MOORLACH UPDATE — California’s and Group 7’s Fiscal Health — September 30, 2019

Comparing States

A simple metric to obtain a quick temperature check on the financial health of municipalities is to divide the unrestricted net position by the population.  Organizations like the Mercatus Center at George Mason University, which is mentioned in the California Globe piece below, dive much deeper.  But, both the Mercatus Center’s study from last fall (https://www.mercatus.org/publications/urban-economics/state-fiscal-rankings) and my metric for last year have California in 42nd place (see MOORLACH UPDATE — 2017 State Per Capita UNPs — April 2, 2018).

The respected Mercatus Center study shows that my simple metric provides a rather helpful and supportable conclusion.  With that, how is California doing? Well, the state of Illinois finally released its Comprehensive Annual Financial Statement after I issued rankings in late August!  I projected their unrestricted net deficit by just $7.5 billion over the actual $209.9 billion.

As a bonus, I’m providing two updated charts.  The first provides the rankings using the per capita metric and shows California moved up one position to 41st place.  The second ranks states by unrestricted net positions and reveals New Jersey barely edged out California for the coveted 50th ranking (see MOORLACH UPDATE — 2018 State Per Capita UNPs — August 22, 2019 and MOORLACH UPDATE — Hart, Handy and OPEBs — August 29, 2019).

The California Globe piece refers to my State of the State analysis, which can be found at MOORLACH UPDATE — 2019 State of the State — February 12, 2019.

School Districts – Group 7 – #565 – #658 

At the 40th percentile, utilizing the same simple metric, this group of 94 California school districts includes the following seven from Orange County:

#568   Magnolia Elementary, down 63
#580   Saddleback Valley Unified, down 50
#581   Fullerton Elementary, down 74
#584   Orange Unified, down 200
#596   Buena Park Elementary, up 17
#604   Brea-Olinda Unified, up 2
#617   Anaheim Elementary, down 37

The dramatic drop by Orange Unified can probably be explained by a $106 million drop in its Other Post-Employment Benefits asset and a $31.5 million increase in its unfunded pension liability.

The details are provided in the third graph.  To work back to the first six groups, go to MOORLACH UPDATE — Wedding Day and Group 6 — September 27, 2019.

Is California’s Fi$cal Health Cause for Worry?

Conflicting reports on California’s cities with the weakest economies and overall economic state health

By Katy Grimes

https://californiaglobe.com/section-2/is-californias-fical-health-cause-for-worry/

While California’s elected politicians are waging a legal and media war on the Trump administration, has the state’s economic status improved under Trump’s economic policies, or are California’s high taxes and restrictive regulations still chilling the economy?

The state unemployment rate has dropped to 4.1 percent from 4.3 in March. Sacramento’s unemployment was 4.2 percent in March, dipped down to 3.1 in May, and jumped back up to 4.0 percent in July. Los Angeles unemployment is 4.7 percent; San Diego’s is 3.6; San Francisco is 2.4; Fresno unemployment is 7.3 percent – down from 9.3 in March.

How Do Big Metro Areas Rank?

Business Insider looked at five measures of labor market and overall economic health for the 30 metropolitan areas with the largest populations: the unemployment rate, job-growth rate, per capita GDP, GDP growth, and average weekly wages, to get an overall sense of economic health in the metro areas.

Sacramento came in at number 15 of big cities with the weakest economies, ranked from best to worst:

#15: Sacramento, California: The job growth rate of 2.4% was tied for ninth-highest among the big metro areas, but the GDP per capita of $46,860 was the sixth lowest.

“America’s big cities have an outsized role in the country’s economic engine, but some urban areas are struggling when compared to their peers,” Business Insider said.

They also ranked every state’s economy from worst to best, in 2019:

9. California’s average weekly wage of $1,131 was the fourth best among the states and DC, but its unemployment rate of 4.2% was tied for tenth worst.

Yet, last week, the Sacramento Bee reported positive economic news:

The median household income in the Sacramento region rose to a historic high last year as unemployment remained low, according to new census data.

The median household income – the middle income in a ranked list – was $73,142 in 2018, up from $69,664 in 2017, after adjusting for inflation. That’s the highest the median income has been in at least three decades, census figures show. Household incomes also rose statewide. The increases were statistically significant, according to the census bureau.

The most comprehensive ranking comes from the Mercatus Center at George Mason University, which ranks on the basis of solvency in five separate categories.

