— State of California: Financial Report Year Ended June 30, 2022

M M C ALIA . OHEN C S C ALIFORNIA TATE ONTROLLER Cover designed by Sacramento artist Matteo Borges M M C ALIA . OHEN C S C ALIFORNIA TATE ONTROLLER March 15, 2024 To the Citizens, Governor, and Members of the Legislature of the State of California: I am pleased to submit the State of California’s Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2022. This report meets the requirements of Government Code section 12460 for an annual report prepared in accordance with generally accepted accounting principles and contains information to help readers gain a reasonable understanding of California’s financial activities and condition. The ability of the State Controller’s Office (SCO) to produce this report is dependent upon the timely receipt of accurate financial statements from every state department. While there is no statutory deadline for publication of the ACFR, its completion satisfies several compliance requirements for the state. The late timing of this year’s report is addressed below along with updates to my plan of action addressing this issue going forward. California’s economic recovery from the impacts of the pandemic continued during the fiscal year ended June 30, 2022, as the state ended the year with total General Fund revenues of $199.2 billion, a $2.2 billion increase compared to prior fiscal year revenues of $197.0 billion. General Fund personal income tax revenues experienced a decrease of $6.2 billion (5.0%), which was offset by increases in sales and use taxes of $3.7 billion (12.6%) and corporation taxes $3.7 billion (11.5%). Most notably, the General Fund ended the fiscal year with a $120.2 billion cash balance, an increase of $56.3 billion compared to the prior year ending cash balance of $63.9 billion. This strong cash position has provided reserves for future fiscal years in which the state may experience less favorable revenues. The ACFR for the fiscal year ended June 30, 2022, will mark the fifth consecutive year that California has published its financial statements well beyond the regulatory deadline of nine months after the fiscal year end. As reported last year, the late publication of the ACFR started when the SCO and departments began transitioning to the Financial Information System of California (FI$Cal). Although departments have shown significant improvements in the timely and accurate submission of their financial reports, the SCO will continue to support departments in strengthening accounting processes. The California State Auditor has reported these conditions in its Internal Control and Compliance Audit Report for several years, in addition to issuing modified opinions on the ACFR for the fiscal years ended June 30, 2020, 2021, and 2022. 300 Capitol Mall, Suite 1850, Sacramento, CA 95814 | P.O. Box 942850, Sacramento, CA 94250 | Fax: 916.322.4404 sco.ca.gov The SCO has taken decisive action to achieve timely and accurate financial reporting for the state, and has established and implemented statewide initiatives that I believe will lead to measurable advancements toward these goals. The SCO began its endeavor to produce the State of California’s 2021-22 ACFR in April 2023. It was our intent to publish this ACFR by December 31, 2023. However, the federal government’s unanticipated decision to extend the 2022 personal and corporate income tax filing deadlines through November 16, 2023, which was also adopted by California, directly impacted the planned release date. It is important to point out that even with the unprecedented tax filing extensions, the publication time of less than 12 months from the previous ACFR represents the fastest production cycle in recent history. The SCO attributes this progress to our statewide initiatives and the significant personnel and contract resources authorized in the 2023-24 Budget Act. The SCO will continue to work earnestly toward the goal of publishing the 2024-25 ACFR in March 2026. The SCO’s statewide ACFR process improvement initiative will increase efficiencies and data quality to advance the fiscal integrity of the state into a position to support our continued economic growth. These efforts include establishing an ACFR compilation governance structure, streamlining manual processes, and optimizing technology. The SCO will build upon our work with partner agencies to provide departments the technical assistance and resources needed to accurately and timely submit their financial reports. We recognize and appreciate the unprecedented coordination and collaboration with our key stakeholders that is necessary to achieve this goal. I extend my sincere appreciation to all state government agencies for their efforts and cooperation in submitting the information required for the ACFR. Finally, thank you to my State Accounting and Reporting Division for their commitment, dedication, and tireless efforts to complete this complex financial report. Sincerely, Original signed by MALIA M. COHEN STATE OF CALIFORNIA Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2022 Prepared by the office of M M C . ALIA OHEN California State Controller . Table of Contents INTRODUCTORY SECTION Report Overview........................................................................................................................ v Principal Officials of the State of California ............................................................................. ix Organization Chart of the State of California............................................................................ x FINANCIAL SECTION Independent Auditor’s Report.................................................................................................. 2 Management’s Discussion and Analysis.................................................................................. 7 BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS Statement of Net Position................................................................................................... 34 Statement of Activities....................................................................................................... 38 FUND FINANCIAL STATEMENTS Balance Sheet – Governmental Funds................................................................................ 42 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position.................................................................................... 44 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ................................................................................................. 46 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities..................... 48 Statement of Net Position – Proprietary Funds.................................................................. 50 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds...................................................................................................... 54 Statement of Cash Flows – Proprietary Funds................................................................... 56 Statement of Fiduciary Net Position – Fiduciary Funds and Similar Component Units.......................................................................................... 60 Statement of Changes in Fiduciary Net Position – Fiduciary Funds and Similar Component Units.......................................................................................... 61 DISCRETELY PRESENTED COMPONENT UNITS FINANCIAL STATEMENTS Statement of Net Position – Discretely Presented Component Units – Enterprise Activity .................................................................................................... 64 Statement of Activities – Discretely Presented Component Units – Enterprise Activity .................................................................................................... 66 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements – Index......................................................................... 67 Notes to the Financial Statements...................................................................................... 71 State of California Annual Comprehensive Financial Report REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in Net Pension Liability and Related Ratios – PERF and Single-Employer Plans.............................................................................................. 188 Schedule of State Pension Contributions – PERF and Single-Employer Plans................. 204 Schedule of the State’s Proportionate Share of Net Pension Liability and Schedule of the State’s Contributions – CalSTRS....................................................................... 210 Schedule of Changes in Net OPEB Liability and Related Ratios – Retiree Health Benefits Program...................................................................................................... 212 Schedule of OPEB Contributions – Retiree Health Benefits Program............................... 226 Infrastructure Assets Using the Modified Approach.......................................................... 231 Budgetary Comparison Schedule – General Fund and Major Special Revenue Funds.......................................................................................................... 236 Reconciliation of Budgetary Basis Fund Balances of the General Fund and Major Special Revenue Funds to GAAP Basis Fund Balances ................................ 240 Notes to the Required Supplementary Information............................................................ 240 COMBINING FINANCIAL STATEMENTS AND SCHEDULES – NONMAJOR AND OTHER FUNDS Nonmajor Governmental Funds..................................................................................... 245 Combining Balance Sheet.................................................................................................. 248 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances.......... 252 Budgetary Comparison Schedule – Nonmajor Governmental Funds................................ 256 Internal Service Funds..................................................................................................... 257 Combining Statement of Net Position................................................................................ 258 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position.......... 262 Combining Statement of Cash Flows................................................................................. 264 Nonmajor Enterprise Funds............................................................................................ 269 Combining Statement of Net Position................................................................................ 270 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position.......... 274 Combining Statement of Cash Flows................................................................................. 276 Fiduciary Funds and Similar Component Units – Pension and Other Employee Benefit Trust Funds............................................................................... 281 Combining Statement of Fiduciary Net Position ............................................................... 284 Combining Statement of Changes in Fiduciary Net Position............................................. 286 Private Purpose Trust Funds .......................................................................................... 289 Combining Statement of Fiduciary Net Position ............................................................... 290 Combining Statement of Changes in Fiduciary Net Position............................................. 291 Investment Trust Funds................................................................................................... 293 Combining Statement of Fiduciary Net Position ............................................................... 294 Combining Statement of Changes in Fiduciary Net Position............................................. 295 Contents Nonmajor Component Units ........................................................................................... 297 Combining Statement of Net Position................................................................................ 298 Combining Statement of Activities.................................................................................... 302 STATISTICAL SECTION Financial Trends............................................................................................................. 307 Schedule of Net Position by Component......................................................................... 308 Schedule of Changes in Net Position............................................................................... 310 Schedule of Fund Balances – Governmental Funds ........................................................ 