When I get mad, I get motivated. That’s probably why I’m in public office. When I did a little research and realized what then-Orange County Treasurer-Tax Collector Robert L. “Bob” Citron was doing, I got mad. Mad enough to step out of my comfort zone as a partner in a large local C.P.A. accountancy firm, Balser, Horowitz, Frank & Wakeling, and run against him, unsuccessfully, in the June 1994 primary (see https://www.ronbluecpa.com/location/orange-county).
Well, I’m watching the financial status of California and its municipalities crumble and everyone seems to either be ignoring it or putting their heads in the sand. What to do? There is no singular and accessible public repository to find the Comprehensive Annual Financial Report (CAFR) for every municipality. So, my office decided to create it. We went to every school district website or contacted the districts (two or three still haven’t provided them). We also received exceptional assistance from Marc Joffe at Reason Foundation by helping us track down a few of the stragglers.
Since my stint as Chairman of the Orange County Board of Supervisors in 2012, I’ve been reviewing California county CAFRs and taking their Unrestricted Net (Assets or Deficit) Position (UNP) and dividing it by its population. The per capita UNP is a very reliable indicator of the fiscal status of a municipality and allows us to compare them apples-to-apples (or, in the case below, oranges-to-oranges). The UNP should be positive (net assets), but more than likely it is negative (net deficit).
We reviewed the 482 cities earlier this year because I was mad. I’ve been drafting and presenting pension reform legislation and most of the cities, with the exception of those in Orange County, have been largely disengaged on this ever-increasing millstone. What to do? Show everyone how all of the cities are doing. It’s having an impact. The third and fourth editorial pieces below are recent columns from the Culver City Observer. The columnist gets it. Not only for the city, but for the city’s school teachers (see MOORLACH UPDATE — City CAFR Rankings – Vol. 1 – February 7, 2018). Just wait until the columnist finds out that Culver City Unified is #831 out of 940 — ouch (see MOORLACH UPDATE — California School District Rankings, Group 13 — August 28, 2018).
The second piece below announces our most recent review of the CAFRs for the 944 school districts in California. As a few have combined to save on auditing fees, we have 940 on the list. The Orange County Breeze, in the second piece below, provides the overview from our press release.
I have had the pleasure these past few years of serving on the Senate Budget and Fiscal Review Committee and its Subcommittee No. 1 on Education (see https://sbud.senate.ca.gov/subcommittee1). When I’m told by representatives of our state’s CSU and UC systems that they cannot provide me with a ten-year Strategic Financial Plan, I get mad.
When I hear that teachers in LA voted to go on strike, I get mad. Don’t these people know how desperate their employer’s CAFR is? And, that it will be worse when the June 30, 2018 audits are completed thanks to the now required inclusion of retiree medical liabilities?
So, as an involved and committed elected official, I rolled up my sleeves and, with my staff, started digging. Regretfully, the data we obtained is not encouraging and the trend lines are not going in the right direction.
What to do? It’s time to be proactive! Now! If California’s elected leaders continue to hesitate, then being reactive will be too late and too ugly.
The first piece below is my editorial submission on this most recent school CAFR repository project. To be honest with you, the numbers were so bleak it impacted me emotionally. I was truly saddened to reveal the results of our simple metric. You’ve already seen them by my releasing 14 volumes of data in the month of August. The OC Register gave me an opportunity to expound on Orange County’s 27 public school districts.
If anything, I hope you get mad, too. And, get out of your comfort zone and do something to improve the situation. Volunteer for a campaign. Contribute to a candidate. Put up a yard sign. Even start doing the research to see if you should be a candidate yourself someday. We’re leaving a massive mess to our children, grandchildren and great-grandchildren. Please, get motivated.
All OC public school districts but one bleed red ink
Of Orange County’s 27 public school districts, just one, Fountain Valley Elementary, boasts a positive balance sheet. Unfortunately, the other school districts have balance sheets that have dipped into the red.
The scoring comes as part of my new report, “Financial Soundness Rankings for California’s Public School Districts, Colleges & Universities.” It reviews the financial soundness of all 944 California public school districts. I performed a similar review of California’s 482 cities, including Orange County’s 34 cities, back in March. In that case, 19 O.C. cities ran positive balance sheets, although 15 ran red ink – a much better performance than for the school districts.
The rankings derive from each district’s latest Comprehensive Annual Financial Report, which you can find on their respective websites. In each CAFR, look for the “Basic Financial Statements,” starting with the page titled “Statement of Net Position.” Look at the top row for “Government Activities.” Then look down the column to where it says, first “Net Position,” then “Unrestricted.” That’s the number you want: the Unrestricted Net Position, or UNP.
The number will either be positive or, with parentheses around it, negative.
I also divide the UNP by the district’s population to get a per-capita UNP. If negative, that’s the amount each person in the district is in hock for, whether or not your children attend school. Citizens should be concerned about the trajectory of these negative balances, which are commonly attributed to unfunded pension liabilities. As school board members are auditioning for their jobs, they need to be held accountable for dealing with these liabilities.
If the negative number runs too high too long, it will mean cuts in teachers, equipment, band and sports, and ultimately calls for tax increases. In the worst cases, takeover by the state, even bankruptcy, is not out of the question.
Fountain Valley Elementary’s positive number clocks at $78 per capita. For comparison, it ranks 102nd of California’s 944 school districts.
It’s all negative after that, with the second and third “best” being Laguna Beach Unified at ($223) and Fullerton Joint Union High at ($344).
