Truth+In+Accounting

Truth In Accounting had an incredibly important 50 state study that needs to be broadcast far and wide. It shows the mess that every state in the union is in with the budget.

When the Institute for Truth in Accounting (the IFTA) began to design “The Truth about Balanced Budgets—A Fifty State Study” (the Study) in early 2008 our purpose was to widely examine the effect accounting principles and policies have on states’ budgeting and financial reporting practices. Experience in Illinois indicated to the IFTA that this state’s budgeting process used unsound accounting principles and evaded the intent of balanced budgets mandated by its constitutional and statutory requirements.

Now complete, the Study discovered that the budgeting and accounting problems first identified in Illinois are rampant in other states. The IFTA’s findings include:

• Most state annual reports indicate their budgets are not balanced;
• Despite this fact, states perpetuate the myth that their budgets are balanced;
• Governors and legislatures intentionally circumvent balanced budget requirements for their own political expediency, endangering fiscal sustainability and evading public scrutiny;
• Billions of dollars in retirement costs are incurred each year but not provided for in state budgets;
• Information required to assess the long-term consequences of current policy decisions is not available;
• Surpluses reported on state financial statements do not report true financial results; and
• Many state annual reports are not published on time, resulting in legislators entering budget negotiations completely unaware on how the state performed in the previous fiscal year.

Back in early 2008 no one foresaw the financial distress that was to develop during the second half of the year. Since then, news of developing fiscal difficulties in several states shows why the creative accounting they use is not useful to understand their financial condition or to predict the future financial crisis. These developments concretely prove the IFTA’s finding that a complete overhaul of the budgetary requirements governing the states is critically needed. It is also time to improve the Generally Accepted Accounting Principles used by state and local governments, so pension and healthcare obligations are included as liabilities on the governments’ balance sheets.
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The Truth About the Balanced Budget”