MyGovCost News & Blog

Last month we suggested that California’s Board of Equalization deserved a stop on the California Corruptour, modeled on the one now functioning in Mexico. The BOE, which does not equalize anything, has misallocated nearly $50 million in tax revenue. BOE members have been spending public funds to promote themselves, staging useless events, and dishing out raises to high-salaried staff without performance reviews. On top of that, the shabbily constructed BOE headquarters in Sacramento continues to be a safety threat and a bottomless money pit. Now the BOE’s longest standing member is sounding the alarm.

Betty Yee, who is also the state Controller, told reporters, “I look at the board and it’s entrusted with making sure our tax dollars get to the right place, and clearly it’s falling short in this critical mission.” Yee cited an audit showing that the BOE tried 11 times to correct its accounting but still could not explain how it moved revenue among different state funds. Yee wants to restrict the board to its original mission of managing property taxes. She would cut its oversight of sales and use taxes and move 80 percent of the staff to a different revenue department.

Similar concerns prompted BOE member Fiona Ma to write Jerry Brown, asking the governor to appoint a public trustee to manage the board. As we noted, Brown’s default response to serious problems is “I mean, look, shit happens,” and he maintains his ironclad commitment to ever-expanding government and constantly rising taxes. So asking Brown to fix the BOE is like a drowning person demanding an anvil.

Like the Coastal Commission and CIRM, the state stem cell agency, California does not need a state Board of Equalization. As veteran Sacramento observer Dan Walters explains, “real reform would be to abolish the board entirely” and fold it into a single Department of Revenue. Anything short of that and the institutionalized waste will continue.

As any motorist can easily verify, California’s roads are a disaster. Governor Brown and the legislature are running to the rescue with a $5.2 billion deal that will raise the tax on gasoline, raise the tax on diesel and raise user fees on motorists. California taxpayers, the most embattled in the nation, have good cause to wonder why the existing funds for road maintenance are not doing the job.

As we noted, the California Department of Transportation developed a model for the allocation of maintenance funds but abandoned it because it would have reduced more than 100 Caltrans staff positions. As the state auditor observed, instead of spending the money based on actual need, Caltrans distributes funding based the previous spending patterns of the region in question, whatever the road conditions there. So even with a repair backlog of $78 billion for local roads and $59 billion for state highways, it’s all about spending, not fixing. Taxpayers might also recall that for years the state has diverted $1.5 billion in transportation infrastructure taxes to subsidize California’s General Fund bond payments.

The state needs new roads and highways but Caltrans is not eager to build them and claims “solid science” on their side. According to the National Center for Sustainable Transportation, adding capacity to roadways does not alleviate traffic congestion, increase employment, or generate economic activity. According to this “science,” new roads only increase vehicle miles travelled (VMT) and that is bad for the planet. This puts Caltrans on the same page with the governor’s climate-change dogma, and that will give the vast bureaucracy fewer projects to oversee and less work to do. But that doesn’t mean Caltrans will downsize. The state agency already maintains 3,500 engineers who do little more than show up, so Caltrans will never hesitate to maintain full-time employees who don’t build new roads and others who don’t maintain existing roads, an obstacle course of potholes.

Taxpayers might note that the state seeks to spend nearly $70 billion on a bullet train, and $15 billion to dig tunnels under the San Joaquin-Sacramento River delta. Perhaps fixing the roads and building new ones would be a better application for those funds. The governor and the legislature would rather hike taxes on the workers.

“I think people know this is something good,” Brown said of the $5.2 billion deal, “this is something necessary.” Taxpayers have good reason to find it another example of bad government. California may have the sixth-largest economy in the world, but in waste, unaccountability, and disdain for working people it surely ranks number one.

Six years ago, the U.S. Department of Veterans Affairs Louis A. Johnson Medical Center in Clarksburg, West Virginia had a shortage of over 600 parking spaces, so federal officials began planning to put in a new parking garage at the facility. Six years later, all the VA had to show for all their planning over that time to address the facility’s parking shortage were plans to spend $9.7 million to build a parking garage that would provide just 25 new parking spaces.

The good news is that the millions of dollars that the VA might have spent on such a small parking lot were never spent. Outside auditors were successful in pulling the plug on the VA’s overly expensive parking lot project before the VA could spend what works out to be $388,000 per parking space to build the parking lot it planned back in March 2016.

