Do you know that local governments have a tax surplus of over $3 billion?

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Everyone knows the state's tax surplus is approaching $1 billion. Art Rathjen found that the LOCAL governments have over $3 billion in tax SURPLUS invested by the state treasurer.

See it for yourself. Go to (www.wa.gov/tre). Then click on investments. Then click on the Average Daily investment pool for Local governments. Check it out. These are SURPLUS tax dollars held by local governments. It's the total amount of their "rainy day funds".

I have a friend who is on our city council. He pointed out there are surplus funds in about every department that are not rainy day funds. So the amound of tax surplus dollars held by local governments could greatly exceed $3 billion.

A Benton County citizens group was ask to look into the funding requirements for a new jail. Their response was not pleasing to county officials. They found enough money tucked away in surplus funds to build the jail without a bond issue (over $15 million). The Benton County budjet shows just over $5 billion held in reserve.

-- RD (Monte) Benham (rmonteb@aol.com), September 06, 1999

Answers

The amount that local governments have invested with the state treasurer's pool is money that is not slated to be spent that month so it is kept in interest bearing accounts as wise stewards of tax dollars do. It is not surplus as in "extra". Since property taxes are collected only in April and October, funds collected are "banked" in the interest bearing account with the state treasurer's pool and then retrieved in the month that they are needed to pay the local government's bills. No, Monte, Benton County does not have "just over $5 billion held in reserve." What have you been smoking?

-- David (unified@whidbey.net), September 07, 1999.

I've been going to the library and looking at the published budgets that are available to every citizen. That's how I know Benton County has over $5 million in reserve. I've looked at the Ben-Franklin Transit Comprehensive Financial Summary. That's how I know they have over $12.5 million in reserve. I've looked at other cities and taxing districts budgets. That's how I know they all have SURPLUS funds.

Many others of this forum have looked up and found SURPLU money. The treasurer invests this money so he has a number that at least approaches a total.

Others who have looked at budgets notice that additional money is invested in other institutions. I wonder if that is legal?

I've looked at RCW 43.250.015.

With a $1 billion state tax surplus and a $3 billion local govt. surplus, the state is holding about $727 for every man women and child in the state (assuming a population of 5.5 million.)

It's time to return some of that money to the tax payer who everyone knows is being overcharged.

-- RD (Monte) Benham (rmonteb@aol.com), September 08, 1999.


David:

I believe you are correct. The investment pool is cash not needed today, that is invested overnight so tax payers get some earnings that become program funds. In addition, local governments frequently have Capital Improvement Plans that require accumulation of public works money for road construction, street overlay, bridge repair and replacement, etc. These are not inexpensive projects, in many cases, and it may take several years to accumulate the funds that must be "banked" and invested. Vehicle replacement and equipment replacement money needs to be accumulatd, and is often done on a life-cycle replacement cost basis; so that a computer may be lifed out at 5 years, by which time the replacement funds are accumulated. (New computers, as in equipment for a new position, are part of the start- up cost). "Surplus" or "Reserve" is the wrong name for these funds. They are allocated, but not yet expended. The comments by Monte Benham are another example of incomplete information being presented as fact. If the point is, local governments will not be broke immediately; that may be true, but at the cost of cutting the operating budget, or cutting the capital plan, or increasing other revenue (taxes). I-695 is not something for nothing. If tax payers "save" in taxes, they will have a "loss" in services. Describing the cuts as essentially painless, is just not accurate. And they will be "cuts". As anyone knows, if your income does not go up with inflation you lose in purchasing power. For a government, they have the added need to grow the revenue to provide services to the new homes, businesses and people that are added each year.

-- dbvz (dbvz@wa.freei.net), September 08, 1999.


The local governments have much more than a $3 billion average daily surplus. According to Rob Gavin a reporter for the P-I, only 420 of the 1720 taxing districts contribute to the fund. This means that the average daily tax surplus for the 420 local governments is $ 7.25 million. How much extra do you have in your checking account each day?