“California ranks 42nd among the US states for fiscal health,” Mercatus reported in fall 2018.

“California has between 0.82 and 1.62 times the cash needed to cover short-term obligations, well below the US average. Revenues exceed expenses by 4 percent, with an improving net position of $271 per capita. In the long run, California’s negative net asset ratio of 0.57 points to the use of debt and large unfunded obligations. Long-term liabilities are higher than the national average, at 92 percent of total assets, or $5,642 per capita. Total unfunded pension liabilities that are guaranteed to be paid are $1,190.84 billion, or 54 percent of state personal income. OPEB are $106.06 billion, or 5 percent of state personal income.”

Mercatus also notes the state has an overregulation problem that’s contributing to the housing affordability crisis. “California is a leader in regulating just about everything — including insurance carriers, public utilities and housing construction,” Mercatus said. “If California’s regulatory code underwent some serious spring cleaning, it could help the state at least make a dent in its housing affordability crisis.

“The residential housing subsection alone has nearly 24,000 restrictions.”

In a California Globe op-ed, Sen. John Moorlach warned back in February, “Financial solutions must come first because, if there’s no money, there’s no way to pay for existing programs, let alone solutions to problems.”

Moorlach is the only CPA currently serving in the California State Legislature.

Moorlach continues to caution that the unfunded liabilities of the state as well as of local governments, specifically pension and retiree medical care, must be addressed. “Gov. Jerry Brown worked out a partial reform with the Public Employees’ Pension Reform Act of 2013, called PEPRA. It was a valiant, but meager attempt and did little to bring down immediate costs,” Moorlach said.

In June, Moorlach reported:

“It’s May 30 and we haven’t received the CAFR for California,” said Sen. John Moorlach, R-Costa Mesa, Thursday during the state’s joint Senate and Assembly budget conference committee hearing. “Will we receive it before we approve the budget?”

Moorlach pointed out that the state’s Department of Finance has reported a $21.5 billion surplus, but the most recent CAFR for year-end June 30, 2017 showed an unrestricted net deficit of $168.5 billion and up a $91 billion in unfunded retiree medical liability benefits for state employee, teachers and judges.

“That’s a quarter-trillion dollars,” said Moorlach.

“The great state of California remains a wonderful place to live, but has been stymied by governmental overreach and planning,” Moorlach said. “The state will be much better once alternatives which allow for more freedom and prosperity are implemented to address these and other problems.”

Mercatus ranking categories:

· Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. (California ranks 45th.)

· Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (California ranks 17th.)

· Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (California ranks 45th.)

· Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? (California ranks 28th.)

· Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities and OPEB liabilities compared to the state personal income? (California ranks 41st.)