314 Schedule of Changes in Fund Balances – Governmental Funds...................................... 316 Revenue Capacity........................................................................................................... 319 Schedule of Revenue Base............................................................................................... 320 Schedule of Revenue Payers by Income Level/Industry.................................................. 324 Schedule of Personal Income Tax Rates.......................................................................... 326 Debt Capacity................................................................................................................. 329 Schedule of Ratios of Outstanding Debt by Type............................................................ 330 Schedule of Ratios of General Bonded Debt Outstanding............................................... 332 Schedule of General Obligation Bonds Outstanding....................................................... 334 Schedule of Pledged Revenue Coverage.......................................................................... 336 Demographic and Economic Information ................................................................... 339 Schedule of Demographic and Economic Indicators....................................................... 340 Schedule of Employment by Industry.............................................................................. 342 Operating Information.................................................................................................. 343 Schedule of Full-time Equivalent State Employees by Function..................................... 344 Schedule of Operating Indicators by Function................................................................. 346 Schedule of Capital Asset Statistics by Function............................................................. 350 Acknowledgments.......................................................................................................................... 354 State of California Annual Comprehensive Financial Report This page intentionally left blank Introductory Section Report Overview General Overview The State’s management assumes responsibility for the accuracy, completeness, and fairness of information presented in the ACFR, 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 Governor. The California State Auditor has issued a modified opinion on certain components of the State’s basic financial statements for the year ended June 30, 2022, in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States, which warrants additional description: • An unmodified opinion has been issued for the General Fund, Transportation Fund, Environmental and Natural Resources Fund, Health Care Related Programs Fund, Electric Power Fund, Water Resources Fund, State Lottery Fund, California State University Fund, Unemployment Programs Fund, aggregate remaining fund information, business-type activities within the government-wide Statement of Net Position and Statement of Activities, and aggregate discretely presented component units. • A modified opinion, consisting of a qualified opinion, has been issued for the Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balance of the Federal Fund, and for governmental activities within the government-wide Statement of Net Position and Statement of Activities. The two modified opinions are the result of the State’s inability to provide the California State Auditor with sufficient appropriate audit evidence to conclude that the aforementioned financial statements taken as a whole are free from material misstatement. The modified opinions are the result of ongoing financial accounting and reporting challenges experienced by one state department in administering California’s unemployment insurance program. The State of California also is required to undergo an annual Single Audit in conformity with the provisions of the United States Code of Federal Regulations, Title 2, Part 200, Subpart F, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. This report is issued separately. The Management’s Discussion and Analysis (MD&A) immediately follows the independent auditor’s report and contains an introduction, overview, and analysis of the financial statements. The MD&A also contains information regarding California’s economy for the year ended June 30, 2022, and its economic performance as of and for the year ended June 30, 2023, and beyond. The MD&A complements this report overview and should be read in conjunction with it. Profile of the State of California The State of California was admitted to the Union on September 9, 1850. The State’s population, as of 2022, is estimated to be approximately 39 million residents. The State’s government is divided into three branches: Executive, Legislative, and Judicial. Executive power is vested in the Governor. Other members of the Executive branch include the Lieutenant Governor, Attorney General, Secretary of State, State Treasurer, State Controller, Insurance Commissioner, and the State Superintendent of Public Instruction. All officers of the Executive branch are elected to a four-year term. The Legislative branch v of government is the State’s law-making authority and is made up of two houses: the Senate and the Assembly. The Judicial branch is charged with interpreting the laws of the State. It provides settlement of disputes between parties in controversy, determines the guilt or innocence of those accused of violating laws, and protects the rights of Californians. California’s government includes control agencies that help to regulate internal governmental operations. The State Controller’s Office, the State’s independent fiscal watchdog, ensures that the State’s budget is spent properly, offers fiscal guidance to local governments, reports on the State’s financial position, and uncovers fraud and abuse of taxpayer dollars. The Department of Finance, part of the Executive branch of government, establishes fiscal policies to carry out the State’s programs and serves as the Governor’s chief fiscal policy advisor. The California State Auditor promotes the efficient and effective management of public funds through independent evaluations of state and local governments. The State of California provides a wide range of services to its citizens, including social, health, and human services; kindergarten through 12th grade (K-12) and higher education; transportation; business, consumer services, and housing; corrections and rehabilitation programs; and other general government services. The State is also financially accountable for legally separate entities (component units) that provide and support post-secondary education programs; provide financing for low and moderate income housing and other public needs; promote agricultural activities; and provide financial assistance to public agencies and small businesses. The State, through its related organizations (organizations for which the primary government is not financially accountable), provides services such as the operation of the statewide energy transmission grid; earthquake insurance for homeowners and renters; workers’ compensation insurance; health insurance for individuals, families, and employees of small businesses; financing for pollution control facilities, and for acquiring, constructing, and equipping health facilities; and loans to students attending public and private nonprofit colleges and universities. The financial information of these institutions is not included in the State’s financial statements. The State Legislature approves an annual budget that contains estimates of revenues and expenditures for the ensuing fiscal year. This budget is the result of negotiations between the Governor and the Legislature. The State Controller’s Office is statutorily responsible for controlling revenues due the primary government and for expenditures of each appropriation contained in the budget. The State’s annual budget is submitted by the Governor no later than January 10 preceding the beginning of the fiscal year on July 1, and must be approved by the Legislature by June 15 each year. This annual budget serves as the foundation for the State’s financial planning and control. Additional information on the budgetary basis of accounting can be found in Note 2, Budgetary and Legal Compliance, in the Budgetary Comparison Schedule at the end of the nonmajor governmental funds combining statements, and in the Required Supplementary Information section of the ACFR that follows the Notes to the Financial Statements. Overview of the State’s Economy California’s economy, the largest among the 50 states, accounted for 14.2% of the U.S. Gross Domestic Product (GDP) in 2022 and continued to rank fifth largest in the world (in terms of GDP) at the end of the year. The sectors of California’s diverse economy include high technology, trade, entertainment, manufacturing, government, tourism, construction, and services. California’s GDP totaled $3.6 trillion at fiscal year-end, and, as the nation’s leader in agricultural production, the State’s farming operations generated over $51.1 billion in cash receipts for the 2021 crop year. In 2022, California exported $186.2 billion in products; its three largest export markets are Mexico ($30.8 billion), Canada ($20.6 billion), and China ($18.2 billion). California’s six largest exports are computer and electronic products, machinery (except electrical), chemicals, transportation equipment, miscellaneous manufactured commodities, and agricultural products. California enjoys one of the finest and most diverse collections of natural, cultural, and recreational resources in the nation. In 2022, California’s travel and tourism industry generated revenues of $134.4 billion—a 31.7% increase over the previous vi year; and travel-generated state and local tax revenues of $11.9 billion—a 21.6% increase over the previous year. The increase was primarily due to continued interest in travel following the restrictions during the COVID-19 pandemic, and increased pricing of goods and services due to inflation. Compared to the peak of 2019 before the pandemic, travel spending in 2022 was still down 7.2% and travel- generated tax revenue was down 3.0%. Budget Outlook Fiscal Year 2022-23 The Governor’s enacted 2022-23 Budget aspired to address many challenges facing the State of California such as soaring prices due to global inflation, and climate change. The Budget provided relief to millions of Californians, added substantial investments to address homelessness and behavioral health, invested significantly in affordable housing development, made multi-year commitments to the state’s infrastructure, included critical actions to maintain energy reliability, and continued to build budgetary reserves. The enacted Budget projected General Fund revenues of $219.7 billion after a $3.0 billion transfer to the Budget Stabilization Account (BSA), the State’s “rainy day” fund. Despite many challenges, California continued to move forward successfully in an uncertain economy due to sustained fiscal responsibility. Fiscal Year 2023-24 The State enacted the 2023-24 Budget Act on June 27, 2023. Following two years of unprecedented General Fund revenue growth fueled largely by federal pandemic relief programs, California faced a projected downturn in revenues driven by a declining stock market, persistently high inflation, rising interest rates, and job losses in high-wage sectors. The Budget addresses the shortfall with balanced solutions that protect core state programs and services, and preserves investments in the programs that are essential to millions of Californians. It protects commitments to education, affordable housing, homelessness, health care, climate change, infrastructure, and public safety. The Budget refines the Governor’s proposals to accelerate construction of water, transportation, and clean energy projects, and continues to prioritize building of reserves to provide a prudent insurance policy as the faces a growing number of revenue risks and uncertainties. By the end of fiscal year 2023-24, the Budget estimates an increase in total reserves to $37.8 billion—$22.3 billion in the BSA, $10.8 billion in the Public School System Stabilization Account, $3.8 billion in the Special Fund for Economic Uncertainties, and $900 million in the Safety Net Reserve. The 2023-24 Budget projects General Fund revenue of $208.7 billion ($235.0 billion after transfers) and expenditures of $225.9 billion. The Budget anticipates decreased revenue from personal income taxes, increased revenue from sales and use taxes, and no change in revenue from corporation taxes. Personal income taxes contribute the majority of General Fund revenue at 56.6% ($118.2 billion), while corporation taxes contribute 20.2% ($42.1 billion), and sales and use taxes contribute 16.0% ($33.4 billion). Long-term