Replies

>-----Original Message-----
>From: Rocco Ken G [mailto:Ken.G.Rocco@state.or.us]
>Sent: Thursday, January 09, 2003 3:53 PM
>To: juli.dichiro@ashland.k12.or.us
>Cc: Sen Hannon; Weyand Dallas G
>Subject: Information Request on CAFR
> >As the attached memo describes, Senator Hannon asked for a response
>to the inquiry you received regarding the Oregon CAFR and potential
>available funding for the state. If you have any questions or need
>clarifications, please let us know.
>
><>
>
>Attachment converted: Macintosh HD:Sen Hannon CAFR.doc (WDBN/MSWD) (0004C430)
Dear Juli,
Thank you for sending the commentary from public employee Rocco.

I have forwarded it to Walter Burien...his reply is below.

I request two simple things:

1. You forward this reply to Sen. Hannon and ask him to respond in HIS OWN WORDS to this issue and not to speak through state employee, Rocco, or anyone else.

Sen. Hannon is OUR representative and we expect him to take a public stand with unambiguous specificity on this issue.

2. I also ask the same of you. Should you feel the need to seek further clarification of any of this, please also feel free to contact Mr. Burien for his input.

This particular sentence from Mr. Rocco alone should be enough to enrage any citizen:

"Additionally, the presentation ignores the potential constitutional and/or legal restrictions on the use of the potential surpluses."

The Constitution is a tool to SERVE THE PUBLIC...not a barrier to obscure public funds in times of crisis.

"Legal restrictions"??? What total bureaucratic B.S.

These "Legal Restrictions", if any, need to be REMOVED by legislation IMMEDIATELY introduced by Sen. Hannon and supported by other public servants of conscience. And the Constitution is a malleable servant of the people of Oregon.

It's time to determine the shortest, most logical method of freeing up the monies in scores of funds and investment portfolios of city, state, and county governments.

With kind regards,
Jeff Rense

From: WalterBurien@aol.com
Date: Tue, 14 Jan 2003
Subject: Oregon response
To: jr@rense.com

Jeff...

Rocco uses the limitations of statute and law as a defense.

Well, who created those statutes and laws? In effect, were they created in secret to benefit the few or were they created with populace oversight. The answer is in secret...in all respects.

A one-liner corrects that:

"All revenue, debt funding accounts, self-insurance, any investment account held, managed, or generated by the state, its agents, or subcontracted, shall be subject to public inspection, audit, review, and examination of actuary accuracy for the purpose of appropriation of revenue to the general fund."

This state individual, in his capacity as a public official, should openly announce statewide and with true participation of the press that the state of Oregon urges all residents of the state to examine the State, City, County, and School District's CAFRs. The CAFR should be identified as that local government's Financial Statement and the past 10 years should be looked at. Having a 2000 and a 1990 gives a 20 year record of the real growth.

No matter what the hype or smoke and mirrors, a public official who does not openly promote his/her local government's Financial Statement clearly has much to hide.

The growth factor shown in the statistical section of the CAFR is the most condemning of all. Many CAFRs give the personal income increase for the taxpayer to compare with the increase in gross income for that government over the same time period. When it comes to state growth, the word whore is much to mild of a word to use.
A state in 2003 may say it has a 900 million dollar budget shortfall but what these sharks leave out is:

1. If the expenditures were kept at the same level - as say 4 years ago - with the same amount of revenue collected in 2003, the state would have somewhere between a 4 to 5 billion dollar surplus.

2. Personal income of individuals living in the state over 10 years went up by 1x and during the same time period the state's gross income went up by 5x. A state-by-state review shows, in most cases, nothing other than rape in comparison.

3. The complexity of state financial operations was not structured for simplicity to benefit the public but structured in obscure complexity to benefit the administrators, giving them the ease to move, reinvest and falsify genuine need.

4. If a public corporation went out of its way to promote its budget and kept its Financial Statement obscure from its shareholders, all directors would be indicted and convicted by the SEC for numerous nondisclosure infractions. Fraud would be the primary word in such SEC indictments.

'Marketing' has been the buzz word within local governments for the last 35 years. Sell a product to the public whether needed or not, with the sole underling motive being the self-enrichment of the administrators. Self- enrichment totaling in the hundreds of billions of dollars as the many different obscure complexities are worked and implemented.