The bad news is that the VA facility’s officials are resisting accountability for the multiple failures that allowed what would have been an enormously wasteful project to progress so far, which means that the bureaucratic culture that allowed the fiasco to advance as far as it did is not capable of avoiding the generation of even more wasteful projects with multi-million dollar price tags in the future. Luke Rosiak of the Daily Caller News Foundation describes some of the more incredible evasiveness from responsibility being taken by the VA facility’s top administrator:

Federal officials took six years to plan a new parking lot for a Department of Veterans Affairs hospital in West Virginia that would cost $10 million for only 25 parking spaces, as their solution for a 600-spot shortage.

Then when outside auditors pulled the plug on the fiasco, the hospital’s top official — who had previously served as the facility’s Chief of Staff since 1999 — claimed that it wasn’t his fault because he was new on the job.

Dr. Glenn R. Snider Jr. “didn’t become director of the Louis A. Johnson VA Medical Center until March 2016” so he “wasn’t in charge then” was the takeaway of the local paper, the Exponent Telegram, after speaking with Snider.

“I didn’t run the show then,” Snider told them of the parking lot and seven similarly long-running boondoggles.

Snider’s bio says “he has served as the chief of staff at the medical center since September 1999” and began serving as acting director in May 2015 before it was made permanent last year.

But wait, there’s more!

While publicly positioning himself as the solution to the problems, Snider privately argued that not all the problems needed addressing by the facility, telling the VA Inspector General IIG) he “disagreed with your conclusion” and “took exception,” blaming the VA regional office above the hospital.

He said he thought the auditors were “inaccurate and misleading” and the “$9.3 million was neither lost, nor misspent” because the project had been aborted, thanks to auditors’ intervention, thus raising the question of why he’s touting himself as the best person to fix a problem he denies exists.

The VA’s Office of Inspector General has a different impression of the site’s management:

We advised the two VA representatives that spending $9.7 million to increase parking capacity by only 25 spaces did not represent a prudent use of taxpayer funds. Construction of this parking garage as planned would cost approximately $388,000 per parking space. Furthermore, once this project was complete, the VAMC would still not have solved its parking space shortfall of approximately 625 spaces.

While the VA’s Clarksburg medical center would appear to still be 650 parking spaces short of what it needs to serve its community, this is a success story, although one that still involves waste to U.S. taxpayers. The VA spent approximately $400,000 in pursuing its botched parking garage project over the six years before common sense imposed from outside auditors prevailed.

Only in government can success mean that only hundreds of thousands of dollars went to waste while the needs of regular Americans, in this case, VA patients needing reasonable parking accommodations for when they seek medical care at the only facility they are entitled to receive it in the area, went completely unfulfilled.

The Congressional Budget Office released its 2017 Long-Term Budget Outlook this week, several months ahead of its usual schedule, which is typically published every July.

The most interesting part of the new long-term budget outlook appears in the report’s appendix, where the CBO’s analysts illustrate how their new outlook for the publicly held portion of the U.S. national debt and the U.S. government’s projected deficits has changed since their 2016 Long-Term Budget Outlook was published back on July 12, 2016.

The CBO’s analysts describe why the budget outlook has worsened from their 2016 projections:

Federal debt held by the public is now projected to reach 150 percent of GDP in 2047; in January, CBO projected it would reach 145 percent in that year. That change primarily reflects higher projected total outlays toward the end of the 30-year period.

In addition to the CBO’s expectation of higher-than-previously-expected government spending, the change also reflects the agency’s belief that the U.S. economy will grow more slowly than previously expected, and also that the net interest rates the U.S. government pays to its creditors will exceed their projections from last year.

In the report, the CBO has also projected that Social Security’s combined Old Age and Survivors’ Insurance and Disability Insurance trust funds will be fully depleted in 2030, one year earlier than they had previously indicated, which is only 13 years from now. Last year, Social Security’s trustees reported that they expect the trust funds to be fully depleted in 2034, at which time all recipients of Social Security benefits will see their pension and disability payments reduced by about one-quarter (25%).

Finally, the CBO also points to an increased risk of the U.S. government suffering a fiscal crisis because of its higher levels of accumulated national debt. They describe their doomsday scenario, which involves the U.S. government entering into a debt death spiral:

A large and continuously growing federal debt would increase the chance of a fiscal crisis in the United States. Specifically, investors might become less willing to finance federal borrowing unless they were compensated with high returns. If so, interest rates on federal debt would rise abruptly, dramatically increasing the cost of government borrowing. That increase would reduce the market value of outstanding government securities, and investors could lose money.

