1. Presentation Title > Presenter Name | Presenter Title Fiscal Responsibility

2. Where are we now?

3. American Institute of CPAs The U.S. Government’s Assets and Liabilities As of September 30, 2010 Source: A Citizen’s Guide to the 2010 Financial Report of the U.S. Government

4. Social Insurance Net Expenditures: Dollars in Billions Sept. 30, 2011 Social Security $9,157 Medicare$24,572 Other$101 Estimated expenditures for future scheduled benefits over a 75-year period, net of revenues that support these programs (i.e. Payroll taxes)

5. Analysis of Federal Debt Federal liabilities20112010 Publicly held debt *$10,174$9,060 Federal employee & VA benefits5,7925,720 Other1,5261,576 Intergovernmental debt — owed to Social Security, Medicare, other trusts 4,7114,577 Federal social insurance obligations20112010 Social Security9,1577,947 Medicare — Parts A, B and D24,57222,813 Other10197 Total liabilities, intragovernmental debt and social insurance obligations $56,033$51,790

6. A National Debt of $14 Trillion? Try $211 Trillion Courtesy of Boston University Lawrence J. Kotkoff Senior Economists, Reagan Administration Lawrence J. Kotkoff : “If you add up all the promises that have been made for spending obligations including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That’s the fiscal gap,” he says. “That’s our true indebtedness.”

7. Where are we going?

8. Source: 2010 Financial Report of United States Government, U.S. Treasury Department

10. Key Measures of State and Local Government Intergovernmental Financial Dependency

11. Key Dependency Measurement VA 2010 NC 2010 MD 2010 FL 2010 Direct Federal Revenues to State (billions) $14.0$24.3$13.2$40.4 Percentage of Total State Revenues — All Sources 31.239.935.941.0 Direct Federal Grants to Local governments (billions) (2008) $1.1$2.3$1.1$3.9 Federal Purchases from State Businesses (billions) $58.3$6.1$26.5$18 Federal Payments to Individuals: wages, pensions, S.S., Medicare (billions) $62.9$62.8$51.7$137.7 Total Direct and Indirect Federal Flows (billions) $136.3$95.5$92.5$200.0 Real GDP by State Inflation Adjusted to 2005 (billions) * $380.6 $264.9$673.4 Percentage Total Federal Flows Gross State Product 35.725.134.929.7 Dependency Measures — Select States

12. Potential slide on state financial statements

13. Key Dependency Measures for Select Localities – FY 2011 thousands) Fairfax County Alexandria City Prince William County Norfolk City Virginia Beach City Federal Allocation to Locality $306,380$46,164$130,848$110,341$139,303 State Allocation to Locality $853,908$105,212$486,155$309,262$497,053 Federal/State Percentage of Total Revenues 26 percent23 percent 44 percent46 percent42 percent

14. Key Dependency Measures for Select Localities – FY 2011 (thousands) Richmond City Henrico County Chesterfield County Hanover County New Kent County Federal Allocation to Locality $143,302$69,472$62,111$18,993$3,019 State Allocation to Locality $264,431$338,714$357,331$109,706$17,318 Federal/State Percentage of Total Revenues 45 percent43 percent45 percent43 percent41 percent

15. Key Dependency Measures for Select Localities – FY 2011 (thousands) Lynchburg City Bedford County Roanoke County Danville City Pittsylvania County Federal Allocation to Locality $26,948$15,101$49,891$20,867$18,987 State Allocation to Locality $86,776$61,173$132,152$71,852$73,612 Federal/State Percentage of Total Revenues 43 percent50 percent48 percent60 percent67 percent

16. Fairfax County Alexandria City Prince William County Norfolk City Virginia Beach City Federal Allocation to Locality $324,572$45,818$136,679$110,341$139,303 Stimulus Allocation to Locality $10,248$6,905$48,743$19,862$50,401 Percentage of Federal Allocation From Stimulus 3 percent15 percent36 percent18 percent36 percent Local Revenues From Stimulus Package - FY 2011 (thousands)

