By David Tulis
(First of two parts.) This interview with a national expert on CAFRs, or comprehensive financial annual reports, explores an important reason why we should dedicate ourselves to the principles of local economy (service to the other, loving our neighbor and buying local, honesty in contracts). The reason, as explored today, staggers the mind. And that is government entities constitute a bigger economy than the hallowed free market espoused by Christianity and common people such as you and me. Walter Burien gave me an interview Friday in which we discussed for an hour his research. An earlier interview is transcribed here from my daily talk show, Nooganomics.com. He graciously granted the interview July 4, independence day.
My show airs 1 to 3 p.m. weekdays at an independent AM station based in Soddy-Daisy, one owned by an entrepreneur seeking to build a local economy- and constitutional government-oriented media platform in Chattanooga. I encourage you to join me via radio or online, and to support my work in this venue by becoming an advertiser or giving me a generous grant to continue my work in entrepreneurial journalism in Chattanooga.
It is reported that Uncle’s debt obligations are at F$16 billion. But government entities across the U.S. (about 184,000 file CAFRs) own more than F$110 trillion in liquid assets, apparently apart from illiquid infrastructure such as city halls and jails. This essay is the first of two parts.
Who is Walter Burien?
David Tulis I’m wondering, if when we talk to our guest, Walter Burien, of [St Johns], Arizona, if you might not have afterwards the sense that we need to have kind of another declaration of independence. It won’t be the same shape as the one the colonies brought about, but it is a compelling concept that we’re going to talk about. It arises from the discovery of not a secret document, because the documents in question that he has been using to unearth amazing financial things about commercial government, they’re not secret, they’re published. But they were a mystery document I think to all Americans until Walter Burien, who was living in New Jersey, he sniffed something about government spending. He discovered something that’s called the comprehensive annual financial report. Again, that’s called the comprehensive annual financial report. We are going to look at what these documents are and what they tell. No one in the country has looked into this as much as the man you are about to talk with. *** You’re going to have to just listen to Walter Burien, the self-developed, self-taught expert what the CAFR, the comprehensive annual financial report, has discovered. He runs the most important website in the country on this question. It’s called CAFR1.com, out of [his operation in St. Johns], Arizona. ****
Walter Burien, tell us the main point. If my listener has to suddenly get out of his car in five minutes, what is the main thing he needs to know about government accrual of capital, of money. What’s the story?
Secrets of the CAFR
Walter Burien The people of Chattanooga who are listening to your show, I strongly recommend that you go call your friends and associates and tell them to tune in. I wish everyone a very happy independence day and at the end of this show I think you are going to realize what true independence is and how you in Tennessee and others in the rest of the country can take the bull by the horns and make a very, very prosperous economy for all time to come, and no more song and dance routine from the politicians as they fleece your pockets.
But the comprehensive annual financial report is effectively an equivalent of a statement of net worth. If an individual had a budget for running their house for the year, compare that to a local government budget report — the county, school district, state. And then your statement of net worth is what you’ve acquired over decades, since you were born, and it’s a showing of your total gross income, total operations, you know, your statement of total net worth. Well, there’s a very very very big difference between a statement of net worth and a budget for a year. Effectively a local government could be saying — a city county or state — oh my G–, we’re $70 million short on our budget. We’re going to have to raise taxes, lay off teachers, fire police officers. In reality, if you looked at their corresponding annual financial report, they could be F$1.5 billion in the black.
So it’s a masterful game of selective presentation. And, in doing so, government on all levels is walking away with all the marbles in the game and the public is being given the short end of the stick. It all boils down to two words: greed and opportunity. We look at a city, county, state, large entity, they’re bringing in more money each year than Midas ever dreamed about.
Walter Burien People sit there, off in la-la land, “I know my local government collects taxes, and they do this service for us,” but the fundamental basics, intentionally so, the entire population has been kept off in lala land not asking for and not looking at the fundamental basics. I started national disclosure in June of ‘’98 on the CAFR structure. *** Keep in mind, it started in the 1946.
