Even though the official figure for the country’s national debt stands at $17.8 trillion, it is not only the federal government that is responsible for the rising debt figure of the country; the state governments are also equally responsible due to their wastefulness and recklessness. According to data provided by a Chicago based research group, in addition to states that have the power to meet their financial obligations there are also many American states that conceal a disturbing level of liability.
The state with the deepest level of debt
Of the various states studied, Connecticut has been shown to have the deepest debt level of $61.4 billion. The finding has left many Connecticut residents wondering how it is possible for the state to have accumulated such debt levels when it too like other states are also required to maintain a balanced budget every year. The reason is very obvious, that is, accountants have misrepresented the numbers. According to the explanation provided by the think tank group, the accountants have chosen to leave the compensation costs that are related to the retirement benefits of an employee untouched while calculating the balanced budget.
A loophole that states take advantage of
Since accountants employed by state governments do not make of the accounting principles in practice at the private sector, it is easier for them to balance the account books as they can keep out certain debts from the balance sheets. As a result, states like Nevada have been able to boast of a balance of over $250 million in the state’s pension system but upon closer inspection, the surplus has been found to be a debt of about $48 billion. The discrepancy is therefore the result of the ignorance of the state accountants to liabilities from the different state jurisdictions, namely cities and counties.
The Sarbanes Oxley Act of 2002 is the remedy
To crack down on fake financial statements and in an answer to the Enron problem, the Congress had come out with the Sarbanes Oxley Act in 2002. The act requires the Chief Executive Officers of public companies to mark their financial statements with their seal of approval. In addition to putting their signature on the documents, it also holds them liable for any lies, mistakes and exaggerations. The act can be a remedy for the country’s debt problem, in that presidents, governors and mayors can be held accountable by the standards followed by the private sector.
Thus good accounting standards that are in practice in the private sector must be employed by the government at every administrative level if it wishes to tackle the menace of rising debt in addition to bringing a stop to unhealthy practices and tricks employed by the public sector to hide long-standing and unfunded duties.