Taxing districts have other places to place their longer term investments. Such as the Ben-Franklin Transis only puts about $45,000 into the local govt. pool. But is invests over $12.2 million in three other places. This pattern is spread across many taxing districts.

Rob Gavin of the Seattle P-I helped us identify that the local governments have a huge tax surplus in excess of the $3 billion in the local govt. pool.

-- RD (Monte) Benham (rmonteb@aol.com), September 14, 1999.


Read about halfway down this article and you'll find that the surplus Monte has been crowing about isn't actually a surplus. They explain the cash-flow surplus pretty well.

BB

$30 car-tab fee plan is 'goofy,' treasurer says Sponsor of 'short-sighted' measure called 'clueless'

Tuesday, September 14, 1999

By ROBERT GAVIN SEATTLE POST-INTELLIGENCER CAPITOL CORRESPONDENT

OLYMPIA -- State Treasurer Michael Murphy yesterday ripped a ballot proposal to cut car tab fees to $30 as "goofy," and the lead sponsor of the measure as "clueless."

In the strongest statement yet by a state elected official, Murphy said Initiative 695 is a short-sighted proposal that would "screw up the economics of the state." The proposal could save a two-car family an average of $300 a year in vehicle excise taxes, but cost the state and local governments more than $1 billion over the next two years.

If passed by voters, I-695 would eliminate the state's motor vehicle excise tax -- based on a formula that can cost a car owner hundreds of dollars depending on the value of the car -- and replace it with an annual $30 flat fee.

It would also require state and local governments to seek referendum approval of any tax or fee increase, regardless of how small or routine.

For example, raising library fines, or copying fees could require a vote of the people.

Many state and local officials say the loss of that money will hurt police, transit, road projects and other services.

"This isn't even in the category of penny-wise and pound-foolish. It's goofy," said Murphy, a Democrat. "I've said it (I-695) is dumb as a brick, but that's an insult to the brick."

Tim Eyman, the lead sponsor of the measure, dismissed Murphy's attack.

"We know that 695 is not popular with politicians, bureaucrats, big business, big labor the press, but it's overwhelmingly supported by taxpayers," Eyman said. "And guess what, Mr. Murphy, there's a heckuva a lot more of us than you who are going to vote in November."

Murphy's fire was sparked yesterday by Eyman's claim that local governments and authorities are sitting atop some $3 billion in surplus that could offset losses from I-695. The figure was based on a recent balance of about $3 billion in the Local Government Investment Pool, managed by the treasurer.

But Murphy said the fund does not invest money from year-end budget surpluses, as claimed by I-695 supporters, but rather short-term cash- flow surpluses.

A budget surplus is money left over when tax receipts and other revenues for a year exceed spending, Murphy said. A cash-flow surplus works something like this:

A city collects $1 million in property taxes at the beginning of the month. It has to use that money to pay off a $1 million bond that becomes due at the end of the month. For 30 days, the city has a cash surplus and turns that cash over to the treasurer. The money earns interest until the city pays off the bond.

"The cash comes in, the bill needs to be paid somewhere down the road, so in that short period of time, it's being invested, which is the proper thing to do," Murphy said. "These are monies that are already spoken for."

Murphy said Eyman's assertion of a huge local government surplus shows how little he and other I-695 supporters understand the workings of government and public finance.

"His use of the word 'surplus' is not only misleading, it's wrong," Murphy said. "This guy doesn't have a clue. He's totally clueless."

Eyman responded: "We 100 percent stand behind that $3 billion figure. We do not back down an inch off of that statement."

Eyman said the figure was based on the research by R.D. "Monty" Benham, co-chair of the I-695 campaign. But Benham said he was unsure of exactly what is in the Local Government Investment Pool. He said his interpretation was based on the name of the fund and his reading of state law and that he did not seek an explanation from the treasurer.

Regardless of the make-up of the investment fund, local governments and authorities are running surpluses across the state. The balance in the investment pool "is indicative of the kind of surplus that is out there," he said.

