Public Finance, Not Wall Street Profit: A Continuing Series for "Government Officials"... Structural Deficits; Structural Imbalances

February 2011

It is unfortunate the best title for this series is what it is.

U.S. Public Finance and the Muni Markets have experienced crisis headlines the last few months.

But Meredith Whitney's warnings and the government employees standoff in Wisconsin are not the whole story. There is much more to this. The real headlines should have happened years ago.

Every government official, if not every American, should understand that our representative democracy is only as strong as our budget.

It is perhaps best to begin with a fundamental. We are at budget deficit when we either take in too little revenue, spend too much, or both. Everyone perhaps recalls a legislature working to fix a budget deficit. But then, the deficit seems to be back the next year, just as bad. What happened to the fix? The problem we find ourselves in is what is termed "structural deficit; structural imbalance." Budget deficits return the following fiscal year because the under revenue or over spending is set in place. Structural deficits and imbalances are not new... they have existed for some years. The crisis warnings and Wisconsin should be no shock.

Next time -- Public / Government Employee Pay, Benefits and Public / Government Employee Retirement Pay, Benefits---and a thing called GASB 45.