Recent reports by a nationally respected organization raise concerns about Kentucky’s lack of financial transparency and the ensuing consequences of such deficiency.
Truth in Accounting ranks states based on their annual comprehensive financial reports with the stated goal of providing a “ ‘best practices’ framework for government officials and citizens that can be used to improve their government’s transparency and accountability.”
Its latest ranking noted some key deficiencies in Kentucky — especially in the weightiest of the group’s categories.
The Beshear administration’s incompetent handling of federal relief dollars and inability to accurately process benefits for Kentuckians thrown out of work by its response to the pandemic caused the state’s score to drop in the key category of receiving a “clean audit opinion,” which includes accounting issues with unemployment insurance.
This category accounts for 50 of the 100 points in the latest ranking of states’ financial transparency released in mid-November.
The state auditor’s conclusions that more than $650 million in unemployment dollars got doled out without recipients even reporting their wages and that it’s impossible to determine either how much was overpaid or even still owed to claimants don’t exactly demonstrate shining examples of government transparency or the accountability which accompanies it.
Truth in Accounting only ranked six states less financially transparent than Kentucky, which also received no points out of a possible 10 for distortions in its comprehensive financial report caused “by misleading and confusing deferred items.”
Most of Kentucky’s neighboring states are considered more financially transparent than Kentucky.
In September, Truth in Accounting gave the Bluegrass State an “F” grade as part of its analysis of the fiscal health of all 50 states.
That ranking deemed ours a “sinkhole state” since, after dividing the amount of money needed to pay its bills by the number of taxpayers in Kentucky, the commonwealth is among the top-10 states with the highest tax burdens and doesn’t have the needed funds to pay its bills.
A $26,000 burden for each taxpayer combined with $46.2 billion in unpaid bills earned Kentucky an “F” grade; states with per-taxpayer burdens above $20,000 earned “F” grades.
While many consider Kentucky a red state politically, only six states — all of them deep blue, including Delaware, Hawaii, Massachusetts, Illinois, New Jersey and Connecticut — ranked lower in Truth in Accounting’s “Financial State of the States 2021.”
Plus, all other states with taxpayer burdens exceeding $20,000 are politically blue.
Contrast this with neighboring Tennessee, whose $4,400 per-taxpayer surplus earned it the distinction of being a “sunshine state.”
Among Kentucky’s other neighboring states, Indiana and Virginia had taxpayer burdens below $1,000 while North Carolina, a benchmark state with whom Kentucky often competes, had a modest $1,400 per-taxpayer burden.
Could there be a connection between a state’s transparency with its financial information and its fiscal health?
Could embracing policies which make government more transparent to the constituents who fund it also help close the competitiveness gap which exists between Kentucky and most of our neighboring and several benchmark states with whom we compete for economic development?
Isn’t it at least worth a try?
Isn’t it worth replacing the state’s current blurred documents providing limited detail on what’s contained within cabinet budgets with clean, clear and comprehensive spending plans?
While making the state’s financial documents more accessible and easier to comprehend won’t singularly solve all of Kentucky’s problems, allowing taxpayers to clearly see how their dollars get spent, the effectiveness of specific expenditures and who voted for and against wasteful spending could help us begin to move from the sinkhole to the sunshine.
Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank.
Read previous columns at www.bipps.org.
He can be reached at firstname.lastname@example.org and @bipps on Twitter.