While Governor Brown was announcing yet another tax increase, State Controller Betty Yee released the latest "California Comprehensive Annual Financial Report" with virtually no fanfare. If you do a Google News search for the five words in quotes, the Orange County Breeze piece below is about all you’ll hear about this exciting audited financial statement.
Aren’t you lucky to be receiving media information from a Certified Public Accountant/Certified Financial Planner (inactive, due to focusing only on one non-billable client, the state of California)?
What does the CAFR (calf-er), which is what governmental accounting types like me refer to it as, tell us?
The CAFR provides excellent news. The state of California is wonderful. The Governor has solved all of our problems. The pensions should be fully funded soon. The roads will be pristine in five years. The bonds will be paid off ahead of schedule. And the rainy-day reserve funds will be flush.
Why read this CAFR or the previous ones? Since the past is prologue, and we have seen the compounding fiscal mismanagement resulting from four decades of a State Legislature controlled by the Democrats, the annual CAFRs tell the future. Here’s what you, your children, grandchildren and great grandchildren will face, should they choose to remain in the Golden State.
First, a car tax to address maintaining roads that the Democrats have not valued as a priority for forty years (see MOORLACH UPDATE — Millstones and SCA 7 — March 30, 2017 march 30, 2017 john moorlach).
Second, a tax increase to pay for additional funding into the pension funds, as both CalPERS and CalSTRS are roughly 35 percent underfunded (see MOORLACH UPDATE — Reporting Pension Debt — March 28, 2016 march 28, 2016 john moorlach and MOORLACH UPDATE — Thumbs Down on Pension Tax — December 27, 2016 december 27, 2016 john moorlach).
Third, another tax increase to pay for increasing state employee wages and benefits, as Propositions 30 and 55 just couldn’t provide enough revenues to address the profligate spending of the monopoly party.
"The trend is your friend" is an investment rule I used while managing billions of dollars as the Orange County Treasurer. The trend for California’s balance sheet is bleak and predictable.
And the monopoly party has only one solution: tax increases. Or, "eating spinach," if you’re Governor Brown.
No wonder there was no fanfare.
California State Controller releases CAFR
The California State Controller’s Office released the 2016 Comprehensive Annual Financial Report (CAFR) today. As we warned last year, the state is not directly accounting for all of its unfunded liabilities as the growing retiree medical debt of $76.7 billion is once again not included in the report.
The Unrestricted Net Deficit for governmental activities has not changed significantly, going from $169.7 billion to $168.5 billion. This is still the highest deficit of any state in the nation. But California’s fiscal shape is actually worse. If the retiree medical unfunded liability is included, the state is actually upside down by nearly a quarter-trillion dollars ($245.2B)!
After Proposition 30 and its higher taxes and after the Proposition 2 requirement to set aside rainy day funds, California’s Balance Sheet is not improving. The Governor is not moving the dial! Consequently, Sacramento is saddling every man, woman, and child in California with a $6,246 per capita liability!
Image courtesy of the Office of Senator John Moorlach.
About Senator John Moorlach (R-Costa Mesa):
State Senator John Moorlach represents the 37th district of California, is a trained Certified Financial Planner and is the only trained CPA in the California State Senate. He gained national attention 20 years ago when he was appointed Orange County Treasurer-Tax Collector and helped the County recover from its bankruptcy filing – at the time the largest municipal bankruptcy in U.S. History.
This article was released by the Office of Senator John Moorlach.
This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District.
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