New accounting structure for financial expansion
David What happened in 1946?
Walter Burien That’s when they started the CAFR accounting structure. A group called the GFOA, the government financial officers association, out of Chicago started pitching the CAFR structure to local governments, and effectively they were pitching local government go on the same accounting principles that any public corporation such as Microsoft, IBM, Johnson & Johnson, AT&T.
And effectively what they were doing was now governments can still prepare their budget report primarily showing where tax income was brought in and expended, but on their annual financial report they could segregate all of their investment funds, enterprise operation income to be accounted on the annual financial report and not viewed on the budget report. Well, when you think of the investment assets and local government and the tune of billions of dollars collectively — city, county and state were holding — the public was kept oblivious to, on the enterprise operations, tollways, bridges, recycling plants, golf courses, state university is an enterprise operation, the public — these revenues were segregated and not shown on the budget report.
Back in 1946 this gave them the ability to basically hide two-thirds of gross income and standing well within the annual financial report, which is not shown or reflected in the budget report. The reason this was done, started in ‘46, large industrial families and banking gangs, they knew that government was where the money was. And by segregating the investment wealth and enterprise income it gave the ability for them to get their projects backed, their corporations backed, their real estate backed by investment from these funds, these basically unlimited pool of funds to draw from. It worked out great for them in the ’50s, ’60s and ’70s, but by the end of the ’70s the CAFR standard across the country, government was building up the wealth. That’s the golden rule. He who has the gold makes the rules.
Government wealth muscles big families aside
At first, as I mentioned, the large institutional families that were controlling the shots, but then government started calling the shots and the large institutional families just became consultants. With those two words, greed and opportunity, they kept expanding, expanding, expanding, playing the double set of books game saying, “Money! We need more money!” as they built up the wealth as shown in the annual financial report. Now up until June 1998 the CAFRs would show the gross income, the gross standing balances, the gross receipts.
But I started national disclosure in June of ’98 and that was their you-know-what moment when people started looking. And keep in mind the government comprehensive annual financial report is the holy grail of accounting. It’s like the Bible to the Catholic church. Can you imagine going to church for 30 years and never one the priest mentioning the Bible? It would be little hard to fathom. But government, they never mention the annual financial report due to the money involved. When I first started national disclosure, the people would say, “Well, if they have all this money, why don’t they use it, spend it?”
I would be pulling my hair out. I would occasionally sit there and tell them, “You know, every investment fund, large or small, is a power base, where that money is invested, with what bank, what real estate project, what corporation, what cash, loans, what shopping mall, what apartment complex it was buying — it’s a power base. The larger the government can build that power base, the more grease there was on the skids of who gets what, where, which made a lot of cooperative players, not a peep, not a mention, not a word, both from the Fortune 500 companies, the syndicated media. If you look at ABC, NBC, CBS, Fox — never a peep, mention or word about the comprehensive annual financial report. ***
Main points thus far
David You are listening to Walter Burien, the national expert on CAFRs, the national annual financial reports, who runs CAFR1.com, and he’s explaining, if you’re just joining us, how government has two sets of books.
It has budgets, which are argued over and haggled over by politicians and presented to the voters as a crisis every year. And then there is a separate set of books called the comprehensive annual financial report. And he has been looking at these for several years. He sort of outed the program in 1989. Can you tell us a little more of the outing of this program, the discovery of this whole thing. It’s a fascinating story. **** You were living in New Jersey *** .
Explosion in New Jersey: The game exposed
Walter Burien It was actually 1990 and there was a governor who got elected by the name of Jim Florio on a no-new-tax platform. Well, as soon as he gets into office, a F$2.8 billion tax increase on the state level, the largest in the state’s history. It was from the prior administration and he could’ve vetoed it, but he didn’t. He let it go through. Well, the proverbial shit hit the fan. There were two deejays, John and Ken, 101.5 FM in Trenton, who started to do some rabble-rousing: “We have to stop them. We have to show them we own New Jersey!”