Financial Planning Long-term financial planning issues and initiatives that will affect the State’s long-term financial goals include the following: • A retreating stock market, high inflation, rising interest rates, and job losses in high-wage sectors weakened the State’s revenue growth entering into fiscal year 2023-24. The 2023-24 Budget reflects a nominal increase in overall expected General Fund revenues of 1.5% from the prior year. The Budget projects that fiscal year 2023-24 personal income tax revenues will decrease from $122.8 billion in the previous fiscal year to $118.2 billion, sales and use tax revenues will increase from $33.1 billion in the previous fiscal year to $33.4 billion, and corporation tax vii revenues are expected to remain consistent with the previous year at $42.1 billion. General Fund personal income tax and sales and use tax revenues are forecasted to rise to $141.8 billion and $36.3 billion, respectively, in fiscal year 2026-27. Corporation tax revenues are projected to decrease to $26.6 billion in fiscal year 2026-27. The Budget is sensitive to these tax revenue amounts such that a slump in tax revenues could impact funding levels for critical programs or necessitate use of reserve funds. • The Consumer Price Index increased 3.0% during the year ended June 30, 2023. The food index increased 5.7%, and the shelter index increased 7.8%. The energy index decreased by 16.7% after a steep increase of 41.6% in the prior year. • Between March 17, 2022, and July 27, 2023, the Federal Reserve Board increased interest rates by 525 basis points, which will directly impact the State’s future cost of borrowing. • The 2023 Budget Act reflects the State’s commitment to addressing the unfunded pension liabilities over the long-term. The Budget includes $1.7 billion in one-time supplemental Proposition 2 debt repayment funding to further reduce the unfunded liabilities of the State’s pension plans. The proposed supplemental payments will result in a minimum of $3.4 billion in estimated savings for the State over the next three decades. Depending on the availability of Proposition 2 funding, an additional $1.8 billion is expected to be paid to CalPERS over the next three fiscal years to fund the State’s pension liabilities. • The State’s employee bargaining units and excluded and exempt employees prefund retiree health benefits. As of June 30, 2022, more than $5.1 billion was set aside in a prefunding trust fund to pay future retiree health benefits. The trust fund is expected to approach $8.8 billion in assets by the end of fiscal year 2023-24. • Although a number of significant wildfires burned in California in 2022, less than 364,000 acres burned. The total acreage burned was well below the 5-year average of 2.3 million acres per year. The 2023 fire season total acreage burned was lower, with approximately 325,000 acres burned. The 2022-23 Budget Act provided for the continued building of forest and wildfire resilience statewide and fire protection operational enhancements to expand the state’s wildfire response capacity. The 2023-24 Budget Act includes investments in restoring forest and wildland health to continue to reduce the risk of catastrophic wildfires. • Despite three consecutive years of drought conditions, California experienced record flooding due to a series of atmospheric river storms during December 2022 and January 2023. The 2023-24 Budget Act maintains a total of $8.1 billion of investments committed in the 2021 and 2022 Budget Acts over multiple years to enhance the state’s capacity to withstand droughts and floods. • Approval of the Governor’s streamlining proposals has strengthened California’s ability to secure federal infrastructure funds that will accelerate the construction of transportation, water, and clean energy projects to advance the state’s ambitious economic, climate, and social goals. Over the next ten years, California has the potential to invest as much as $180.0 billion in infrastructure projects that would create an estimated 400,000 direct and indirect jobs. viii California State Controller’s Transmittal Letter Principal Officials of the State of California Executive Branch Gavin Newsom Governor Eleni Kounalakis Lieutenant Governor Malia M. Cohen State Controller Rob Bonta Attorney General Fiona Ma, CPA State Treasurer Dr. Shirley N. Weber Secretary of State Tony Thurmond Superintendent of Public Instruction Ricardo Lara Insurance Commissioner Board of Equalization Ted Gaines, Member, First District Sally J. Lieber, Member, Second District Antonio Vazquez, Member, Third District Mike Schaefer, Member, Fourth District Legislative Branch Mike McGuire President pro Tempore, Senate Robert Rivas Speaker of the Assembly Judicial Branch Patricia Guerrero Chief Justice, State Supreme Court ix California State Controller's Report Overview Organization Chart of the State of California Citizens of the State Legislative Executive Judicial State Lieutenant State Judicial Senate Assembly Controller Governor Governor Supreme Council Court State State Courts Commission Board of Superintendent of on Judicial Equalization of Public Appeal Performance Instruction Insurance State Superior Habeas Commissioner Treasurer Courts Corpus Resource Center Secretary Attorney State Bar Commission of State General of on Judicial California Appointments Board of State Student Aid Business Office of Office of Office of Government Governors Board of Commission Consumer Business and Planning and Emergency Operations Community Education Services and Economic Research Services Agency Colleges Housing Development Agency Trustees University of State State Fair Political Transportation Department Environmental of State California Gambling Lottery Practices Agency of Corrections Protection Universities Board of Control Commission and Agency Regents Commission Rehabilitation Office of Delta Arts Labor and Department Health and Department Board of the Inspector Stewardship Council Workforce of Finance Human of Food and State and General Council Development Services Agriculture Community Agency Agency Corrections Commission Public Military State Natural Department Office of Tax on Peace Utilities Department Public Resources of Veterans Appeals Officer Commission Defender Agency Affairs Standards x Financial Section Independent Auditor’s Report THE GOVERNOR AND THE LEGISLATURE OF THE STATE OF CALIFORNIA Qualified and Unmodified Opinions We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the State of California, as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the State of California’s basic financial statements as listed in the table of contents. Summary of Opinions OPINION UNIT TYPE OF OPINION Governmental Activities………………………………………… …………Qualified Business-Type Activities………………………………………... …...….Unmodified Aggregate Discretely Presented Component Units……………… ……....Unmodified General Fund…………………………………………………….. ……....Unmodified Federal Fund…………………………………………………….. …………Qualified Transportation Fund……………………………………………... ……....Unmodified Environmental and Natural Resources Fund……………………. ......…..Unmodified Health Care Related Programs Fund……………………………. …...….Unmodified Electric Power Fund……………………………………………... …...….Unmodified Water Resources Fund…………………………………………... …...….Unmodified State Lottery Fund………………………………………………. ……....Unmodified Unemployment Programs Fund…………………………………. ……....Unmodified California State University Fund………………………………... …...….Unmodified Aggregate Remaining Fund Information………………………... ……....Unmodified Qualified Opinions on Governmental Activities and the Federal Fund In our opinion, except for the possible effects of the matter described in the Basis for Qualified and Unmodified Opinions section of our report, the financial statements referred to above present fairly, in all material respects, the financial position of Governmental Activities and the Federal Fund of the State of California, as of June 30, 2022, and the changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Unmodified Opinions on Each of the Other Opinion Units In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, aggregate discretely presented component units, each major fund except for the Federal Fund, and the aggregate remaining fund information of the State of California, as of June 30, 2022, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. We did not audit the financial statements of the following: Government-wide Financial Statements • Certain governmental funds that, in the aggregate, represent 1 percent of the assets and deferred outflows, and less than 1 percent of the revenues of the governmental activities. • Certain enterprise funds that, in the aggregate, represent 82 percent of the assets and deferred outflows, and 59 percent of the revenues of the business-type activities. • The University of California and the California Housing Finance Agency that represent 92 percent of the assets and deferred outflows, and 95 percent of the revenues of the discretely presented component units. Fund Financial Statements • The following major enterprise funds: Electric Power, Water Resources, State Lottery, and California State University. • The Golden State Tobacco Securitization Corporation, the Public Building Construction, the Public Employees’ Retirement, the State Teachers’ Retirement, the State Water Pollution Control Revolving, the Safe Drinking Water State Revolving, and the 1943 Veterans Farm and Home Building funds, that represent 87 percent of the assets and deferred outflows, and less than 1 percent of the additions, revenues and other financing sources of the aggregate remaining fund information. • The discretely presented component units noted above. The related financial statements were audited by other auditors whose reports have been furnished to us, and our opinions, insofar as they relate to the amounts included for those funds and entities, are based solely on the reports of the other auditors. Basis for Qualified and Unmodified Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. The financial statements of the Golden State Tobacco Securitization Corporation, the Public Building Construction fund, the State Lottery fund, and the Campus Foundations of the University of California, which represents 13 percent of university’s total assets and deferred outflows, and 5 percent of its revenues, were not audited in accordance with Government Auditing Standards. We are required to be independent of the State of California, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified and unmodified audit opinions. Matter Giving Rise to the Qualified Opinions on Governmental Activities and the Federal Fund The Employment Development Department had inadequate internal control over its financial reporting for federally funded unemployment insurance (UI) benefits, including not properly estimating the total population of ineligible payments. As a result, the department was unable to provide complete and accurate information for certain accounts within the federally funded portion of its UI program. We were therefore unable to obtain sufficient and appropriate audit evidence to conclude that the department’s balances representing 100 percent of Other Liabilities, 11 percent of Intergovernmental Revenues, and 12 percent of Health and Human Services Expenditures within the Federal Fund are free from material misstatement. The issues pertaining to the Federal Fund also affect the Governmental Activities. Therefore, we were unable to obtain sufficient and appropriate audit evidence about the Federal Fund balances that represent 99 percent of Other Current Liabilities, 12 percent of Health and Human Services Revenues, and 8 percent of Health and Human Services Expenses within Governmental Activities. Emphasis of Matter As described in Note 1 to the financial statements, in 2022, the State of California implemented Governmental Accounting Standards Board (GASB) Statement No. 87, Leases, and restated the beginning balances for its effect. Our opinions are not modified with respect to this matter. As described in Note 1 to the financial statements, in 2022, the State of California restated the beginning net position of the Unemployment Programs Fund to correct a prior year misstatement. Our opinions are not modified with respect to this matter. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the State of California’s ability to continue as a going concern for 12 months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the State of California’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the State of California’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, and other required supplementary information as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the State of California’s basic financial statements. The combining financial statements and schedules of nonmajor and other funds are presented for the purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures by us and other auditors, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures, in accordance with auditing standards generally accepted in the United States of America. In our opinion, based on our audit and the report of the other auditors, the combining financial statements and schedules of nonmajor and other funds are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 8, 2024, on our consideration of the State of California’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the State of California’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the State of California’s internal control over financial reporting and compliance. CALIFORNIA STATE AUDITOR LINUS LI, CPA Deputy State Auditor Sacramento, California March 8, 2024 Management’s Discussion and Analysis The following Management’s Discussion and Analysis is required supplementary information to the State of California’s financial statements. It describes and analyzes the financial position of the State, providing an overview of the State’s activities for the fiscal year ended June 30, 2022. We encourage readers to consider the information that we present here in conjunction with the information presented in the Controller’s transmittal letter at the front of this report and in the State’s financial statements and notes, which follow this section. Financial Highlights – Primary Government Government-wide Highlights In the wake of the pandemic, California’s priorities shifted from emergency response to economic resurgence going into fiscal year 2021-22. Circumstances during the previous year brought several of the less attended programmatic needs for the State to the forefront such as increasing disaster preparedness, expanding access to broadband infrastructure, addressing the homelessness crisis, and rebalancing the State’s unemployment insurance program. As its coffers were filled with substantial inflows of federal funding through the CARES Act and the American Rescue Plan Act, and higher than anticipated tax revenues in spite of purported economic impediments, California ended the previous fiscal year with a fund balance of $74.1 billion and cash and pooled investments of $63.9 billion in the General Fund. Fiscal year 2021-22 presented a couple new challenges – managing spending levels to circumspectly tackle the State’s many novel priorities while maintaining a watchful eye on future revenue projections still marked with uncertainty and volatility, and mitigating the onset of inflationary pressures that could impact both revenue and expenditure levels. For fiscal year 2021-22, General revenues, comprised primarily of taxes, showed continued growth with an increase of $6.6 billion (2.9%), a residual of the unexpected significant increase of $48.7 billion (27.2%) in general revenues recorded for fiscal year 2020-21. The increase in general revenues for both fiscal years is attributed to substantial tax collections from high-income Californians who experienced favorable economic outcomes through the pandemic, and from whom a large share of state tax payments are derived. Expenses and transfers for the State’s governmental activities decreased by $72.0 billion (14.5%) and were less than total revenues received, resulting in an $18.8 billion increase in the governmental activities’ net position, as restated. Total revenues and transfers for the State’s business-type activities also exceeded expenses, resulting in a $3.3 billion increase in the business-type activities’ net position, as restated, for fiscal year 2021-22. Net Position – Activity for fiscal year 2021-22 reflects a combined $22.1 billion increase in the primary government’s net position. Beginning net position included significant restatements related to the State’s unemployment programs, which resulted in a decrease in the beginning net position of governmental activities of $47.0 billion, and an increase in beginning net position of business-type activities of $19.8 billion. Beginning net position was also restated as a result of implementing GASB Statement No. 87, Leases, which established a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. The impact on the primary government’s beginning net position as a result of this implementation was an increase of $360 million. See Note 1 for additional details related to restatements. The primary government ended fiscal year 2021-22 with a deficit net position of $54.7 billion, an increase of $22.1 billion (28.8%) from the previous year, as restated. The total deficit net position is 7 State of California Annual Comprehensive Financial Report reduced by $129.2 billion for net investment in capital assets and by $71.1 billion for restricted net position, yielding a negative unrestricted net position of $255.1 billion. Restricted net position is dedicated for specified uses and is not available to fund current activities. More than 60.4%, or $154.0 billion, of the negative $255.1 billion unrestricted net position consists of unfunded, employee- related, long-term liabilities (net pension liability, net OPEB liability, and compensated absences) that are recognized as soon as an obligation occurs, even though payment will occur over many future periods. In addition, the State’s outstanding bonded debt consists of $64.6 billion to build capital assets of school districts and other local governmental entities. Bonded debt reduces the State’s unrestricted net position; however, local governments, not the State, own the capital assets that would normally offset this reduction. Fund Highlights Governmental Funds – As of June 30, 2022, the primary government’s governmental funds reported a combined ending fund balance of $68.6 billion, which was an increase of $7.2 billion over the prior fiscal year fund balance, as restated. The unrestricted fund balance, comprised of committed, assigned, and unassigned balances, was $5.2 billion, a decrease of $54.5 billion from the prior fiscal year unrestricted fund balance of $59.7 billion. The nonspendable and restricted fund balances were $3.0 billion and $60.4 billion, respectively. Proprietary Funds – As of June 30, 2022, the primary government’s proprietary funds reported a combined ending deficit net position of $20.8 billion, an increase of $3.6 billion from the prior fiscal year, as restated. The total net position is reduced by $4.1 billion for net investment in capital assets, expendable restrictions of $10.7 billion, and nonexpendable restrictions of $2 million, yielding a negative unrestricted net position of $35.6 billion. Noncurrent Assets and Liabilities As of June 30, 2022, the primary government’s noncurrent assets totaled $187.0 billion, of which $165.6 billion is related to capital assets. State highway infrastructure assets of $82.0 billion represent the largest portion of the State’s capital assets, while buildings and other depreciable property are the second largest portion with a total of $56.1 billion. The primary government’s noncurrent liabilities totaled $272.7 billion, which consists of $154.0 billion in unfunded employee-related future obligations, $73.5 billion in general obligation bonds, $30.2 billion in revenue bonds, and $15.0 billion in other noncurrent liabilities. During fiscal year 2021-22, the primary government’s noncurrent liabilities decreased by $56.8 billion (17.2%) from the previously reported noncurrent liabilities. The net decrease in noncurrent liabilities is driven by a decrease of $40.1 billion in net pension liability, and a decrease of $19.8 billion in loans payable due to the aforementioned restatement. Overview of the Financial Statements This discussion and analysis is an introduction to the section presenting the State’s basic financial statements, which includes four components: (1) government-wide financial statements, (2) fund financial statements, (3) discretely presented component units financial statements, and (4) notes to the financial statements. This report also contains required supplementary information, and combining financial statements and schedules intended to furnish additional detail that supports the basic financial statements. 8 Management’s Discussion and Analysis Government-wide Financial Statements Government-wide financial statements are designed to provide readers with a broad overview of the State’s finances. The government-wide financial statements do not include fiduciary programs and activities of the primary government and component units because fiduciary resources are not available to support state programs. The statements provide both short-term and long-term information about the State’s financial position to help readers assess the State’s economic condition at the end of the fiscal year. These statements are prepared using the economic resources measurement focus and the accrual basis of accounting, similar to methods used by most businesses. These statements take into account all revenues and expenses connected with the fiscal year, regardless of when the State received or paid the cash. The government- wide financial statements include two statements: the Statement of Net Position and the Statement of Activities. • The Statement of Net Position presents all of the State’s financial and capital resources in a format in which assets and deferred outflows of resources equal liabilities and deferred inflows of resources, plus net position. Over time, increases or decreases in net position indicate whether the financial position of the State is improving or deteriorating. • The Statement of Activities presents information showing how the State’s net position changed during the most recent fiscal year. The State reports changes in net position as soon as the event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, this statement reports revenues and expenses for some items that will result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). This statement also presents a comparison between direct expenses and program revenues for each function of the State. The government-wide financial statements separate into different columns the three types of state programs and activities—governmental activities, business-type activities, and component units. • Governmental activities are mostly supported by taxes, such as personal income and sales and use taxes, and intergovernmental revenues, primarily federal grants. Most services and expenses normally associated with state government fall into this activity category, including general government; education (public K–12 schools and institutions of higher education); health and human services; natural resources and environmental protection; business, consumer services, and housing; transportation; corrections and rehabilitation; and interest on long-term debt. • Business-type activities typically recover all or a significant portion of their costs through user fees and charges to external users of goods and services. The business-type activities of the State of California include providing unemployment insurance programs, providing housing loans to California veterans, providing water to local water districts, providing services to California State University students, selling California State Lottery tickets, and selling electric power. These activities are conducted with minimal financial assistance from the governmental activities or general revenues of the State. • Component units are organizations that are legally separate from the State, but for which the State is financially accountable, or whose relationship with the State is so significant that their exclusion 9 State of California Annual Comprehensive Financial Report would cause the State’s financial statements to be misleading or incomplete. Various types of component units are presented; all are legally separate. However, blended component units function as part of the State’s operations. Fiduciary component units are primarily the resources and operations of the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System. Discretely presented component units contain some form of accountability either from or to the State. Most component units prepare their own separately issued financial statements. For information regarding obtaining the financial statements of the individual component units, refer to Note 1A, Reporting Entity. Fund Financial Statements The State of California, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal and contractual requirements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. All of the funds of the State may be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. • Governmental funds are used to account for essentially the same functions that are reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on short-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s short-term financing requirements. This approach is known as the flow of current financial resources measurement focus and the modified accrual basis of accounting. These governmental fund statements provide a detailed short-term view of the State’s finances, enabling readers to determine whether adequate financial resources exist to meet the State’s current needs. Because governmental fund financial statements provide a narrower focus than do government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s short-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate comparison between governmental funds and governmental activities. Primary differences between the government- wide and fund-based statements relate to noncurrent assets, such as land and buildings, and noncurrent liabilities, such as bonded debt and amounts owed for net pension liability, compensated absences, and capital lease obligations. These amounts are reported in the government-wide statements but not in the fund-based statements. • Proprietary funds show activities that operate more like those found in the private sector. The State of California has two proprietary fund types—enterprise funds and internal service funds. ◦ Enterprise funds record activities for which a fee is charged to external users; they are presented as business-type activities in the government-wide financial statements. 