State Auditor: California Net Worth <$127,200,000,000>

[AgeOfEnlightenmentSCP]

One argument I've heard to try to mitigate the obvious fact that death spiral state's debts are insurmountable and growing is, "Well, sure- they owe $X, but they have assets".  Um, folks- this isn't the debt.  This is the balance sheet.  

blogs.sacbee.com/capitolalertlatest/2013/03/state-auditor-california-net-worth-at-negative-127-billion.html

[djAdvocate]

Apr 2, 2013 14:18:16 GMT -5 AgeOfEnlightenmentSCP said:

One argument I've heard to try to mitigate the obvious fact that death spiral state's debts are insurmountable and growing is, "Well, sure- they owe $X, but they have assets".  Um, folks- this isn't the debt.  This is the balance sheet.  

blogs.sacbee.com/capitolalertlatest/2013/03/state-auditor-california-net-worth-at-negative-127-billion.html

SacBee is a good paper.  i wonder how other states would stand up to this kind of audit?

[usaone]

California has already turned the corner. They are looking much better than a year or two ago.

[AgeOfEnlightenmentSCP]

Apr 2, 2013 14:31:57 GMT -5 usaone said:

California has already turned the corner. They are looking much better than a year or two ago.

[djAdvocate]

Apr 3, 2013 20:21:12 GMT -5 AgeOfEnlightenmentSCP said:

Apr 2, 2013 14:31:57 GMT -5 usaone said:

California has already turned the corner. They are looking much better than a year or two ago.

he's right, you know.

[Sum Dum Gai]

About half of the $127.2 billion in accumulated red ink came from the state's issuing general obligation bonds and then giving the money to local governments and school districts for public works projects, the auditor pointed out. The assets built with the bonds remain on local balance sheets while the bonded debt accrues to the state.

This audit would be like looking at a conglomerate without looking at it's subsidiaries.  It's all made up numbers.

[Virgil Showlion]

Apr 4, 2013 1:32:04 GMT -5 Sum Dum Gai said:

About half of the $127.2 billion in accumulated red ink came from the state's issuing general obligation bonds and then giving the money to local governments and school districts for public works projects, the auditor pointed out. The assets built with the bonds remain on local balance sheets while the bonded debt accrues to the state.

This audit would be like looking at a conglomerate without looking at it's subsidiaries.  It's all made up numbers.

Yeah. But you lose half of your municipal assets in wildfires every year anyway.

It all averages out.

[AgeOfEnlightenmentSCP]

Apr 4, 2013 1:32:04 GMT -5 Sum Dum Gai said:

About half of the $127.2 billion in accumulated red ink came from the state's issuing general obligation bonds and then giving the money to local governments and school districts for public works projects, the auditor pointed out. The assets built with the bonds remain on local balance sheets while the bonded debt accrues to the state.

This audit would be like looking at a conglomerate without looking at it's subsidiaries.  It's all made up numbers.

You can point it out all you want.  I would only comment that it is the kind of a dumb move that put the state in this position.  The state issued bonds, and has nothing to show for it- brilliant.  So, the audit is accurate- those assets are on the local balance sheet, not the State's.

A locality is NOT a "subsidiary" of the state.  That's not how it's set up.

[AgeOfEnlightenmentSCP]

...unless you think CA can start what? Spinning off "subsidiaries"? 

[Deleted]

 Splitting irrelevant hairs... the ultimate pseudo-intellectually masturbatory exercise!

[AgeOfEnlightenmentSCP]

Apr 3, 2013 21:55:01 GMT -5 djAdvocate said:

Apr 3, 2013 20:21:12 GMT -5 AgeOfEnlightenmentSCP said:

he's right, you know.

No.  He's not right.  California is in a financial death spiral from which it cannot recover. 

btw- one of the subsidiaries is now the bankrupt town of Stockton- San Bernardino is likely next, and it will spread.

