Post on 25-Feb-2016
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Connecticut’s State and Local Government Crisis:Fixing Our Future
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Full Accrual=Long-Term Health
Modified Accrual=Short-Term Health
Budget Basis can be anything!“Modified Cash” for the State
Either of the above are GAAP
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SHORT-TERMFINANCIAL HEALTH
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www.CTCPAs.orgBasis of Accounting• Government Funds – Modified Accrual– Measures flow of “current financial resources”– No long-term assets are added to equity• Capital Assets are expensed and not depreciated• Receivables not collected in 60 days are deferred
– No long-term liabilities are subtracted• New debt is recorded as a revenue• Payments of principal and interest are expensed
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State of CT–ST Balance Sheet
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Equity Compared to Others
Source: National Association of State Budget OfficersThe Fiscal Survey of the States – Spring 2013
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LONG-TERMFINANCIAL HEALTH
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State of CT – LT Balance Sheet
Summarized for discussion purposes from page 29 of 6/30/12 audited statements
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www.CTCPAs.orgPension & OPEB Obligations• What is this?– Benefits we owe retired employees– Benefits that current employees have earned
• OPEB - What is included in the liability?– Being “amortized” onto the books starting in 08– On these 6/30/12 statements only 5/30th included– That means 25/30th are not included yet!
• Most of this debt (83%) is NOT on the books yet!
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Percent of Pension Funded
CT is #48 of 50 in Funding our PensionsSource: The Pew Center on the States – 2012 report
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11Source: The Pew Center on the States – 2012 report
Connecticut is one of 17 states that has not funded any of its OPEB Obligations
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www.CTCPAs.orgOPEB Costs per Year
Source: The Pew Center on the States
CT is #43 of 50 States in Cost per YearCT is #50 of 50 States in Cost per
Year/Person
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Source: Truth in Accounting’s “The 2012 Financial State of the States”
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Connecticut New Jersey Hawaii Illinois California Michigan $-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000 $46,100
$42,700
$39,600
$24,920
$18,000 $16,400
Total Liabilities & Unfunded Obligations Per Taxpayer
Source: Truth in Accounting Institute. State of the States Report.
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State of CT–LT Balance Sheet
Liabilities are FIVE times the Assets
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BUDGET BASIS
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www.CTCPAs.orgSpending Cap• Basic Rule:– Budgeted Expenditures Must Equal Est. Revenues
• Expenditure Limitations:– % increase capped at higher of:• Annual growth in personal income• Annual inflation• Excludes: Debt Service, Certain Grants, Mandates
• Any Surplus must:– Reduce Debt or Increase the Rainy Day Fund– Exception by Gov. and 3/5ths Gen’l Assembly• (This has normally occurred in surplus years)
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Where have all the Surpluses Gone?
Source: Connecticut’s Office of Fiscal Analysis
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Recommendations from the CPAs!
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Basis of Accounting
Not for Operating
Fund the ARC
We
Wanted
We Got
AuditScope
Limitation
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Our Recommendations for the State• Real “Rainy Day Funds”– Set a 10% to 15% threshold– No offsetting negatives!– Excess committed to pensions/OPEB Obligation
• Strategic Planning including:– Long-term budgeting (5 to 10 years out)– Manage the Full Accrual Balance Sheet
• It can no longer be business as usual
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We must FIX OUR
FUTURE now!
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www.KeepingAmericaGreat.org
Art Renner, CPA, Executive DirectorConnecticut Society of CPAsArtR@CTCPAs.org
Marcia Marien, CPA, PartnerO’Connor Davies, LLPMMarien@ODPKF.com