10 Management’s Discussion and Analysis ◦ Internal service funds accumulate and allocate costs internally among the State’s various functions. For example, internal service funds provide public buildings construction, information technology, printing, fleet management, and architectural services primarily for state departments. As a result, their activity is considered governmental. • Fiduciary funds account for resources held for the benefit of parties outside the State. Fiduciary funds and the activities of fiduciary component units are not reflected in the government-wide financial statements because the resources of these funds are not available to support state programs. The accounting used for fiduciary funds and similar component units is similar to that used for trusts. Discretely Presented Component Units Financial Statements The State has financial accountability for discretely presented component units, which have certain independent qualities and operate in a similar manner to private sector businesses. The activities of the discretely presented component units are classified as enterprise activities. Notes to the Financial Statements The notes to the financial statements in this publication provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements, which describe particular accounts in more detail, immediately follow the discretely presented component units’ financial statements. Required Supplementary Information A section of required supplementary information follows the notes to the basic financial statements in this publication. This section includes several schedules of information for the State’s pension and OPEB plans and the State’s contributions to those plans; information on infrastructure assets based on the modified approach; a budgetary comparison schedule; and a reconciliation of the budgetary basis and the GAAP basis fund balances for the major governmental funds presented in the governmental fund financial statements. Combining Financial Statements and Schedules The Combining Financial Statements and Schedules – Nonmajor and Other Funds section presents combining statements that provide separate financial statements for nonmajor governmental funds, nonmajor proprietary funds, fiduciary funds, and nonmajor component units as supplementary information. The basic financial statements present only summary information for these activities. Government-wide Financial Analysis Net Position The primary government’s combined deficit net position (governmental and business-type activities improved by $22.1 billion (28.8%), from a negative $76.9 billion, as restated, to a negative $54.7 billion at June 30, 2022. As previously mentioned, the net position at the beginning of fiscal year 2021-22 was restated as a result of the implementation of GASB Statement No. 87, and there were significant restatements to the Federal Fund and Unemployment Programs Fund due to error corrections in accounting for the State’s unemployment programs. 11 State of California Annual Comprehensive Financial Report The primary government’s $129.2 billion net investment in capital assets, such as land, buildings, equipment, and infrastructure (roads, bridges, and other immovable assets) comprise a significant portion of its net position. This amount of capital assets is net of any outstanding debt used to acquire those assets. The State uses capital assets when providing services to citizens; consequently, these assets are not available for future spending. Although the State’s investment in capital assets is reported net of related debt, the resources needed to repay this debt must come from other sources because the State cannot use the capital assets to pay off the liabilities. The primary government’s deficit net position includes another $71.1 billion, which represents resources that are externally restricted as to how they may be used, such as resources pledged to debt service. The internally-imposed earmarking of resources is not presented in this publication as restricted net position. As of June 30, 2022, the primary government’s combined unrestricted deficit net position was $255.1 billion—$221.9 billion for governmental activities and $33.2 billion for business-type activities. Table 1 presents condensed financial information derived from the Statement of Net Position for the primary government. Table 1 Net Position – Primary Government – Two-year Comparison June 30, 2022 and 2021 (amounts in millions) Governmental Activities Business-type Activities Total 2022 2021 2022 2021 2022 2021 ASSETS Current and other assets............................. $ 272,237 $ 232,590 $ 30,040 $ 28,979 $ 302,277 $ 261,569 Capital assets.............................................. 148,939 142,535 16,646 15,358 165,585 157,893 Total assets............................................ 421,176 375,125 46,686 44,337 467,862 419,462 DEFERRED OUTFLOWS OF RESOURCES 29,093 26,921 3,778 3,598 32,871 30,519 Total assets and deferred outflows of resources....................... $ 450,269 $ 402,046 $ 50,464 $ 47,935 $ 500,733 $ 449,981 LIABILITIES Noncurrent liabilities.................................. $ 233,183 $ 267,265 $ 39,470 $ 62,207 $ 272,653 $ 329,472 Other liabilities........................................... 202,779 127,774 22,722 23,565 225,501 151,339 Total liabilities....................................... 435,962 395,039 62,192 85,772 498,154 480,811 DEFERRED INFLOWS OF RESOURCES 49,826 14,327 7,501 4,500 57,327 18,827 Total liabilities and deferred inflows of resources......................... 485,788 409,366 69,693 90,272 555,481 499,638 NET POSITION Net investment in capital assets................. 125,863 120,745 3,341 2,678 129,204 123,423 Restricted.................................................... 60,482 46,363 10,642 7,653 71,124 54,016 Unrestricted................................................ (221,864) (174,428) (33,212) (52,668) (255,076) (227,096) Total net position (deficit).................... (35,519) (7,320) (19,229) (42,337) (54,748) (49,657) Total liabilities, deferred inflows of resources, and net position......... $ 450,269 $ 402,046 $ 50,464 $ 47,935 $ 500,733 $ 449,981 Note: Prior-year adjustments recorded in the current year have not been reflected in the prior-year column. A significant factor contributing to the unrestricted net deficit is that governments recognize a liability on the government-wide Statement of Net Position as soon as an obligation occurs, while financing and budgeting functions focus on when a liability will be paid. As of June 30, 2022, the primary government 12 Management’s Discussion and Analysis recognized $154.0 billion (60.4% of the $255.1 billion unrestricted net deficit) in unfunded employee- related obligations—net pension liability, net OPEB liability, and compensated absences. In addition, the primary government recognized $64.6 billion in outstanding bonded debt issued to build capital assets for school districts and other local governmental entities, a common state practice nationwide. As the State does not own these capital assets, neither the assets nor the related bonded debt is included in the portion of net position reported as net investment in capital assets. Instead, the bonded debt is reported as a noncurrent liability that increases the State’s unrestricted deficit net position. The State can expect continued deficits in the unrestricted net position of governmental activities as long as it has significant unfunded employee-related obligations and outstanding obligations for school districts and other local governmental entities. Chart 1 presents a two-year comparison of the State’s net position. Chart 1 Net Position – Primary Government – Two-year Comparison June 30, 2022 and 2021 (amounts in billions) Net Investment in 129.2 Capital Assets 123.4 71.1 Restricted 54.0 -255.1 Unrestricted -227.1 $-300 $-250 $-200 $-150 $-100 $-50 $0 $50 $100 $150 ■ 2022 □ 2021 Changes in Net Position The expenses of the primary government totaled $455.3 billion for the fiscal year ended June 30, 2022. Of this amount, $242.8 billion (53.3%) was funded with program revenues (charges for services or program-specific grants and contributions), leaving a negative $212.5 billion to be funded with general revenues (mainly taxes). The primary government’s general revenues of $234.6 billion were greater than the unfunded expenses. As a result, the total net position, as restated, increased by $22.1 billion, or 28.8%. 13 State of California Annual Comprehensive Financial Report Table 2 presents condensed financial information derived from the Statement of Activities for the primary government. Table 2 Changes in Net Position – Primary Government – Two-year Comparison Years ended June 30, 2022 and 2021 (amounts in millions) Governmental Activities Business-type Activities Total 2022 2021 2022 2021 2022 2021 REVENUES Program Revenues: Charges for services.................................... $ 36,222 $ 35,355 $ 29,967 $ 37,327 $ 66,189 $ 72,682 Operating grants and contributions............. 170,663 268,258 4,010 3,103 174,673 271,361 Capital grants and contributions................. 1,895 1,847 — — 1,895 1,847 General Revenues: Taxes........................................................... 233,194 227,301 — — 233,194 227,301 Investment and interest............................... 789 140 — — 789 140 Miscellaneous............................................. 660 640 — — 660 640 Total revenues....................................... 443,423 533,541 33,977 40,430 477,400 573,971 EXPENSES Program Expenses: General government................................... 38,760 30,605 — — 38,760 30,605 Education.................................................... 108,451 101,570 — — 108,451 101,570 Health and human services......................... 216,232 311,926 — — 216,232 311,926 Natural resources and environmental protection................................................ 12,503 9,923 — — 12,503 9,923 Business, consumer services, and housing.................................................... 7,364 2,947 — — 7,364 2,947 Transportation............................................. 15,793 18,120 — — 15,793 18,120 Corrections and rehabilitation.................... 16,526 14,185 — — 16,526 14,185 Interest on long-term debt........................... 3,508 3,504 — — 3,508 3,504 Electric Power............................................. — — 36 290 36 290 Water Resources......................................... — — 1,233 1,157 1,233 1,157 State Lottery............................................... — — 8,885 8,453 8,885 8,453 Unemployment Programs........................... — — 14,966 55,737 14,966 55,737 California State University......................... — — 10,778 10,391 10,778 10,391 Other enterprise programs.......................... — — 271 209 271 209 Total expenses........................................ 419,137 492,780 36,169 76,237 455,306 569,017 Excess (deficiency) before transfers.... 24,286 40,761 (2,192) (35,807) 22,094 4,954 Gain on early extinguishment of debt......... 12 — — — 12 — Transfers..................................................... (5,466) (3,852) 5,466 3,852 — –– Change in net position................................ 18,832 36,909 3,274 (31,955) 22,106 4,954 Net position (deficit), beginning.................. (54,350) * (44,230) * (22,504) * (10,381) * (76,854) (54,611) Net position (deficit), ending....................... $ (35,518) $ (7,321) $ (19,230) $ (42,336) $ (54,748) $ (49,657) *Restated Note: Prior-year adjustments recorded in the current year have not been reflected in the prior-year column. 