Rank State Population 2018 UNP Per Cap Change
1 Alaska 737,438 $17,387,310,000 $23,578 0
2 North Dakota 760,077 $7,172,275,944 $9,436 0
3 Wyoming 577,737 $4,237,698,833 $7,335 0
4 Idaho 1,754,208 $1,256,840,000 $716 0
5 Oklahoma 3,943,079 $1,853,248,000 $470 1
6 Tennessee 6,770,010 $2,704,085,000 $399 -1
7 Utah 3,161,105 $1,249,827,000 $395 2
8 South Dakota 882,235 $283,343,000 $321 -1
9 Nebraska 1,929,268 $503,722,000 $261 -1
10 Iowa 3,156,145 ($1,013,268,000) ($321) 1
11 Washington 7,535,591 ($4,163,206,000) ($552) 1
12 North Carolina 10,383,620 ($5,884,784,000) ($567) -2
13 Oregon 4,190,713 ($2,466,140,000) ($588) 3
14 Virginia 8,517,685 ($5,115,028,000) ($601) 3
15 Montana 1,062,305 ($642,952,000) ($605) 10
16 South Carolina 5,084,127 ($3,578,770,000) ($704) 2
17 Indiana 6,691,878 ($5,062,064,000) ($756) 4
18 Arizona 7,171,646 ($5,522,793,000) ($770) 2
19 Nevada 3,034,392 ($2,448,744,000) ($807) -5
20 Georgia 10,519,475 ($8,506,350,000) ($809) -7
21 Florida 21,299,325 ($17,686,725,000) ($830) -6
22 Kansas 2,911,505 ($2,617,412,000) ($899) 6
23 Minnesota 5,611,179 ($5,629,152,000) ($1,003) 0
24 Arkansas 3,013,825 ($3,115,348,000) ($1,034) -5
25 Ohio 11,689,442 ($12,787,140,000) ($1,094) -1
26 Colorado 5,695,564 ($7,251,155,000) ($1,273) 6
27 Missouri 6,126,452 ($7,922,530,000) ($1,293) -1
28 Wisconsin 5,813,568 ($8,542,138,000) ($1,469) 3
29 Michigan 9,995,915 ($14,946,883,000) ($1,495) -2
30 Mississippi 2,986,530 ($5,845,872,000) ($1,957) 6
31 Alabama 4,887,871 ($9,597,426,000) ($1,964) 4
32 New Mexico 2,095,428 ($4,690,920,000) ($2,239) 1
33 West Virginia 1,805,832 ($4,119,293,000) ($2,281) 5
34 New York 19,542,209 ($45,231,000,000) ($2,315) 3
35 New Hampshire 1,356,458 ($3,221,260,000) ($2,375) -6
36 Maine 1,338,404 ($3,491,939,000) ($2,609) -6
37 Pennsylvania 12,807,060 ($42,892,246,000) ($3,349) -3
38 Louisiana 4,659,978 ($16,052,435,000) ($3,445) 1
39 Texas 28,701,845 ($104,638,813,000) ($3,646) -17
40 Rhode Island 1,057,315 ($4,702,373,000) ($4,447) 3
41 California 39,557,045 ($213,316,033,000) ($5,393) 1
42 Maryland 6,042,718 ($34,404,356,000) ($5,694) 2
43 Vermont 626,299 ($3,831,618,339) ($6,118) -3
44 Hawaii 1,420,491 ($11,381,725,000) ($8,013) 1
45 Delaware 967,171 ($8,475,290,000) ($8,763) -4
46 Kentucky 4,468,402 ($42,257,250,000) ($9,457) 0
47 Massachusetts 6,902,149 ($74,254,002,000) ($10,758) 0
48 Illinois 12,741,080 ($209,932,970,000) ($16,477) 0
49 Connecticut 3,572,665 ($61,949,017,000) ($17,340) 0
50 New Jersey 8,908,520 ($214,093,149,142) ($24,032) 0
Rank State 2018 UNP State 2017 UNP Change
1 Alaska $17,387,310,000 Alaska $14,558,125,000 0
2 North Dakota $7,172,275,944 North Dakota $5,989,501,438 0
3 Wyoming $4,237,698,833 Wyoming $4,518,975,575 0
4 Tennessee $2,704,085,000 Tennessee $2,736,079,000 0
5 Oklahoma $1,853,248,000 North Carolina $1,822,821,000 -24
6 Idaho $1,256,840,000 Oklahoma $1,484,206,000 1
7 Utah $1,249,827,000 Idaho $1,146,468,000 1
8 Nebraska $503,722,000 Utah $819,880,000 1
9 South Dakota $283,343,000 Nebraska $550,525,000 1
10 Montana ($642,952,000) South Dakota $267,296,000 1
11 Iowa ($1,013,268,000) Montana ($971,795,000) 1
12 Nevada ($2,448,744,000) Iowa ($999,603,000) 1
13 Oregon ($2,466,140,000) Nevada ($1,580,030,000) 1
14 Kansas ($2,617,412,000) New Hampshire ($1,683,141,000) -2
15 Arkansas ($3,115,348,000) Maine ($1,885,023,000) -2
