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11.15 Claws out: crab fishermen sue 30 oil firms over climate change [workers are waking-up...]

11.15 Trump administration to cut air pollution from heavy-duty trucks [behaving ignorantly again...]

11.14 Backed by Ocasio-Cortez, Youth Climate Activists Arrested in Pelosi's Office Demanding Democrats Embrace 'Green New Deal'

11.13 What would a smog-free city look like?

11.13 Global report highlights Australia’s renewables potential amid mixed signals for coal

11.13 Interior department whistleblower: Ryan Zinke hollowed out the agency

11.12  This Land is Your Land:  The Zinke effect: how the US interior department became a tool of industry [behaving ignorantly again...]

11.12 Planned Parenthood's new president warns of 'state of emergency' for women's health

11.11 Trump responds to worst fires in California’s history by threatening to withhold federal aid [behaving ignorantly again...]

11.11 Interior department sued for ‘secretive process’ in at-risk species assessment [behaving ignorantly again...]

11.11 Keystone XL pipeline: judge rules government 'jumped the gun' and orders halt [behaving ignorantly again...]

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11.15 Democrats Won Big. Can They Go Bold, Too? [it's about suppressing the influence and leadership by Republican-like Democrats who counsel 'íncremental' (no) change, such as Nancy Pelosi, Steny Hoyer, Hillary Clinton, Chuck Shumer and Joe Biden]

11.15 Pentagon Officials Forced to Make Fewer Public Appearances to Avoid Provoking Trump [...by revealing Trump's huuuge ignorance]

11.15 REPUBLICANS USED A BILL ABOUT WOLVES TO AVOID A VOTE ON YEMEN WAR [if there are 'defense industry' profits to be made—including congress-critter insider-trading—and political 'donations' to be had, we mustn't stop killing innocent civilians!]

11.15 Big Oil v the planet is the fight of our lives. Democrats must choose a side

11.14 The Real Florida Recount Fraud

11.14 Telling NRA #ThisIsOurLane, Doctors' Photos Show Blood-Soaked Reality of America's Gun Madness

11.14 At Freshman Orientation, Young and Growing Progressive Caucus Makes Clear It Will 'Fight Like Hell' for Bold Democratic Agenda

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  Thinking About the States
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ECONOMIC ANALYSIS:

Thinking About the States

"Too big to fail"? Hmm...what about a whole state?

by Fred Cederholm

The amounts states owe would literally shock the public, but the public rarely has access to those figures.

I’ve been thinking about “the big five” states, unpaid bills, money, and prisons—specifically the Thomson facility here in Illinois. I can’t help but think how our multiple financial messes are getting a pass in current news coverage because of St. Nicholas coming to town... plus the fact that the politicians feel what isn’t being openly and notoriously discussed will not hurt them. It is a classic case of no news (covered in the media) is good news (for them).

You see, all but about four of the 50 US states are in major financial trouble. Their revenue streams have declined far more than we are being told—while expenses have risen. Deficits on the Federal, State, County, and community levels continue to grow hourly. Any good news is relative to what other governmental entities elsewhere owe. The accounting tricks of the governmental trade are legion. The most prevalent game played is using “cost basis accounting” as opposed to “comprehensive accrual accounting.” Under the cost basis accounting method, revenues are only recognized when received, while expenses are only recognized when actually paid. If there is no money in the governmental coffers, the bills wait to be paid. Rarely do states, counties, and communities make public what is owed and outstanding. There are no "accounts receivable" or "accounts payable." This is understandable in this age of outstanding payables; the amounts states owe would literally shock the public.

All but about four of the 50 US states are in major financial trouble. Their revenue streams have declined far more than we are being told.

Until just recently Illinois was considered in the “baddest of the bad." Under our State Constitution, we are required to have a balanced budget. What a joke! We presently have over $90 billion in unpaid bills. Roughly 94% of that is for unfunded pensions for the teachers and the IMRF (Illinois Municipal Retirement Fund). The next biggest chunks are owed to hospitals and nursing homes for Medicaid patients. These medical payments are about two years in arrears—and growing rapidly. Illinois has not made any such payments since October 2008!

When a few minor news stories were leaked out after Governor Blagojevich was booted out of office for “allegedly” trying to sell the vacated US Senate seat of Barack Obama, the guess-timates of Illinois payables were put at over $60 billion. Every time a new figure is made public, that figure grows by several billion motr. But then... with our former governor now awaiting trial, the attitude in Springfield appears to be, come clean and dump all the deficits, debt and payables at Blagojevich's feet! Well, trust me: there is plenty of blame to go around. This didn’t just also happen in the past few years.

I figure that Illinois joins California, Michigan, New York, and Florida as the “big five” states with major financial problems.

Illinois' raising the state income tax from 3% to 5.5% would only generate half of what is needed to cover current deficits—not including the arrears in pensions and medical services. Revenues from the income taxes, gaming, user fees, vehicle licensing, etc. continue to decline.

I feel that the only reason we have not seen a state (or even major city) bankruptcy is because the major accounting and law firms are not certain how to even do one.

State deficits are a national problem that will not be acknowledged until a major state is forced into bankruptcy. As a CPA with considerable governmental experience, I feel that the only reason we have not seen a state (or even major city) bankruptcy is because the major accounting and law firms are not certain how to even do one. How would one play out? Remember that when Chrysler had their problems in the early 1980’s (minuscule by comparison to problems and amounts now), their audited financial statements did not even carry the traditional opinion wording for a going concern. "Too big to fail"? Hmm...what about a whole state?

Illinois has talked about selling off assets to cover its bills. The sale of the $100 million correctional facility at Thomson, Illinois (built and left unused since 2001) to Uncle $ugar to incarcerate the so-called Al-Qaeda bad boys from Guantanamo, Cuba, and military bases around the planet for $240 million would come as a God-send for the northwestern corner of Illinois. The Federal payroll would be considerable for the opening of the Thomson facility. Presently, the annual costs for a prisoner at a minimum security prison are $45,000 per inmate per year. It is being argued that bringing a terrorist “storage” facility to the Land of Lincoln might paint a bull’s eye on the state, but I'm not so sure about that.

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.


Copyright 2009 Questions, Inc. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at asklet@rochelle.net.




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This story was published on December 14, 2009.

 

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