July 30, 2007 | last updated May 26, 2012 8:28 am

Look At State's Lesser Fiscal Stewards

Mention "accounting rules" to most people and they're likely to put an end to your conversation as quickly as possible. But a spat earlier this month between Connecticut's governor and comptroller revealed just how important such rules are to taxpayers — whether they know it or not.

On July 6, Gov. M. Jodi Rell vetoed a bill that would have empowered Comptroller Nancy Wyman to scrap the accounting practices established by the Norwalk-based Governmental Accounting Standards Board (GASB) in favor of, as the governor put it, "whatever standards she prescribed."

Predictably, Wyman denounced the governor's action as "a setback for the taxpayers' right to know how their money is really being spent."

The president and chief operating officer of the Financial Accounting Foundation, GASB's parent organization, took a somewhat different view. Robert J. DeSantis considered Wyman's bill "a threat to integrity and objectivity of the standard-setting process" and "a step backwards for public trust, government accountability and transparency."

The American Institute of Certified Public Accountants also recommended a veto, expressing concern that if Connecticut "were to prescribe its own standards, it would not be clear … what rules are being used and why financial statements are different from other states."

Legislative Democrats took a pass on overriding the governor's veto, so at least for now, Connecticut's notoriously partisan comptroller won't be allowed to rewrite the rules set by the independent board that has governed public-sector financial accounting and reporting for over 20 years.

Headline-Happy Nappier

But unfortunately for Connecticut taxpayers, Wyman isn't alone in putting personal power grabs ahead of sound fiscal stewardship. Treasurer Denise Nappier, who is charged with managing the state's pension funds, has pursued headline-grabbing policies with a relish that rivals that of Attorney General Richard Blumenthal. Nappier is a national leader in the "socially responsible" investing movement, an attempt by left-wing politicians and activists to use pension-fund power to effect "progressive" change. The usual suspects are targeted for their villainy: energy multinationals that aren't doing enough about "climate change," companies that don't embrace "diversity" to her satisfaction, and "corporate compensation packages that range from excessive to obscene."

Campaigns for trendy causes regularly generate puff press coverage, but are such efforts about smart investing, or politics? Tom Borelli, Ph.D., the portfolio manager of the Free Enterprise Action Fund, believes Nappier has politicized her position: "Cleverly disguised as an activist shareholder interested in long-term value, she is really riding the waves of anti-corporate populism and global-warming alarmism to advance her political goals."

Jon Entine, a scholar with the American Enterprise Institute, believes that Nappier is improperly placing her "idiosyncratic measures of social responsibility" ahead of beneficiaries' bottom-line interest. "Politicians should set only the broadest investment guidelines for state pension funds and no more," he recommends. "It's time to stop gambling with other people's money in support of ideological vanity."

Attention Shifted

Perhaps the most disturbing thing about Wyman's and Nappier's grandiose schemes is the time and resources they surely draw from ensuring efficient operation of their agencies. Connecticut's nonpartisan Office of the Auditors of Public Accounts has repeatedly cited the comptroller's and treasurer's offices for serious mismanagement.

Vigilant Connecticut taxpayers are certainly justified when they focus their ire on the state's spendthrift governor and General Assembly. But let's not forget that Connecticut's comptroller and treasurer are also at the state's fiscal helm — and can be just as irresponsible as legislators and Jodi Rell.

D. Dowd Muska is the Harford-based Yankee Institute's Philip Gressel Fellow for Tax and Budget Policy.


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