MSNBC describes it as the spreading "municipal disease"... four cities are now inextricably on the path to bankruptcy, businesses, and the state's most productive people are leaving in droves.  The State WILL go broke.  There will be no bailout.  California will fall under the weight of liberalism, it will experience a complete financial collapse of State government.

usnews.nbcnews.com/_news/2012/10/04/14218808-fourth-california-city-faces-bankruptcy-as-municipal-disease-spreads?lite

[AgeOfEnlightenmentSCP]

And before you try the "old news" defense, there's no substance to that charge without NEW information to the contrary.  But the new information is the same:
articles.latimes.com/2013/apr/01/local/la-me-stockton-bankrupt-20130402

[djAdvocate]

Apr 4, 2013 18:18:05 GMT -5 AgeOfEnlightenmentSCP said:

Apr 3, 2013 21:55:01 GMT -5 djAdvocate said:

he's right, you know.

No.  He's not right.

yes, he is.  whether it continues is another matter entirely, but the state is vastly better off than it was 2 years ago.

and don't bore me with Stockton.  that town has been a disaster for decades.

[djAdvocate]

Apr 4, 2013 18:20:24 GMT -5 AgeOfEnlightenmentSCP said:

And before you try the "old news" defense, there's no substance to that charge without NEW information to the contrary.  But the new information is the same:
articles.latimes.com/2013/apr/01/local/la-me-stockton-bankrupt-20130402

dude.  did you see my first reply?  did it seem like i was debating the basic facts of this thread to you?

edit: i did have ONE comment about the methodology of the appraisal.  they seem to be picking up a lot of liabilities, but they are not counting a whole lot as assets, as far as i can tell.  i couldn't tell whether they were counting up ANY, truthfully.  IF that is the case, and it may very well be, what they did here could more correctly be called a liabilities page, not a balance sheet.

if you disagree, i would welcome the addition of the asset page to the thread.

[djAdvocate]

Paul:

i just read the actual report.  it is here:

www.bsa.ca.gov/pdfs/reports/97001.pdf

this is a very complicated balance sheet, but here is how i read it:

assets = $420B
liabilities = $140B
net equity = $280B

what you are reporting in this thread is liabilities ONLY.  that is not a balance sheet.
the public properties (some 33,000 assets) in CA, ALONE, are worth over $200B.

[djAdvocate]

my conclusion after reading that report is that CA has enough assets to run itself badly for DECADES without fear of bankruptcy.  i will place a $1,000 bet with anyone that wishes to do so that it will not happen in our lifetimes, which for purposes of gambling, we can place at 2050.  if i make it that long, i won't live here.  i am guessing Paul and i will be fishing in CR.

[Virgil Showlion]

Apr 4, 2013 18:44:11 GMT -5 djAdvocate said:

Paul:

i just read the actual report.  it is here:

www.bsa.ca.gov/pdfs/reports/97001.pdf

this is a very complicated balance sheet, but here is how i read it:

assets = $420B
liabilities = $140B
net equity = $280B

what you are reporting in this thread is liabilities ONLY.  that is not a balance sheet.
the public properties (some 33,000 assets) in CA, ALONE, are worth over $200B.

Your 'actual report' is from 1997.

[fairlycrazy23]

Apr 4, 2013 18:44:11 GMT -5 djAdvocate said:

Paul:

i just read the actual report.  it is here:

www.bsa.ca.gov/pdfs/reports/97001.pdf

this is a very complicated balance sheet, but here is how i read it:

assets = $420B
liabilities = $140B
net equity = $280B

what you are reporting in this thread is liabilities ONLY.  that is not a balance sheet.
the public properties (some 33,000 assets) in CA, ALONE, are worth over $200B.

That report is from 97, this one: www.bsa.ca.gov/pdfs/reports/2012-001.pdf is the current one.

And I can't find close to $420B ( I see $155B total, with $112B in capital, with more than half in highways) in assets.
So from my casual reading, it does appear that CA has higher liabilities than assets, probably not $127B, maybe about $15B, unless I missed some huge liability.

[Virgil Showlion]

Also, dare we point out that assets like parks, courthouses, highways, fire stations can't be sold to settle a state's debts, unless you relish living in a state where you pay monthly bills to your road provider, parks provider, fire protection provider, Proctor & Gamble pay-as-you-go courthouse, etc., etc.

If you sold even a tenth of state assets to creditors, you'd see such a rapid exodus from California that the book value of the remaining assets would tank faster than Enron.

