Public Finance Spotlight: Bill Bergman

Continuing my series spotlighting my favorite sources on public finance data and policy, today I’m looking at Bill Bergman.

In my last Public Finance Spotlight, I lit upon Truth in Accounting and noted that Bill Bergman was involved at the time in most of the posts at STUMP using TIA.

(I also meant to highlight Bill in July… but events got in the way. Here I am now!)

Bill’s GovMoneyNews

Bill is now a Lecturer at the Quinlan School of Business at Loyola University Chicago, and he also has a regular public finance new roundup in GovMoneyNews.

You get a Top Three Reads each weekday, plus some additional links on Federal finances, Financial regulation, State and local government finance, and then sometimes a BLAST FROM THE PAST!

Not kidding re: Blast from the past — he’ll give you one item, sometimes from decades ago. A recent item is from Milton Friedman in 1955 “The role of government in education”:

“… Governmental institutions in fact play a smaller role in the United States in higher education than at lower levels. Yet they grew greatly in importance until at least the 1920'S and now account for more than half the students attending colleges and universities. One of the main reasons for their growth was their relative cheapness: most State and municipal colleges and universities charge much lower tuition fees than private universities can afford to. Private universities have in consequence had serious financial problems, and have quite properly complained of "unfair" competition. They have wanted to maintain their independence from government, yet at the same time have felt driven by financial pressure to seek government aid. …” 

It’s nice to find other people also taking the long-term view of public finance — because you have to.

Thinking it’s a 5-10-year issue means you’re going to miss a lot of things.

Bill & I commiserate on credit ratings

I’ve told people I do not delete emails, and one reason is that I can find out the first contact I had with folks, which is usually email now.

The first direct contact I had with Bill that I can find is from January 2017, when he told me about a project he had detailing how credit ratings were used in regulations — especially capital regulation.

As Bill noted in the email:

Longer story short, it was pretty central to the meltdown 2007-2009.

Yeah, I’d say it was.

Bill was reacting to my post on then-Chicago mayor Rahm Emanuel's scrapping with credit rating agency Moody’s, in which I pointed out that outsourcing one’s risk assessment, especially for regulatory purposes, was foolish.

After that, Bill started linking to STUMP, and we started emailing each other about Chicago’s and Illinois’s horrid financial positions, as well as changing government accounting/actuarial standards… or nonchanging, as the case usually was.

It’s great to bond over shared interests.

It’s Got to Be Correct and ON Time

This was one of my favorite gags from Bill while at TIA [this is 2016]

He played it straight in 2016… and then… 2017:

2018:

2019:

2020:

Have Some Standards!

Of course, the things we love to do is just geek out like the finance nerds we are — especially argue for accrual accounting standards.

Bill convinced me to write to the Government Accounting Standards Board on this score.

For the more accounting-oriented folks here, I want to point you to an email-writing campaign from Truth in Accounting. If you are on their mailing list, you may have already received the following request:

….

I have written to GASB and other regulatory/accounting bodies before. Obviously, a lot of the details in the letter are specific to me… but many are not.

I am giving anybody permission to re-use any of the ideas in my letter, but it may be better that you put it in your own words, so that it doesn’t look too form-lettery. Truth in Accounting’s focus is on taxpayers, but I want to make sure GASB understands that low-balling the pension promises also affects the people they should also be protecting: pension participants.

Note I did not reference municipal bondholders, who obviously get damaged in municipal bankruptcies. However, with respect to securities holder protections, that’s more of an interest of the SEC than GASB.

In the public company world, we have seen bad accounting practices drive destructive behavior (let me not start on the credit crisis stuff). Similarly, bad pension accounting practices have led to behavior that makes disaster more likely.

Fixing the accounting obviously won’t fix the problem by itself, but it can help signal problems well in advance of a crash.

And by “Truth in Accounting” asked, I mean that Bill asked.

Bill is good at finding something he knows that will set me off, throw it at me, and then get me to respond.

But enough about me - let me grab some of my fave of Bill commentary.

Bill on Illinois Mega-Bond Concept

This was an incredibly stupid idea. Let me grab Bill’s response.

Illinois’ huge pension obligation bond proposal – 3 good things and 3 bad things

The Illinois State Universities Annuitants Association (SUAA) recently developed a proposal for a $107 billion (with a b) bond offering designed to secure the funding of state government employee pension funds.

SUAA asserted the proposal could lead to a 90% funding ratio for the plans in 2018, up from what Truth in Accounting calculates at roughly 36% as of fiscal 2016.

Poof, problem solved?  No. There’s no such thing as a free lunch.

Here are three good things and three bad things about the SUAA proposal:

GOOD THINGS

1) This is ONLY A PROPOSAL. This proposal has friends in the Illinois General Assembly, but it is far from certain at this point.

2) If the proposal becomes reality, it could improve the financial position of the hundreds of thousands of members in these plans.

3) If the proposal is enacted, it would be a big payday for financial, law and credit rating firms.

BAD THINGS

1) Good things for government pension plan members and financiers aren’t necessarily good for taxpayers.

2) Experience indicates any short-term improvement in reported funding ratios would reduce discipline in Illinois government to reform and adequately fund the plans in the future.

3) The proposal would effectively double down on the forced participation of Illinois taxpayers and citizens in risky financial markets.

There are more points at the link, but the proposal was over 5 years ago, and in this interest rate environment (forget about all the other stuff going on right now), none of this is going anywhere.

I like how Bill gets to the meat of the matter.

Selected Publications

Bill Bergman, “Bank Stocks Rallied Today, But …” Institute for New Economic Thinking (March 27, 2023) 

Bill Bergman, “What the U.S. Government’s Financial Report Doesn’t Tell You,” Mises Institute (February 22, 2023)

Bill Bergman, "Don't Mess With Accrual Accounting in Government," Pennsylvania Society of CPAs (April 2022)

Bill Bergman, "The Fed Says It Stabilizes the Economy. I'm Skeptical," Mises Institute (July 2021)

Bill Bergman, “New Leadership Needed in Government Financial Reporting,” The CPA Journal (April 2017)