Connecticut’s State and Local Government Crisis: Fixing Our Future
description
Transcript of Connecticut’s State and Local Government Crisis: Fixing Our Future
www.CTCPAs.org
1
www.CTCPAs.org
Connecticut’s State and Local Government Crisis:Fixing Our Future
www.CTCPAs.org
2
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
www.CTCPAs.org
3
www.CTCPAs.org
SHORT-TERMFINANCIAL HEALTH
www.CTCPAs.org
4
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
www.CTCPAs.org
5
State of CT–ST Balance Sheet
www.CTCPAs.org
6
Equity Compared to Others
Source: National Association of State Budget OfficersThe Fiscal Survey of the States – Spring 2013
www.CTCPAs.org
7
www.CTCPAs.org
LONG-TERMFINANCIAL HEALTH
www.CTCPAs.org
8
State of CT – LT Balance Sheet
Summarized for discussion purposes from page 29 of 6/30/12 audited statements
www.CTCPAs.org
9
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!
www.CTCPAs.org
10
Percent of Pension Funded
CT is #48 of 50 in Funding our PensionsSource: The Pew Center on the States – 2012 report
www.CTCPAs.org
11Source: The Pew Center on the States – 2012 report
Connecticut is one of 17 states that has not funded any of its OPEB Obligations
www.CTCPAs.org
12
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
www.CTCPAs.org
13
www.CTCPAs.org
Source: Truth in Accounting’s “The 2012 Financial State of the States”
www.CTCPAs.org
14
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.
www.CTCPAs.org
15
State of CT–LT Balance Sheet
Liabilities are FIVE times the Assets
www.CTCPAs.org
16
www.CTCPAs.org
BUDGET BASIS
www.CTCPAs.org
17
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)
www.CTCPAs.org
18
Where have all the Surpluses Gone?
Source: Connecticut’s Office of Fiscal Analysis
www.CTCPAs.org
19
www.CTCPAs.org
Recommendations from the CPAs!
www.CTCPAs.org
20
Basis of Accounting
Not for Operating
Fund the ARC
We
Wanted
We Got
AuditScope
Limitation
www.CTCPAs.org
21
www.CTCPAs.org
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
www.CTCPAs.org
22
We must FIX OUR
FUTURE now!
www.CTCPAs.org
23
www.KeepingAmericaGreat.org
Art Renner, CPA, Executive DirectorConnecticut Society of [email protected]
Marcia Marien, CPA, PartnerO’Connor Davies, [email protected]