In preparation for today’s budget vote, Senator John Moorlach (R-Costa Mesa) issued the following statement and summary of 5 key California budget health indicators.
“I appreciate Governor Brown’s commitment to a leaner, more responsible budget, including working with more conservative revenue estimates and largely holding the line on higher spending. This year’s budget makes a small step in the right direction.
“We must, however, 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.
“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.”
A Certified Public Accountant and Certified Financial Planner, Senator Moorlach first gained national prominence by helping Orange County navigate its way out of bankruptcy 20 years ago – then the largest municipal bankruptcy in the U.S. history.
Five Key Measures of California’s Fiscal Health
- 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.
- Unfunded Pension Obligations
The Legislative Analyst’s Office estimates current CalPERS, CalSTRS and UC Pension unfunded liabilities at approximately $140 billion. 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).
- 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.
- 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).
- 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.