14 Management’s Discussion and Analysis Governmental Activities During fiscal year 2021-22, governmental activities’ expenses and transfers totaled $424.6 billion. Program revenues totaling $208.8 billion, including $172.6 billion in federal grants and contributions, funded 49.2% of expenses and transfers, leaving $215.8 billion to be funded with general revenues (mainly taxes). General revenues for governmental activities ($234.6 billion) exceeded net unfunded expenses and transfers, resulting in the governmental activities’ deficit net position of $35.5 billion, after restatement, as of June 30, 2022, an improvement of $18.8 billion (34.7%) over the prior year’s restated deficit net position of $54.3 billion. Chart 2 presents a comparison of governmental activities’ expenses to related revenue by program. Chart 2 Program Revenues and Expenses – Governmental Activities Year ended June 30, 2022 (amounts in billions) 11.1 General government 38.8 17.9 Education 108.4 151.4 Health and human services 216.2 12.3 Transportation 15.8 0.7 Corrections and rehabilitation 16.5 15.4 Other programs 23.4 $0 $40 $80 $120 $160 $200 $240 ■ Program Revenues □ Expenses For the fiscal year ended June 30, 2022, total governmental activities’ revenue was $443.4 billion, a decrease of 16.9% from the prior year. General revenues increased by $6.6 billion (2.9%), to $234.6 billion, and program revenues decreased by $96.7 billion (31.7%), to $208.8 billion. Corporation taxes continued to surge, increasing by $3.7 billion (11.7%) over the prior year due to growth in retail sales and corporate investment earnings. Sales and use taxes increased by $6.4 billion (14.0%) from the prior year due to the collection of deferred payments granted during the last quarter of fiscal year 2021-22 for relief from the COVID-19 pandemic. Personal income taxes decreased by $6.0 billion (4.5%) from the prior year in fiscal year 2021-22, compared to an increase of $23.7 billion (21.9%) for fiscal year 2020-21. The decrease occurred despite an improving and overall positive job market. This 15 State of California Annual Comprehensive Financial Report could be attributed in part to a slump in employee compensation levels due to the economic uncertainty of the pandemic, and significantly less corporate initial public offerings (IPOs) to fuel individual investment earnings. Chart 3 presents the percentage of total revenues by source for each governmental activities program. Chart 3 Revenues by Source Year ended June 30, 2022 (as a percent) Personal income tax 28.4% Sales and use tax 11.8% Corporation tax 8.1% Charges for services 8.2% Other revenue 4.6% Grants and contributions 38.9% Overall, expenses for governmental activities decreased by $73.6 billion (14.9%) from the prior year. The largest decrease in expenditures, $95.7 billion (30.7%), occurred in health and human services programs. In the prior year, the Department of Health Care Services and the Employment Development Department, in administering the California Medical Assistance (Medi-Cal) program and unemployment benefit programs, respectively, received significant assistance under the CARES act to support California’s recovery from the COVID-19 recession and thereby incurred a spike in program expenditures. In the current year, the level of activity was greatly reduced. Chart 4 presents the percentage of total expenses for each governmental activities program. Chart 4 Expenses by Program Year ended June 30, 2022 (as a percent) Education 26.0% I General government 9.2% Corrections and rehabilitation 3.9% Transportation 3.7% Other 5.6% Health and human services 51.6% 16 Management’s Discussion and Analysis Business-type Activities As of June 30, 2022, business-type activities’ expenses totaled $36.2 billion. Program revenues of $34.0 billion, primarily generated from charges for services, and $5.5 billion in transfers, exceeded business-type activities expenses. As a result, the business-type activities’ total deficit net position improved by $3.3 billion over the prior year’s restated deficit net position of $22.5 billion, to a net deficit of $19.2 billion at June 30, 2022. Business-type activities’ expenses for fiscal year 2021-22 decreased by $40.1 billion from the prior year total of $76.2 billion due to a significant reduction in unemployment benefit expenses. Chart 5 presents a two-year comparison of the expenses of the State’s business-type activities. Chart 5 Expenses – Business-type Activities – Two-year Comparison Years ended June 30, 2022 and 2021 (amounts in billions) 1.2 Water Resources 1.1 8.9 State Lottery 8.5 15.0 Unemployment Programs 55.7 10.8 California State University 10.4 0.3 Other enterprise programs 0.5 $0 $4 $8 $12 $16 $20 $24 $28 $32 $36 $40 $44 $48 $52 $56 $60 ■ 2022 □ 2021 Fund Financial Analysis The financial position of the State’s governmental funds improved in fiscal year 2021-22, with a combined fund balance increase of $7.2 billion over the prior year’s restated ending fund balance. Governmental funds rely heavily on taxes to support the majority of the State’s services and programs. The State’s “Big Three” tax revenues (personal income, sales and use, and corporation) had a net increase during the fiscal year. The proprietary funds’ total net position increased by $3.6 billion during fiscal year 2021-22—comprised of a $3.3 billion increase for enterprise funds, as well as a $302 million increase for internal service funds. The increase in the enterprise funds’ net position is attributable to a 17 State of California Annual Comprehensive Financial Report net position increase of $1.6 billion for the California State University driven largely by subsidies, and a net position increase of $1.3 billion in the Unemployment Programs Fund to improve to a deficit balance of $11.7 billion. The deficit net position for Unemployment Programs is due to the programs’ inability to confirm eligibility for revenue sources associated with certain claims payments, beginning in previous fiscal years. Governmental Funds As of June 30, 2022, the governmental funds’ balance sheet reported $288.6 billion in assets, $220.0 billion in liabilities and deferred inflows of resources, and fund balances totaling $68.6 billion. Total assets of governmental funds increased by 11.2%, while total liabilities and deferred inflows of resources increased by 45.9%, which still yielded a net fund balance increase of $7.2 billion (11.7%) above the prior year’s restated balance. Within the governmental funds’ total fund balance, $3.0 billion is classified as nonspendable, as this amount consists of long-term interfund receivables, loans receivable, and legal or contractual requirements. Another $60.4 billion is classified as restricted for specific programs by external constraints such as debt covenants and contractual obligations, or by constitutional provisions or enabling legislation. Furthermore, $16.9 billion of the total fund balance is classified as committed for specific purposes and $7.4 billion is classified as assigned for specific purposes. The remaining unassigned balance of the governmental funds is deficit $19.1 billion — $63.0 billion less than the unassigned balance from the prior fiscal year. The Statement of Revenues, Expenditures, and Changes in Fund Balances of the governmental funds reported $443.9 billion in revenues, $445.4 billion in expenditures, and $8.6 billion in net receipts from other financing sources. The ending fund balance of the governmental funds for the fiscal year ended June 30, 2022, was $68.6 billion, a $7.2 billion increase over the prior year’s restated ending fund balance of $61.4 billion. Governmental funds’ revenue consists primarily of taxes (52.5%) and intergovernmental revenue (39.4%). Personal income taxes accounted for 54.0% of tax revenues and decreased by $6.2 billion from the prior fiscal year. Sales and use taxes accounted for 22.5% of tax revenues and increased by $6.4 billion over the prior fiscal year. Corporation taxes accounted for 15.4% of tax revenues and increased by $3.7 billion over the prior fiscal year. Intergovernmental revenue, primarily from the federal government, plummeted by $97.6 billion (35.8%) from the prior fiscal year as funding from the American Rescue Plan Act was exhausted. Governmental funds’ expenditures decreased by $53.6 billion (10.7%) from the prior fiscal year. The decrease includes a decline in health and human services expenditures of $94.9 billion (30.5%) due to a reduction in Medi-Cal spending from pandemic levels. The overall decrease in governmental funds’ expenditures also consists of an increase in education expenditures of $11.8 billion (11.8%) over the prior fiscal year to comply with constitutional requirements (Proposition 98) that provide a minimum funding guarantee to support California’s K-12 schools and community colleges. The minimum funding guarantee increased as a result of increased General Fund revenue in fiscal year 2021-22. 18 Management’s Discussion and Analysis Chart 6 presents a two-year comparison of governmental funds’ tax revenues. Chart 6 Governmental Funds Tax Revenue – Two-year Comparison Years ended June 30, 2022 and 2021 (amounts in billions) 125.9 Personal income taxes 132.1 52.3 Sales and use taxes 45.9 35.8 Corporation taxes 32.1 8.5 Motor vehicle excise taxes 7.9 3.5 Insurance taxes 3.2 Managed care organization enrollment 2.6 tax 2.3 4.4 Other taxes 4.0 $0 $20 $40 $60 $80 $100 $120 $140 ■ 2022 □ 2021 The State’s major governmental funds are the General Fund, the Federal Fund, the Transportation Fund, the Environmental and Natural Resources Fund, and the Health Care Related Programs Fund. The General Fund ended the fiscal year with a fund balance of $74.0 billion, a decreases of $93 million over the prior year’s fund balance. The Federal Fund ended the year with a negative fund balance of $54.7 billion, while the Transportation Fund, the Environmental and Natural Resources Fund, and the Health Care Related Programs Fund ended the fiscal year with fund balances of $10.2 billion, $17.6 billion, and $1.8 billion, respectively. The nonmajor governmental funds ended the fiscal year with a combined fund balance of $19.7 billion. General Fund: As shown on the Balance Sheet, the General Fund (the State’s main operating fund) ended fiscal year 2020-21 with assets of $168.5 billion; liabilities and deferred inflows of resources of $94.4 billion; and nonspendable, restricted, committed, and assigned fund balances of $3.0 billion, $23.3 billion, $4.0 billion, and $7.3 billion, respectively. This left the General Fund with an unassigned fund balance of $36.5 billion, a decrease of $16.2 billion over the prior year. Total assets of the General Fund increased by $40.7 billion (31.9%) over the prior fiscal year, and total liabilities and deferred inflows of resources increased by $40.8 billion (76.2%) over the prior year. 19 State of California Annual Comprehensive Financial Report Chart 7 presents a two-year comparison of the components of the governmental funds’ balance. Chart 7 Governmental Funds – Components of Fund Balance – Two-year Comparison Years ended June 30, 2022 and 2021 (amounts in billions) 3.0 Nonspendable 2.9 60.4 Restricted 46.2 17.0 Committed 10.8 7.3 Assigned 5.0 -19.1 Unassigned 43.9 $-30 $-20 $-10 $0 $10 $20 $30 $40 $50 $60 ■ 2022 □ 2021 As shown on the Statement of Revenue, Expenditures, and Changes in Fund Balances, General Fund revenues exceeded expenditures by $8.1 billion ($199.2 billion in revenues and $191.1 billion in expenditures). Approximately $192.0 billion (96.4%) of General Fund revenue is derived from the State’s largest three taxes—personal income taxes ($123.3 billion), corporation taxes ($35.8 billion), and the sales and use taxes ($32.8 billion). A total of $498 million in revenue is included in the General Fund as a result of fund classifications made to comply with generally accepted governmental accounting principles. These revenues are not considered General Fund revenues for any budgetary purposes or for the State’s Budgetary/Legal Basis Annual Report. During fiscal year 2021-22, total General Fund revenue increased by $2.2 billion (1.1%), attributable primarily to increases of corporation taxes and sales and use taxes of $3.7 billion and $3.7 billion, respectively. General Fund expenditures increased by $44.7 billion (30.6%). The largest components of the expenditure increase were education and health and human services, which rose by $21.2 billion and $4.9 billion, respectively. The General Fund ended the fiscal year with a fund balance of $74.0 billion, a decrease of $93 million over the prior year’s restated ending fund balance of $74.1 billion. The General Fund’s ending fund balance includes $20.3 billion restricted for budget stabilization if the Governor must declare a budget emergency during an economic crisis, such as the COVID-19 pandemic. Federal Fund: The