The resulting losses for mutual funds, pension funds, insurance companies, banks, and other holders of government debt might be large enough to cause some financial institutions to fail, creating a fiscal crisis. An additional result would be a higher cost for private-sector borrowing because uncertainty about the government’s responses could reduce confidence in the viability of private-sector enterprises.

It is impossible for anyone to accurately predict whether or when such a fiscal crisis might occur in the United States. In particular, the debt-to-GDP ratio has no identifiable tipping point to indicate that a crisis is likely or imminent. All else being equal, however, the larger a government’s debt, the greater the risk of a fiscal crisis.

The likelihood of such a crisis also depends on conditions in the economy. If investors expect continued growth, they are generally less concerned about the government’s debt burden. Conversely, substantial debt can reinforce more generalized concern about an economy. Thus, fiscal crises around the world often have begun during recessions and, in turn, have exacerbated them.

If a fiscal crisis occurred in the United States, policymakers would have only limited—and unattractive—options for responding. The government would need to undertake some combination of three approaches: restructure the debt (that is, seek to modify the contractual terms of existing obligations), use monetary policy to raise inflation above expectations, or adopt large and abrupt spending cuts or tax increases.

At this point, it is important to note that the CBO is not considering any changes in federal spending that might result from President Trump’s fiscal policies. Their baseline assumption is that federal spending policies will continue the pace established during President Obama’s administration.

Time will tell how seriously federal politicians and bureaucrats take the CBO’s worsening long-term outlook for the U.S. fiscal situation.

On March 23, 2017, the U.S. government’s total public debt outstanding added up to more than $19.86 trillion, or if you round up by another 0.014 trillion, we’re really talking about a national debt of 20 trillion dollars.

That’s a big number, which for many people, is really tough to grasp just how big a number it is. However, the visual infographic artists at Demonocracy put themselves to the challenge and used stacks of cash to illustrate just how much space $20 trillion of national debt would occupy if all that cash were to ultimately be stacked up in tall piles next to the Statue of Liberty.

As Tyler Durden notes:

Just remember “the money in the video has already been spent.”

Last December, Amtrak train number 527 approached a track switch near Davis, California, where the speed limit was 40 mph. The engineer roared through at 78 mph, jerking the train violently and causing five passengers to suffer injuries. The Federal Railroad Administration let Amtrak conduct its own investigation, and as one passenger told reporters, the tax-funded rail system was “refusing transparency on what could have been a catastrophic incident.” Amtrak conceded a “speed violation” but did not name the engineer who “lost situational awareness” and “did not recognize the action to be taken.” Amtrak submitted employee discipline “assessments” but has yet to reveal if any employee was in fact disciplined. A ballpark figure would be zero. Amtrak employees, including engineers, belong to government employee unions and government bosses protect them at all costs.

In May 2015 near Philadelphia, engineer Brandon Bostian hurtled Amtrak 188 through a 50-mph curve at a full 106 mph, more than twice the limit. The train derailed, killing eight people and injuring 200. The National Transportation Safety Board explained that Bostian was distracted by radio reports of another train being struck by a projectile. Bostian sued Amtrak for failing to provide a safe environment and charged that his train “was under attack by projectiles,” which caused him to be “disoriented.” Injured victims could be forgiven for dismissing that as nonsense. Nobody in Amtrak management appears to have lost their job over the derailment but the lack of safety is not the only problem.

As we noted, Amtrak is a certified money-loser, despite massive subsidies from the federal government. From 2002 to 2012 Amtrak lost $834 million on food and drink services alone, much of it due to fraud and theft. Republicans have talked about halting subsidies and privatizing the system but ended up increasing Amtrak’s funding by $384 million.

Privatized passenger rail, Gabriel Roth explains, would likely have a better safety record because management would spend money more wisely. For example, Positive Train Control can prevent excessive speed but despite a 2008 Amtrak mandate, PTC was never installed on the busiest routes. Amtrak 188 didn’t have PTC and neither did Amtrak 527.

“Getting government out of the rail passenger business,” Roth notes, “would free management to align service with passenger demand, and focus on quality and safety, rather than satisfying political constituencies.”

With the April deadline looming, taxpayers might ponder the prospects of filing a return in which they fail to account for millions of dollars. As it happens, that is the case with a California tax agency. According to Board of Equalization member Betty Yee, who is now state controller, the BOE misallocated $47.8 million in retail sales tax to the state’s general fund. The BOE now awaits a new audit from the state department of finance, but some of the details have already emerged in news reports.