And he urged the listeners to start an organization to repeal the tax increase. I was one of the listeners the first couple of days. I called them. I had the budget report in my hand. It had F$11 billion on budget, F$6 billion off budget. The total service budget showed F$17 billion should have been available,about F$23.5 billion. And yeah, this is for ‘89’s figures.
But I took over looking at the budget revenue in finance; I was a commodity trading adviser for many years. I constantly look at large numbers. To me, a million and a trillion is just a number. In the commodity market, F$25 trillion was going through. So I started looking and I noticed they weren’t showing their investment income. And I noticed the enterprise income — New Jersey has 69 enterprise authorities — the New Jersey turnpike, port authority New York New Jersey, they weren’t showing that on the budget reports. So I said this is a selective presentation. The director of the budget at that time was Richard Keevey, and I knew he was on vacation until the following Tuesday.
I called his assistant. I said, “Hi, I’m Walter Burien, I am working on a report for Richard, and have to have it done on Tuesday when he gets back from vacation. I need to know all the figures on the autonomous agency accounts, interest accounts, investment accounts. He goes, “Oh, you want the comprehensive annual financial report.” Bing. I said, “Yeah, can you send it to me?” “Yes, well, uh, I’d better talk to Mark,” you know, the next one down from Richard. And I said, “OK.” I hit my speed dial. “Hi, Mark, just spoke to Jim. Working on a report from Richard. Need the comprehensive annual financial report so I can finish up a report on Tuesday. *** Got it that Friday. I”m a bottom-line type person. So I wanted to look at total cash receipts, total standing investments. The standing investments were about F$72 billion, or something around that nature.
But I kept trying to track down gross receipts, and on Page 174, I think, it was ‘89’s figures. Now this is total cash gross receipts. Tax income, enterprise income, investment income, federal grants, any cash income, total gross receipts. Well, on Page 174 it showed it.
David Was it in a footnote?
Walter Burien F$83.799 billion, approximately. I learned the definition of syndicated organized crime right there on the spot and the principle of operation. Anything that was a cost or an expense they left on the budget report. The public footed the bill through taxation. Any large investment fund, enterprise operation that was generating billions they separated; that would be shown under the annual financial report. Well, I went live on the the air, 101.5 FM with the book in my hands. I said, I’ve got the holy grail of accounting. *** They loved it. They said, yup, this is it.
Deep government counterattacks
So I started reading out bottom-line [figures] for 45 minutes. And the population now was listening. They had about 6 to 7 million listeners. After one hour, the riot act was read to the radio station. Sponsors came down on them. “If you ever have that guy again on the air, you’ll never get our sponsorship again.” FCC came down on them. That was the last live interview for about three months. I had broken the silence is golden rule. Sponsors had their hand in the kitty and they were getting multimillion dollar payments from most of the funds that were even seen by the population. They didn’t want me looking into it. *** Pharmaceutical companies, construction crews, the whole nine yards. So they had a visceral reaction.
I personally was attacked. I had 12 points appear on my driver’s license, so had a little accounting changes and wiped out four years of point credits; I received a suspension notice. One of my good friends, down in New Brunswick, he did about F$3 million of printing with the county. He was very politically connected, and he was one of my primary supporters. Larry gets a few calls from the county boys. “Larry, keep helping out Walter, you may just lose those printing contracts.” I said, time to leave New Jersey, and I moved out to Arizona. Dropped out, you know, exposure on the annual financial reports. My birth name was Bubien. I changed it one letter to Burien. Dropped off the grid. Moved to Prescott, Ariz. [Harassed after popping up in the grid again after getting a patent for an invention, Mr. Burien moves to St. Johns, Ariz.]
Keep in mind anyone on the inside track, the politician, the local news media from the syndicate, if they mention the comprehensive annual financial report , they find themselves getting drug out to the back alley and you-know-whatted on. So, the only ones that had the ability to make mention were the independents. Over the last 12 years the independents were making clear and conspicuous mention. They came under attack. This is the biggest game in town. It’s always been about the money.
