The reality is that the rest of us ignore such nonsense. :wink:

I love it when people knee-jerk react with comments without checking out the information first.

If you are not going to take the time to check out the links I gave you then understand this:

  • Nobody disputes that the financial information is NOT hidden.

  • The point is that if (according to Durien) you know how to read these CAFRs you will find that these government entities have Billions of dollars in assets such as common stock, and they actually take in much more than they spend.

  • The point is that these government entities don’t need TAX INCREASES. The point is that they already have plenty of funds and liquid assets at their disposal

Durien led a movement to defeat a proposed tax increase in the state of New Jersey and he was successful. As I understand it, he is currently helping citizens of Arkansas to revolt against proposed TAX INCREASES.

Take the time to check out the links or listen to an interview with the gentleman. I know that this stuff isn’t as sexy or emotional as UFOs or religion, but who among us likes to pay taxes?

Contestant #3

Not for nothing, but I did follow the links. Every one of them (well, OK, I didn’t email Walt, but you know what I mean). My first response was apparently not well crafted, because I certainly didn’t want to seem “knee jerk.” I wanted to begin the process of understanding a fairly complicated subject on which I have some knowledge that may be helpful. So to respond your second post:

OK. I guess that I was projecting from Burien’s story about the radio station almost being shut down, and the mainstream media as a consequence considers it a “third rail” story, etc. If you say it’s not hidden, than it’s not hidden. We’ll move on.

Burien is half right. These entities do in fact hold substantial assets, but they are often insufficient to fund the liabilities that the entity has agreed to take on. So the entity is not sitting there flush with unclaimed assets that could be used in lieu of taxes. There are some exceptions, as we’ll see.

In virtually all cases, the liquid securities (stocks & bonds) he’s concerned about live three places. First, they live as stocks and bonds in pension plans. Second, they live as US Treasury bills, notes and bonds in escrow accounts meant to pay off bonds which have been defeased. Third, they live in short-term liquid securities (money market instruments) as a cash equivalent. In the case of pension plans, the laws that govern states and locality are more lax than those that govern private companies, and states do in fact “raid” pension funds from time to time to cover revenue deficits. This is in most cases considered poor form by the financial community and a sign that an issuer is in trouble. But in reality, the fact that the markets have performed so well over the past decade makes it possible sometimes to remove assets from pension accounts and still leave the thing actuarially sound.

This is a very tricky subject. But I used to work on a muni desk (about a billion years ago) and my current position requires financial statement analysis. So if you have a specific question about a document to which we both have web access, I may be able to help you. I chose the NJ link simply because Burien uses Jersey in his story. As it happens, it’s a terrible site with inadequate bandwidth - even my T1 took 15 minutes to download the Adobe version of the thing. So if you want to pick another state, let me know and I’ll find the CAFR.

I’ll certainly agree with you on the first part. But on the second part, states most often do not have the assets “at their disposal.” The funds are segregated for specific things like teacher’s pensions and the like.

Burien seems to go on a lot about authorities. If this is your concern, I can give a short tutorial (Here’s a really short one: Some are in fact “profitable.” But not as much as is imagined)

As it happens, states often go to pretty ridiculous lengths to make the financial condition as reflected in the CAFR appear better than it really is, to get higher bond ratings and lower borrowing costs.

Livin’ on Tums, Vitamin E and Rogaine