Introduction

The State of Wyoming at the State-level has approximately $5.95 billion of the taxpayer's money it is not using, i. e. surpluses equal to $11,941 for every man, woman and child in Wyoming or $47,762 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Wyoming.

I never imagined that any State would exceed the State of Alaska, but I was wrong. The State of Alaska per capita surplus is $11,888.

The Exhibit A below shows the results of the FY 2003 review.

What are these surpluses we refer to?

Government surpluses, as used in this report, are funds that are not required or needed for the operation of all government operations, funds, accounts, agencies, etc., directly or indirectly, for the year(s) covered by the budget which is usually one year. Theoretically, at the end of every fiscal year, governments should have little or no cash/investments on hand. But what we have found is that most governments have huge amounts of cash and investments on hand at the end of the fiscal year. And somehow these cash and investments are not being recycled back through the budget process the next year, but are being held year-after-year.

A Government Can Have a Budget Deficits/Shortfalls and Financial Surpluses At The Same Time.

This is the most deceiving topic that governments, politicians, and the news media have conveyed to the public about governmental financial matters. In realty, a government can simultaneously have a budget shortfall and a financial surplus of the taxpayers' money.

The problems are focused in four areas:

1. The budget only covers a small portion of the State's financial condition. There are a group of funds not part of the budget process. The complete list of funds and budgetary requirements are found in the Comprehensive Annual Financial Report (CAFR). This report depicts the complete financial status of the State. The budget only covers a portion of the financial resources of the government.

A Little Background:

The CAFR usually has four categories.

Governmental Funds
Proprietary Funds
Fiduciary Funds
Component Units

Governmental Funds involve activities of the government including most basic services such as environmental resources, general government, transportation, education, health and human services, and protection of persons and property. Most of the cost of these activities are financed by taxes, fees , and federal grants.

Proprietary Funds are used when a government charges customers for the services it provides, whether to outside customers or to other agencies with the state. For example, Enterprise Funds, a component of proprietary funds, are for activities that provide goods and services to outside (non-government) customers, which includes the general public. Fees, charges for services or goods, assessments, fines, licenses, etc. are the major revenue sources.

Fiduciary Funds are activities in which the state acts as a trustee or fiduciary to hold resources for the benefit of others. These funds are pension trust funds, investment trusts, and agency funds (which are for assets held for distribution by the government as an agent for other governmental units, other organizations, or individuals).

Component Units reportedly are legally separated organizations for which the government is financially accountable. Usually fees, charges for services or goods, assessments, fines, penalties, licenses, etc. are the major revenue source.

In Wyoming they do budget for most of the funds in the States total financial arena. But it is the way that they budget for these items that causes the surpluses.

2. Next year's budget consists only of next year's estimated revenues and next year's estimated expenditures. Previous years' revenues not used (spent) are normally not considered in the next year's budget, but should be. In other words, the previous years' revenues (as shown in the CAFR) are not recycled back to the budget process.

Historically, a budget consists of three parts: 1) Funds brought forward (funds not previously spent); 2) Next year's estimated revenues; and 3) Next year's estimated expenditures.

But somewhere along the way the funds brought forward category was lost. In accounting, the previous years' revenues are no longer called revenue but have been converted to Cash and Investments. Since they no longer called Revenues governments have forgotten about them to the public. They are there but not considered in the budget process, but should be.

3. The budgeted items and non-budgeted items (off budget) should be budgeted to zero (usually referred to as zero-based budgeting). In addition, the government should be on a pay-as-you-go basis, no reserves for future years. What this means is that you budget to have a zero fund balance. If you plan to spend $100 you budget for $100 with no excess or reserve allowed.

4. Budgeted expenditures should be last year's expenditures (as shown in the CAFR) with an adjustment for increase in requirements (costed out) or reductions in requirements. In most cases the CAFR expenditures are not considered in the next year's budget because the CAFR in many cases is published after next year's budget is considered and sometimes approved.

Running Surpluses is Stealing

Although taxation is legitimate, running a government surplus isn't. It represents a taking by the state, because it exceeds the government's contract with the community. It is no different than if a federal agency were to take a person's land or possessions without just compensation (an activity barred by the Fifth Amendment). Excess taxation isn't what the people bargained for.

In presuming entitlement or authority not ceded by the community, the state abrogates its moral pact with those it governs. Its power is no longer derived from the people, whose rights to liberty and property it boldly denies.