Closing note: If Oregon brought its expenditures back to were they were just 5 years ago, the surplus revenue being collected would build to a point with compounded return to a point were the return would equal the budgetary requirements in approximately 6 to 7 years. Other factors included into the equation could expedite self-sufficiency for the State budget to 3 to 4 years. At that point, all taxation could be phased out. Salaries at retirement are paid by pensions, budgets can follow the same good example. A Tax Retirement Pension. Basic=Fundemental+Aplication.

A prospectus could be written for any State, County, City, or School District that would show the crossover marks to accomplish self-sufficiency.

Public officials need to get on the ball and do their job for the public and not their own self-enrichment..

Yours Truly,

Walter J. Burien, Jr.

[FIRST EMAIL NEXT]

Subj: IMPORTANT
Date: 1/13/03 1:08:22 AM US Mountain Standard Time
From: jr@rense.com
To: WalterBurien@aol.com

Hi Walter....

I sent Oregon's $12 billion CAFR fund data from cafrman to the Schools Superintendent, Juli DiChiro. She didn't believe it and forwarded the data to the local State Senator...Len Hannon. Here is the response to Juli from the Oregon Legislative Fiscal Officer, Ken Rocco. (Nothing came back from Hannon, of course).

I've scanned through this and it appears to be a lot of double speak and bullshit.

Can you please write me a rebuttal to this which I can present to the Superintendent AND the 'honorable' state senator?

I have a group of activist citizens now in the loop...the Superintendent is going to close two of our five elementary schools over 'budget' problems!

We might end up flying you up here for a full blown news conference to put the heat on the senator and superintendent....

Let me know your thoughts on the below....

State Of Oregon Legislative Fiscal Office
900 Court Street NE State Capitol
Room H-178
Salem OR 97301-4048
Phone 503-986-1828
FAX 503-373-7807

Ken Rocco
Legislative Fiscal Officer

Larry Niswender
Deputy Legislative Fiscal Officer

Date: January 9, 2003
TO: Juli Di Chiro
FROM: Ken Rocco
Subject: Information Request Relating to the Oregon 2001 CAFR

Senator Lenn Hannon asked that the Legislative Fiscal Office (LFO) respond to your inquiry concerning funds that may be available to address the state's budget shortfall as identified by Mr. Rense. We prepared this information in June 2002 during the third special session in response to a similar inquiry. If you have any questions regarding our response, please contact Dallas Weyand in LFO at 503-986-1834.

The question posed of LFO is whether the potential surpluses represent actual surpluses and, if there are surpluses, whether it is possible to take or borrow them and the steps needed to affect such actions.

The CAFRman Website takes specific information from the published Comprehensive Annual Financial Reports (CAFR) of all 50 states. For the state of Oregon, the specific information consists of cash and investments of various fund and account types in the State's financial statements. The amounts are presented as potential surpluses. The information does not present corresponding liabilities or restrictions on the use of that cash. (e.g. accounts payable that are paid July 1.) Additionally, the presentation ignores the potential constitutional and/or legal restrictions on the use of the potential surpluses.

The Website purports that the State of Oregon had approximately $12.2 billion of potential surpluses at June 20, 2001 and encourages people to ask whether an analysis of the government's financial condition (as presented in the CAFR) has been considered.

Interfund borrowing in general - With the exception of borrowing from the Public Employees Retirement Fund, short-term interfund borrowing is currently done. These interfund loans are generally the result of temporary cash flow needs. Treasury oversees these interfund borrowings and makes sure that: the cash flow need is temporary, future receipts will enable repayment, the operation of the lending program is not jeopardized, and that the borrowing isnít prohibited by federal or state laws, rules or regulations. Most likely, longer term borrowing between funds would have to be specifically permitted in statute before Treasury would consider approving them.

