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NTI

HYSTER

Volume 8, No. 2 www.antishyster.com

As editor of the AntiShyster, I’veseen so many “unbelievable” storiesover the last eight years, that I’ve be-come jaded, cynical and worldly. Thereare no surprises left for me. I’m sure I’ve seen it all. I’ve thought so for sev-eral years. And generally speaking,about every two or three months, life proves me absolutely wrong by show-ing me another story so awesome that I’m left (almost) speechless. This ar-ticle introduces another one of thosestories so awesome that it’s right off the Richter Scale.Walter Burien Jr. worked as a WallSt. commodity trader for fifteen years,but now resides in Arizona. Accordingto Mr. Burien, every state, county, and major metropolitan city is keeping twosets of books. One set (the “Budget”) iscommonly available and tracks eachgovernmental entity’s costs and tax rev-enue. The Budget is the financial record that’s seen by the public and used by politicians to justify new governmentalservices and higher taxes. However, there is a second set of books (called the Comprehensive An-nual Financial Report, or CAFR) whichis virtually unknown to the public but contains the real record of total gov-ernmental income. According to Mr. Burien, although the Budget gives anaccurate account of government

costs

,only the CAFR gives an accurate ac-count of government’s

income

.For example, while a particular state Budget might report receiving $20billion in taxes (just barely enough tosustain its $20 billion costs) – the CAFRmight reveal the state’s real income isin the neighborhood of $60 billion –three times as much as reported on the Budget. If these allegations are accu-rate, the particular state could stopcharging all the taxes we are familiar with, and not only survive, but either double the amount of reported govern-ment services or give every citizen ahuge tax rebate.The implications are mind-bog-gling. They’d mean our world is so dif- ferent from what we are led to believe,so much more corrupt than even I sus- pect, that we are left with three choices,either, 1) government agrees to end thedeception and stop overtaxing us; 2) the American people agree to accept their status as slaves; or 3) both sides refuseto agree and precipitate a shootingrevolution. The issue is that big. But. Are Mr. Burien’s allegationscorrect? How could any governmentalentity dare to routinely overcharge itscitizens by 200%, underreport its in-come by 2/3rds, and knowingly press for higher taxes based on an inaccu-rate Budget? Worse, how could such a fraudulent system become widespread among all states, counties, big cities,and even the Federal Government?When you stop to think about it, Mr. Burien’s allegations are too fantasticto be credible. Nevertheless, I talked to Mr. Burien by phone for several hours and found him to be articulate, knowledge-able, and apparently sincere. I asked aretired professor of economics to inter-view Mr. Burien and evaluate his alle-gations. The professor’s assessment? Burien is probably correct. I steered an Alaskan M.D. (who is also a dedi-cated constitutionalist researcher) to Mr. Burien. The Doctor subsequently found evidence supporting Mr. Burien’sclaims: The state of Alaska and the cityof Anchorage both use Budget/ CAFRaccounting systems that conceal a“breathtaking” difference in reported revenue. Another researcher in Wyo-ming claims that a comparison of hisstate’s Budget and CAFR also support Mr. Burien’s arguments. In every case,there are two sets of books and the in-come reported on the Budget is millionsor billions of dollars less than is reported on the CAFR. Does this support prove Mr. Burien’s extraordinary allegations? No. But they lend enough credence to publish his allegations to a broader au-dience who will do more research toconfirm, refute or refine those allega-tions.What follows is an amalgam of statements or implications raised by Mr. Burien on our telephone conversation,Tom Valentine’s radio interview, Mr. Burien’s Email, and an article on Mr. Burien written by “Betsy Ross”.

ComprehensiveAnnual FinancialReports

by Walter J. Burien, Jr.

NTI

HYSTER

Volume 8, No. 2 www.antishyster.com

Mr. Burien reports first discover-ing the CAFR report in New Jersey in1989, when he helped start a New Jer-sey tax protest group called “HandsAcross New Jersey”. While involvedwith that group, Mr. Burien read in thestate’s Annual Budget that the total costof all public services was $17 billionand the “net available” (the money onhand to pay bills) was $24.6 billion.But then he asked first question the IRSasks in any audit: “What are the

grossreceipts

?” He added figures from vari-ous sources and came up with about $44billion and began to wonder how thestate could have a $17 billion in costs,$24.6 billion in cash on hand, and $44billion annual income. The numbersdidn’t add up, so he began to dig deeper.Because his father had been Per-sonnel Manager for the State Treasuryfor eight years, Mr. Burien understoodhow to get around in the various gov-ernment departments. The state Direc-tor of the Budget was on vacation, soMr. Burien called one of his lowest-level assistants and said, “I’m workingon a report for Richard [the vacation-ing Budget Director] and I need all thefigures on the autonomous agency ac-counts, interest accounts, investmentsaccounts.” The assistant said, “Ohh,you want the Comprehensive AnnualFinancial Report.” This was the firsttime Burien had heard of CAFR but hesaid, “Yes” and the assistant mailed it.The Comprehensive Annual Fi-nancial Report (CAFR) showed NewJersey had liquid investment funds(cash) of $188 billion; common stocksworth $70 billion; $10 billion due fromloans to public and private corporations;and $14 billion in insurance companyequity participation. The little state of New Jersey, which admitted to less than$25 billion in annual income on itsBudget, reported almost $300 billion incash, stocks, loans, and insurance eq-uity on its CAFR. According to Mr.Burien, “On that day, I learned the defi-nition of syndicated organized crime.”The scam worked something likethis: Anything that was a

cost

expense

for public services (the traditionalside of the Annual Service Budget, suchas the Department of Transportation,health and welfare, etc.) was reportedon the Budget where public taxes paid100% of the bill for those services. Thatwas $17 billion.However, any governmentalagency that was a