The Governor and the Legislators

The Governor and the legislators should include in the next year's budget the previous years revenues not spent as indicated by the CAFR. These were once a revenue and should still be considered revenue for budgetary purposes.

Also, they should consider a zero-balance budget concept for all budget and non-budgetary items in the CAFR including the College and Universities and the Component Units.

Budgeted expenditures (for the budget) should be last year's expenditures (from the CAFR) adjusted for demonstrated requirement changes in project, program or services. An increase in requirements should include the costs of these additional requirements. Conversely, a decrease in requirements should result in a decrease in costs associated with the decreased requirements.

The Governor and legislators should take into consideration the entire financial condition/status of the State in the budgetary process by including all of the funds in the CAFR as being a part of the budget.

This system is covered in the CAFR Budget System. This system needs to be implemented in all governments.

If the State holds the excesses/surplus, it will earn 4% to 5% on that money. If the State returns the money to the people it will receive 20% in revenue because of the increased economic activity. This is elementary economics.

Laws need to be changed.

Every thing done by governments is by law. There are laws that state this or that regarding the use of some of the funds. Man made the laws, man can change the laws. How much effort would it be to include at the end of every law "...or if considered excess or not needed for the current operation that the funds will be refunded to the taxpayers?" See how easy it is.

At one time every law had its place, but things change. The laws need to be reviewed for change to meet the current needs of the government and the people to release these funds for use/refunded.

If this were accomplished, the State would have a huge surplus to refund (rebate or tax reductions) to the taxpayers. Such a refund would create considerable wealth and jobs, increase wages, increase State and local government revenues, dramatically increase the economy, and create the greatest economic expansion in the history of the State. Everyone wins.

If you want to know the financial condition of your government(s), do not look at the budget. Get the CAFR.

The Synergistic Magic of Economics.

What happens when the government holds the $5.95 billion.

Here is what happens when the $5.95 billion is returned to the taxpayers (the private economy).

In addition, 119,096 jobs are created. There is only 500,000 in the entire State. This is why it is disastrous for governments to hold excesses/reserves of the taxpayers money.

Note: The economic impact analysis is further explained at Economic Impact Analysis.

The business community suffers the most.

Before the 9-11 tragedy, President Bush and Congress provided tax rebates which averaged $427 for every American. This was to create an additional $60 billion in consumer (economic) spending, turn the economy around and create jobs for the unemployed. However, 9-11 change that.

As the above economic impact chart shows, if the State returned the $5.95 billion in surpluses to the people the State economy would grow by $23,881 per capita. That is 56 times the amount the Federal government used to stimulate the U.S. economy. Businesses net incomes could double or triple. This is elementary economics.

Examples

Two of the largest surpluses are in the Workers' Compensation Insurance Fund and Unemployment Compensation Fund.

The Workers' Compensation Insurance Fund, an Enterprise Fund, had net expenses of $54 million. It also had reserves (cash and investments) of $448 million. That represents 8 years of reserves.

Unemployment Compensation Fund, another Enterprise Fund, had net expenses of $15 million and cash and investment reserves of $209 million. That represents 14 years of reserves.

Environmental Quality Fund, a Special Revenue Fund, made a profit of $2.3 million . It had reserves of $60 million.

Game and Fish Fund, another Special Revenue Fund, made a profit of $48 thousand and had cash/investment reserves of $30 million.

Water Fund, another Special Revenue Fund, had net expenditures of $28 million. It also had cash/investment reserves of $191 million. That represents 7 years of reserves.

Internal Service Funds are funds that mostly charge other governmental departments/agencies for goods and services. Computer Technology Fund made a profit of $1.3 million and had a reserve of $6.7 million.

These only represent six of the 49 funds shown below that had cash and investment reserves not being used.

What to do?

Unless the budget flaws are corrected and the entire State finances are used in the budget process, the problems that created the surpluses will continue to exist. If budget deficits are reported by the Governor and legislatures these deficits will be used year after year for the excuses for tax increases and/or to reduce needed services.

What is needed is to reduce taxes, fees, charges for services, etc. and give the money back to the people.

Just stopping a tax increase or a reduction in services will not solve the problems. The problems will come back the next year.

I have provided the details of the surpluses and explained the ways the surpluses are accumulated. The data is accurate because it comes directly from the government's own financial statement, the CAFR. You must provide the where-with-all to convince the Governor and legislatures that the surpluses exist and what should be done about it. I live in Arizona. It is not my money that is at stake.