Why uproar over public document?
David Let me ask you: Why people would attack you? This is a public document. They are published by the secretary of state, or they are published by the governor’s office. In Tennessee, my listener simply has to do a Google on “comprehensive annual financial report Tennessee” and he can go right to it and download it. I downloaded it just recently, 220 pages.
Walter Burien When I first started national disclosure I did a Google on CAFR and came up with 11 hits. You know, city of Minneapolis won an excellence award on their CAFR. No would would have a clue on what that was. Not one editorial or article from the LA Times, the New York Times, the Chicago Tribune, anything. Total blackout. To pull off the biggest scheme in town you hold back your annual financial report for 65 years, they needed to include the main power groups. So syndicated media was sent reports for every year for 45 years on education, the school districts, the local universities were sent CAFRs — they produce their own financial report. The senators, the congressmen got their copies. The only one who was excluded was the entire population of the United States. The silence is golden rule was strictly enforced.
Incredible wealth in Tennessee
David The listener may want to know that the Tennessee Consolidated Retirement system has assets of F$35 billion, according to its CAFR, and his liabilities of F$969 million. It has assets 35 times its total liabilities, somewhere invested profitably. *** Governments around the country have amassed a vast treasure that is so great that, according to the preeminent expert, the preeminent nongovernment outside analyst of this system, Walter Burien of St. Johns, of Arizona, the need for taxation in the United States could come to an end. Walter, tell my listener how much you calculate the paper dollar value of investments owned by state governments, county governments, city governments, Free Enterprise industrial parks , public schools such as those in Hamilton County, counties, cities, municipalities and other organisms.
Walter Burien Keep in mind that on local governments we are talking close to 180,000 separate operations, enterprise, local government, city, school districts, the whole nine yards across the country; you’ve got the federal with about 30,000 different operations. But, collectively, gross income, by that I mean tax income, investment income — investment income is No. 1.
David What is enterprise income?
Walter Burien The income in 2007 came out to be F$14.6 trillion for the year. The standing liquid assets came out to being F$110 trillion. Now, on the investment income, that was their largest percentage of the gross income, and their international investments — China, Russia, Poland, Vietnam yielded the highest rates of return, especially the Chinese investments —
David Well, back up just a second.
Walter Burien — taking advantage of cheap labor. People keep screaming at companies, “Oh, we’re outsourcing, we’re losing all of our jobs.” Corporations are under pressure from their investors to move to China and Mexico and so forth. Collective investors owning a majority of those Fortune 500 companies? Collected government.
David You mention the governments of Vietnam and China and other countries. Are we talking about their investments in our country, or our investment in theirs?
Walter Burien Our investments in their countries. Government in the ’80s started outsourcing their investment capital internationally. Massive funds, globally, all across the world. Their first target was Mexico. They networked among each other to drive the peso down through the floor. Every day back in that time period you’d see a new article “The peso hits a new low.” “The peso hits another new low.” Well, that was being networked through the currency exchanges and the [indeciperhable] market to drive the peso through the floor.
Bringing Mexico City into line
David Why were the Americans driving the peso down?
Walter Burien To make a phenomenal profit. They drove the peso down, and the Mexican government was crying uncle. The feds came in and said, “Well, we’ll bail you out with F$50 billion if you pay us back in crude oil at F$10 a barrel. Crude oil was the No. 1 production item for Mexico. The Mexican government did. We put in F$50 billion there and F$135 billion after the next year. But we also sank in about F$480 billion into the Mexican economy, buying up corporations, the whole nine yards. Then we backed off on the peso. The peso rebounded; we made a phenomenal profit there. Then we opened up the floodgates, Nafta. Those policies were passed to open up the floodgates of Mexican goods. During that time period everything you picked up at Wal-Mart said, “Made in Mexico.” Well, that F$480 billion invested turned into a little over F$5 trillion in four years. That was their first taste of blood.