profit

center

(the PortAuthority for New Jersey, the New Jer-sey Turnpike, an investment account,etc.) that generated non-tax revenue was“restricted by statute” from being re-ported in the Annual Budget. Why?Because the state legislature passedlaws to prevent reporting the incomefrom profit centers on the Budget. In-stead, income from these profit centerswas disclosed only on the CAFR.But that disclosure was not im-mediately apparent. For example, whenMr. Burien looked for New Jersey’s1989 “gross cash receipts” in theCAFR, he found the figure buried onpage 174, under the “Waste Water Treat-ment Trust Fund.” It showed theamount of the

total cash receipts

for1989 from all 69 autonomous stateagencies and departments was almost

$87 billion

. In other words, New Jer-sey was charging $87 billion to provide$17 billion in public services. New Jer-sey citizens were paying $5 for every$1 in services they received, and thestate was pocketing the other $4 as“profit”.The CAFR also reported the stateowned $32 billion in common stocks –but this figure was footnoted. The foot-note revealed that the stocks were val-ued according to their

original

purchaseprice, not

current

market value. In otherwords, if the state bought a stock in1968 at $1.25 a share and it’s worth$3,000 a share now, they still report iton the CAFR as worth $1.25 a share.Burien determined that the true marketvalue for the “$32 billion” in stocks re-ported on the New Jersey CAFR wasactually about $70 billion.

To believe or not to believe . . .

Mr. Burien’s claims concerningNew Jersey are incredible and alsodated. Whether New Jersey kept twosets of books in 1989 is an intriguingbut not particularly compelling ques-tion. After all, the allegations are al-most ten years old, and relatively fewof us live in New Jersey. As a result,Mr. Burien’s allegations might be dis-

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NTI

HYSTER

Volume 8, No. 2 www.antishyster.com

missed as largely irrelevant.But Mr. Burien goes further – heclaims the dual system of books wasnot unique to New Jersey, but also com-mon among

all

fifty states. Moreover,he claims t

he dual accounting system wasnot only used ten years ago, but is stillbeing used

today

For example: “In 1987 Arizona’sannual Service Budget reported $2.8billion in revenues but the state’s 1987CAFR reported total cash receipts of $3.1 billion – a mere $300 million dif-ference.”“However, in 1997, Arizona re-ported an Annual Service Budget of $5.5 billion while the State’s CAFR(printed by the Auditor Generals Office)showed Total Gross Cash Receipts of

$17 billion

. That’s a difference of over

$11 billion

. In just ten years, Arizonahad caught up to New Jersey in that bothstates’ Annual Budgets reported lessthan one-third of the actual gross in-come seen in the states’ CAFRs.”“CAFR reports indicate that thecomposite totals for all government(Federal, state, county and city) own-ership of publicly traded stock exceeds$32 TRILLION (

53%

of the total own-ership of all listed stocks), $8 TRIL-LION in insurance company equity(should we be surprised by high pricedmandatory auto insurance orunaffordable health care?), and $5TRILLION in Bond Surety Escrow Ac-counts for

future

liability of existing orpotential debt.Governments use Bond SuretyEscrow Accounts to evade that peskylittle rule that government should notoperate at a “profit”. That is, govern-ment should not impose more taxes thanit actually uses to run the government.By designating tax revenue that exceedsoperating costs as “Bond Surety Es-crow” for

future

liability, governmentavoids calling excess revenue a “profit”and is thereby enabled to continue en-riching itself at public expense.

Ask not for whom the road tolls

To illustrate the potential forabusing “future liability payments”,consider the New Jersey’s plan in the1950s to build the New Jersey StateTurnpike and Garden State ParkwayAuthorities. The state asked voters toapprove a $7.5 billion bond to constructthe turnpikes. The state explained thatthese turnpikes would be operated astoll roads by the bondholders until the$7.5 billion bond was paid off – but thebondholders could not operate the tollroads at a profit. Once the bonds wererepaid, the turnpikes would revert back into the state’s Annual Budget as a nor-mal cost/revenue item. The public votedYes.Over the following years, thestate sometimes alleged that the toll rev-enue from operating those turnpikesfailed to cover their operating expenses,and so additional bonds were passed tofund the turnpikes. As a result, in 1990,the total bond liability still owed for theturnpike had grown to $14.5 billion. Butguess how much was in the Bond SuretyEscrow Accounts?

$38 billion!

Enough to repay the original $7.5 bil-lion bonds almost four times.How could that happen? Say thetoll road made a $400 million profit forthe year and the scheduled payment onthe $7.5 billion bond was $100 million.The state made the $100 million bondpayment but kept the extra $300 mil-lion in a Bond Surety Escrow Accountfor “future liability payments.” Al-though they kept the $300 million, theydid not declare it as an

asset

but wroteit off as a line-item

payment

. In otheryears, even though they made a profit,they’d allege that they lost money andtherefore floated more billions in bonds.The bottom line is that New Jer-sey is collecting hundreds of billions of virtually unreported dollars from all theautonomous agencies. The motivatingfactor is not public welfare, but controlof those billions.Mr. Burien not only alleges thatthe dual accounting system exemplifiedby CAFR is used by all fifty states, butalso by all counties, cities, and the Fed-eral Government itself. If Mr. Burien’sallegations are correct, they comprisethe most damning indictment of biggovernment yet seen. In sum, Mr.Burien implies that our government isin fact a

criminal enterprise

bent on op-pressing Americans by extorting sev-eral times as much tax revenue as itspends on public services and using themajority of those extorted revenues toenrich, empower and enlarge govern-ment at public expense.

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