[djAdvocate]

Apr 4, 2013 20:14:33 GMT -5 Virgil Showlion said:

Also, dare we point out that assets like parks, courthouses, highways, fire stations can't be sold to settle a state's debts, unless you relish living in a state where you pay monthly bills to your road provider, parks provider, fire protection provider, Proctor & Gamble pay-as-you-go courthouse, etc., etc.

If you sold even a tenth of state assets to creditors, you'd see such a rapid exodus from California that the book value of the remaining assets would tank faster than Enron.

why would you sell them to creditors?  if they are assets, you could borrow against them, at ultralow interest rates, right?

is anyone here a businessperson, or is everyone just a policy wonk? 

[djAdvocate]

Apr 4, 2013 19:44:19 GMT -5 fairlycrazy23 said:

Apr 4, 2013 18:44:11 GMT -5 djAdvocate said:

Paul:

i just read the actual report.  it is here:

www.bsa.ca.gov/pdfs/reports/97001.pdf

this is a very complicated balance sheet, but here is how i read it:

assets = $420B
liabilities = $140B
net equity = $280B

what you are reporting in this thread is liabilities ONLY.  that is not a balance sheet.
the public properties (some 33,000 assets) in CA, ALONE, are worth over $200B.

That report is from 97, this one: www.bsa.ca.gov/pdfs/reports/2012-001.pdf is the current one.

And I can't find close to $420B

that is because this report only looks at net assets, not assets.  it is not a balance sheet.  it is some weird hybrid.  never seen anything like it in the business world. 

i will look into the 33,000 asset items on the state register and report back to you.

[djAdvocate]

ok, this is from page 44 of the 1997 balance sheet.  it shows $251B in fixed assets:

Table 2

Category

Carrying

Market

1

2

3

Value

Value

Schedule of Investments - Primary Government

June 30, 1997

(Amounts in thousands)

Pooled Investments *

U.S. Government securities.......................................

$

8,745,859 $ –– $ –– $ 8,745,859 $ 8,745,635

Deposits.....................................................................

6,832,540 –– –– 6,832,540 6,831,485

Bankers’ acceptances................................................

870,395 –– –– 870,395 871,718

Commercial paper......................................................

6,782,756 –– –– 6,782,756 6,785,493

Corporate bonds........................................................

1,569,890 –– –– 1,569,890 1,567,125

Bank notes.................................................................

949,074 –– –– 949,074 948,889

Other..........................................................................

29,495 –– –– 29,495 29,495

Total Pooled Investments.......................................

.

25,780,009

––

––

25,780,009

25,779,840

Separately Invested Funds Subject

to Categorization

U.S. Government securities.......................................

8,991,927 134,512 –– 9,126,439 9,341,905

Commercial paper......................................................

2,334,124 –– –– 2,334,124 2,334,124

Corporate bonds........................................................

6,303,615 764 –– 6,304,379 6,303,781

Mortgage loans..........................................................

13,244,530 –– –– 13,244,530 13,244,530

Debt securities – STRS..............................................

14,131,637 –– –– 14,131,637 14,131,637

Equity securities.........................................................

110,530,849 –– –– 110,530,849 110,530,849

Securities lending collateral.......................................

25,122,038 –– –– 25,122,038 25,122,038

Other investments......................................................

4,418,027 –– –– 4,418,027 4,418,028

Total Separately Invested Funds Subject

To Categorization................................................

185,076,747

135,276

––

185,212,023

185,426,892

Separately Invested Funds Not Subject

to Categorization

Real estate....................................................................................................................

.........................

8,384,488 8,384,488

Venture capital and private equity funds.......................................................................................

.........

2,722,170 2,722,170

Investment contracts...........................................................................................................

...................

2,045,877 2,045,877

Mutual funds...................................................................................................................

.......................

.

1,758,886 1,760,248

Investments held by broker-dealers under securities

loans with cash collateral.....................................................................................................

.............

.

24,378,763 24,378,763

Other..........................................................................................................................

............................

1,393,270 1,393,270

Total Separately Invested Funds Not Subject

to Categorization..............................................................................................................

...............

40,683,454

40,684,816

Total Investments....................................................

.

$

210,856,756

$

135,276

$

––

$

251,675,486

$

251,891,548

[djAdvocate]

i think i see the problem with that report.  they have stopped (at some point) reporting state investments in the financial statements.  therefore they are underreporting assets by probably $1/4-1/2T.  i guess it makes sense if you are not treating the government like a business.  but it makes no sense whatsoever if you are.

this is not me guessing, either.  they clearly state it.

