Welcome to sunny Greece: The very week that Governor Rick Perry, campaigning for president in South Carolina, announced his plan to overhaul the federal tax system, an ugly report emerged on the condition of the 50 states' finances, which are awful — even in the miracle land of Texas.
Perry wants to establish a 20 percent optional flat tax on income, cut corporate tax rates, eliminate taxes on dividends and generally lower the tax burdens on the long-suffering wealthy. Call his "Cut, Balance and Grow" plan a response to the Occupy Wall Street protesters' demands: "Roll that up and smoke it, hippies."
Perry's scheme would require massive cuts to federal programs to balance the budget. Details on those cuts will come later, his campaign promises.
"Later" is a scary word if you accept the findings in the report from State Budget Solutions, a nonpartisan group that tracks state finances, which found that states have racked up more than $4 trillion in debt. Texas, with $282 billion in liabilities, ranks third highest — behind only California and New York.
How did the states — including one under the conservative eye of Perry — slip into such deep holes? By practicing accounting gimmickry to kick debts down the road, says Bob Williams, a former Washington state legislator and president of SBS. For example, states tend to be overly optimistic about how much they will earn from their pension fund investments. As budgets gets tight, legislators short payments to the funds and use the savings to cook the books. "It's a game legislatures play," says Williams, whose group applied private market pension standards to estimate the states' shortfalls. "They don't have to accept actuaries' recommendations." (Estimates of state pension fund shortfalls vary widely — perhaps a sign of just how tough it is to unravel the accounting — though groups that have studied them generally agree states are awash in red ink.)
And that's just one of the gimmicks SBS says states employ to screen debt. Texas, under Perry, has used the full bag of tricks freely, as a recent story by the Fort Worth Star-Telegram's Aman Batheja revealed.
"The biggest problem we face is [that] legislators want to be elected," Williams says. Most of them are unaware of the accounting legerdemain and probably would rather not know about it when the time for making hard budget calls comes.
Why pay today what you can put off paying until tomorrow? There's no doubt a good answer to that, and we're sure the Perry campaign will come up with one ... later.
