LOUISVILLE, KY HAS AT LEAST $322.51 MILLION IN POTENTIAL SURPLUSES OF THE TAXPAYERS MONEY.

By CAFRman,
Lieutenant Colonel, USAF, Retired

Louisville has approximately $322.51 million of the taxpayers' dollars it is not using, i. e. potential surpluses equal to $1,274 for every man, women and child in Louisville or $5,096 for a family of 4. This does not include all the additional potential surpluses that exist in the school system applicable to Louisville. If these potential surpluses were returned to the people, the total economic benefits increase to $2,959 per capita and $11,834 for a family of 4. Could you use an additional $2,959 per capita in benefits this year? The Louisville review is shown in Exhibit A in this report.

You say "This is not possible because we have been watching the politicians and the budget like hawks. Nothing gets by us." You are looking in the wrong place. We want to introduce you to another document that you probably have not heard of, the Comprehensive Annual Financial Report (CAFR, pronounced "cay-fer"). The budget is only a planning document. The CAFR shows what actual happened.

Governments should be non-profit organizations, and except for retirement/pension funds and a few other funds, should be on a pay-as-you-go system. The budget is a planning document that matches revenues and expenditures for the next fiscal year of its operation based on the two principles above. Because governments normally are not allowed by law to exceed the budgeted amounts, the budget is a very important document for government officials and politicians.

Think of the CAFR as the government's version of a company's annual financial statement. The CAFR does not include what the government is planing to do (the budget), but describes what it did; what actually was spent and the status of assets and liabilities at the end of the fiscal year.

Each year all States and local governments prepare a report that provides the status on all assets and liabilities and what the revenues and expenditures were for the fiscal year. The report is prepared in more or less in a standardized format using the Government Accounting Standards Board (GASB) accounting and reporting standards. This is where the potential surpluses are disclosed. They are not in a category called "surpluses". The potential surpluses have to be found and identified.

Government surpluses, as used in this report and on our site, 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 find is that most governments have huge amounts of cash and investments on hand at the end of the fiscal year. And somehow this cash and investments are not being recycled back through the budget process the next year, but are being held year-after-year and the income and amounts keep increasing.

As stated above Louisville's potential surpluses at the City-level (CY1) as of June 30, 2000 had reached $322.51 million. But the $1,274 per capita is just the tip of the iceberg. It is what happens if that $322.51 million is returned to each person on an equal basis that makes history.

Using elementary economic principles found in every Econ 101 text book, after one year the refunds turn into total benefits of $2,959 per capita or $11,834 for a family of 4 and much more. Here is a chart that tells the whole story, but only for the major portion (CY1) of the Louisville-level government, not the potential surpluses in the school system applicable to Louisville. These potential surpluses would be added to the amounts indicated below.

Remember, private sector economics are completely different than public sector (governments) economics.

ECONOMIC IMPACT ANALYSIS SUMMARY - LOUISVILLE, KY CY1 REVIEW - 2000

Well, in his testimony to the Senate Humphrey- Hawkins Committee, Alan Greenspan, Chairman of the Federal Reserve, in late July 1999 gave us a clue on what he thought should be done when he stated:

“I'm of the old fiscal school that you raise revenues for basic government purposes and if you don't have those purposes you give the money back or you don't tax it... My experience is that private rates of return are significantly higher than the governments rates of return.”

What did he say?

• If a government collects too much from the people, the government should give it back.

• It is better to let the private sector have the money than governments. This we prove here as shown above and in http://www.cafrman.com beyond a reasonable doubt.

We agree that the potential surpluses should be returned to the people NOW before governments spend it.

Some wrestler called “the body”, now called Governor Jesse “the mind” Ventura of Minnesota, while mayor of a city in Minnesota refunded over $40 million in government surpluses to the people. Within the first six months as Governor he returned $1.3 billion in surpluses to the residents of Minnesota. This refund amounted to $700 to $800 per family. We hear he wanted to return more but the politicians prevented him from doing so.

A December 1999 article in the Wall Street Journal stated:

"Holiday cheer is in good supply in Minnesota these days, where the congressional ban on e-taxes is saving online shoppers a bundle and a HUGE STATE SURPLUS means that even those who do their Christmas shopping in more traditional ways are looking forward to a sales-tax rebate that may average some $250 for every tax filler." (Emphasis added)

An April 2000 article in the Wall Street Journal entitled "State Spending Machines" clearly states what is happening across the country.

