Phoenix’s former City Manager repeatedly turned down annual raises. But the Arizona Republic reports, behind the scenes, Mr. Fairbanks was instead tacking on unused vacation and sick days, as he accepted salary hikes along the way to boost his final three years of salary to $1.3 million. As a result Mr. Fairbanks will retire with an annual pension of $246,813 a year. These actions were perfectly acceptable under the rules of Phoenix’s pension system, in contrast to the plans operated by the state government. Due to its design Phoenix’s pension plan is slated to cost the city $93.7 million this year, the equivalent of its parks budget.
Councilman Sal DiCiccio would like to see the system changed but thinks the only way it can happen is by citizen intitiative. The law prohibits the city from increasing the employee contribution, and prevented Mr. DiCiccio from stopping his own pension benefits when he left office.
Along with many municipal governments, Surprise, Arizona is facing budget problems this year. In addition to decreased revenues, some of the city’s problems are coming from its history of poor budgeting practices.
The city’s Accounting Division says that department adheres to Generally Accepted Accounting Standards (GAAP), which are industry guidelines for following the principles of sound accounting. In light of recent finance problems in Surprise, the Arizona Republic questions whether the Finance Department actually has been following GAAP guidelines. Faulty accounting may have led to a budget shortfall in fiscal year 2009 that was revealed this fall.
Financial messiness in Surprise is minor compared to many of the accounting problems common in government budget offices. One of the most common areas for accounting gimmicks is in government pension funds, where budget offices can relatively easily alter cost estimates. However, even more blatant gimmicks have resulted when states have moved their employees’ year-end pay checks to the next fiscal year in order to close budget shortfalls. The Daily Reporter outlines other shocking budget antics here.
In the private sector, scandals have unfolded around firms such as Enron and Worldcom that engaged in similar fraudulent practices, but public sector employees and elected officials do not face the same consequences when they use unorthodox methods to balance their budgets.