The BOE still cannot account for the misallocation of tens of millions in tax revenue but it seems some BOE bosses have been spending public funds on events described as “education and outreach.” The BOE boasts more than 4,000 employees and its “external affairs department” deploys staff all over the state, supposedly to promote tax policy and increase public awareness. Last year the BOE member Diane Harkey sponsored a “connecting women to power” conference that cost $189,000 and included sessions such as “desk yoga,” not exactly related to taxes. In similar style, BOE member Jerome Horton has reassigned state employees to work for him and staged events not in line with the agency’s mission. As we noted, BOE members have used public funds to promote themselves and dished out raises to high-level management without performance reviews.

By any standard, the BOE deserves a spot on a California “Corruptour” modeled on one in Mexico City. Trouble is, the BOE headquarters in Sacramento, purchased from CalPERS for $80.7 million in 2007, remains plagued with falling glass, toxic substances and other defects that have cost $60 million. The building has earned a reputation as the “Terror Tower” and “bottomless money pit.” So if taxpayers swing by they should wear their hard hats and ponder this reality.

Like other stops on the Corruptour such as the Coastal Commission and the state stem cell agency, the BOE is not necessary. As veteran Sacramento observer Dan Walters explains, “real reform would be to abolish the board entirely” and fold it into a single Department of Revenue. This won’t happen “because it would mean abolishing offices that legislators themselves yearn to fill.” At the BOE they never “equalize” anything but they always waste taxpayers’ money.

According to the latest estimates, it will cost Californians upwards of $64 billion to build the bullet train envisioned by Governor Jerry Brown and the state’s legislature. That’s money that they don’t have today, but if they did, that’s also a lot of money that could be put to work to do more things that most Californians might rather have than a bullet train, albeit one that might run at speeds as high as 220 miles per hour between San Jose and Bakersfield, sometime more than a decade from now.

The California Policy Center’s Ed Ring describes what Californians are being compelled into giving up for Governor Brown’s dream of a train that would compete with higher speed commercial air traffic.

California’s High-Speed Rail project fails to justify itself according to any set of rational criteria. Its ridership projections are absurdly inflated, its environmental benefits are overstated if not actually net detriments, and its cost, its staggering cost, $64 billion by the latest estimate, overwhelms anyone with even a remote sense of financial proportions. To make this final point clear, here is an assortment of California infrastructure projects that could be paid for with a $64 billion budget.

If these projects were built, instead of the bullet train, Californians would have abundant, cheap electricity, abundant fresh water, and upgraded roads and freeways capable of handling all the traffic a surging economy could possibly dish out.

Here’s the list:

(1) Build 10 natural gas power plants generating 6.2 gigawatts of electrical output for $5.7 billion.

(2) Build plants to desalinate 1.0 million acre feet of seawater per year, supplying 1/3 of ALL California’s residential (indoor and outdoor) water requirements for $15 billion.

(3) Build plants to reclaim and reuse 2.0 million acre feet of sewage per year, supplying 2/3 of ALL California’s residential (indoor and outdoor) water requirements for $10 billion.

(4) Build the Sites Reservoir for $4.4 billion.

(5) Build the Temperance Flats Reservoir for $3.3 billion.

(6) Widen and resurface every major interstate (and then some) in the entire state. ($15.4 billion).

(7) Fix the Potholes. ($10.2 billion).

Together, these seven major projects would positively affect the lives of millions of Californians more than who might ever ride the state’s frequently delayed bullet train project.

For a drought-stricken state with so much of its public infrastructure in horrible condition and an electrical power grid subject to so many rolling blackouts, can Californians really afford the bullet train its politicians are choosing to prioritize over these other kinds of public projects that would provide greater benefits to more of the state’s residents?

After the 2016 election, California governor Jerry Brown showed signs of early onset Trump Derangement Syndrome, pledging resistance and warning that California would “launch its own damn satellite” if President Trump backed off on climate research. On his trip to Washington this week, Brown toned down the defiance and held out the begging bowl.

The governor met with the heads of the federal Department of Transportation and FEMA to follow up requests for nearly $540 million in disaster relief for recent storm damage and nearly $650 million for a Bay Area rail project. Brown will also hit up the Trump Administration for more than $100 billion in infrastructure spending. “One way or another the roads must be fixed,” Brown said, and with all the money Trump wants to spend on defense and a border wall, “how do we then take care of our roads, our bridges, our dams and all the other things we have to deal with?” California taxpayers have a right to wonder how their recurring governor is doing on all that.

