ALEC Stands for Government Financial Transparency
This week is Sunshine Week, celebrating the access to public information and what it means for you and your community. To stay accountable to taxpayers, state and local governments publish publicly available financial information. This means they must make this information easily accessible and publish the information in a timely manner.
ALEC understands that knowing how tax dollars are being spent helps taxpayers and policymakers make fully informed decisions on the proper role of government.
Last year, ALEC highlighted the State of California’s failure to publish a comprehensive annual financial report (CAFR) on time. The CAFR contains important information about tax revenue and state budgets as well as important information on pensions, other post-employment benefits (OPEB), and bonded obligations. The Golden State did not publish a CAFR until October 30, 2020, 16 months after FY 2019 ended.
While there is no official deadline set for state governments to publish this information, the Government Accounting Standards Board (GASB) recommends, “Timeliness alone does not make information useful, but the passage of time usually diminishes the usefulness that the information otherwise would have had.” The information in the California CAFR for FY 2019 reflected a time when the United States economy was in the middle of a record-long expansion, but it was published after 9 months of economic shutdown.
State leaders can avoid these pitfalls by looking to ALEC model policy. For example, The Open Financial Statement Act educates state leaders on how to replace PDF-formatted audited financial statements with Interactive eXtensible Business Reporting Format (iXBRL).
Making this transition will ease the identification of fiscally distressed local governments and will increase liquidity in the municipal bond market. In addition, this will also ease the identification of pension and OPEB fund contributions, funding ratios, key assumptions, and unfunded liabilities.
In the same vein, the Public School Financial Transparency Act would require each local education provider in the state to create and maintain a searchable expenditure and revenue website database that includes detailed data of revenues and expenditures in an easily accessible, searchable and downloadable format.
If a local government wants to increase property taxes, public officials are required to notify the public of the change and the impact of the new tax burden in the county newspaper and on the government website. After at least 10 days of public notice, local governments are then required to hold public hearings and votes on the proposed tax increases.
This level of transparency keeps the public engaged throughout the discussion of property tax changes. This model policy builds on the ALEC Statement of Principles on Truth in Property Taxation, adopted at the 46th ALEC Annual meeting.
Readers can view the full text of these model policies and all ALEC model policies by visiting https://www.alec.org/model-policy/