Truth in Accounting (TIA) is a think tank that analyzes government financial reports. As part of its mission, it encourages public entities to produce financial reports that are comprehensive, clear, and transparent; and which inform the public of the importance of truthful accounting.
Last year, this column reported on TIA’s fifteenth annual Financial State of the States report, which ranks all 50 states by financial health. No one was shocked by California’s less-than-stellar fiscal health rating.
Earlier this month, TIA released a new report, The States Financial Transparency Score 2025, focusing specifically on financial transparency noting that, while “state budgets receive most of the public and media’s attention, their outcomes are detailed in each government’s Annual Comprehensive Financial Report (ACFR), which is audited annually by certified public accountants.” TIA’s transparency score is based on key criteria outlining best practices, offering government officials and citizens a roadmap to enhance fiscal transparency and accountability.
For a state to achieve a top score of 100 points, its ACFR must meet the following criteria:
- 50 points: Receive a clean opinion from an independent auditor (This criterion also applies to the annual report of the state government’s largest pension plan.)
- 15 points: Include a net position not distorted by misleading and confusing deferred items.
- 10 points: Report all retirement liabilities on its balance sheet (Statement of Net Position).
- 10 points: Be published within 100 days of the government’s fiscal year-end.
- 5 points: Be searchable with useful links from the table of contents and bookmarks.
- 5 points: Be audited by an independent auditor who is not an employee of the government (This criterion also applies to the annual report of the state government’s largest pension plan.).
- 5 points: Measure the net pension liability using the same date as the annual report.
For government entities, a major impediment to assessing both financial health and transparency is that the data is frequently delayed for periods much longer than that found in the private sector. For this report, TIAs data was based on information available as of August 31, 2024. For Arizona, California, Illinois, Mississippi, Oklahoma, and Nevada, fiscal year 2022 data was used, as 2023 data was not yet available. For the other 44 states, 2023 data was available.
California’s inability to provide timely financial data is legendary. As TIA’s earlier report noted, as of August 31, 2024, California had not released its fiscal year 2023 annual financial report, making it the fifth year in a row California has been late submitting critical information.
For TIA’s Transparency Report, California ranked an abysmal 44th out of 50 states. Here’s the breakdown:
- Auditor Opinion: 35 out of 50 points.
- Deferred Items: 14 out of 15 points.
- Off-Balance Sheet Liabilities: 10 out of 10 points.
- Timeliness: 0 out of 10 points.
- Navigation: 4 out of 5 points.
- External Auditors: 2 out of 5 points.
- Pension Data Timing: 0 out of 5 points.
Regrettably, the lack of transparency regarding the financial health of California is consistent with a pattern of actions by elected leaders and agencies that limit access to vital information and restrict transparency for citizens and the media. For example, legislative leaders have, in the past year, been increasingly hostile to reporters, limiting their access to the floor of the Assembly. Likewise, non-disclosure agreements, also known as NDAs, are legally binding contracts that keep information secret.
Despite serious concerns about violations of the First Amendment by limiting free speech and the freedom of the press, their use in the state capital continues. Taxpayers can only hope that the latest effort to ban NDAs will succeed in the legislature.
Elected leaders owe it to their constituents to be open and transparent in all their official duties. That especially applies in financial matters where responsible stewardship is paramount.
Jon Coupal is the president of the Howard Jarvis Taxpayers Association. Sheila Weinberg is the founder and CEO of Truth in Accounting.