The second target was the Soviet bloc countries. We dangled the string to Gorbachev, saying “We’ll back off on the pressure; we’ll sink in about F$2½ trillion if you dissolve the Soviet Union. He bit, and announced he was dissolving the Soviet Union and going democratic. We sank in about F$2½ trillion, and during that time period you’d see a lot of “Made in Poland,” “Made in Czechoslovakia,” “Made in Russia” in the Wal-Mart and Kmart.
The big cherry to pick was China. And in 1999, 2000 when the Chinese government came in line we sank in about F$3 trillion into the Chinese economy, buying up companies, manufacturing and so forth, investing. And then we opened up the floodgates with China.
David When you say we, what do you mean? Do you mean we, government entities? Or we, private capital?
Walter Burien Government investment managers, associations of — the established government policy, *** During the next 10 years you’d always hear about the trade deficit with China. “Oh my G–, F$54 billion this month with China.” “F$36 billion this month — it’s backing off a little bit.” It’s important to realize that that floodgate being opened was making phenomenal profits for the prepositioned collective government investment funds in China, both federal and local. So, from about 2000, we sank in about F$3 trillion, the market capitalization come 2012 was up to around F$14 [trillion] or F$15 trillion. Now the public, they were always used as useful idiots — you hear ranting and raving on the Internet, “Oh my G–, China has F$2 trillion in reserves; they can crash the U.S. economy.” Yeah, right. If we cashed in F$4 trillion of our investment assets in China, China would be a tad bit short in converting the yuan back into the dollar. There is big money involved here. And when there’s big money, there’s a lot of quiet, there’s a lot of secrecy, there’s a lot of talking behind closed doors. The public was not included due to the money involved. If the public had had a clearer look as to what was taking place, the public would have stopped it 40 years ago. That’s why the silence is golden rule is strictly maintained.
Try to get your local politician to mention the comprehensive annual financial report in public forum, or put it in his newsletter; try to get your local anchor — ABC, NBC, CBS — just a simple mention. I think the public should look at their local government comprehensive annual financial reports — ain’t gonna happen. They’ve had a lock on the silence is golden rule for 65 years. There is so much money involved, so much wealth involved, and cooperative players: not a peep, not a mention, not a word.
Remedy: End taxes, bring universal prosperity
On the remedy side of the aspect, now keep in mind these two words, greed and opportunity. The inside players expanded, expanded, expanded. Let’s make it very clear on the arrogance of the expansion. Everyone saw what happened in 2008, the bubble burst in the real estate market, which was actually orchestrated through the investment arena. A phenomenal profit was made by the prepositioned shorts. I remember seeing LA city. “Oh, we’re going to have to go bankrupt, we’re going to have to lay off employees, everyone’s going to have to take a 10 percent pay cut.” That kind of got me a little peeved. So I pulled up the LA city CAFR. They had F$115 billion in liquid investment assets. Then I pulled up the county CAFR, LA county. They had about F$325 billion in liquid investment assets. And the normal operating budget fo the year was F$17.5 billion. Now I am sure than 99.9999 percent of the population in LA county would have no clue that the county, their normal operating budget, was F$17.5 billion.
CAFR world plays both sides of crisis
But then the 2008 bubble burst hit, and everyone was crying, “Oh, bankruptcy. Oh! We took a big hit. Oh, we’re going to have to cut back, tighten the belt.” Here they’re pulling in the dogs for the next couple of years, supposedly pulling in expenses. You could imagine that their budget could possibly go down or flatline; if there were any increases they would be extremely small. Well, from 2007 to 2012, in 2007 F$17.5 billion to 2012 their budget was now F$25.8 billion, a 47 percent increase during a time where they said they were pulling in the dogs and pulling in on expenses. If that’s not in your face, I don’t know what is.
David California was facing bankruptcy about a year ago, right, and according to a story that is based on a CAFR, I read in naturalnews.com, the state government had F$577 billion in assets yet it was saying it was about to go under.