But Mark Funk, a spokesman for the No on I-695 campaign, said Eyman's use of the figure is more indicative of supporters disregard for the truth.

"It's high time somebody called Tim Eyman on the numbers he's using," Funk said.

"Some of them seem to be made up out of whole cloth. People have to know he's playing fast and loose with the facts."

While many elected officials are privately opposed to I-695, few have stepped forward, fearing a voter backlash. Recent polls show likely voters favoring the measure by 2-1.

Murphy, who is up for re-election next year, said he is not concerned about the polls or the impact on his election.

"I have to call them the way I see them," he said.

Eyman said he's not surprised Murphy is attacking the proposal.

"It sounds familiar," he said. "Credibility is lacking whenever it comes to these doomsday predictions."

---------------------------------------------------------------------- ----------

P-I reporter Robert Gavin can be reached at 360-943-8311 or robertgavin@seattle-pi.com

-- BB (bbquax@hotmail.com), September 14, 1999.



I have observed both sides. I believe it is time for the people to speak how they want their tax dollars spent. And As a People, I believe that the 1-695 is an initiative to help the People...all this talk...and no one speaks for us? Govt...speaks for themselves. WE WANT to be able to have a vehicle that is dependable...and does not cost more than we can afford to register it. So that we can go to work...and pay our taxes like good abiding dependable citizens(UGH)..but the govt wants us to not be able to afford to make it to work...in dependable vehicles...especially if they are new dependable vehicles. So Where does that leave us? Where does that leave the monies in "surplus" we already spent to make roads and other thing usuable? Where does that leave Govt when we can no longer afford to have a car to go to work?

It leaves US with a bad taste in our mouths about the taxes they have taken and want more of for what? Are there repairs? are the schools better...has there been a change I did not see??? I think not.

The Roads are in sad disrepair...and so are all the other "needs" that this "surplus" is from. Now...Why should we give up our life to give more to the govt than it gives back to us>?

I can go on...but I believe I have said what I wanted to say.

Thank You...Jessica Anne Lee...Puyallup

-- Jessica Anne Lee (forestcat52@foxinternet.net), September 15, 1999.


The local government investment pool (LGIP)has an average daily balance of $3.045 billion. According to Rob Gavin only 422 of the 1720 taxing districts invest in the LGIP.

In 1991 the av daily balance of the SURPLUS funds in the LGIP was $ 1.169 billion. It's growing!

The taxing districts have additional places to invest their tax surplus. For example of the $12.3 million the Ben-Franklin Transis has only $45,000 is in the LGIP. The other $12.25 million is spread out in 3 other investments. Someone needs to add up all of the separate pockets these folks have to place the surplus funds.

Art Rathjen e-mailed me this information about Grays Harbor County. "They have $18,494,483 invested in the state Local Govt Investment Pool (LGIP). But their surplus is $47,673,224, about 2.5 times what they have in the LGIP. If this ratio is typical, then $3.1 billion in the LGIP represents a local government surplus of $7,75 billion. Add the state surplus of $1 billion, and the total surplus out there of $8.75 billion!

The Grays Harbor County surplus is many times the amount of the motor vehicle excise tax revenue they will lose when I-695 passes. The sky is not falling!"

-- RD (Monte) Benham (rmonteb@aol.com), September 15, 1999.


Benham:

Pay attention. It is not a "surplus". It is mostly allocated funds that have not yet been expended.

-- dbvz (dbvz@wa.freei.net), September 15, 1999.


D'

Do your homework! The RCW that governs the local government investment pool fund uses the designation "Tax Surplus".

Anyhow this is just indicative of the vast surplus that the local agencies have. There are several different pots the local governments use to place their SURPLUS funds. Visit you local library and examine your county, city, and transit district's comprehensive Annual Financial Reports.

-- RD (Monte) Benham (rmonteb@aol.com), September 15, 1999.


