Texas received mediocre scores for financial transparency from a government watchdog group due to factors like what information is being released to the public, and who’s examining the books.
Chicago-based fiscal watchdog Truth in Accounting gave Texas a score of 74 in a recent examination of states’ openness with their financial information. The score put Texas in the lower half of the rankings.
Bill Bergman, director of research for TIA, told The Texas Monitor that Texas scored poorly, as did almost all the states, for not accurately reporting its net position, using confusing accounts called deferred outflow and inflows. In a previous TIA report on financial health in which Texas earned a “D,” the watchdog group noted that Texas has “failed to disclose significant amounts of retirement debt” on its balance sheet, giving taxpayers “an unreliable and inaccurate accounting of the state government’s finances.”
Bergman said that Texas was also dinged because the finances are examined by the state auditor, a government employee. TIA prefers that states use third parties to audit finances, since they are more likely to provide unbiased, independent opinions. However, Bergman noted that only 15 states use third-party firms for those services.
Texas provides its reports in a relatively timely fashion, which helped its score. (Bergman said that TIA is still waiting on Comprehensive Annual Financial Reports from a handful of states.) Another plus was that Texas produces easily accessible online reports.
“You have to recognize the fact that Texas is a big state with a lot of moving parts,” he said.
Overall, Texas tied for 27th place among the states, hardly a cause for celebration.
Chris Bryan, communications director for the Texas Comptroller’s Office, told The Texas Monitor that the office typically doesn’t comment on studies in which the office isn’t privy to all of the methodology involved.
He added that for 27 consecutive years Texas has received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association.
The states only began reporting true pension debt on their books in recent years, after receiving a mandate from the federal Governmental Accounting Standards Board.
States still don’t have to report retiree health care debt on their books, but that will change next year — and it will make the numbers even worse. As The Texas Monitor previously reported, Texas has $65.5 billion in unfunded retiree health care benefits (to go along with $45 billion in pension benefits it hasn’t funded).
The recent big drop on Wall Street could exacerbate pension debt since governments promise certain returns in their plans, whether the market provides that return or not.
“Now with the stock market going against us it’s not going to get any better,” Bergman said.
Johnny Kampis can be reached at [email protected].