Paul Volcker, former chairman of the Federal Reserve, is warning that US states rely on faulty practices to balance their budgets, masking the true nature of their finances and leading to poor policy making, reports FT.
“The continued fiscal stress is tempting states to continue, and even intensify, budgeting and accounting practices that obscure their true financial position, shift current costs on to future generations, and push off the need to make hard choices on spending priorities and revenue practices,” Volcker said in a report released on Monday by the Volcker Alliance, a government reform group he founded in 2013.
“There are problems hidden by a lack of truth and integrity” in state budgeting,Volcker said.
The Alliance examined the budget practices of three states, as examples. Triple-A-rated Virginia, though not perfect, has the best methods, New Jersey is a serious offender and California falls somewhere in the middle, having improved significantly in recent years.
-RW
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