Benhan:

I have done my homework, and your conclusions are wrong. The funds are primarily allocated funds that are not needed today, but will be spent tomorrow or next month or next year. If that is your idea of surplus; then you don't need the funds in your bank account the day after you deposit your paycheck, or the funds in your retirement account, either. They are just as much "surplus" as these government funds. Some of these funds you call "surplus" need to accumulate for years for a major capital project. A local city has a Capital Improvement Plan that needs $15 Million to complete, and they put about $1 Million a year into the CIP fund for street improvements, repaving, intersection signalization, parks development, etc. It accumulates until they have enough to do the job the community wants them to do with their tax money. IT IS NOT SURPLUS!

In another case, a fire district sold voter approved bonds for capital purchases and construction of a fire station. 90% of that money needs to be spent or committed within 3 years, but in that time some items are ordered but not yet delivered, and the contract for construction could be awarded but the work may not be finished. The bond proceeds are invested until the items are delivered, and payment is required, and until progress on construction needs to be paid for. There may be $3 or 4 Million invested in the fund for 2 or 3 years, untill the projects need to be paid for. IT IS NOT A SURPLUS!

Perhaps the largest share of these funds are the daily operating funds of local governments that recieve sales tax revenue quarterly, in uneven amounts; property taxes semi-annually, in nearly even amounts; and other revenue such as permit fees, on an inconsistent basis. On any given day the local government may have half their annual budget in the fund invested overnight. Through the year the expenses draw down the balance. At the end of the calendar year, they need funds to keep operating until the next quarterly sales tax or semi-annual property tax revenue is recieved. IT IS NOT A SURPLUS!

Calling these funds a "surplus" is just another deception by the proponents of this initiative. If you can't get your facts straight, stick to the $30 license tabs to sell the initiative. At least an appeal to greed is honest.

-- dbvz (dbvz@wa.freei.net), September 15, 1999.



D'

The legislature must have made typo's in RCW 43.250.010 when they refer to the Local Government Investment Pool funds as "SURPLUS" (4 times in one paragraph). Or, again mabye it depends on what the definition of "is" is.

Face the facts. The opposition denies the existence of any surplus funds, state or local. But financial reports of many taxing districts show investment amounts of their surplus funds in locations such as: Municipal investments, US Government Securities, Bankers' acceptnces, savings and loans,Local Government Investment Pool, and others.

No matter what you call it, it's still our money.

-- RD (Monte) Benham (rmonteb@aol.com), September 16, 1999.


Benham:

Ok, call it a "surplus"; but most of it is only surplus in the sense of "not expended yet". In that sense it is surplus to the needs of today. Does anyone expect the government to operate as if it is not needed at all?

As for all this extra local money you are talking about, that is between the local voters and tax payers an their local elected officials. They don't need someone else spending their savings for them without knowing what they were saving for.

-- dbvz (dbvz@wa.freei.net), September 16, 1999.


Just to be clear, I said "call it a surplus". I did not agree it is a surplus. I certainly don't agree that Benham and others can assume they can spend it for the local goverments that are attempting to meet the needs of their communities.

-- dbvz (dbvz@wa.freei.net), September 16, 1999.

"They don't need someone else spending their savings for them " What? The start of a rational thought. That's right d, People ought not to have their money taken away for other people to spend. Essential functions of government are great. Anyone who can't find two percent of current government spending that isn't essential, isn't trying. That being the case, the taxpayers all ought to get our two percent back, because (let's hear it) "They don't need someone else spending their savings for them " You're getting there d, you're getting there.

-- Craig Carson (craigcar@crosswinds.net), September 16, 1999.

Craig:

Cute, but not on the point. If local government is supported by their voters, and they elect representative of their choice, and approve plans for the taxes they collect, they don't need anyone to revise their funding plans for them by a radical change in how governments operate. And you can get off the 2% reference on every other post. That is a bogus number, based on all government revenue (state and local) and the loss of just the MVET. When you look at specific situations, it is much more. If property tax revenue from both inflation and new construction are prohibited without a vote, as many expect, the effective revenue loss will depend on the growth rate in the community. At least one I know of expects a revenue shortage of about 5% less than what is needed to maintain the current level of service (personnel, supplies, services, etc.); and they get NO MVET. Some cities get a lot of MVET funding, and some were reporting 40% losses.