Transfer of surpluses in general - Generally Oregon state programs do not accrue surpluses over time. Legislative oversight of agency fee and revenue policies, expenditures, and fund balances tend to keep operating revenues in line with operating expenditures. Significant capital acquisitions are generally funded with borrowings. I am aware of at least one state whose statutes allow the finance director to transfer "excess cash" from non-general fund programs to the general fund. (NOTE: excess cash is defined as cash in excess of program needs and therefore, subject to a great deal of judgement). However, Oregon has no such statute that would allow either the State Treasurer or Budget and Management to transfer excess surpluses from non-general fund programs to the general fund. Budgetary control maintained by the Oregon Legislature indicates that one blanket statute to allow general transfers of "excess cash" would not be appropriate. Any transfers of "excess cash" should be specifically spelled out in statute or session law.

Review of potential surpluses - Presented here is our response to the question posed by category of funds presented on the Website. Our discussion follows the category of funds because of the similar issues surrounding the individual funds within each category.

General Fund - $0.4 billion. This amount is available and is considered in the budget process and Economic Forecast as an available revenue source.

Special Revenue Funds - $1.2 billion. These cash balances are proceeds from specific revenue sources that, by the state constitution and/or state and federal laws or administrative regulation, must be used for specific activities. A number of the funds receive substantial amounts of federal funds. The State Controller's Office has provided additional information on the various Special Revenue Funds. That information is included at Attachment 1 to this memo. Any substantial transfers or borrowings from these various funds would require change to the state constitution (weight mile tax), numerous state statutes, and would necessarily be limited to non-federal funds.

Debt Service Funds - $0.1 billion. These cash balances are set aside for specific debt repayments. Any transfer or other use of these funds would violate governing debt instruments.

Capital Project Funds - $0.2 billion. These cash balances are dedicated to the construction or acquisition of capital facilities. Generally the source of these funds are borrowings under Certificates of Participation, Revenue, or General Obligation bonds. Diversion of these funds for other uses would violate the debt instruments issued for the construction or acquisition of the capital assets.

Enterprise Funds - $1.8 billion. These cash balances are in self-sustaining, business type operations (predominately loan programs). Also included is the operation of the State Lottery. Changes to the state constitution and numerous statutes would be required to transfer or divert long-term funds from these operations. For most, if not all of the loan programs, any diversion would constitute a breach of loan covenants. This would, in turn, make loans to the programs callable by the lenders, resulting in the need to find funds to repay the called debt. Some of the Other Enterprise Funds cash balances (e.g. Capitol Gift Shop and Blind Commission Enterprises) may be more easily transferred.

Internal Service Funds - $0.2 billion. These cash balances are in state agencies that provide central services to itself other state agencies; principally the Department of Administrative Services, Attorney General, Forestry, Audits Division, and Treasury). Balances held in these funds are generally to meet working capital needs and replacement of capital assets. Statutory transfer of funds is possible. However, the federal government would require return of any portion deemed to be federal equity.

Trust and Agency Funds - $4.5 billion. Most of these cash balances are governed by other laws covering fiduciary responsibilities that prohibit accessing or using the moneys for other purposes. The Unemployment Insurance Fund may be used only to provide unemployment benefits. Funds administered by the Public Employees Benefit Board (PEBB) are included as agency funds because all of the funds there are from benefits allowances included in the state employees compensation plan. Changes to the state constitution and statutes could allow access to the Common School Fund and the Education Endowment Fund.

College and University Funds - $0.3 billion. A portion of these cash (unrestricted) balances may be available for transfer by enabling legislation. Certain of the cash balances are set aside for retirement of debt and capital construction and are probably governed by lending agreements as well as restricted by wealthy donors.

Component Units - $3.5 billion. $2.9 billion of this is with SAIF and the courts have held the state cannot access these moneys. Most of the balance is with OHSU. Any attempt to repatriate cash turned over to OHSU when it became a separate public corporation (July 1, 1995) can be expected to be contested. Investments in the Children's Trust Fund which receives its funding from charitable fund drives, tax refund check-offs and from a portion of the Criminal Fines and Assessment account.

Summary
Existing laws, for the most part, govern quite explicitly the use of the $12.2 billion identified as "potential surpluses" at the CAFRman Website. Some of the funds have even been dedicated in the State Constitution. Existing controls over cash balances include rigorous legislative review during the budget hearings process. All state agency budgets, regardless of funding source, are subjected to the same level of legislative scrutiny. Further, the State Treasurer closely monitors interfund borrowings to ensure that agency operations (and state laws) are not compromised. As a result, many of the "potential surpluses" are not actually available to shore up deficits (other than short-term cash flow deficits for which interfund borrowing is already occurring) in the General Fund.