[AgeOfEnlightenmentSCP]

Apr 4, 2013 18:25:36 GMT -5 djAdvocate said:

Apr 4, 2013 18:18:05 GMT -5 AgeOfEnlightenmentSCP said:

No.  He's not right.

yes, he is.  whether it continues is another matter entirely, but the state is vastly better off than it was 2 years ago.

and don't bore me with Stockton.  that town has been a disaster for decades.

California has been a disaster for a decade.  Now, you might believe the impossible- but there's no realistic mathematical scenario in which California digs out.  It's over.

[djAdvocate]

Apr 4, 2013 21:48:43 GMT -5 AgeOfEnlightenmentSCP said:

Apr 4, 2013 18:25:36 GMT -5 djAdvocate said:

yes, he is.  whether it continues is another matter entirely, but the state is vastly better off than it was 2 years ago.

and don't bore me with Stockton.  that town has been a disaster for decades.

California has been a disaster for a decade.  Now, you might believe the impossible- but there's no realistic mathematical scenario in which California digs out.  It's over.

name your bet. 

edit: never mind- how about doubling down on the first one?

[AgeOfEnlightenmentSCP]

Apr 4, 2013 21:21:13 GMT -5 djAdvocate said:

Apr 4, 2013 19:44:19 GMT -5 fairlycrazy23 said:

That report is from 97, this one: www.bsa.ca.gov/pdfs/reports/2012-001.pdf is the current one.

And I can't find close to $420B

that is because this report only looks at net assets, not assets.  it is not a balance sheet.  it is some weird hybrid.  never seen anything like it in the business world. 

i will look into the 33,000 asset items on the state register and report back to you.

Um, yeah- the whole purpose of the balance sheet is to calculate net assets.  That's not weird, that's what a balance sheet's entire purpose is.  

[AgeOfEnlightenmentSCP]

Apr 4, 2013 21:50:43 GMT -5 djAdvocate said:

Apr 4, 2013 21:48:43 GMT -5 AgeOfEnlightenmentSCP said:

California has been a disaster for a decade.  Now, you might believe the impossible- but there's no realistic mathematical scenario in which California digs out.  It's over.

name your bet.

You name your bet.  There can be NO BAILOUT, no workout, no default, no bankruptcy. California has to dig out.  If you think that's going to happen...just say no to drugs.

[djAdvocate]

Apr 4, 2013 21:51:05 GMT -5 AgeOfEnlightenmentSCP said:

Apr 4, 2013 21:21:13 GMT -5 djAdvocate said:

that is because this report only looks at net assets, not assets.  it is not a balance sheet.  it is some weird hybrid.  never seen anything like it in the business world. 

i will look into the 33,000 asset items on the state register and report back to you.

Um, yeah- the whole purpose of the balance sheet is to calculate net assets.  That's not weird, that's what a balance sheet's entire purpose is. 

not really.  the purpose is to reconcile assets to liabilities.  what this "balance sheet" does is to presume the (majority of the) assets don't exist.  it actually looks more like a cash flow study, but using accrual methods.  it is the weirdest thing i have ever seen.

[djAdvocate]

Apr 4, 2013 21:52:43 GMT -5 AgeOfEnlightenmentSCP said:

Apr 4, 2013 21:50:43 GMT -5 djAdvocate said:

name your bet.

You name your bet. 

i already named it.

There can be NO BAILOUT, no workout, no default, no bankruptcy. California has to dig out.  If you think that's going to happen...just say no to drugs.

how about you give me 100:1 odds on a $100 bet, if you are so fucking sure.

[djAdvocate]

seriously, Paul.  it would be like a business doing a balance sheet without including any physical assets.  it is totally freaking weird.

personally, i get tired of balance sheets that pad the net worth with intangibles like "goodwill".  it makes it hard to determine what is actually going on in many companies.  but this is just the opposite extreme.  these books are not declaring the hard assets at all, only the liquid ones.  which is great, if you want to liquidate CA (don't get any ideas ), but it is really a bad representation of what the state owns, and what it is worth.  jmho, as someone who has read probably 1,000 financial reports in my short life on earth.