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Tales of Fiscal Accountability (or not)

Tales of Fiscal Accountability (or not)

To be true to the actuarial stereotype, I get more and more dismal

No transcript...

Three tales of accountability… or lack thereof. I start with a “heartwarming” tale of a supposed Excel error - $92 million error - that becomes an opportunity to strengthen the corporate team… yay! (That’s not exactly what happened, FWIW.) The second one is from Liz Farmer and involves a Virginia town with finances in a mess. And the third… is really big. But shouldn’t surprise anybody.


Episode Links

Liz Farmer’s substack

I was not realizing this story is free to all:

Long Story Short
Saving distressed cities from themselves
Happy weekend, readers! At the end of last week’s newsletter, I mentioned a city in Virginia that had similarities to Chester, Pennsylva…
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Here is a quote from this free story:

A commonality with all the fiscal distress laws I’ve reviewed is that decisions are to be made for the sake of the health, safety and well-being of residents. When a locality is chronically unable to manage its finances, it endangers vital public services and puts residents at risk. 

But state takeovers can go horribly wrong. In Michigan, studies have shown that the wide-ranging authority of the emergency manager law and the resulting lack of accountability of the manager in place in 2014 contributed directly to Flint’s devastating water crisis.

This is a worst-case scenario, but it shouldn’t be dismissed as an extreme. The fear that an outsider will strong-arm duly elected local officials and subvert the will of the people is a legitimate one. The key here is accountability. Virginia’s law requires an emergency manager to submit regular reports to state and local entities, which is one mechanism for accountability.

Sadly, the more common scenario is that residents suffer harm due to local officials’ inability (or unwillingness) to make the tough decisions that a fiscal crisis requires. Emergency response times tick upward, garbage litters the streets because trash pickup is unreliable, libraries and community centers operate on shortened hours—you get the point. I haven’t done a deep dive into Hopewell’s long-term financial trends, but I did stumble upon one datapoint that suggests residents here have increasingly been paying for the city’s fiscal woes. 

Long Story Short
The three-year fight over who's in charge of a bankrupt city
Happy weekend, readers! This week’s newsletter is an update on the slow-moving bankruptcy of Chester, Pennsylvania, the Philadelphia suburb I’ve been following for the past year. After more than nine months of waiting, the Pennsylvania Supreme Court finally issued its ruling on a key piece of the city’s recovery plan. The court affirmed the city Receiver’s plan, rejecting the challenge brought by now-former Mayor Thaddeus Kirkland and other elected officials. Now, the bankruptcy case in federal court could potentially start moving faster than the glacial pace it has set thus far…
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I highly recommend Liz Farmer’s work.

The Norwegian Sovereign Wealth Fund Story

Financial Times: The Norwegian Sovereign Wealth fund’s $92 million error [paywall]

ResearchGate: Anthropological gaze, stories, and reflections on NBIM culture

Last year (spring 2022) we had an off-site. One of our workshops was on “Mistakes and how to deal with them”. We wrote post-it notes, classifying them into different categories from harmless to no-goes. One of my post-it notes, I remember it vividly, read: Miscalculation of the Ministry of Finance benchmark. I placed it in the category unforgivable. When I wrote that note, I honestly couldn’t even dare to think about the consequences . . . And less than a year later, I did exactly that. My worst nightmare. It was a manual mistake. My mistake. I used the wrong date, December 1st instead of November 1st which is clearly stated in our mandate. The mistake was not revealed until months later, by the Ministry of Finance. They reported back that the numbers did not add up. I did all the numbers once more, and the cause of the mistake was identified. I immediately reported to Patrick [Global Head] and Dag [Chief]. I openly express that this was my mistake, and mine alone. I felt miserable and was ready to take the consequences — whatever they might be.

Federal Debt and Entitlement Issue

Babylon Bee: Senators Say They're Not Super Worried About Running Up National Debt As Most Of Them Will Die Of Natural Causes In The Next Year Or So

Charles Blahous in Discourse Magazine: Americans Should Be Less Complacent About Social Security

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STUMP - Death and Taxes
Meep (Mary Pat Campbell) talks about mortality trends and/or public finance issues, usually with a connection to current events.