Governor Parson, in his final State of the State address, said, “Actually, with the budget we outline today . . . we will leave office with over $1.5 billion dollars on the bottom line, which has never been done before in our state’s history.” He never said the word surplus, but that is how it was reported in one news service.
Earlier in the year, Rudi Keller wrote in the Missouri Independent:
Missouri will enter the new fiscal year Saturday in its best financial shape ever. But there are unmistakable signs that the massive surplus, now approaching $8 billion, has likely peaked.
Really? Is Missouri actually running a huge surplus? Are we taking in more than we owe?
No, no we are not.
In Truth in Accounting’s (TIA) “Financial State of the States 2023,” Missouri ranked 25th. TIA gave Missouri a “C” grade and concluded: “Missouri would need $700 from each of its taxpayers to pay all of its outstanding bills.” Of particular concern to TIA was Missouri’s highest-ever unfunded debt to the Missouri State Employees’ Plan.
The reason for the disparity is due to how states account for debt. In cash-basis accounting, states merely account for the money they have on hand without considering their debts. If you and I were to budget like this, we’d count loans as income, ignore debt, and put off expenses until next year in order to claim a huge surplus now.
If you think that sounds criminal, you’re not alone. The IRS does not permit businesses with gross receipts exceeding $29 million for three years to use cash-basis accounting—but city and state governments may do so. As a result, according to the International Monetary Fund, “Governments have been tempted to exploit this weakness by deferring cash disbursements or bringing forward cash receipts as a means of artificially inflating their financial balance.” This is exactly what is happening in Missouri.
Governor Parson isn’t alone, sadly. Mayors and governors of both parties and all ideological stripes do the same thing. And journalists on deadline often repeat the claim without checking it. If such claims seem too good to be true, they probably are.
