Transcript www.ctcpas.org

www.CTCPAs.org
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RUNNING THE NUMBERS……
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Connecticut’s Crisis
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GASB – policy setting org that sets GAAP for state & local govt
June 2012 – GASB imposed reforms to take effect no later than
FYB after 6-15-14. (GASB #68).
Require all pension and OPEBs to be reported fully on F/S.
Estimated T’s of unreported liabilities.
How will States handle this?
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Moody’s
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Accounting Principles
Core – Matching Concept
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Where is the data?
CAFR’s
C = comprehensive
A = annual
F = financial
R = reports
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Full Accrual=Long-Term Health
Modified Accrual=Short-Term Health
Either of the above are GAAP
Budget Basis can be anything!
“Modified Cash” for the State
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Budget Reporting Basis – not GAAP
• Revenue – as earned and available
• Expense – as paid
• Debt - income
(reporting revenue as fast as possible
reporting expense as slow as possible)
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State of CT - Balance Sheet
Modified Accrual
June 30, 2012 (expressed in thousands)
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Total
Governmental
Funds
Assets
Cash and Cash Equivalents
412,647
Investments and Securities
129,385
Receivables:
Other short-term assets
Total Assets
3,880,909
747,668
5,170,609
Liabilities and Fund Balances
Liabilities
Accounts Payable and Accrued Liabilities
Other short-term liabilities
Total Liabilities
505,556
2,974,164
3,479,720
Fund Balances
Nonspendable:
Restricted
171,576
2,454,652
Committed For:
Other
99,931
"Rainy Day Fund"
93,454
Assigned
Unassigned
22,770
-1,151,494
Total Fund Balances
1,690,889
Total Liabilities and Fund Balances
5,170,609
Summarized for discussion purposes from the YE June 30, 2012 Consolidated Annual Financial Report (CAFR)
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State of CT – Balance Sheet
Full Accrual – Almost…….Sort of…….
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June 30, 2012 (expressed in thousands)
Assets
Current Assets
Noncurrent Assets
Capital Assets
Total Assets
Governmental Activities
As Reported
2,774,150
1,170,411
10,965,884
14,910,445
Liabilities
Current Liabilities
Noncurrent Liabilities
Bonds
Long-term Notes
Net Pension Obligation
16,559,594
573,365
2,496,190 *
Net Other Post Employment Obligation (OPEB)
Compensated Absences
Workers' Compensation
Capital Leases
Claims and Judgements
Other
Total Liabilities
5,755,731 *
503,954
456,702
36,162
35,241
25,661
29,941,309
3,498,709
Deficit
15,030,864
Summarized for discussion purposes from the YE June 30, 2012 Consolidated Annual Financial Report (CAFR) Pages 29 and footnote 17
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Pension & OPEB Obligations
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• 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
• 83% of this debt - NOT on the books
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State of Connecticut Balance Sheet – Long-term
State of Connecticut Balance Sheet - Including Long-term Debts
June 30, 2012 (expressed in thousands)
Governmental
Activities as Reported
Assets
Current Assets
Noncurrent Assets
Capital Assets
Total Assets
Liabilities and Fund Balances
Current Liabilities
Noncurrent Liabilities
Bonds
Long-term Notes
Net Pension Obligation
Net Other Post Employment Obligation (OPEB)
Compensated Absences
Workers' Compensation
Capital Leases
Claims and Judgements
Other
Total Liabilities
Unrecorded Debt
Governmental
Activities in Total
2,774,150
1,170,411
10,965,884
14,910,445
2,774,150
1,170,411
10,965,884
14,910,445
3,498,709
3,498,709
16,559,594
573,365
2,496,190
22,049,821
16,559,594
573,365
24,546,011
5,755,731
15,197,203
20,952,934
37,247,024
503,954
456,702
36,162
35,241
25,661
67,188,333
503,954
456,702
36,162
35,241
25,661
29,941,309
Summarized for discussion purposes from page 29 of the YE 6/30/2012 Consolidated Annual Financial Report (CAFR), Page 29 and
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June 30, 2012 Actuarial reports
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June 30, 2011 Actuarial report - most recent
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State of Connecticut Balance Sheet – Long-term – Continued
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State of Connecticut Balance Sheet - Including Long-term Debts
June 30, 2012 (expressed in thousands)
Governmental
Activities as Reported
Unrecorded Debt
Governmental
Activities in Total
Assets
Total Assets - From previous slide
14,910,445
14,910,445
Liabilities and Net Assets (Equity)
Total Liabilities - From previous slide
Net Assets
Invested in Capital Assets , net of related debt
Restricted, but expendable
Restricted, not expendable (endowed)
Unrestricted
Total Net Assets
29,941,309
5,305,440
1,429,076
212,897
($21,978,277)
($15,030,864)
37,247,024
($37,247,024)
67,188,333
5,305,440
1,429,076
212,897
($59,225,301)
($52,277,888)
Summarized for discussion purposes from page 29 of the YE 6/30/2012 Consolidated Annual Financial Report (CAFR), Page 29
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Avail Assets
Assets
As Reported
3
15
Liab
67
67
Avail
-64
-52
Per taxpayer
~50,000
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Lessons from Detroit…..
