Skip to comments.CA: State has used Enron-style accounting tricks to cover its deficits
Posted on 02/21/2006 9:11:59 AM PST by NormsRevenge
The allegations against former Enron Corp. chairman Kenneth Lay and others involved in corporate scandals, such as WorldCom, generally revolve about creative accounting - hiding liabilities, inflating revenues and assets, etc.
One specific charge in the Enron trial now under way in Houston, for example, is that it cooked the books one year to add a penny to the company's per-share earnings and thus meet Wall Street analysts' expectations.
What's striking about the allegedly illegal corporate accounting is its similarity to the gimmicks that California politicians have employed in two state budget crises over the past 15 years.
Here's a short list of some of the more egregious stunts:
* Republican Gov. Pete Wilson faced a multibillion-dollar deficit when he became governor in 1991, and his first budget transferred $1.6 billion in public employees pension fund earnings to the general fund. Wilson's advisers knew the transfer was illegal, but reasoned that by the time the courts voided it, the state could afford to repay it, thus making it an off-the-books loan. And that's exactly what happened.
* The budget deficit was still plaguing Wilson in 1994, so his budget that year assumed that the federal government would cough up an additional $3.1 billion in aid - even though everyone knew it was phantom "revenue." The federal bucks never appeared, .. the gimmick was repeated the following year at $1 billion.
* Republican Gov. Arnold Schwarzenegger came into office promising to fix the state's chronic deficits but has employed trickery of his own, including an assumption in the 2004-05 budget that the state would get $450 million from seizing 75 percent of the punitive damage awards in civil cases, even though those involved in civil litigation universally agreed that it wouldn't work. .. it resulted in no revenue.
(Excerpt) Read more at sacbee.com ...
Maybe he wanted a copy of Ken's financials Cook Book. ;-)
No wonder Arnie wants to spend the surplus instead of returning it in the form of tax breaks. Of course, you guys in California ought to be glad you have surpluses; Jim "Craps" Doyle (WEAC/Potawatomi-For Sale) and the Legislature can't manage to create one here in the land of cheese and beer.
(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie. Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")
Becuz Dan Walters likes to pad his paragraphs to no end in wordiness, I snipped the Gray Davis example, but it is there, trust me. ;-)
Enron Accounting comes from Government Accounting...it was just cleaned up a bit.
Does this mean that California can now file for bankruptcy, pay back its debts at cents on the dollar, tell all of the overpaid-freeloading state workers that their pay is half what is was, and that their pensions were just turned over to the PBGC and they'll only be getting a quarter of what they'd been expecting?
---and then there is the federal government--
Using phantom revenues to 'balance' the budget has a long history in CA. Just look for the "$10 billion revenue from sale of diamonds embedded in meteor that falls in California in 2007" type items.
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