By far the worst is Santa Ana Unified at ($1,805), a very dangerous number. It ranks a dismal 901st of California’s 944 school districts.
Oddly, the next two places of financial distress are held by districts in wealthy OC communities, Irvine Unified ($1,115) and Newport-Mesa Unified ($1,089).
Here are the per capita UNPs for all Orange County school districts:
1. Fountain Valley $ 78
2. Laguna Beach Unified ($ 223)
3. Fullerton Joint Union High ($ 344)
4. Huntington Beach City Union High ($ 350)
5. Huntington Beach City Elementary ($ 508)
6. Centralia Elementary ($ 532)
7. Orange Unified ($ 553)
8. Garden Grove Unified ($ 573)
9. Savanna Elementary ($ 589)
10. Cypress Elementary ($ 607)
11. Los Alamitos Unified ($ 619)
12. Anaheim Union High ($ 675)
13. Magnolia Elementary ($ 741)
14. Fullerton Elementary ($ 743)
15. La Habra City Elementary ($ 752)
16. Saddleback Valley Unified ($ 779)
17. Ocean View ($ 813)
18. Tustin Unified ($ 837)
19. Anaheim Elementary ($ 841)
20. Brea-Olinda Elementary ($ 888)
21. Buena Park Elementary ($ 898)
22. Placentia-Yorba Linda Unified ($ 966)
23. Capistrano Unified ($ 967)
24. Westminster ($ 988)
25. Newport-Mesa Unified ($1,089)
26. Irvine Unified ($1,115)
27. Santa Ana Unified ($1,805)
This is part of my effort to track the per capita UNPs of California’s various government budgets. In addition to the city budgets mentioned earlier, I have tracked counties, community colleges, California State University and the University of California as well as all 50 U.S. states.
You can follow all these analyses on my legislative website. The reports will be regularly updated.
Next year is going to be especially revealing – and distressing – as the Governmental Accounting Standards Board for the first time will require balance sheets to include unfunded retiree medical liabilities, which will show even more city and school districts in critical condition.
And when the next economic recession hits, for even those modestly distressed, it’s going to be one big financial train wreck.
Let’s hope our elected school board members and their administrative staff get in front of this serious cash management squeeze on their horizon. It’s time to be proactive, as taxpayers are not very forgiving with those who are reactive. Especially with supposed leaders who only have one solution: raise taxes.
John M.W. Moorlach, R-Costa Mesa, represents the 37th District in the California Senate
Moorlach report finds 2/3 of California’s 944 school districts bleed red ink
Sen. John Moorlach released his latest fiscal report, “Financial Soundness Rankings for California’s Public School Districts, Colleges & Universities.” SEE REPORT HERE. It follows his March 2018 reports on the state’s 482 cities that found 2/3 of them in the red; of 58 counties, 55 suffered deficits and only three enjoyed positive balance sheets. His May 2018 report on the 50 U.S. states found only nine were financially healthy, with California ranked among the worst, in 42nd place.
Some key findings from the new education report:
- About two-thirds of California’s 944 public school districts run negative balance sheets. These statements show the most distressed districts could soon reach a tipping point into insolvency and receivership.
- Of the state’s large school districts, those in severe distress include Los Angeles Unified School District, with a negative $10.9 billion balance sheet; San Diego Unified at negative $1.5 billion; Fresno Unified at negative $849 million; and Santa Ana Unified at negative $485 million, the worst in Orange County.
- Of Orange County’s 27 public school districts, only one, Fountain Valley School District, is in positive financial territory.
- One bright spot is the 58 county boards of education. At least 51 of them have manageable per capita unrestricted net deficits of -$159 or less, with 14 in positive territory.
- Of the state’s 72 community college districts, only one enjoys a positive unrestricted net position (UNP).
- Cal State University’s balance sheet is negative $3.66 billion.
- The University of California’s balance sheet bleeds red ink all over the state, at negative $19.3 billion. Worse, that will double next year, to $38.6 billion, when retiree medical is included.
The Moorlach Report is a flashing caution light to almost every public education budget in California. Unless things can change quickly, taxpayers can expect new levies, and post-secondary students and parents should fear higher tuition.
This article was released by the Office of Senator John Moorlach.
Editor’s Note: Los Alamitos Unified School District is ranked 426, Savannah Elementary School District is ranked 408, Cypress Elementary School District is ranked 423, and Anaheim Union High School District is ranked 463.
Teachers Pensions Beat Others by 3-1 Margin
By Neil Rubenstein
In an ironic twist, a recent study by the nonprofit Bellwether Education Partners has found that the rising costs of teacher pension plans are starting to eat into their own salary hikes.
Teachers, and their unions, often complain about low salaries. The research from Bellwether shows that, since 1994, teacher salaries have failed to keep pace with inflation.
But total compensation for teachers has risen faster than inflation when non-salary benefits, such as insurance and retirement, are included.
Chad Aldeman, an associate partner at Bellwether, says lack of money isn’t why teacher salaries aren’t rising.
“Even after adjusting for inflation and rising student enrollment, total school spending is up,” Aldeman reports.
“It’s not for lack of money spent on teachers, either. Districts are allocating about the same portion of their budgets to instructional costs – including salaries, wages, and benefits for teachers – as they did 20 years ago.”
Aldeman notes that teachers have the highest retirement benefits of almost any profession.
“While the average civilian employee receives $1.78 for retirement benefits per hour of work, public school teachers receive $6.22 per hour than three times that amount