Detroit
Debt
CT
3,990
21,690
643-3.5B*
24,546
OPEBs
5,727
20,953
Total Debt
10,360
67,189
Avail Assets
1,830
3,000
5.66
22.4
Off B/S Debt
Pensions
Debt to Asset
Ratio
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Lessons from Detroit…..
At .16
$30,000 pension
$ 4,800
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• Large income disparity within state
• Revenue has not grown as fast as commitments
• Beg 1990’s state employee benefits increased
significantly, with little contribution to funding
• Unfunded pensions – close only to MA
• OPEBs – highest in country
• CT & RI only 2 states with no county gov’t
– Inefficiencies in running 169 towns, 195 school
districts
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• CT problems – exacerbated by reliance of fed
funding (37% of our revenue)
• 32% economy on FIRE (nat’l average is 21%)
• Worst state for job creation since 1990
• Less people employed than in 1990
• Not recovering as quickly as expected/hoped
• 5,000 fewer small business than in previous
decade
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• Co’s downsizing CT presence/leaving
• Loosing highly educated workforce
• Major investments in higher education –
students move to other states
• Tax incentives do not constitute an economic
development strategy
• Our reputation is unfriendly to business
– High taxes, over regulated
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• Healthcare costs rising
• Population – shrinking
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1 Time Fixes to Balance Budget
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• 2009:
– $916 Million in Borrowing due 2012 to 2016
– $400 Million in Federal Stimulus Temporary Funding
• 2010:
– $1.3 Billion in “Rainy Day Funds”
– $844 Million in Federal Stimulus Temporary Funding
– $164 Million in Delayed Pension Payments
• 2011:
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–
–
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$103 Million in “Rainy Day Funds”
$745 Million in Federal Stimulus Temporary Funding
$100 Million in Delayed Pension Payments
$647 Million in Borrowing paid with utility surcharges
$449 Million in “Carry forwards”
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Connecticut’s 2014 – 2015 Biannual Budget Balanced By:
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• $220 Million
in Extended Taxes.
• $28 Million Projected From a Tax Amnesty Program .
• A 4-Cents-per-Gallon Gasoline Tax Increase.
• Shifting $6 Billion of Medicaid Spending Off Budget.
• 2009 Bond Issue Repayment Delayed Saving $392 Million over
FY14 and FY15. Additional Interest Expense for Delay - $45 Million
• $25 Million from the Banking Fund
• $12 Million from the Tobacco and Health Trust Fund.
• $35.4 Million From Energy Efficiency Programs.
• $35 Million From CRRA.
• $1 Million From the Probate Court System.
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What lies ahead?
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$1B deficit awaits the “winner”
2015-2016
tax increases?
tuition increases?
drastic cuts in spending?
more borrowing?
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As services are cut……….
As taxes increase……….
What happens to our population?
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$875 M
$560 M *
$314 M refi
*GAAP Conversion Bonds
really?
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A small sampling of idea’s from the
CPAs….
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What do we do now?
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• Address the problem – report truthfully &
completely
• Improve economic growth
– Improve infrastructure (roads, bridges, mass
transit)
– Update, coordinate, rationalize regulations
– Tax code reforms to encourage small business and
private sector growth
– Strengthen education-workforce pipeline
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• Enhance CT competitiveness
• Create transparency, accountability,
efficiency and transformation at all
levels of gov’t
• Insist on 5 and 10 yr strategic plans
• Promote dialog for non-partisan
solutions
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Anyone have any idea’s they’d like to
share??????
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We’ve never been here before
The solutions are not easy
Recovery will be slow, incremental
IT CAN BE DONE!
IT MUST BE DONE!
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Resources
• CT State Financial Statements (CAFR’s)
www.osc.ct.gov/2012cafr/CAFR12.pdf
• Connecticut at Risk/Comeback America Initiative
www.keepingamericagreat.org
• Data Lab
www.statedatalab.org
• Institute for Truth in Accounting
www.truthinaccounting.org
• Forbes Magazine, Aug 2013, Jim Powell
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Thank you!
Camille Murphy, CPA
203-208-0572
[email protected]
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