DANGEROUS STRATAGEMS research paper

DANGEROUS STRATAGEMS

In three-fourths of the states, the treasurer or chief financial officer (CFO) is ejected by citizens in statewide elections. In some spates, such as New York and Texas, the comptroller is elected and performs many of the functions of the CFO. About two-thirds of local governments have an official with the title “financial officer,” “financial director.” or a similar title implying broad duties. Financial wizardry is not a CFO’s primary calling; but when governors or mayors find their budgets unbalanced, they turn to the CFO for possible stratagems. For the past few years, politicians in far too many cities and states—not to speak of Washington, DC —have tended to rely on nine dangerous stratagems:

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Delay maintenance and replacement of assets— and rely on hope. On August 1. 2007. the I-35W bridge across the Mississippi River in Minneapolis collapsed suddenly, killing 13 people. Seven months later, a federal commission said that just to maintain and upgrade surface transportation in the United States world cost $225 billion a year for the next 50 years. Ensuring safe and dependable roads, bridges and transportation systems, as well as water systems, sewage treatment plants, dams and even schools also requires long-term planning. Unfortunately, most politicians prefer quick fixes.
Sell assets. In economic hard time, it is popular to sell land, buildings, or surplus assets. California’s real estate is one of its greatest assets and selling off state property, according to the governor’s office, would raise over $1 billion. Specifically, Governor Schwarzenegger proposed the sale of seven state-owned properties to help get his budget in balance including: San Quentin State Prison, the Cow Palace, Del March Fairgrounds. Orange County Fairgrounds. Ventura County Fairgrounds, and the Los Angeles Coliseum. Schwarzenegger’s proposal was rather straightforward compared to that of Governor Eliot Spitzer in New York, who wanted to securitize, or sell off part of future state lottery proceeds.
Lease rather than buy equipment. Say the U.S. Air Force needs 100 Boeing 767 aircrafts to use as aerial refueling tankers. Buying them outright would cast about $20 billion and add appreciably to this years deficit. Therefore, for politi­cal reasons. Congress and the president might prefer to lease them over a 12-year period. The budget would take far less of a hit each year even though total cost would be higher than if the Air Force had bought the planes.
Rob Peter to pay Paul. Most budgets are made up of multiple accounts. The account that gets the most attention is called the general fund. When that general fund gets in trouble, poli­ticians start considering off budget funds as resources to be tapped. New York helped balance its budget in 1992 by transferring the cost of running the Erie Canal from the general fund (“on budget”) to the Thruway Authority (” off budget”). Similarly, in 2003, Massachu­setts transferred management of a convention center and a parking garage (both “on budget”) to the state pension fund (“off budget”) to show a savings of $ 175 million.
Nickel and dime employees. The response to budget problems is often symbolic. David Osborne and Peter Hutchinson wrote: “Leader’s order coffee pots unplugged, travel budgets slashed, and consultants banned. To save energy, they force workers to endure hotter offices in summer and colder offices in winter. Some even outlaw petted plants, in Missouri last year, the governor ordered that every other light bulb in government buildings be unscrewed.”
Make across-the-board cuts rather than targeted cuts. In 2008. Governor Schwarzenegger proposed cutting California’s budget across the board by 10 percent, meaning that every state agency from police to health to the arts would receive a 10 percent reduction in its annual budget. Less drastically, that same year, Iowa Governor Chet Culver announced a 1.5 percent across-the-board cut and said education and Medicare “won’t escape unscathed.” The popularity of broad-brush, across-the-board cost-cutting is easy to understand: If Is a way to avoid making difficult, uncomfortable political choices.
Fudge the numbers. A budget is really just a forecast, a necessary statement of expected revenues and expenses. But every budget is based on assumptions, and CFOs can make it lock better or worse simply by changing those assumptions. If they expect 1000 new students to enroll in their schools but assume (for budget purposes) only 900, they hove reduced the basis for their estimate of net expenses by 10 percercent. Ronald Reagan’s approach in 1982 was a classic example of making the budget “Work” by fudging the numbers. To justify large tax cuts, his budget director, David Stockman, forecast 5 percent growth for 1982. Theoretically, this would help create a $28 billion surplus by 1986. As it turned out, the gross national product fell by 2 percent that year— and the largest deficits since World War II soon followed. The Obama White House presented its own rosy scenario with the fiscal year 2010 budget. It expected economic growth in 2009 to decline by only 1.2 percent, whereas the non partisan Congressional Budget Office assumed a 3 percent decline.,,,,,,,,,,,,,,

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