California’s fiscal accountability dashboard for cities, which was implemented in 2019 and identified local governments with financial problems, was taken down last month. Why?
First, some background.
In 2006, I was elected to serve on the Orange County Board of Supervisors and had the privilege of serving as the chairman during two very tumultuous years, 2008 and 2012.
The legendary liquidity crisis that became a huge component of the Great Recession spurred the need for the County of Orange to lay off some 1,000 employees during my first time at the helm.
Since negotiations with major collective bargaining units would also occur in 2012, I needed to communicate that this once perceived “wealthy” county was no longer in the best fiscal condition. Consequently, I reviewed the annual audited financial statements for the fiscal year ending on June 30, 2010, from the other 57 counties in California. All of them were available, except for delinquent Modoc County, indicating that there are laggards in the critical duty of timely reporting.
I decided to divide the unrestricted net position for governmental activities from the statement of net position (balance sheet) and divide it by that county’s population. This provided a simple metric for comparing different counties. And it gave a range, finding the County of Orange in 46th place. Thus, proving its weak financial position.
It was a gauge that notified everyone in the county’s management and trenches to watch the finances and work on fiscal solutions that would improve its standing among its fellow counties.
As most of us know, it’s not about what revenues you take in, it’s what you spend. It also includes what promises are made that will come due in the future, like granting generous defined benefit pension and retiree medical plans not found in the private sector.
These commitments were accomplished in the shadows due to the failure of the Government Accounting Standards Board (GASB) to require the reporting of liabilities created by defined benefit pension plans until 2015 and other post-employment benefit (OPEB) arrangements in 2018. Most local elected officials probably didn’t even know the true condition of their agencies until these unfunded actuarial accrued liabilities had to be added to their balance sheets.
As a state senator, I wanted to communicate the status of California amongst its peers, as well as that of the state’s counties, cities, and school districts for the year 2017 using the same simple metric. It would then show the dramatic impact the implementation of the GASB OPEB pronouncement would have in 2018 and moving forward. My doing so may have prompted the California State Auditor to pursue a similar strategy.
This “dashboard” focused on cities and only those that were releasing their annual comprehensive financial reports (ACFRs) in a timely manner, resulting in about 50 cities being excluded.
You can imagine how controversial it must have been for the State Auditor to be transparent, as the bottom ranked cities must certainly have complained. So, it may not come as a surprise that the State Auditor took the dashboard down in October. The supposed reason? To devote more staff time toward completing the state’s ACFR, which is prepared by various state auditing departments for 36 of the nation’s states.
California needs a fiscal accountability dashboard. Unfortunately, it is the poster child for poor fiscal stewardship. It makes one wonder why the Golden State’s Governor goes around the country and world bragging about California. He may find that a timely financial statement may do the bragging for him. Or not.