Federal Fund reports federal grant revenues and the related expenditures to support grant programs. The largest of these programs is for health and human services, including Medi-Cal and unemployment programs, which accounted for $138.2 billion (81.1%) of the total $170.4 billion in fund expenditures. Education and general government programs also constituted $18.0 billion (10.6%) and $4.3 billion (2.5%) of the fund’s expenditures, respectively. The Federal Fund’s revenues decreased by $97.5 billion from the prior year, while expenditures and transfers had a combined decrease of 20 Management’s Discussion and Analysis $105.1 billion, and resulted in a $1.2 billion improvement over the prior year’s ending deficit fund balance of $55.9 billion, to a $54.7 billion deficit. Transportation Fund: The Transportation Fund accounts for fuel taxes, bond proceeds, and other revenues used primarily for highway and passenger rail construction. The Transportation Fund’s revenues increased by $727 million (4.5%) and its expenditures increased by $389 million (2.4%), as a result of continued funding under the Road Repair and Accountability Act of 2017 (Senate Bill 1). Other financing sources provided net receipts of $156 million. The Transportation Fund ended the fiscal year with a $10.2 billion fund balance, an increase of $383 million from the prior year. Environmental and Natural Resources Fund: The Environmental and Natural Resources Fund accounts for fees, bond proceeds, and other revenues that are used for maintaining the State’s natural resources and improving the environmental quality of its air, land, and water. The Environmental and Natural Resources Fund’s revenues increased by $1.7 billion (22.9%), and expenditures increased by $79 million (0.9%) due to the spending requirements related to the Parks and Water Bond Act of 2018 (Proposition 68), passed by voters in June 2018. Other financing sources provided net receipts of $2.4 billion, mainly from bond proceeds, including those sold under Proposition 68. The Environmental and Natural Resources Fund ended the fiscal year with a $17.6 billion fund balance, an increase of $2.8 billion (18.8%) over the prior year. Health Care Related Programs Fund: The Health Care Related Programs Fund accounts for fees, taxes, intergovernmental revenue, bond proceeds, transfers from other state funds, and other revenue used for the Medi-Cal program, medical research, and other health care-related programs. The Health Care Related Programs Fund’s revenues decreased by $350 million (3.5%), and expenditures decreased by $304 million (3.0%). Other financing sources provided net receipts of $221 million. The Health Care Related Programs Fund ended the fiscal year with a $1.8 billion fund balance, a decrease of $164 million from the prior year. Proprietary Funds Enterprise Funds: The total deficit net position of the enterprise funds at June 30, 2022, was $19.2 billion—a $3.3 billion improvement from the prior year’s restated deficit net position of $22.5 billion. The largest portion of the net increase in net position was in the California State University Fund and totaled $1.6 billion. The Unemployment Programs Fund accounted for $1.3 billion of the net increase, ending the fiscal year with a deficit net position of $11.7 billion. The net position of nonmajor enterprise funds increased by $258 million, while the net position of the State Lottery Fund decreased by $100 million. As shown on the proprietary funds’ Statement of Net Position, total assets and deferred outflows of resources for the enterprise funds were $51.2 billion as of June 30, 2022. Of this amount, current assets totaled $16.2 billion, noncurrent assets totaled $31.2 billion, and deferred outflows of resources totaled $3.8 billion. The total liabilities and deferred inflows of resources for the enterprise funds was $70.4 billion. One of the largest liabilities of the enterprise funds is $18.2 billion due to other governments, $17.9 billion of which represents the balance in the Unemployment Programs Fund for which the program was unable to confirm eligibility for revenue sources associated with certain claims payments. As of June 30, 2022, the Unemployment Programs Fund also reported a balance on deposit with the U.S. Treasury of $480 million, funds used to pay unemployment claims during the pandemic. Other noteworthy cumulative liabilities of the enterprise funds include a net OPEB liability of $16.9 billion and $13.9 billion in revenue bonds payable, including the current portion. 21 State of California Annual Comprehensive Financial Report Total net position for enterprise funds consisted of four segments: net investment in capital assets of $3.3 billion, nonexpendable restricted net position of $2 million, restricted expendable net position of $10.6 billion, and unrestricted net deficit of $33.2 billion. As shown on the Statement of Revenues, Expenses, and Changes in Fund Net Position of proprietary funds, the enterprise funds ended the year with operating revenues of $29.9 billion, operating expenses of $33.4 billion, and net revenues from other transactions and transfers of $6.8 billion. The largest sources of operating revenues were unemployment and disability insurance receipts of $16.3 billion in the Unemployment Programs Fund, and lottery ticket sales of $8.9 billion collected by the State Lottery Fund. Unemployment and disability insurance receipts in the Unemployment Programs Fund were $7.6 billion (31.9%) less than the prior fiscal year. The largest operating expenses were distributions to beneficiaries of $14.9 billion reported in the Unemployment Programs Fund, personal services expenses of $6.1 billion reported in the California State University Fund, and lottery prizes of $5.8 billion distributed by the State Lottery Fund. Internal Service Funds: The total net deficit of the internal service funds was $1.6 billion as of June 30, 2022. The net position consists of three segments: net investment in capital assets of $705 million, restricted expendable net position of $99 million, and unrestricted deficit net position of $2.4 billion. Fiduciary Funds The State of California has four types of fiduciary funds: pension and other employee benefit trust funds, private purpose trust funds, investment trust funds, and custodial funds. The pension and other employee benefit trust funds ended the fiscal year with a net position of $778.8 billion. The private purpose trust funds ended the fiscal year with a net position of $12.6 billion. The investment trust funds ended the fiscal year with a net position of $35.8 billion. The custodial fund ended the fiscal year with a net position of $690 million. For the fiscal year ended June 30, 2022, the fiduciary funds’ combined net position was $827.9 billion, a $52.9 billion decrease from the prior year net position. The net position decreased primarily due to payments made to participants which exceeded the contributions received and investment income earned in pension and other employee benefit trust funds. General Fund Budget Highlights The original General Fund budget of $168.6 billion was increased by $48.3 billion during fiscal year 2021-22. This increase is primarily attributed to additional funding for education, health and human services, and other general government. Education increased due to an increase in guaranteed minimum funding levels for K-12 schools and community colleges under Proposition 98. The increase in health & human services is due to increased funding for home and community-based services made available by the American Rescue Plan Act, and additional allocations to children’s behavioral health. Other general government increased due to the one-time Golden State Stimulus II Tax Refund program. 22 Management’s Discussion and Analysis Table 3 presents a summary of the General Fund original and final budgets. Table 3 General Fund Original and Final Budgets Year ended June 30, 2022 (amounts in millions) Increase/ Original Final (Decrease) Budgeted amounts Business, consumer services, and housing.................................................. $ 1,114 $ 1,158 $ 44 Transportation.............................................................................................. 1,303 3,028 1,725 Natural resources and environmental protection......................................... 8,855 9,816 961 Health and human services.......................................................................... 50,630 56,204 5,574 Corrections and rehabilitation...................................................................... 13,833 14,262 429 Education..................................................................................................... 68,498 107,428 38,930 General government: Tax relief................................................................................................... 393 415 22 Debt service............................................................................................... 6,188 4,718 (1,470) Other general government......................................................................... 17,834 19,966 2,132 Total....................................................................................................... $ 168,648 $ 216,995 $ 48,347 Capital Assets and Debt Administration Capital Assets As of June 30, 2022, the State’s investment in capital assets for its governmental and business-type activities amounted to $165.6 billion (net of accumulated depreciation/amortization). The State’s capital assets include land, state highway infrastructure, collections, buildings and other depreciable property, intangible assets, and construction/development in progress. The buildings and other depreciable property account includes buildings, improvements other than buildings, equipment, certain infrastructure assets, certain books, and other capitalized and depreciable property. Intangible assets include computer software, land use rights, patents, copyrights, and trademarks. Infrastructure assets are items that normally are immovable, such as roads and bridges, and can be preserved for a greater number of years than can most capital assets. As of June 30, 2022, the State’s capital assets increased by $7.7 billion, or 4.9% over the prior fiscal year. The majority of the increase is attributed to right to use leased assets of $3.3 billion due to the implementation of GASB Statement No. 87, Leases, as well as net additions to buildings and other depreciable property of $2.9 billion. Additional information on the State’s capital assets can be found in Note 6. 23 State of California Annual Comprehensive Financial Report Table 4 presents a summary of the primary government’s capital assets for governmental and business- type activities. Table 4 Capital Assets – Primary Government – Two-year Comparison June 30, 2022 and 2021 (amounts in millions) Governmental Activities Business-type Activities Total 2022 2021 2022 2021 2022 2021 Land................................................................ $ 21,699 $ 21,547 $ 448 $ 423 $ 22,147 $ 21,970 State highway infrastructure........................... 81,997 81,019 — — 81,997 81,019 Collections – nondepreciable......................... 23 23 35 34 58 57 Buildings and other depreciable property................................... 35,948 34,249 20,114 18,914 56,062 53,163 Intangible assets – amortizable...................... 3,129 2,937 497 458 3,626 3,395 Right to use leased assets............................... 2,953 — 386 — 3,339 — Less: accumulated depreciation/amortization........................... (18,875) (17,947) (8,170) (7,564) (27,045) (25,511) Construction/development in progress........... 20,917 19,783 3,210 2,969 24,127 22,752 Intangible assets – nonamortizable................ 