16 New Hampshire ($3,221,260,000) Arkansas ($2,160,882,000) 1
17 Maine ($3,491,939,000) Vermont ($2,263,168,022) -2
18 South Carolina ($3,578,770,000) Oregon ($2,482,259,000) 5
19 Vermont ($3,831,618,339) Kansas ($3,205,914,000) 5
20 West Virginia ($4,119,293,000) New Mexico ($3,311,311,000) -2
21 Washington ($4,163,206,000) Washington ($3,376,575,000) 0
22 New Mexico ($4,690,920,000) South Carolina ($3,497,642,000) 4
23 Rhode Island ($4,702,373,000) Delaware ($3,622,572,000) -9
24 Indiana ($5,062,064,000) West Virginia ($4,455,964,000) 4
25 Virginia ($5,115,028,000) Rhode Island ($4,581,514,000) 2
26 Arizona ($5,522,793,000) Minnesota ($5,029,153,000) -1
27 Minnesota ($5,629,152,000) Georgia ($5,210,957,000) -6
28 Mississippi ($5,845,872,000) Indiana ($5,319,406,000) 4
29 North Carolina ($5,884,784,000) Arizona ($5,341,848,000) 3
30 Colorado ($7,251,155,000) Virginia ($5,344,284,000) 5
31 Missouri ($7,922,530,000) Missouri ($5,787,207,000) 0
32 Delaware ($8,475,290,000) Mississippi ($6,058,425,000) 4
33 Georgia ($8,506,350,000) Hawaii ($7,996,567,000) -3
34 Wisconsin ($8,542,138,000) Colorado ($8,359,538,000) 4
35 Alabama ($9,597,426,000) Wisconsin ($8,361,432,000) 1
36 Hawaii ($11,381,725,000) Alabama ($8,608,527,000) 1
37 Ohio ($12,787,140,000) Michigan ($9,848,197,000) -1
38 Michigan ($14,946,883,000) Ohio ($10,571,925,000) 1
39 Louisiana ($16,052,435,000) Louisiana ($11,949,852,000) 0
40 Florida ($17,686,725,000) Florida ($12,401,193,000) 0
41 Maryland ($34,404,356,000) Pennsylvania ($21,275,848,000) -2
42 Kentucky ($42,257,250,000) Texas ($25,170,339,000) -5
43 Pennsylvania ($42,892,246,000) Maryland ($27,010,946,000) 2
44 New York ($45,231,000,000) Kentucky ($40,157,358,000) 2
45 Connecticut ($61,949,017,000) New York ($45,599,000,000) 1
46 Massachusetts ($74,254,002,000) Connecticut ($52,826,131,000) 1
47 Texas ($104,638,813,000) Massachusetts ($63,992,915,000) 1
48 Illinois ($209,932,970,000) New Jersey ($148,863,714,435) -2
49 California ($213,316,033,000) Illinois ($161,239,415,000) -1
50 New Jersey ($214,093,149,142) California ($169,499,683,000) 1
Totals ($1,206,633,219,704) ($878,007,376,444)
Rank School District Population Per Cap 2017 Chg
565 San Mateo-Foster City 138,627 ($987) 424 -141
566 South Whittier Elementary 29,829 ($987) 544 -22
567 Brawley Elementary 26,885 ($987) 449 -118
568 Magnolia Elementary 66,051 ($987) 505 -63
569 Oak Grove Elementary 113,621 ($988) 418 -151
570 Panama-Buena Vista Union 126,837 ($995) 510 -60
571 Temecula Valley Unified 156,672 ($995) 588 17
572 Ontario-Montclair 178,174 ($996) 498 -74
573 Eureka City Schools 50,612 ($996) 805 232
574 Ripon Unified 18,847 ($997) 632 58
575 Chino Valley Unified 183,203 ($1,000) 650 75
576 Oakdale Joint Unified 32,909 ($1,001) 586 10
577 Encinitas Union Elementary 75,426 ($1,002) 441 -136
578 El Tejon Unified 8,952 ($1,008) 721 143
579 Redwood City Elementary 101,224 ($1,009) 557 -22
580 Saddleback Valley Unified 221,407 ($1,009) 530 -50
581 Fullerton Elementary 124,983 ($1,011) 507 -74
582 Graves Elementary 76 ($1,020) 63 -519
583 Reed Union Elementary 14,105 ($1,026) 579 -4
584 Orange Unified 231,727 ($1,030) 384 -200
585 Oakley Union Elementary 36,328 ($1,031) 609 24
586 Chico Unified 111,707 ($1,032) 491 -95
587 Gridley Unified 11,750 ($1,033) 573 -14
588 Mountain View Elementary 20,915 ($1,039) 597 9
589 North Monterey County Unified 27,725 ($1,040) 672 83
