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California’s controller finally files state audit – for 2021

April 5, 2023

Hand it to new California Controller Malia M. Cohen. On March 23 her office finally achieved what her predecessor, Betty Yee, failed to do. Cohen filed the Audited Comprehensive Financial Report for California for fiscal year 2020-21, which ended on June 30, 2021. Almost two years ago. Every other state filed its ACFR long ago, as did almost all California cities, counties and school districts. It’s the fifth year in a row California was late.

California’s ACFR for the latest full fiscal year, ending June 30, 2022, still is AWOL. This is especially important because, as state legislators are crafting the budget for 2023-24 fiscal year beginning on July 1, they need an accurate picture of the state’s finances.

All these ACFRs now are online. So check those for your local county, city and school district. The person who showed me how to analyze the ACFRs 20 years ago was John Moorlach, then the Orange County treasurer-tax collector, later supervisor, then a state senator, in which role I worked for him as press secretary. For years, Moorlach has compiled lists and rankings of the ACFRs for the U.S. states and California counties, cities and school districts.

The key is dividing the “Unrestricted net position” (UNP) by the population, to get a per-capita number. For California’s new 2021 ACFR, the UNP was -$174.4 billion; which was better than 2020’s -$208 billion. A $33.6 billion improvement, or 16%.

Divide the new -$174.4 billion number by the state’s population in 2021 of 39.24 million. And we get a per capita tally of -$4,434. That’s the credit card slip Gov. Gavin Newsom and the Legislature signed for you. For a family of four, you owe $17,736.

Moorlach pointed out to me a couple of things he found. As the state’s population declines, the per capita number will increase. Because almost all of it is for public retiree pensions and medical care, which cannot be cut no matter how many people flee.

Second, he fingered this excuse from the ACFR on the tardiness: “The modified opinions are the result of ongoing challenges experienced by one state department in administering California’s unemployment insurance program and preparing its financial statements using the Financial Information System for California (FI$Cal) accounting system.”

That means the highly incompetent Employment Development Department.

The fiscal year ending June 30, 2021 included almost the whole period of Newsom’s excessive COVID-19 lockdowns, forcing millions into unemployment and overloading the EDD’s rickety old computer systems. As I wrote for this newspaper in Dec. 2020, I saw firsthand how Moorlach and his Senate staff worked overtime helping local jobless constituents navigate that broken system.

The new ACFR calculates a $19.8 billion EDD “loan” from the federal government, which Moorlach said is paid down by $147 per year taken from your paycheck today. That number is not included in the ACFR’s $33.6 billion UNP improvement. So the real improvement is only $13.8 billion.

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The person Newsom appointed to oversee EDD during that time was Julie Su, secretary of the California Labor and Workforce Development Agency from Jan. 7, 2019 to July 17, 2021, that entire period. She currently is the acting U.S. secretary of labor, and was appointed to hold the post, pending Senate confirmation, by President Biden on Feb. 13. Moorlach called it “failing upward.”

A real problem here was term-limited former Controller Betty Yee failed to call out Newsom for not putting competent people in charge of the EDD, both to serve the people suffering in jobless lines and to finish her ACFR on time.

A second problem is this is what happens in a one-party state. Republican Lanhee Chen in his run for controller promised to produce timely ACFRs. To Cohen’s 55.3%, he got just 44.7%, actually the best performance of any GOP candidate statewide.

But Cohen’s timely performance in producing this ACFR just three months into her term is promising. Now, could we please have the 2022 numbers before the June 15 constitutional budget deadline? So the governor and legislators – and all Californians – can know what’s really going on in their fiscal house?

John Seiler is on the SCNG Editorial Board.

Orange County Register

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California’s controller finally files state audit – for 2021

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