Editor’s Note: The recent election of John Moorlach as a state senator is one of the best things that has ever happened to California’s legislature. Not because of his party affiliation, or his ideology, but because he has a skill in short supply in Sacramento – he is a Certified Public Accountant. Moorlach is the only CPA currently serving in California’s state legislature. Earlier this month Senator Moorlach took his evaluation of the State’s fiscal health to the Senate floor, where he argued that California must focus on fixing the unfunded liabilities. Moorlach also released 5 key indicators of California’s fiscal health. In his own words:
We must remember that overspending from past legislatures, combined with growing unfunded liabilities and the lingering effects of the Great Recession, have left California in a weakened fiscal condition,” said Senator Moorlach. “Even though this budget brings a measure of spending restraint to California, we still need a long-term budget framework that focuses on restoring our state’s fiscal health.
Five Key Measures of California’s Fiscal Health
1. Tax Rates: The state has the nation’s highest income, sales and gas taxes, when cap and trade is included. California also has the highest corporate tax in the western United States and the fourteenth highest property tax. According to the Tax Foundation’s 2015 Facts and Figures, that puts California fourth in overall tax burden on a per capita basis.
2. Unfunded Pension Obligations: The Legislative Analyst’s Office estimates current CalPERS, CalSTRS and UC Pension unfunded liabilities at approximately $140 billion. As expressed on the graph below, the Pew Charitable Foundation found that, according to 2012 data, California is ranked highest in the nation for unfunded public employee pension obligations at $131.3 billion (Pew Charitable Foundation, most recent comparable data between states from 2012).
3. Unfunded Retiree Medical Obligations: Data from 2013 showed California ranked second in the nation with $66.0 billion in unfunded retiree medical costs. New York was number-one at $67.7 billion (2013 data by National Association of State Retirement Administrators). However, the State Controller’s Office 2014 data suggests that California has since surpassed New York and now has $71.8 billion in unfunded retiree medical liability.
4. Deferred Infrastructure Maintenance: California has 31,827 miles of major roads and at least 34 percent of these are rated in ‘poor’ condition. The Reason Foundation’s Adrian Moore recently pegged the unfunded road maintenance number at $59 billion (OC Register, January 16, 2015).
5. Unrestricted Net Assets/Deficits: California’s most recent Comprehensive Annual Financial Report (CAFR) shows an unrestricted net deficit of $117 billion. The unrestricted net asset (or deficit) is a summary of the state’s available assets after removing from the balance sheet fixed assets (buildings, parks, roads, etc.) minus outstanding debt obligations for these fixed assets. This commonly used fiscal health indicator should be positive for healthy organizations. Here’s a recent history of the net unrestricted assets for California.
About Senator John Moorlach: State Senator John Moorlach 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.