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Connecticut’s Crisis. - PowerPoint PPT Presentation
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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 in 2014.
Require all pension and OPEBs to be reported fully on F/S.
Estimated T’s of unreported liabilities.
How will States handle this?
How will Towns handle th is?
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Moody’s
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Accounting Principles
Core – Matching Concept
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C = comprehensive A = annualF = financialR = reports
Where is the data?CAFR’s
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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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Budget Reporting Basis – not GAAP
(reporting revenue as fast as possible reporting expense as slow as possible)
• Revenue – as earned and available• Expense – as paid• Debt - income
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State of CT - Balance Sheet Working Capital MethodModified Accrual Total
June 30, 2012 (expressed in thousands) GovernmentalFunds
AssetsCash and Cash Equivalents 412,647Investments and Securities 129,385Receivables: 3,880,909Other short-term assets 747,668 Total Assets 5,170,609Liabilities and Fund BalancesLiabilitiesAccounts Payable and Accrued Liabilities 505,556Other short-term liabilities 2,974,164
Total Liabilities 3,479,720Fund BalancesNonspendable: 171,576Restricted 2,454,652Committed For: Other 99,931 "Rainy Day Fund" 93,454Assigned 22,770
Unassigned -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 SheetFull Accrual – Almost…….Sort of…….
June 30, 2012 (expressed in thousands)Governmental Activities
Assets As ReportedCurrent Assets 2,774,150Noncurrent Assets 1,170,411Capital Assets 10,965,884Total Assets 14,910,445
LiabilitiesCurrent Liabilities 3,498,709Noncurrent Liabilities
Bonds 16,559,594Long-term Notes 573,365Net Pension Obligation 2,496,190 *
Net Other Post Employment Obligation (OPEB) 5,755,731 *Compensated Absences 503,954Workers' Compensation 456,702Capital Leases 36,162Claims and Judgements 35,241Other 25,661
Total Liabilities 29,941,309
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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www.CTCPAs.orgPension & OPEB Obligations
Being “amortized” onto the books starting in 08On these 6/30/12 statements only 5/30th includedThat means 25/30th are not included
83% of this debt - NOT on the books
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State of Connecticut Balance Sheet – Long-termState of Connecticut Balance Sheet - Including Long-term DebtsJune 30, 2012 (expressed in thousands)
Governmental Unrecorded Debt Governmental Assets Activities as Reported Activities in Total
Current Assets 2,774,150 2,774,150Noncurrent Assets 1,170,411 1,170,411Capital Assets 10,965,884 10,965,884
Total Assets 14,910,445 14,910,445
Liabilities and Fund BalancesCurrent Liabilities 3,498,709 3,498,709Noncurrent Liabilities
Bonds 16,559,594 16,559,594Long-term Notes 573,365 573,365Net Pension Obligation 2,496,190 22,049,821 24,546,011
Net Other Post Employment Obligation (OPEB) 5,755,731 15,197,203 20,952,934
Compensated Absences 503,954 503,954Workers' Compensation 456,702 456,702Capital Leases 36,162 36,162Claims and Judgements 35,241 35,241Other 25,661 25,661 Total Liabilities 29,941,309 37,247,024 67,188,333
Summarized for discussion purposes from page 29 of the YE 6/30/2012 Consolidated Annual Financial Report (CAFR), Page 29 and* June 30, 2012 Actuarial reports** June 30, 2011 Actuarial report - most recent
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State of Connecticut Balance Sheet – Long-term – Continued
State of Connecticut Balance Sheet - Including Long-term DebtsJune 30, 2012 (expressed in thousands)
Governmental Unrecorded Debt Governmental Activities as Reported Activities in Total
AssetsTotal Assets - From previous slide 14,910,445 14,910,445
Liabilities and Net Assets (Equity)Total Liabilities - From previous slide 29,941,309 37,247,024 67,188,333Net Assets
Invested in Capital Assets , net of related debt 5,305,440 5,305,440Restricted, but expendable 1,429,076 1,429,076Restricted, not expendable (endowed) 212,897 212,897Unrestricted ($21,978,277) ($37,247,024) ($59,225,301)
Total Net Assets ($15,030,864) ($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 As Reported
Assets 3 15
Liab 67 67
Avail -64 -59
Per taxpayer ~50,000
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Lessons from Detroit…..Detroit CT
Debt 3,990 21,690
Off B/S Debt
Pensions 643-3.5B* 24,546
OPEBs 5,727 20,953
Total Debt 10,360 67,189
Avail Assets 1,830 3,000
Debt to Asset Ratio
5.66 22.4
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Lessons from Detroit…..
At .16 $30,000 pension$ 4,800
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• Revenue has not grown as fast as commitments• 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%)• 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/leaving CT• Loosing highly educated workforce• Major investments in higher education –
students move to other states • Tax incentives do not constitute an economic
strategy• Our reputation is unfriendly to business
– High taxes, over regulated
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• Healthcare costs rising• Population – shrinking
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Many One-Time Fixes to Balance the Budget
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What lies ahead?
$1B 1 year deficit awaits the “winner”
2015-2016 tax 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
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A small sampling of idea’s from the CPAs….
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What do we do now? • 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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Thank you! Camille Murphy, CPA