But they can fix that with a funding proposal to restore the revenue. In the interrum, the least senior personnel may be looking for jobs with more security. And someone will say, "great, we don't need them" as was said about the 1000 police officers. Except, we do need them.

-- dbvz (dbvz@wa.freei.net), September 16, 1999.



d-

I've been there and done that. I've been in a number of organizations that have received substantial cuts in a program line, often more than 40%. That's why you get paid the big bucks to MANAGE. You either take it out of low priority or marginal programs or reprogram accross program lines to level the shortfall. A 2% across the board cut in a program line that's growing 10% a year is not only manageable, it's easy. But the key is to manage. If the managers (elected representatives and bureaucrats) are competent, this is little more than an annoyance. If they are incompetent (or so arrogant that they purposely choose to foul this up), I certainly don't want them to have my 2% to waste, and may not want them to have the other 98% either. This is not just theory with me d, I've been there and done that.

-- Gary Henriksen (craigcar@crosswinds.net), September 16, 1999.


Monte writes:

"The legislature must have made typo's in RCW 43.250.010 when they refer to the Local Government Investment Pool funds as "SURPLUS" (4 times in one paragraph)."

You crack me up. Why don't you try reading the FAQ at their website? You know, the one that says the average maturity of the investments is 90 days? Hmmm, is 90 days a long-term surplus? Doesn't sound like it to me.

I'm amazed that you're basing the fact that you think it's a surplus on its TITLE. That's sorta like implying that this initiative is only about $30 tabs...actually, that probably explains quite a bit.

Why don't you ask somebody from the state about it? Why don't you actually read what's posted on the website?

One more time, it's not a surplus. It's where they put tax money that they've already collected until it's ready to be spent. A surplus contains money that isn't designated to be spent on anything. All the money in the LGIP is going somewhere, sometime soon.

BB

-- BB (bbquax@hotmail.com), September 17, 1999.


BB- Point of order "You know, the one that says the average maturity of the investments is 90 days? Hmmm, is 90 days a long-term surplus? Doesn't sound like it to me. " All this shows is that the money is invested in short term instruments, not anything about the source of the money. Generally they'll provide more return on investment than a checking account, but not tie up the money in long term notes.

I've looked into this issue and tend to side with you, although it's not as clearcut as you make it. If you look into the budgets of many departments, they show under revenues the interest earned from these accounts. If I receive all of my funding money at the first of the year, putting 11 months of it into an interest earning account and drawing it down incrementally over the year is quite reasonable. If there really are numbers like $5 billion sitting around in these accounts, or if they do not come pretty close to zeroing out at the end of the FY, explanations from the responsible people are warranted, if only to explain why they SHOULDN'T have been invested in longer term instruments that would have likely brought a better return on investment. Even if you have a good reason to hold a lot of cash, how you manage your cash flow is as legitimate an issue for government as it is for the banking industry. But as I said, I tend to think like you that people are seeing allocated but not yet obligated funds, and confusing that with a huge surplus. If we had more performance audits of government functions, I believe people would have more confidence in their management practices. They can be quite interesting. The performance audit on the Pierce County website indicates that, through better management practices, they could offset the complete funding shortfall they will have if I-695 passes. It'd be a lot of hard work, but they could do it.

-- Gary Henriksen (henrik@harbornet.com), September 17, 1999.


Good Reasons:

Bond sale, hold the funds until the purchase is made or construction completed.

Capital Plan, accumulate funds for a major project like road and bridge construction, pavement overlay, park development.

Operating budget, due to the cash flow issues I noted before.

Investment Options:

Actually, the size of the account gets them the best rates.

-- dbvz (dbvz@wa.freei.net), September 18, 1999.


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