Public Sector Corporations employ 15.3% of the 160,000,000 people in the American workforce. As a collective of Federal and State Corporations and Subsidiaries, the American Government employs 24,480,000 people in the American workforce. The closest Private Sector Corporation employs 195,000 people – worldwide!

Government, Federal, State, County, City and related Agencies are incorporated in much the same way as any other businesses in America – publically traded or private.

Every Agency, the Internal Revenue Service (IRS), Environmental Protection Agency (EPA), the States Attorney Generals Office, Department of Motor Vehicles (DMV), even cities like San Francisco, (Incorporated April 15, 1850) and Chicago, (Incorporated March 4, 1837) are incorporated somewhere as official Corporations.

These Government entities operate very similar in terms of income (revenue) and expense centers, assets, profit and loss, credit ratings and barrowing power as any other Corporation in America. The basic corporate structure of government is not very different from the executive (CxO) structure of a corporation in the private sector.

The flow chart demonstrates the point at the upper level of a State and highlights its CxO (management) structure.

Each Public sector from the top executive office, legislation and judicial branches to the individual Agencies they manage is by nature of spending an expense center. And, most include extremely profitable revenue centers within their subordinate Agencies.

The Legislation Branch is the one exception in that nothing they physically do or produce has anything to do with the revenue and expense of a product or services. They simply appropriate funds for their own expenses (Operations and Salaries) and the service they provide generally benefits the Business of State.

State Water Boards generate revenue from natural resources (rain, snow and reservoir reserves) and then sell the water to local Private Water Company’s who are often publically traded corporations.

So called privately run “Public Utility Commissions” (PUC) who supposedly regulate consumer prices always side with these pal-opolies. So, when Utility Companies (water, electric, gas, etc.) need more revenue, they simply turn on the consumer spigot.

The San Jose Water Company (CA), a publically traded company has increased dividends annually for the last eight years. In the past few years, Regulators mandated they force consumers to reduce water consumption while equally increasing water rates tenfold to make up for loss revenue from slower sales.

The Board of Directors at any private (unaffiliated with Public Corporations) company would have made savings adjustments to operations. California Utilities turn on the consumer spigot instead and the PUC grants them the right to milk consumers. Unfortunately, consumers who should represent the Board of Directors for any utility seem to accept the way Government manages the Business of State.

Another example of a Utility being allowed to milk consumers is Pacific Gas & Electric Company. In a century of providing electrical and gas, they allowed their infrastructure to deteriorate until the San Bruno, CA gas pipe explosion that killed eight and destroyed more than a dozen homes.

Shortly after the San Bruno disaster, PG&E requested and the PUC granted rate hikes so consumers could flip the bill for related expense and the upgrades they ignored for decades. Again, after Court rulings related to the San Bruno disaster, PG&E was granted additional rate hikes.

More local Businesses of State are County Assessor and DMV Offices. The County Assessor falls under the category of Pseudo-Entities for their ability to Self-Litigate Disputes with consumers.

In a rare and what is now ancient ruling for the consumer, The California Voter initiated Proposition 13. Aside from its stated purpose, the law was intended to put the reins on runaway and corrupt County Assessors who were taxing the daylights out of homeowners. The Santa Clara County Assessors’ Office found a loophole by doing an end-round in their personal version of the “Rule of Law” over the “Words of Law”.

The Department of Motor Vehicle (DMV) is a direct descendent in the Business of the State Corporation. They produce products and offer services for sale. And, in California the DMV is one of the most profitable Corporations in America – public and private sectors.

Its program descriptions actually identify the purpose of its existence in part as “collects revenue for various state and local programs” in addition to distributing your personal information to state and local agencies.

The Governors 2016-17 Budget indicates the DMV has an annual expense of $1.1 Billion. In 2017 as with the last several years the CA DMV added new and raised existing fees. The 2017 budget footnotes read;

“The Budget includes a $10 increase in the vehicle registration fee to address an imbalance between operating costs and available revenues.”(note, it doesn’t say revenue or income)

Read aa bit further than the $1.1B funding published on the surface by State and we see the DMV earns $2.8 Billion from “Motor Vehicles Registration Fees” alone with a total income of over $3.2 billion.

So what happens to the $2 billion difference – the Profit between Income and Expense? And, why do vehicle owners suddenly have to pony up an additional $10 for registration fees if the DMV Corporation is so profitable?

Notably, these Public Corporations don’t follow the Federal Accounting Standards Board (FASB) normal corporations must follow. Government entities use a version called the Governmental Accounting Standards Board (GASB) – code named for “we comingle funds”.

The Wired Hierarchy image from Tom Spiglanin’s work on the “Erosion of Hierarchies” is analogous of how complex Government Revenue streams are. California has 343 State Agencies, each one a revenue and expense center. In contrast, New York has 20 State Agencies.

Nonetheless, “Government” the total of all State, County and Municipal Agencies represent the biggest business in America. As the business of public interest they have a fiscal responsibility to their communities. A superior responsibility that outweighs political posturing, spend and tax approaches, the extent to which these entities should offer welfare services or how they manipulate private individuals and entities to fund special interest by force.

They also have a legal responsibility to their communities that not only protect from street criminals but also against the greed, negligence and mismanagement at the hand of Pubic Employees who Govern by their personal “Rules of Law” they use to twist the words of law.

But as the title “Erosion of Hierarchies” suggests, anything Government is something that likely represents inefficiency. The absence of accountability and fiscal responsibility by private sector standards is the quicksand consumers and employers are sinking in as states like California consistently run deficit budgets.

If the states, counties and cities that run consistent year-over-year deficits they don’t alter their fiscal objective to operate economically with year-over-year surplus, consumers will soon be paying 20% sales tax on top of state income tax rates that match federal rates.

As the DMV budget proves, income and sales tax are not the only income sources for Government but every dollar comes from the taxpayer – even income from Washington via Federal Funding for State Programs.

Each agency has its own income expense structure that may be based on other taxes, and include federal taxes, they charge fees and impose penalties like the fine for a no seatbelt violation going from $50 to $168. There is only one objective in rate changes like these and that’s to increase income for the Business of State.

Unfortunately, we can’t even count on Government to protect its communities from their own Governments.

Most will argue there are fundamental differences in how the Business of State is run and what is considered acceptable business practices in the private sector. The foremost argument is Public Corporations should not be in the Business of State to earn a profit. On the other hand, it should not be a business that runs financial losses year over year. Unfortunately, consumers permit it.

Government can operate fiscally responsible, earn a profit (called surplus in government) and create rainy day reserves and serve the community.

The City of Crestwood Illinois in the 1990s proved Government can earn a profit with honor. Voter approval of a shopping center provided considerable tax revenues and City Management had a plan. The excess revenue over operating expense was returned to the community in the form of home tax offsets. Delayed in 2007 to cover an unexpected rise in operating expense, the City of Crestwood reinitiated the rebates in 2016.