Later this year an organization little known outside green-eyeshade circles will make a decision that could profoundly change what state and local governments tell us about their ability to provide public services for taxes residents can afford.
That decision is who should chair GASB, the organization that sets accounting standards for state and local governments. A bad decision would lead to seven more years of allowing state and local governments to say their books are balanced even if done with gimmicks and legerdemain. A good decision would be the first step to accurate financial statements.
The decisionmaker is the Financial Accounting Foundation, the nonprofit parent of GASB and its sister organization FASB, which sets private sector accounting standards. Late this year FAF trustees will select the next GASB chair, who is the only full-time GASB board member and sets the agenda for the other six members.
The deck is stacked against a good decision. The political deal that created GASB in 1984 gave excessive power to organizations of state and local officials to decide who gets appointed to GASB’s board. As a result, at GASB the regulated largely get to choose their regulators.
But FAF trustees have more power when appointing GASB’s chair. State and local officials cannot block that appointment, which is the key to accurate financial reporting by state and local governments.
You can help by asking members of the SEC, Federal Reserve, Executive Branch or Congress to ask FAF trustees to choose an independent and reform-minded GASB chair. With the selection due to be made later this year, now is the time to do so.
State and local governments spend more than $3 trillion per year, employ nearly 20 million public employees, and provide most domestic government services to nearly 330 million Americans. Their financial statements are not accurate and bury facts that produce devastating consequences for public education, infrastructure and other critical public services. Federal officials need to tell FAF trustees that GASB should have an independent and reform-minded chair willing to stand up to the status quo. For more information see below.