In three-fourths of the states, the treasurer or chieffinancial officer (CFO) is elected by citizensin statewide elections. In some states, such asNew York and Texas, the comptroller is electedand performs many of the functions of the CFO.About two-thirds of local governments have anofficial with the title financial officer, financialdirector, or a similar title implying broad duties.Financial wizardry is not a CFOs primary calling;but when governors or mayors find their budgetsunbalanced, they turn to the CFO for possiblestratagems. For the past few years, politicians infar too many cities and statesnot to speak ofWashington, DChave tended to rely on ninedangerous stratagems:1. On August 1, 2007, theI-35W bridge across the Mississippi River inMinneapolis collapsed suddenly, killing 13people. Seven months later, a federal commissionsaid that just to maintain and upgradesurface transportation in the United States worldcost $225 billion a year for the next 50 years.Ensuring safe and dependable roads, bridgesand transportation systems, as well as water systems,sewage treatment plants, dams and evenschools also requirers long-term planning. Unfortunately,most politicians prefer quick fixes.2. In economic hard times, it ispopular to sell land, buildings, or surplus assets.AP Photo/Pioneer Press, Minneapolis Star Tribune, Brandi Jade Thomas, www.TwinCities.comAll rights reserved. No distribution allowed without express authorization9781111632366, Managing the Public Sector, Grover Starling Cengage Learning.530 Part Three RESOURCES MANAGEMENTCalifornias real estate is one of its greatestassets and selling off state property, accordingto the governors office, would raise over $1billion. Specifically, Governor Schwarzeneggerproposed the sale of seven state-ownedproperties to help get his budget in balanceincluding: San Quentin State Prison, the CowPalace, Del March Fairgrounds, Orange CountyFairgrounds, Ventura County Fairgrounds, andthe Los Angeles Coliseum. Schwarzeneggersproposal was rather straightforward comparedto that of Governor Eliot Spitzer in New York,who wanted to securitize, or sell off, part ofstate lottery proceeds.3. Say the U.S.Air Force needs 100 Boeing 767 aircrafts to useas aerial refueling tankers. Buying them outrightwould cost about $20 billion and add appreciablyto this years deficit. Therefore, for politicalreasons, Congress and the president mightprefer to lease them over a 12-year period. Thebudget would take far less of a hit each year,even though total cost would be higher than ifthe Air Force had bought the planes.4. Most budgets are madeup of multiple accounts. The account that getsthe most attention is called the general fund.When that general fund gets in trouble, politiciansstart considering asresources to be tapped. New York helpedbalance its budget in 1992 by transferring thecost of running the Erie Canal from the generalfund (on budget) to the Thruway Authority( off budget). Similarly, in 2003, Massachusettstransferred management of a conventioncenter and a parking garage (both on budget)to the state pension fund (off budget) to showa savings of $175 million.5. The responseto budget problems is often symbolic. DavidOsborne and Peter Hutchinson write: Leadersorder coffee pots unplugged, travel budgetsslashed, and consultants banned. To saveenergy, they force workers to endure hotteroffices in summer and colder offices in winter.Some even outlaw potted plants. In Missouri lastyear, the governor ordered that every other lightbulb in government buildings be unscrewed.6. In 2008, Governor Schwarzeneggerproposed cutting Californias budget acrossthe board by 10 percent, meaning that everystate agency from police to health to the artswould receive a 10 percent reduction in itsannual budget. Less drastically, that sameyear, Iowa Governor Chet Culver announceda 1.5 percent across-the-board cut and saideducation and Medicare wont escapeunscathed. The popularity of broad-brush,across-the-board cost-cutting is easy to understand:It is a way to avoid making difficult,uncomfortable political choices.7. A budget is really just aforecast, a necessary statement of expectedrevenues and expenses. But every budget isbased on assumptions, and CFOs can make itlook better or worse simply by changing thoseassumptions. If they expect 1000 new studentsto enroll in their schools but assume (for budgetpurposes) only 900, they have reduced thebasis for their estimate of new expenses by 10percent. Ronald Reagans approach in 1982was a classic example of making the budgetwork by fudging the numbers. To justify largetax cuts, his