Budget Discussion

I thought it might be good to elevate this issue to a separate post. In the proposed school budget 2008-09, Board President William Hellmann, CPA has proposed what appears to possibly be accounting gimmickry and sleight of hand in transferring $1.25 million from the Capital Reserve fund (the fund that exists to finance large building projects) and transferring it to the general (everyday expenses) fund.

Before I address this, let's look at an example of financial gimmickry from the past.

In early 1968 President Lyndon Johnson made a change in the budget presentation by including Social Security and all other trust funds in a "unified budget." This is likewise sometimes described by saying that Social Security was placed "on-budget."

This 1968 change grew out of the recommendations of a presidential commission appointed by President Johnson in 1967, and known as the President's Commission on Budget Concepts. The concern of this Commission was not specifically with the Social Security Trust Funds, but rather it was an effort to rationalize what the Commission viewed as a confusing budget presentation. At that time, the federal budget consisted of three separate and inconsistent sets of measures, and often budget debates became bogged-down in arguments over which of the three to use. As an illustration of the problem, the projected fiscal 1968 budget was either in deficit by $2.1 billion, $4.3 billion, or $8.1 billion, depending upon which measure one chose to use. Consequently, the Commission's central recommendation was for a single, unified, measure of the federal budget--a measure in which every function and activity of government was added together to assess the government's fiscal position.

This allowed Johnson to fund both his "guns and butter" approaches (the Vietnam War and the Great Society), but it also led us into a governmental financial tailspin that continues to this day. We masked the true deficits with the surpluses from Social Security. Lo and behold, those surpluses are now gone too, and because of the gimmickry, we missed both the federal and SS deficits until too late.

Our Zen moment for the day: If we hide the truth, and no one holds us accountable for it, does it really exist and is it truth or fiction?

DISCLAIMER: I am not a CPA or a lawyer. I am impressed when my checkbook balances to within $10. When I have money left at the end of the month, either it was a short month or I forgot to pay a bill. And maybe I'm not reading the budget effectively enough and not understanding enough. But here's my questions. Readers: Please feel free to add any other questions and/or explanations as you would like. And this time, maybe we can hear from ANYONE out there who supports this NSN budget.

Dear Mr President Hellmann, CPA: I have no doubt that news of this post will make its way to your ears within hours of posting, so would you please prepare now to explain this to us in clear, precise, non-evasive, non-technical laymans terms at the school board meeting on January 23, 2008:

1) What legal authority allows you to transfer this money and please provide three additional examples of other school boards who have done the same thing in Pennsylvania AND survived a legal challenge. No problem if the lawyer answers for you, but he needs to be under the same non-evasive and non-technical rule.

2) How is transferring this money NOT financial gimmickry? Again, please use clear and precise laymans terms. And what is the gain for the district in using this transfer OTHER than providing a fig leaf of respectability to not have a larger tax increase? What about the money that is left and how much more do you expect to take from the Capital Reserve in this budget cycle and the next, and the next?

3) Where's the beef? There's still playing fields behind the high school. You successfully stopped the school and had well over six months to analyse the situation. You talked and talked with meaningless platitudes and non-specific soothing speech and only a few people found the courage to call you on your empty rhetoric. You and your compatriots ignored those brave few and deferred substantive comment on these issues until you were seated. Congratulations. You're seated. And you've gone through the budget with your fine tooth comb and found zip, nada, and bupkis to cut? Man, I gave you the benefit of the doubt that you would find something, anything, that you could cut because of those irresponsible boards of the past spending too much incorrectly. And now we find out that your magic CPA wand has run out of black ink. So here's the question: What DID you cut? (HINT: The answer "because so much of the budget is written in stone" is not a valid excuse. You knew that going in, didn't you?) If this is the best you can do, maybe the plane tickets for the Orlando conference should be cancelled.

4) Please tell us right now why the Stop the School people, one and all, should not be labeled as frauds and run out of town on the same tar and feather rail used so recently for the departed board members. (Hmmm...Can board members be impeached or recalled?)

[ADDED Dec 24, 2007: In re-reading this, it seemed a little harsh in some spots, so I applied my fairness test by replacing "William Hellman, CPA" with "Dr Sandy Gibson" and re-read it as if I was a Stop the School candidate complaining that the previous board had submitted the proposed budget. Not only did this post pass my fairness test, it turned out to be rather mild.]

Anyone else want to add to this list? I supported the new school and I feel like I'm getting hosed royally. Now if I could only find a window that opens...