Bill Gates Accuses States of Enron Style Budgeting

During his recent presentation at the recent TED conference in Long Beach, California, former Microsoft CEO Bill Gates accused state governments of creative accounting methods that would have made Enron executives blush.

“The guys at Enron would never have done this, this is so blatant, so extreme,” he said. “Is anyone paying attention to what these guys do?”

Schools or Pensions?

The “guys” he was referring to are the state representatives grappling with budget deficits all over the nation. Gates believes that creative accounting on the part of elected officials is shortchanging the nation’s children.

Obligated to fund pensions for state retirees and hobbled by the rising costs of health care coverage for current employees, states are balancing the difference on the future of their children by underfunding education. Gates believes that the sacrifice children are asked to make in order to fund the retirements of the older generation and provide health care for their teachers and other state employees is too much to ask.

It’s also bad for the future of the United States, which is already dealing with knowledge gaps in comparison to the rest of the world and can’t help but to fall further behind if state governments continue to use education funding to fill in their shortfalls.

Cooking the State Books

Gates points out that sleight-of-hand funding techniques allow states to appear to have balanced budgets on paper, but in reality, money is being shifted about like the Queen of Hearts in a game of Three Card Monte.

States use tricks like borrowing funds from one-time proceeds or the sale of state property - something Gov. Scott Walker of Wisconsin is proposing to do by selling state-owned power and water plants to private businesses. But these tactics produce only enough money for one budget year and leave the state with the same shortfall year after year.

States should, Gates says, be obligated to the same financial principles that private businesses must employ, and he plans to use the Gates’ Foundation website to expose state budget practices in his campaign to eliminate what he feels is fraud at the expense of the nation’s children.

Golden Parachutes

He makes valid points about unrealistic state pension plans which promise future retirees a return on investment that far exceeds what someone in the private sector could expect, and he rightly points out that health care costs are rising at a rate that states cannot hope to keep up with, even if the economy were to return to robust health.

His bottom line pits the youth of America in a fight for their futures against their parents’ and grandparents’ retirement expectations.  He asks, “Whom should we worry about more?” An excellent question, but one that from the federal government on down seems to have been decided already, and they didn’t pick the kids.

What Do You Think?

Gates has been on a roll lately, questioning the wisdom of pay increases for teachers based on seniority and declaring that teacher raises for advanced degrees are a waste of money. His new efforts to force states to be more accountable for their budgets, and to invest in America’s future workers rather than spend more on its aged, is likely the opening shot in the coming generational struggle between the Baby Boomers and their children and grandchildren.

Where do you think the limited resources of states should be directed? Should education be a sacred cow and Social Security and Medicare be put on the chopping block? Is it time for Americans to make such choices? Can’t we have it all? Let’s hear from you.


Related Stories:

Education Headed For the Funding Cliff

Sorry, Education: California State Budget Deficit at $28 Billion

House of Representatives Votes to Cut Education Funding by $5 Billion


Photo credit: Bill Gates at CES 2007 by Domain Barnyard


Jan Boyd
Jan Boyd6 years ago

If millionaires, billionaires and corporations paid their fair share of taxes we would not be asking an either or question. Also unfair is the cap on Social security at $107 thousand, when the wealthy also draw social security, yet don't pay their fair share. All this on top of the Republicans making it so medicare cannot shop around for the best prices for pharmaceuticals, makes for blaming the elderly for everything. I guess since they are no longer needed or wanted in the workforce they make a good scapegoat. Does anyone ever look at how many people pay in to a pension or social security for years, but then die and never collect a dime? or they live to collect for a very short time, due to a very stressful job. Not too many people live to be 100, or 90, or 80 or even 70!

Mary Vaughn
Mary Vaughn6 years ago

If Bill Gates and all of those other billionaires had paid their fair share in taxes and kept their corporations in America and created the jobs they promised when Bush gave them that temporary tax reduction the schools could be funded. Yes I realize he is a benefactor, but he is still one of those who need to pay their fair share in taxes, just like Warren Buffet said. Instead he is asking that we either throw our children under the bus or steal grandma's SS and let her live in a cardboard box.

