Comprehensive Annual Financial Report - sco.ca.gov

1 State of California Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2017 STATE OF CALIFORNIA Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2017 Prepared by The Office of the State Controller BETTY T. YEE California State Controller Contents INTRODUCTORY SECTION California State Controller s Transmittal iii Certificate of Achievement for Excellence in Financial Reporting .. ix Principal Officials of the State of x Organization Chart of the State of California .. xi Financial SECTION Independent Auditor s Report .. 2 Management s Discussion and Analysis .. 5 BASIC Financial STATEMENTS GOVERNMENT-WIDE Financial STATEMENTS Statement of Net 32 Statement of Activities.

2 36 FUND Financial STATEMENTS Balance Sheet Governmental Funds .. 40 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net 42 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds .. 44 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of 46 Statement of Net Position Proprietary 48 Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds .. 52 Statement of Cash Flows Proprietary 54 Statement of Fiduciary Net Position Fiduciary Funds and Similar Component 58 Statement of Changes in Fiduciary Net Position Fiduciary Funds and Similar Component 59 DISCRETELY PRESENTED COMPONENT UNITS Financial STATEMENTS Statement of Net Position Discretely Presented Component Units Enterprise 62 Statement of Activities Discretely Presented Component Units Enterprise 64 NOTES TO THE Financial STATEMENTS Notes to the Financial Statements 65 Notes to the Financial Statements.

3 69 State of California Comprehensive Annual Financial Report REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in Net Pension Liability and Related Ratios PERF and Single-Employer 164 Schedule of State Pension Contributions PERF and Single-Employer 172 Schedule of the State s Proportionate Share of Net Pension Liability 175 Schedule of the State s Contributions CalSTRS .. 175 Schedule of Funding Progress Other Postemployment Benefit Plans .. 176 Infrastructure Assets Using the Modified 176 Budgetary Comparison Schedule General Fund and Major Special Revenue Funds .. 182 Reconciliation of Budgetary Basis Fund Balances of the General Fund and Major Special Revenue Funds to GAAP Basis Fund Balances.

4 185 Notes to the Required Supplementary 185 COMBINING Financial STATEMENTS AND SCHEDULES NONMAJOR AND OTHER FUNDS Nonmajor Governmental Funds .. 191 Combining Balance Sheet .. 194 Combining Statement of Revenues, Expenditures, and Changes in Fund 198 Budgetary Comparison Schedule Nonmajor Governmental Funds .. 202 Internal Service 203 Combining Statement of Net 204 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position .. 208 Combining Statement of Cash 210 Nonmajor Enterprise Funds .. 215 Combining Statement of Net 216 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position .. 218 Combining Statement of Cash 219 Private Purpose Trust 221 Combining Statement of Fiduciary Net Position.

5 222 Combining Statement of Changes in Fiduciary Net Position .. 223 Fiduciary Funds and Similar Component Units Pension and Other Employee Benefit Trust 225 Combining Statement of Fiduciary Net Position .. 228 Combining Statement of Changes in Fiduciary Net Position .. 230 Agency Funds .. 233 Combining Statement of Fiduciary Assets and 234 Combining Statement of Changes in Fiduciary Assets and 236 Nonmajor Component Units .. 239 Combining Statement of Net 240 Combining Statement of Activities .. 244 Contents STATISTICAL SECTION Financial Trends .. 249 Schedule of Net Position by Component .. 250 Schedule of Changes in Net Position.

6 252 Schedule of Fund Balances Governmental 256 Schedule of Changes in Fund Balances Governmental 258 Revenue 261 Schedule of Revenue Base .. 262 Schedule of Revenue Payers by Income 266 Schedule of Personal Income Tax Rates .. 268 Debt Capacity .. 271 Schedule of Ratios of Outstanding Debt by 272 Schedule of Ratios of General Bonded Debt 274 Schedule of General Obligation Bonds Outstanding .. 276 Schedule of Pledged Revenue 277 Demographic and Economic 281 Schedule of Demographic and Economic Indicators .. 282 Schedule of Employment by 284 Operating Information .. 285 Schedule of Full-time Equivalent State Employees by 286 Schedule of Operating Indicators by 288 Schedule of Capital Asset Statistics by 292 296 State of California Comprehensive Annual Financial Report This page intentionally left blank Introductory Section BETTY T.

7 YEE California State Controller March 21, 2018 To the Citizens, Governor, and Members of the Legislature of the State of California: I am pleased to submit the State of California s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2017. This Report meets the requirements of Government Code section 12460 for an Annual Report prepared in accordance with accounting principles generally accepted in the United States and contains information to help readers gain a reasonable understanding of the state s Financial activities. California s fiscal health continues to improve since the Great Recession of 2009. For the fiscal year ended June 30, 2017, the state s revenue exceeded expenses by $ billion for governmental activities, marking the fifth consecutive year the state s Financial position improved.

8 Governmental activities include most expenses normally associated with state government such as health and human services, education, transportation, corrections and rehabilitation programs, and general government administration. While California s economy currently is vibrant and its coffers are full, we run the risk of becoming complacent. A fiscal crisis may very well be on our doorstep. Both the 2017-18 State Budget (enacted on June 27, 2017) and the Governor s proposed 2018-19 budget continue to build the Budget Stabilization Account (the state s rainy day fund). This emphasis on paying down accumulated debts and liabilities is an effort to counter the potential fiscal impact of federal policy changes on California and the potential end of economic expansion.

9 I can sum up the Governor s budgets in one word: smart. The federal tax measure likely will have a devastating impact on our state budget, which may mean less money for essential social services such as Medi-Cal, Medicare, and the children s health insurance program. It is wise to exercise caution with responsible short-term spending, boost rainy day fund reserves, and pay down debt. In addition, California must create a tax system that is sustainable for our ever-changing economy. I extend my deep gratitude to all the government agencies for their efforts and support in submitting the required information for this CAFR. Thank you to the California State Auditor and her staff for maintaining the highest standards of professionalism in the management of the state s finances.

10 Finally, I wish to thank my entire team for their skill, effort, and dedication in completing this Financial Report . Sincerely, Original signed by BETTY T. YEE This page intentionally left blank Report Overview The State s management assumes responsibility for the accuracy, completeness, and fairness of information presented in the CAFR, including all disclosures, based on a Comprehensive framework of internal controls established for this purpose. The internal control structure is designed to provide reasonable, but not absolute, assurance that the Financial statements are free of material misstatements. The objective of these controls is to ensure compliance with legal provisions embodied in the Annual appropriated budget approved by the Legislature and the Governor.