17. Richmond City Henrico County Chesterfield County Hanover County New Kent County Federal Allocation to Locality $110,682$84,309$68,517$19,553$4,649 Stimulus Allocation to Locality $17,642$13,851$23,596$7,923$2,556 Percentage of Federal Allocation From Stimulus 16 percent 34 percent41 percent55 percent Local Revenues From Stimulus Package - FY 2011 (thousands)

18. Lynchburg City Bedford County Roanoke City Danville City Pittsylvania County Federal Allocation to Locality $36,611$15,396$26,162$20,867$18,987 Stimulus Allocation to Locality $12,146$4,428$3,894$71,852$73,612 Percentage of Federal Allocation From Stimulus 33 percent29 percent15 percent60 percent67 percent Local Revenues From Stimulus Package - FY 2011 (thousands)

19. Assessing Risks

20. Informed and Proactive

21. vs. Reactive

22. Become informed and proactive or reactive 3 Components of Being Proactive

23. Communicate with Leaders

24. Explore Reporting Options

25. Support Shared Leadership

26. 26 The story of The Fed Family

27. 27 Joe Judy Johnny Sally and Max!

28. 28 Joe has a good job and plans to retire in 5 years. THE SITUATION Judy stays home with the children. Grandma had a stroke last year and is in a coma. Johnny and Sally attend private school.

29. 29 Joe has a nice income of $129,000 per year. However, the Fed Family is living beyond their means. They have no cash and had to add over $12,000 to their credit card debt 2010 Gross Domestic Product The Fed Family share of the 2010 deficit

30. 30 They have $79,473 in credit card debt In order to make ends meet, Joe borrowed all the money from Grandma’s trust account: $40,149 Fed Family share of publicly held debt Fed Family share of amount “borrowed” from Social Security trust fund

31. 31 Grandma’s estimated care at the Park Avenue Nursing Home over the next several years is: $200,000 But Joe doesn’t think he’s signed a contract, so he isn’t worried…. Fed Family share of obligation to Social Security and Medicare Some say this estimated obligation is not a liability…

32. 32... so the Fed Family got together and had a family meeting …

33. 33 Why do we have to pay for Grandma? The latest plan to privatize Medicare. Or is it?

34. 34 Let’s not visit Aunt Frieda this Saturday! Great idea! But that will only save $263! The value of $30 billion in cuts toward deficit reduction

35. 35 I know, I’ll go to the bank and extend our credit card limits! Unfortunately Joe’s bank is now a subsidiary of the Bank of China and won’t extend more credit until the Fed Family gets its act together! As of May 2011, China holds 36 percent of all foreign-owned Treasury Securities (16 percent of total public debt)

36. 36 No, we all need to chip in to get out of the mess your father got us into!

37. 37 Joe ― resigns himself to working 5 more years Johnny and Sally ― go to public school Max ― gets dry dog food Grandma ― moves to a more suitable nursing home Judy ― takes a part-time job Bank extends credit after approving a payment plan that begins to reduce the outstanding balance THE PLAN

38. 38 Historical & Current Policy Projections for the Composition of Non-interest Spending

39. 39 Analysis of Federal Liabilities, Intragovernmental Debt and Social Insurance Obligations (in trillions)20102009 FEDERAL LIABILITIES Publicly held debt 9,060 7,583 Federal employee and VA benefits 5,720 5,284 Other 1,576 1,257 Intragovernmental debt (owed to trust funds) 4,577 4,391 FEDERAL SOCIAL SERVICES OBLIGATIONS Social security 7,949 7,677 Medicare (Parts A,B & D) 22,813 38,107 Other 97 94 Total liabilities, intragovernmental obligations and Social Insurance 51,792 64,393 Current dollar GDP (3rd quarter 2010 and 4th quarter 2009) 14,750 14,119 Publicly-held debt as a percentage of GDP6154 Liabilities and obligations as a percentage of GDP351456

40. Components of the Solution

41. Communication & Education

42. Sustainability

43. Transparency

44. Ideas for Consideration Sustainability Transparency Stewardship

45. Resources www.vscpa.com/FiscalResponsibility www.aicpa.org/WhatsAtStake http://tinyurl.com/2011CitizensGuide (PDF)http://tinyurl.com/2011CitizensGuide http://www.fms.treas.gov/fr/index.html http://datapoint.apa.virginia.gov/