Back on April 17 2012 the Northern Mariana Islands Retirement Fund attempted to file for bankruptcy under Chapter 11. There was some pretty interesting reading in their petition for bankruptcy including this section (para 10) which suggests some pretty bad public financial management (emphasis added): “Debtor has had difficulty maintaining healthy funding levels due to […]
The State Budget Crisis Task Force was convened in June 2011 and issued its report in July 2012.
The top line quote from the main site states:
State finances are not transparent and often include hidden liabilities as well as rapidly growing responsibilities which are difficult to control. While state revenues are gradually recovering from the drastic decline of the Great Recession, they are not growing sufficiently to keep pace with the spending required by Medicaid costs, pensions, and other responsibilities and obligations. This has resulted in persistent and growing structural deficits in many states which threaten their fiscal sustainability. [emphasis added]
Striking quote on inability to understand that debt != revenue:
California is also confused about the meaning of the term “revenues”. Asked at a 2008 budget conference whether Schwarzenegger would consider raising revenues to balance the budget, Thomas Sheehy, deputy director of the Department of Finance, replied that the governor’s budget, in fact, already included new revenues: $3.3 billion from the sale of deficit bonds! A corporate executive who reports borrowed dollars as sales is angling for for a bunk in federal prison. It doesn’t take much financial sophistication to understand that a cash advance on your credit card isn’t revenue. It is debt.
The authors follow this with this comment which I think is of striking relevance to Open Spending:
The first, crucial step towards responsible and democratic budgeting is to present the state’s fiscal information to Californians honestly and clearly.
It also reminds me of Niall Ferguson’s statement quoted in a previous post:
The present system is, to put it bluntly, fraudulent. There are no regularly published and accurate official balance sheets. Huge liabilities are simply hidden from view.
Not even the current income and expenditure statements can be relied upon in some countries. No legitimate business could possible carry on in this fashion.