budget director, David Stockman,forecast 5 percent growth for 1982. Theoretically,this would help create a $28 billionsurplus by 1986. As it turned out, the grossnational product fell by 2 percent that yearand the largest deficits since World War II soonfollowed. The Obama White House presentedits own rosy scenario with the fiscal year 2010budget. It expected economic growth in 2009to decline by only 1.2 percent, whereas the nonpartisanCongressional Budget Office assumeda 3 percent decline. Quite a difference.8. Even when the general fund is legallyprohibited from being in debt, governmentsfind ways to borrow. The chief way statesand local governments borrow is by issuingbonds. California has proven that the politicsof borrowing works for both Republicans andDemocrats. In 2003, the legislature finallypassed a $99 billion budget with $10.7billion of borrowingwhich was probablyunconstitutional. After voter removed (recall)Democratic Governor Gray Davis from office,the new Republican governor, Schwarzenegger,immediately endorsed borrowing $15billion more as part of his budget balancingAll rights reserved. No distribution allowed without express authorization9781111632366, Managing the Public Sector, Grover Starling Cengage Learning.Chapter 11 PUBLIC FINANCIAL MANAGEMENT 531plan. Meanwhile, on the East Coast, NewJersey faced a $3.5 billion shortfall and hadaccumulated a $32 billion debt. GovernorJohn Corzine therefore proposed increasingfees on toll roads and issuing up to $38billion in bonds against future toll revenues.Although issuing bonds is the chief way fora state to borrow, Schwarzenegger wouldlater try another way, namely, invoking a lawthat lets the state demand loans of 8 percentof property tax revenue from cities, counties,and special districts. Under this law, thestate must repay the municipalities withinterest within three years. So, he requested$2 billion, displeasing local officials up anddown the state and in effect, kicking the candown the road three years.9. Accounting offersmany temptations to politicians who might havemade a read-my-lips pledge of no new taxes.Since we cannot consider all the gimmicks,we note here just four: manipulating the timingof expenditures and receipts, requestingfunds after budget approval, making falseassumptions, and making dubious promises.Our first example involves pretending or evenrequiring that money you expect to receive nextyear will actually come in this year or pretendingthat expenses planned for this year will bemade, technically, next year. For example, statestell school districts that are expecting a school-aidpayment in May (this fiscal year) that they will getit in July (next fiscal year), thus making this yearsexpenses look smaller. At the same time, they tellretailers who normally submit their June sales taxreceipts in July (next fiscal year) to do so in June,thus making this years revenue look larger. InMassachusetts, Governor Deval Patrick proposedcounting about $900 million in proceeds fromlicense fees of new casinos that Prudent presidents and governors recognizethat natural disasters happen and allow for themin their budgets. Others simply assume none willoccur, lower their spending request to the legislatureaccordingly, and then blithely ask the legislaturefor supplemental funding two months later,when the flooding or whatever occurs. This workswell for wars, too.Another accounting gimmick used to make deficitprojection look smaller involves the alternativeminimum tax (AMT) enacted in 1969 to preventthe wealthy from using tax shelters to avoid payingany income tax. Although it was intended tohit the wealthy taxpayer, it was not indexed forinflation. That fact has meant that it could affectmillions of middle-class taxpayers. If they pay it,the government would get billions of dollars morein tax revenues, which is what past budgets havefalsely assumed. But it would also probably meana taxpayer revolt. So each year the White Houseand Congress agree to patch the alternative tax forinflation and the extra revenues never materialize.Finally, we come to a relatively new gimmick:PAYGO (pay-as-you-go) . Heres how it works: Thepresident promises that Congress can only spenda dollar if it saves a dollar elsewhere. Thus,PAYGO, provides politicians with convenienttalking points and taxpayers with a false senseof security on budget reform. From 1991 through2002, PAYGO existed as a statute and wasbrought back in 2007. But it never workedbecause Congress severely limited the amount ofthe budget to which it applied and, in those caseswhen it did apply, conveniently voted waivers..