Exhibit A

The 2003 CAFR is located at:

http://sao.state.wy.us/download.htm#accounting

Items not Included:

The following items are not included in the amount of surplus shown:

-Buildings, roads, bridges, land (not for sale), and equipment.

-Deferred compensation plans for employees. These are plans in which the employee contributes to his/her retirement over and above the normal employee retirement contribution.

-Any fund that is 100% supported by donations, bequests, gifts, endowments, etc. These are not taxpayers money.

-For Colleges and Universities. All endowment and similar-type funds should not be included as surpluses. Sometimes these funds are combined with other college/university funds. We are interested in surpluses, so in these cases the total amount should not be included.

-Funds in which the revenues/contributions are 100% held for other individuals, organizations or another government.

-Funds that are required by law in which a bank, financial institution, insurance companies, etc. are required to deposit with the government a certain amount for insurance against the entity going bankrupt. These are not taxpayers' money.

-Retirement/Pension Funds - only included are 1/2 of the actuarially determined excesses, the taxpayers portion. The other 1/2 is the government employees portion.

  Review of The State of Wyoming CAFR- FY 2003

CAFR Page	List of Investments By Fund	Surpluses
	Governmental Funds:
Page	General Fund	122,412,468
Nrs	Foundation Program Fund	58,416,046
Not	Budget Reserve Fund	169,917,930
Shown	Common School Land Fund	1,187,761,384
	Permanent Mineral Trust Fund	2,109,900,152
	Special Revenue:
	Environmental Quality Fund	59,681,773
	Board & Regulatory Fund	19,048,334
	Game and Fish Fund	29,772,480
	Statutory Reserve Account Fund	4,492,233
	GAAP Holding Fund	195,513
	Special Projects Fund	100,544,389
	Community College Grants Fund	319,398
	Municipal Rainy Day Fund
	School Debt Service Assistance Fund	6
	Water Fund	191,214,222
	Workforce Development Fund	4,084,182
	Mineral Royalties Fund	120,348,200
	Government Royalty Distributions Fund	36,067,097
	Farm Loan Revenue Fund	52,811
	Farm Loan Loss Reserve Fund	4,259,697
	State Revolving Fund (SRF)	104,516,055
	Miners Hospital Land Fund	60,694,662
	Omnibus Land Fund
	Donations and Bequests Fund
	Wyoming Wildlife Fund	2,737,114
	University Endowment Fund
	Oil Surcharge Conservation Fund	11,498,220
	State Land Fund	25,644,401
	Flex Benefit Program Fund
	Debt Service Fund	5,096,184
	Capital Projects Fund	37,455,922
	Permanent Trust Funds:
	Wyoming Wildlife Trust Fund	16,571,478
	Montgomery Home for the Blind Fund	4,392,135
	Wyoming Tobacco Settlement Fund	48,148,444
	Proprietary Funds:
	Enterprise Funds:
	Workers' Compensation Insurance Fund	448,105,618
	Liquor Commission Fund	1,373,443
	Canteen Fund	418,398
	Subsidence Insurance Fund	3,043,520
	Honor Farm Agricultural Sales Fund	528,436
	Wyoming Health Insurance Fund	2,715,562
	Unemployment Compensation Fund	209,010,510
	Internal Service Funds:
	Computer Technology Fund	6,673,507
	Motor Vehicle Fund	2,156,551
	Central Duplicating Fund	462,458
	Telecommunications Fund	1,311,894
	Group Insurance Fund	19,961,702
	Wyoming Surplus Property Fund	17,591
	Personnel/Training Fund	93,951
	State Self Insurance Fund	11,695,420
	Wyoming Building Corporation	3,445,538
	Fiduciary Funds
	Pension Trust Funds:
	Private-Purpose Trust Funds:
	Unclaimed Property Fund
	College Savings Fund
	Investment Trust Funds:
	Agency Funds
	Treasurer's Agency Fund
	Department of Revenue Fund
	Funds Held For Individuals
	State Lands Fund
	Other Agency Funds
	Component Units:
	University of Wyoming	193,633,754
	Department if Transportation	43,529,221
	Wyoming Business Council	11,421,626
	Wyoming Community Development Authority	459,939,899
	Total Surpluses…	5,954,781,529
	Per Capita…	11,941
	Family of 4…	47,762

Note: For those familiar with governmental accounting, for surpluses we basically used GFOA Balance Sheet Account Classification Codes 101, 102, 103, 151, 153, and 170.

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This report was prepared by: Gerald R. Klatt Lieutenant Colonel, USAF, Retired www.cafrman.com Qualifications Contact

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