Poor Planning On Your Part Doesn't Not Constitute a Fiscal Emergency On My Part, California

While California legislators are busy patting themselves on the back for breaking the gridlock that set world records for the longest a state has gone without an official budget (the word "budget" in government accounting terms being a joke in and of itself), it is important to point out that their "solutions" are really just costly magic tricks that manipulate the accounting to create an illusion of a fix.

Case in point, the good old "sale leaseback" trick.

LA Times:

The budget deficit would also be closed partly by selling an array of state properties and buildings, many of which the state will subsequently lease back . The sales are projected to generate more than $1 billion, the sources said.

Some of the deficit would be wiped out on paper but could quickly rematerialize. Legislators have said they will fill $1.4 billion of the budget gap by replacing the administration's revenue projections with those of the state's nonpartisan Legislative Analyst's Office, which are more optimistic.

Billions more of the deficit would be handled with expectations of financial help from Washington, but the state has no control over whether those funds will arrive. More than $3 billion more would be borrowed from other state funds.

To recap:

Using better numbers than the first set of numbers = $1.4 billion
Selling PP&E to be leased back = $1 billion upfront (doesn't mention how much it will cost us in the long run to lease the crap back)
Handouts from Obama = a couple billion

So glad to see accounting fraud has been completely legitimized.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


chairmanben said...
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chairmanben said...

Same way Private Equity fund managers earn $900,000 per hour.

Find a large public company with low profit dividend and low debt.

Take it private. Pile on debt.

Keep piling on debt until hourly fund manager fees = $900,000

Restructure and securitize. Sell debt to 401K pension bond funds

Why aren't we all doing it?

JDA PE Partners...

We used to have GAAP, Now we have GALOAP - Generally Accepted Lack of Accounting Principles.

GAAF - Generally Accepted Accounting Fraud