Walter Burien They were saying they were F$68 billion short on their budget. That was on the state level. Now, if you look at collective government in California, their collective assets are up around F$14 trillion. If you just looked at LA county and all the townships and school districts in LA county by itself, it’s about F$1.8 trillion verging on F$2 trillion. So the governor he’s saying, “Oh, we’re F$68 billion [short] — you know, that’s pocket change on pocket change when you look at the whole picture. If you are going to take money from somebody, you want to give the impression that you’re broke.
If Bill Gates came up to you and said, “Can I borrow F$10,000; I may not be able to pay it back.” You say, “What? You’re one of the wealthiest guys in the world. I’m not going to lend you 10 grand, especially if you’re not going to pay me back.” Well, when your neighbor knocks on your door and he says “My mortgage is behind, I’ve got to make the payment or they’re going to take my house. Could I borrow F$10,000.” Yeah, you might consider giving him 10 grand to help him out.” So, for government, it’s a very strong psychological point for them to constantly keep taking more and satisfying their greed and opportunity principle — more, more more, and expand expand. They play the “We’re broke” routine.
Gross figures ? CAFRs give ‘net’
David In Tennessee we have a company, it’s called the Tennessee Consolidated Retirement System. It has a CAFR report published by a division called “the Treasury.” I’d not seen that before. But according to Page 18 there’s a summary of “plan net assets,” this is for teachers and police officers —
Walter Burien And it’s one program. Most states have several hundred smaller pension funds.
David And it has total assets of F$35 billion as of June 30, 2012. Talk about it.
Walter Burien Here’s the important point. As of 2012 it shows $34.99 billion. *** In 2010 they made F$3.284 billion. In 2011 they made F$6.784 billion and then for 2012 F$3 billion and 66 million. Whew. That’s a lot of money. Their total deductions, retirement benefits, disability benefits, cost of living adjustments, death benefits, refunds and so forth, administrative expenses — in 2010 it was $1.5, about $1.6 billion. F$1.7 billion in 2011, F$1.8 billion in 2012. So, when you look at 2011 total operating expenses was F$1.7billion, but what they brought in was F$6.7 billion. The growth of their fund just kept going up, up, up, up, up, and it builds a bigger power base. Keep in mind, their standing balance of F$35 billion, that money is invested all over the globe in real estate projects, corporations, cash loans, apartments, malls shopping centers, apartment complexes, companies in China, Vietnam, Mexico, Czechoslovakia, Poland.
On my website on the articles page it has an example of one large fund, Calsters, you know, California’s teachers retirement fund, with a couple of hundred billion. And when you click on the article link, it goes to a page, gives you a quick summary. Then you go on the page to click on showing of assets. It’s broken up into categories, domestic, international, real estate, equities, cash loans. And when you click on the international investments and go down through the list there, damn! China, Russia, Israel, Libya. You never had a clue as to how much money was invested all over the globe and how much profits they were making from these investments. And once that sinks into the brain of the viewer, they realize the scope and the degree of the power bases and the influence peddling of the cooperative players. Not a peep, not a sound, not a word. Keep in mind that the major networks, they are getting a good chunk of their gross income from collective government, federal and local governments and so forth.
And the major Fortune 500 companies, which have major advertising accounts, which, in fact, in the point of collective ownership, most of the Fortune 500 companies are owned by collective government and are networked through private associations. If ABC or CBS all of a sudden came out with open disclosure on the annual financial report and accounting structure, they could pull all their advertising revenue and pull them into the ground.
David And a bankrupt media company, CBS, almost bankrupt, would be on the floor.
Come back for Part II of my interview with Walter Burien. Please forward a link to this piece to your friends, and see if they might not think it worth giving their attention.
Other essays on CAFRs at this website are as follows:
CAFRs reveal the secret wealth of American government entities
Walter Burien talks about the scope of commercial government
If government’s economy is greater than the private and corporate economy, how are we to understand the prospect of inflation, which will damage government’s capital base?