590 Scotia Union Elementary 1,403 ($1,040) 602 12
591 Davis Joint Unified 81,161 ($1,040) 700 109
592 Allensworth Elementary 500 ($1,040) 726 134
593 Oakland Unified 430,440 ($1,040) 683 90
594 Berkeley Unified 123,816 ($1,043) 642 48
595 Chatom Union 4,749 ($1,046) 677 82
596 Buena Park Elementary 50,709 ($1,047) 613 17
597 Castle Rock Union Elementary 363 ($1,048) 712 115
598 Point Arena Joint Union High 5,692 ($1,051) 598 0
599 Yucaipa-Calimesa Joint Unified 62,637 ($1,052) 616 17
600 San Leandro Unified 75,257 ($1,058) 718 118
601 Tulelake Basin Joint Unified 2,387 ($1,058) 690 89
602 National Elementary 62,131 ($1,060) 565 -37
603 Marysville Joint Unified 62,556 ($1,062) 649 46
604 Brea-Olinda Unified 36,985 ($1,065) 606 2
605 Charter Oak Unified 37,895 ($1,065) 413 -192
606 Conejo Valley Unified 139,972 ($1,067) 671 65
607 Evergreen Elementary 108,384 ($1,068) 614 7
608 Riverdale Joint Unified 8,418 ($1,068) 755 147
609 Palm Springs Unified 182,200 ($1,069) 521 -88
610 Escalon Unified 15,739 ($1,071) 575 -35
611 Simi Valley Unified 132,174 ($1,073) 637 26
612 San Miguel Joint Union 5,307 ($1,073) 777 165
613 Kentfield Elementary 11,769 ($1,073) 665 52
614 Denair Unified 8,455 ($1,074) 643 29
615 Travis Unified 32,265 ($1,075) 717 102
616 Linden Unified 12,965 ($1,075) 587 -29
617 Anaheim Elementary 208,150 ($1,079) 580 -37
618 Lakeside Union Elementary 43,949 ($1,082) 605 -13
619 Willits Unified 13,004 ($1,082) 583 -36
620 Sutter Union High 7,922 ($1,082) 603 -17
621 Atascadero Unified 37,637 ($1,086) 615 -6
622 Stony Creek Joint Unified 961 ($1,092) 666 44
623 Snowline Joint Unified 42,528 ($1,095) 514 -109
624 Monterey Peninsula Unified 92,486 ($1,097) 674 50
625 Planada Elementary 5,881 ($1,099) 548 -77
626 Kings River Union Elementary 3,396 ($1,101) 570 -56
627 Carlsbad Unified 76,420 ($1,102) 610 -17
628 Santa Monica-Malibu Unified 112,724 ($1,105) 648 20
629 Lincoln Unified 50,741 ($1,105) 686 57
630 Lake Elsinore Unified 130,089 ($1,105) 692 62
631 Camino Union Elementary 4,491 ($1,106) 502 -129
632 Saugus Union 105,583 ($1,106) 500 -132
633 Kerman Unified 20,992 ($1,110) 732 99
634 Sunol Glen Unified 1,041 ($1,116) 693 59
635 Fruitvale Elementary 22,006 ($1,117) 518 -117
636 Patterson Joint Unified 27,171 ($1,121) 644 8
637 Exeter Unified 17,104 ($1,127) 576 -61
638 Sierra Unified 11,998 ($1,128) 702 64
639 Delano Union Elementary 58,438 ($1,133) 582 -57
640 Capay Joint Union Elementary 1,050 ($1,133) 501 -139
641 Moreno Valley Unified 185,444 ($1,138) 746 105
642 Valle Lindo Elementary 6,241 ($1,139) 442 -200
643 Bear Valley Unified 19,638 ($1,140) 679 36
644 Bonsall Unified 18,458 ($1,141) 688 44
645 Taft Union High 21,445 ($1,143) 619 -26
646 Sweetwater Union High 490,742 ($1,144) 542 -104
647 Hemet Unified 147,561 ($1,147) 627 -20
648 Livermore Valley Joint Unified 93,255 ($1,154) 709 61
649 King City Union 16,778 ($1,158) 743 94
650 San Lorenzo Unified 85,151 ($1,161) 753 103
651 Rowland Unified 112,779 ($1,163) 567 -84
652 Palermo Union Elementary 8,479 ($1,166) 675 23
653 San Lorenzo Valley Unified 25,123 ($1,168) 641 -12
654 Visalia Unified 149,775 ($1,172) 618 -36
655 Carpinteria Unified 18,961 ($1,173) 658 3
656 Carmel Unified 24,246 ($1,175) 633 -23
657 Manteca Unified 127,006 ($1,176) 571 -86
658 Los Nietos 15,522 ($1,179) 607 -51

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