"Virginia's GOP Governor Jim Gilmore says that when taxpayers hear their state is running a surplus they should watch their wallet. 'Surpluses only mean the money is coming in so fast that even government hasn't had a chance to spend it."

"Virginia's Governor Gilmore believes the only way real insurance against even greater spending increases when times get tougher is to cut taxes...."

"Governors Ridge of Pennsylvania and Ventura of Minnesota are popular in part because they have actually gotten rebate checks into the hands of voters."

"Steve Moore of the Cato Institute says one-shot tax rebates may be a next-best solution. 'Getting money out of the government makes it less likely that programs you can never kill will spring up,' he says".

[Note: Do you think maybe Mr. Moore has gone to CAFRman.com?]

So for those of you who believe surpluses do not exist and the returning of surpluses won't happen, better think again, because it has happened and is happening in those communities where the citizens are taking an active approach to the issue.

What we have identified is potential surpluses, not actual surpluses. This is because only an on-site audit will determine the actual surpluses. The public does not have the liberty to conduct an audit. But a citizens committee could establish an initiative to force governments to accept a citizens' on-site audit for the sole purpose of turning potential surpluses into actual surpluses and determine how the surpluses will be handled. As our site recommends, do not let the government have an independent audit of potential surpluses. The American Institute of Certified Public Accountants (AICPA) auditors are excellent, but they have to walk a tight rope. We know of no living creature that bites the hand that feeds it.

For most of what we have identified as potential surpluses, the government's and politician's response will be "These are required by law to be used only for the purposes designated." or "These are Federal funds and can only be used for a specific purpose." or "These are restricted funds controlled by law." Our response is Federal funds are taxpayers' money; State funds are taxpayers' money; restricted funds are taxpayers' money. We don't care what governments/politicians call it, the potential surpluses are "taxpayers' money" and the people should get it back. No tax cuts or paying off debt. These never work. The only way to get the most economic benefit is for the potential surpluses to be returned in total to the people.

If the laws cannot be changed to provide for the people to receive refunds of excessive tax dollars, then we no longer have governments "...of the people, by the people, and for the people..", we have communism operating within a capitalist society. Some say we have it now. They may be right.

There are two axioms that should be remembered: (1) He who owns the gold rules, and (2) He who writes the rules wins. It is time the people write the rules, because we surely do not own the gold.

If we were to summarize what has been said and shown in this article and to keep it as truthful as possible it would read like this:

"A review of Louisville's FY 2000 Comprehensive Annual Financial Report (CAFR) has disclosed that Louisville has approximately $322.51 million in potential surpluses of the taxpayers' money that the city is not using. This equals $1,274 for every man, women, and child (per capita) in Louisville or $5,096 for a family of 4.

However, if these potential surpluses were returned to the people, the total benefits because of the economic impact of returning these potential surpluses would be $2,959 per capita or $11,834 for a family of 4. This amount does not include other "quasi-government" entities at the city-level that may have potential surpluses, nor does it include any potential surpluses in the school system. The total potential surpluses for all of Louisville CAFR entities would be much more than shown above.

Full details, criteria and conditions of this analysis are available at www.CAFRman.com ."

This is not the whole story, but it is a good start to understanding that the Louisville has substantial potential surpluses that should be returned to the people. Definitely the City should not be considering additional taxes or cutting of services with $322.51 million in potential surpluses.

Would you like to know if there are other individuals/groups in Louisville that are interested in or currently working on the potential surplus issue? We provide a way for you to find out. We have a new section called "Contacting Others". This section allows someone to find others that are also interested in this issue by school district, city, county, and/or State. Consider entering your e-mail address in the area of the government(s) you are interested in. You may be surprised on what others are doing and how you can help. It does not necessarily require time on your part, because moral support is also very encouraging to those that are actively doing something. Remember, it is your money at stake here, a lot of money.

Exhibit A

Note: For those familiar with governmental accounting, for potential surpluses we basically used GFOA Balance Sheet Account Classification Codes 101, 102, 103, 151, 153, 170 and 181.

But the $1,274 per person is small potatoes to what the economic impact would be if that amount was returned to the residents of Louisville. Let's do an economic impact analysis of the combination of the Commonwealth of Kentucky S1 review and the Louisville CY1 review. This is where the data becomes dramatic.