CAFRman review Attachment 1

Health and Social Services Fund - Nearly 80% of revenues for Health and Social Services comes from federal grants. For example, the Mental Health Division has a federal grant to administer the State's Medicaid program.

Public Transportation Fund - About 85% of the revenue for this fund comes from taxes and federal grants. For example, the Department of Transportation is required by statute [319.410 & 319.880] to use motor fuels taxes for transportation purposes. The Department of Transportation also receives federal highway administration funds that must be used only for transportation purposes.

Employment Services Fund - Over 80% of the revenue for this fund comes from taxes and federal grants. For example, statute [656.506] requires the Department of Consumer and Business Services to deposit employer-employee taxes into the Workers' Benefit Fund for assisting injured workers and helping employers make appropriate workplace accommodations. As an example of restricted federal revenues, the Department of Community Colleges and Workforce Development receives federal funds for the Job Training Partnership Act (JTPA) program.

Nutritional Support Fund - Nutritional support revenues are 95% federal grants. For example, the Health Division receives federal funds to administer a food program that benefits women and infant children. In addition, the Adult and Family Services Division distributes food stamps through electronic benefits to Oregonians in need of assistance.

Environmental Management Fund - The majority of revenue for environmental management comes from licenses and fees that are restricted for use by statute and federal grants. For example, the Department of Environmental Quality is required by statute [468A.400] to establish and collect fees for issuance of certificates for vehicles in compliance with pollution control standards and is required to use those fees only for operating expenses associated with regulating the emission of pollutants from vehicles in Oregon. The Forestry Department receives federal funds to administer programs such as forest patrol and smoke management.

Educational Support Fund - Over 80% of the revenue for this fund comes from federal grants. For example, the Oregon Student Assistance Commission administers a federal family education loan program. Lottery funds that are dedicated by law to educational purposes are also accounted for in this fund.

Business Development Fund - Over 80% of the revenue for this fund comes from taxes and federal grants. For example, the Department of Revenue collects TriMet and Lane Transit District payroll and self-employment taxes and passes the taxes on to the districts. As an example of federal revenues, the Department of Economic and Community Development receives federal funds from HUD to administer a community development program. In addition, Lottery revenue bonds are issued by the Department of Economic and Community Development; proceeds are restricted for the specific purposes for which the bonds were issued (i.e., the Oregon Garden or the Coos County Pipeline project). Lottery funds that are dedicated for business development are also accounted for in this fund.

Community Protection Fund - Nearly 85% of the revenues for this fund come from fines and federal grants. For example, the Department of State Police receives federal funds for the Office of Emergency Management. The Department of Revenue collects fines, which are used in the manner prescribed by the legislature [ORS 137.300].

Consumer Protection Fund - About 95% of revenues come from taxes and fees. For example, the Department of Consumer and Business Services charges an annual regulatory assessment based upon the value of assets held by state chartered financial institutions, charges licensing and registration fees for persons selling securities, and charges licensing fees for persons doing business as mortgage lenders, pawnbrokers, consumer finance lenders, short-term loan companies, collection agencies, credit service organizations, money transmitters, certification authorities, and debt consolidators. Revenues are used to promote a business climate whereby innovative financial products and services are provided to the public, while ensuring that financial transactions are delivered in a safe, sound, and fraud-free environment.

Residential Assistance Fund - Over 70% of the revenue for this fund comes from federal grants. For example, the Housing and Community Services Department receives federal funds that are restricted for programs such as housing programs, energy programs and federal rent subsidy.

Agricultural Resources Fund - Nearly 85% of the revenues for agricultural resources come from fees and charges. For example, the Department of Agriculture is required by statute [570.705] to inspect imported timber products to safeguard the health of trees and plants in Oregon; the fees associated with these services are required to be used for operation of the inspection program.

Other Special Revenue Fund - About 80% of the revenue for this fund comes from charges for services. A variety of small programs are accounted for in this fund for agencies that are directed by various statutes to charge fees for certain services, the revenues from which are generally directed to be used for operation of the programs.

END OF COMMUNICATIONS