Helen Delahunt-Avila
Helen Avila7 years ago

Enron, isnt that the company who skimmed the wealth for the top execs at the expense of their employees... Bill gates has it wrong I think.. funding the pensions didn't mean to fund themselves.

Helen Delahunt-Avila
Helen Avila7 years ago

If the states had not used pension money in their possession to speculate on the stock market and the banks and lose it, there would not be these state budget problems. Now they have to pay it back and the way to do that is to strip the teachers of their rights.. if you have no rights, you can't argue. Maybe you should as your state representatives where that money it went to raises all around for them - whatever was left from the financial melt down last year.

Maira Sun
Maira Sun7 years ago


Helen Delahunt-Avila
Helen Avila7 years ago

Anyone from Idaho on Care2 who sees this please send me a note.. we have a petition to recall our school superintendent who is trying to bust the unions and have schools online..

Linda D.
Linda D7 years ago

The taxpayers can no longer support the huge pensions authorized by corrupt and bribed politicians who were not representing the taxpayers in an adversarial role as they should have been. The money is no longer there. I notice the public employees who say they paid into their pension fund do not say what percentage they paid, nor how much they receive in retirement or at what age they were allowed to retire. Retiring in their 50's and receiving 80% pension is common. The formula has been out of whack for a long time and it may be painful to correct it, but it has to be done. The same age restrictions that apply to social security should apply to these pensions and the payout should be comparable. Some politicians are saying since they do not want to revoke previous pensions agreements for those retired, they will force them to pay taxes above a certain level to get back some of the inflated pensions. Double and triple dippers will really be upset. Changes have to be made for the sake of fairness to all. Here in Illinois top level positions where someone might work only a year or two get a full pension as if they had worked 30 years on the job, and they keep accumulating pensions as they go from job to job. The system is unjust and has to be changed. The banks received stimulus taxpayer money without conditions or any oversight to save them from t heir mismanagement and it was used for bonuses for themselves, not to make loans to people to help stimulate the econom

Grace Adams
Grace Adams7 years ago

I remember when there used to be some sort of strike almost every year that would badly inconvenience everybody for about a week. Then the strike would be settled, the price of whatever was affected by the strike would go up , and nobody would dare complain because they had just been through a strike to prove how important that item was to everybody. Maybe if the states get radical enough to cut education out of the budget altogether, then maybe the teachers could get mad enough to organize the students to mill around and yell and scream and carry on through what was regular school hours until everybody was thoroughly enough inconvenienced to realize that we do need education if only to get the children off the streets

Jan Boyd
Jan Boyd7 years ago

I am a retired State Teacher from Calif. Corrections, and I see both sides. I voted to have my local property taxes raised to support the building of schools in my small town in Calif., however I paid in to my state pension for 30 years and my bargaining unit did not pay in to social security (myself or the state) and my state pension is all I have for retirement. My job was dangerous (working with 18 - 25 yr old felons) and extremely stressful. Am I to understand that after I went to college for seven years, worked and paid in to a pension system for 30, I am to go homeless in my old age? There has to be a balance here, and had I known this was coming I would have chosen a different profession or gone in to my own business, which wasn't so stressful or required so much education. The state workers have binding contracts with the states. I am willing to sacrafice as we all must, but what about the wealthiest who are getting huge tax cuts and corporations and banks that can write off every cent of taxes and get weathier and wealthier? They are the crooks who caused this financial meltdow, illegally, yet still get HUGE bonuses for their great job performance with taxpayer dollars. First they stole our 401K's and now they want our state pensions and Social Security is last and then all of us old codgers can just go die somewhere so the youth can go to school. I am sure there is some other way!

Robert O.
Robert O7 years ago

He has a point since the good, hardworking, long-suffering taxpaying citizens are being squeezed dry, but where's the money? Show me the money! Fiscal mismanagement is a big problem, especially here in Arizona where the Republicans and Tea-partiers use and misuse money to support their own poitical agendas then when things go bad they try to blame it on their predeccessors (Democrat or otherwise) the governmenmt, Obama or look to find some group or segment of the population to blame it on.