As Lawrence McQuillan observed last year, and as any motorist can easily verify, most of California’s 50,000 miles of highways are in terrible shape. The responsibility for maintenance lies with CalTrans, the huge state transportation agency with “a history of wasting taxpayer money, while at the same time demanding more funding.” Governor Brown has been uncritical of the CalTrans bosses who supervised the new span of the Bay Bridge. That came in ten years late and $5 billion over budget, and the bridge to no accountability, built with cheap Chinese steel, remains riddled with corrosion, faulty welds and such. Whistleblowers called for a criminal investigation but neither Brown nor attorney general Kamala Harris followed up on that. When apprised of the bridge’s safety issues, Brown famously said, “I mean, look, shit happens.”

The governor toned down a bit in the wake of the Oroville Dam spillway disaster this winter. State engineers knew all along the spillway was unreliable but did nothing. “I’m glad we found out about it,” Brown said, after nearly 200,000 people had to be evacuated. “We live in a world of risk. Stuff happens and we respond.” Not very well, taxpayers might say, on dams, roads and bridges and “all the other things we have to deal with.”

Every year for the past four years at least 40 billion dollars has gone to waste because the Centers for Medicare and Medicaid Services (CMS) has declined to audit its own expenditures to ensure that unintentional medical billing errors are caught and corrected.

That is a stunning claim being advanced by Kristin Walters of The Council for Medicare Integrity in a recent op-ed in The Hill, who notes that the CMS has the tools it needs to stop the waste, but has chosen to not use them.

Medicare wastes more taxpayer dollars than any other program government-wide, with more than $40 billion lost annually. It’s outrageous that the federal government allows such rampant wasteful spending to persist while it is in dire need of funding to bolster important healthcare programs — whether to extend full Medicare coverage, improve health services for veterans or extend funding for the Children’s Health Insurance Program (CHIP).

We’re not talking about Medicare fraud here, that’s accounted for separately. The loss of $40 billion each year is due purely to rampant billing mistakes — coding errors, double billing, upcoding — issues that could be easily caught and corrected. In fact, over the past four years these billing errors have drained more than $166 billion from the Medicare Trust Funds….

Interestingly, the ability to stop the hemorrhaging of taxpayer dollars from the Medicare FFS program exists, is in place and has been tested — it’s just barely being used.

After seeing its success in the private sector, Congress mandated the Recovery Audit Contractor (RAC) Program in 2009 to review post-payment Medicare FFS claims, identify improper payments and return misbilled funds back to the program. Since the RAC Program began, more than $10 billion has been returned to the Medicare Trust Funds, all while auditing a mere 2 percent of a provider’s claims.

Recently, the Centers for Medicare and Medicaid Services (CMS) scaled back the RAC program, allowing auditors to only review 0.5 percent of a Medicare provider’s claims — essentially green-lighting the continued loss of tens of billions of dollars from the program each year.

The Council for Medicare Integrity is a Washington, D.C., lobbying group backed by firms that perform the recovery audits, so its view may be somewhat one-sided.

Virgil Dickson of Modern Healthcare reported on the outcome of the CMS’s decision to significantly scale back its audits of medical billings in December 2016, after the Medicare and Medicaid programs overseers issued their annual report to the U.S. Congress:

The report, which covered the federal government’s fiscal 2015, noted a dramatic slide in the amount of money returned to Medicare’s trust fund due almost entirely to the government’s temporary prohibition of auditing inpatient hospital claims….

Emily Evans, a health policy analyst at Hedgeye Risk Management, independently tracks the RAC program and said the “significant reduction in the scope and the scale of the RAC program are a result of poor oversight and execution of the RAC program by CMS.”

In addition to the CMS’ decision to prohibit inpatient reviews, Evans believes the stops and starts to the program as well as the slow re-procurement throughout 2016 hurt improper payment corrections.

CMS appears to have made its decision to limit the actions by RACs to recover improper payments in part because of a surge of appeals filed by hospitals, which have created such a huge backlog of appeals to challenge audit findings that a federal judge ordered CMS to take action to clear the over 800,000 cases filed by hospitals by the end of 2020.

In typical bureaucratic fashion, it appears that CMS has opted to suspend and restrict new recovery audits that might reduce significant waste, rather than improve its ability to address the appeals in a more timely manner, or to take more positive actions that would minimize the incidence of medical billing errors in the first place. The interests of U.S. taxpayers and Medicare patients, who would benefit from the reduced risk of being overbilled, don’t appear to be of high priority to CMS officials, and as a result the U.S. government is needlessly racking up expenditures of $40 billion a year more than what it should have to pay for what it is actually getting for its money.

But that’s just small change in the grand scheme of the bureaucrats’ cost of doing business.