1,148 924 126 124 1,274 1,048 Total....................................................... $ 148,939 $ 142,535 $ 16,646 $ 15,358 $ 165,585 $ 157,893 Note: Prior-year adjustments recorded in the current year have not been reflected in the prior-year column. Modified Approach for Infrastructure Assets The State has elected to use the modified approach for capitalizing infrastructure assets of the state highway system (state bridges and roadways). Under the modified approach, the State does not report depreciation expense for its bridges and roads but capitalizes all costs that add to their capacity and efficiency. All maintenance and preservation costs are expensed. Under the modified approach, the State maintains an asset management system to demonstrate that the infrastructure is preserved at or above established condition levels. During fiscal year 2021-22, the actual amount spent on preservation was 51.8% of the estimated budgeted amount needed to maintain the infrastructure assets at established condition levels. Although the amount spent fell short of the budgeted amount, the assessed condition of the State’s bridges and roadways is better than the established condition baselines, with 94.1% of bridge deck area judged to be of fair or better quality and 86.1% of lane miles judged to be of fair or better quality in the last completed pavement-condition survey. The State is responsible for maintaining 13,055 bridges and tunnels and 50,182 lane miles. The Required Supplementary Information includes additional information on how the State uses the modified approach for infrastructure assets; it also presents the established condition standards, condition assessments, and preservation costs. Debt Administration At June 30, 2022, the State had total bonded debt outstanding of $109.5 billion. Of this amount, $77.9 billion (71.2%) represents general obligation bonds, which are backed by the full faith and credit of the State. The current portion of general obligation bonds outstanding is $4.4 billion and the long- 24 Management’s Discussion and Analysis term portion is $73.5 billion. The remaining $31.6 billion (28.8%) of bonded debt outstanding represents revenue bonds, which are secured solely by specified revenue sources. The current portion of revenue bonds outstanding is $1.4 billion and the long-term portion is $30.2 billion. During the fiscal year, the State issued a total of $6.6 billion in new general obligation bonds to fund various capital projects and other voter-approved costs related to K-12 schools and higher education facilities, transportation improvements and high-speed rail, water quality and environmental protection, and other public purposes. Table 5 presents a summary of all the primary government’s long-term obligations for governmental and business-type activities. Table 5 Long-term Obligations – Primary Government – Two-year Comparison Years ended June 30, 2022 and 2021 (amounts in millions) Governmental Activities Business-type Activities Total 2022 2021 2022 2021 2022 2021 Government-wide noncurrent liabilities General obligation bonds.................................. $ 72,977 $ 74,088 $ 533 $ 551 $ 73,510 $ 74,639 Revenue bonds payable.................................... 16,310 15,144 13,858 13,411 30,168 28,555 Total bonded debt......................................... 89,287 89,232 14,391 13,962 103,678 103,194 Net pension liability.......................................... 47,921 84,713 6,248 9,543 54,169 94,256 Net other postemployment benefits liability............................................ 77,369 76,992 16,914 16,960 94,283 93,952 Mandated cost claims payable.......................... 1,923 2,044 — — 1,923 2,044 Loans payable................................................... 40 46 — 19,769 40 19,815 Compensated absences payable........................ 5,225 5,384 287 374 5,512 5,758 Workers’ compensation benefits payable.......................................................... 4,909 4,416 15 13 4,924 4,429 Lease liability................................................... 2,091 316 300 316 2,391 632 Commercial paper............................................. 1,449 1,176 307 401 1,756 1,577 Other noncurrent liabilities............................... 2,968 2,945 1,009 870 3,977 3,815 Total noncurrent liabilities...................... 233,182 267,264 39,471 62,208 272,653 329,472 Current portion of long-term obligations............. 6,475 6,113 1,769 2,576 8,244 8,689 Total long-term obligations..................... $ 239,657 $ 273,377 $ 41,240 $ 64,784 $ 280,897 $ 338,161 During the fiscal year ended June 30, 2022, the primary government’s total long-term obligations decreased by $57.3 billion from the prior year’s balance. The largest decrease in long-term obligations during the fiscal year was a $40.1 billion decrease in net pension liability resulting from an increase in pension plan net investment income. Another notable decrease included $19.8 billion in loans payable due to a prior period adjustment to the Unemployment Program Funds. Significant increases included $1.6 billion in revenue bonds payable, as well as $1.8 billion in lease liability due to the implementation of GASB Statement No. 87. Note 9, Long-term Obligations, and Notes 10 through 17 include additional information on the State’s long-term obligations. 25 State of California Annual Comprehensive Financial Report During the year ended June 30, 2022, the State’s general obligation bonds rating from Fitch Ratings, Standard and Poor’s Rating Services, and Moody’s Investors Service remained unchanged at “AA”, “AA-”, and “Aa2”, respectively. Economic Condition and Future Budgets The Economy for the Fiscal Year Ending June 30, 2022 As California’s economy experienced rapid expansion during the 2021-22 fiscal year spurred by pandemic-related federal stimulus, evidence began to mount that this economic expansion was unsustainable. Businesses were strained to meet surging customer demand amid global supply chain challenges, and as a result, the state experienced a one-year rise in consumer prices that was the highest in four decades. At a lofty 6.6%, the consumer price index in California nearly tripled the prior year inflation rate, and lagged slightly behind the national average of 7.2%. The Federal Reserve Board – tasked with maintaining stable price growth – enacted large interest rate increases during the fiscal year in efforts to cool the economy and slow inflation. After two years of stable, record low federal funds interest rates plateauing around 0.2%, the Federal Reserve Board raised rates by 150 basis points between March and June 2022, which was a mere foretaste of things to come. Higher interest rates dampen economic activity by increasing borrowing costs for home buyers, consumers, and businesses, as well as depressing the value of riskier assets like stocks. The impacts of these interest rate hikes were readily apparent in certain other economic indicators during the year. As of June 2022, California’s real gross domestic product (GDP) had reached $3.6 trillion, an increase of 7.5% during fiscal year 2021-22, compared to growth of 17.7% during the 2020-21 fiscal year to $3.4 trillion. California’s economic growth slowed but did not trail far behind that of the United States GDP, which increased by 9.7% during fiscal year 2021-22. The California real estate market felt a downshift in June 2022 as housing demands slowed with the rise of interest rates. In keeping with the trend of inflation, the median price of homes in California continued to rise to another record high of $858,000 as of June 2022, an additional increase of 4.7% on top of the prior year’s explosive growth, for a total increase of 37.0% over a two-year span. The national median home price increased by 11.3% to $413,800. The housing market saw 30-year fixed mortgage rates rise to an average of 5.52% in June 2022, compared to 2.98% in June 2021. This impacted sales of existing single-family homes, which were down 20.9% from the prior year at June 30, 2022. New active listings surged by 64.0%, the largest year-over-year growth in more than seven years. New California privately owned residential units increased during the 2021-22 fiscal year by approximately 16,127 units. Despite the dampening of the housing market with high home prices and rising interest rates, buying opportunities are anticipated with cooling off of competition, rates stabilizing, and a larger number of listings available. The real estate market was not the only segment of the state’s economy that was adjusting during the 2021-22 fiscal year. New light vehicle registrations declined by 17.9% from the prior year, as supply constraints continued and prices escalated. The end of the 2021-22 fiscal year marked six months of consecutive labor force gains for California’s workforce, and a twelve month decrease in unemployment. At the beginning of the 2021-22 fiscal year, California was issuing approximately 626,000 unemployment insurance claims per week to unemployed workers. By June 30, 2022, weekly claims had been cut in half to roughly 299,000. The unemployment rate responded comparably, falling to 3.9% by the end of the 2021-22 fiscal year compared to 7.8% at the end of the prior period. The increase in non-farm employment of 1 million jobs in both fiscal year 2021-22 and the previous fiscal year led California to regain about 94% of non-farm jobs lost during the COVID-19 pandemic during 26 Management’s Discussion and Analysis 2020. Seven of California’s eleven major industry sectors experienced job growth. The leisure and hospitality sector also saw growth for a consecutive year with a 26.8% gain of jobs during fiscal year 2020-21 and another 279,000 jobs added in fiscal year 2021-22, an increase of 16.9%. The leisure and hospitality sector includes jobs in arts, entertainment, and recreation, as well as food service and accommodations. California’s personal income remained steady with an incremental increase of 0.3% during the period, which underperformed the national increase of 2.9%. Since 2011, personal income of Californians has grown an average of 5.9% annually, due largely to the low unemployment rate sustained during the majority of this period. Comparatively, United States personal income grew an average of 5.0% during the same period. Effective January 1, 2022, California’s minimum wage increased to either $14.00 or $15.00 per hour, depending on the number of employees of a business. The minimum wage continued to increase each year until it reached $15.50 per hour for all businesses in 2023. In spite of the long-term growth trend, the current stagnation of personal income will place a considerable strain on the lifestyles of Californians given the accelerated rate of price inflation. Economic factors such as changes in consumer spending, incomes, and prices for food and energy suggest that inflationary pressures will continue to remain high for the near future. The longer inflation persists and the higher the Federal Reserve increases interest rates in response, the greater the risk to the economy. Economic Conditions for the 2022-23 Fiscal Year and Future Outlook With economic indicators signaling a potential recession on the horizon, California’s government faced a steep revenue decline in fiscal year 2022-23, with total income tax collections down 25.0%. Still, at June 30, 2023, the state’s GDP climbed to $3.8 trillion, an increase of 5.1% over the previous fiscal year, which equaled the United States GDP increase of 5.1% over the same period. Personal income growth for Californians continued to be sluggish, increasing by a modest 4.03% during fiscal year 2022-23. Income growth was adequate to cover the change in Consumer Price Index of 3.1% during the period, but trailed the U.S. national personal income increase of 5.7%. California’s unemployment rate for the 2022-23 fiscal year was relatively stable throughout the year, ending at 4.6% at June 30, 2023, and hovering around 4.9% thereafter. Coinciding with the return to low unemployment rates, the leisure and hospitality sector saw continued improvement with an additional 161,000 jobs gained during fiscal year 2022-23, an increase of 8.5% from June 30, 2022. To limit available funds for investments and tamper the economy, the Federal Reserve Board continued its aggressive hoist of interest rates, raising rates by 350 basis points during fiscal year 2022-23, and another 25 basis points thereafter in July 2023. This impacted the housing market with lower existing home sales in June 2023 totaling 277,490 units, a 4.1% decrease from June 2022. The 30-year fixed mortgage interest rate jumped again from an average of 5.52% in June 2022, to a 6.71% average in June 2023, which elicited a drop in the statewide median home price to $838,260 in June 2023, a decrease of 2.4% from June 2022. The U.S. national median home price experienced a comparable decrease of 1.9% from June 2022 to June 2023, at $406,700. In contrast, the automotive industry rebounded in fiscal year 2022-23, with an 11.6% increase in new vehicle registrations in the first six months of 2023 when compared to the same period during the prior year. The market could soften once the inflation subsides allowing for improvements in interest rates and supply conditions. In March 2023, Silicon Valley Bank in Santa Clara, the 16th largest bank in the United States with assets of about $209.0 billion, was abruptly shut down by the California Department of Financial Protection and Innovation. Silicon Valley Bank had a large investment portfolio of low risk U.S. Treasuries and other bonds. As the Federal Reserve continued increasing interest rates in response to high inflation, these bonds became riskier investments and declined in value. Simultaneously several of 27 State of California Annual Comprehensive Financial Report Silicon Valley Bank’s customers in the technology sector were experiencing financial troubles and made a run on the bank’s deposits, withdrawing large amounts of funds from their accounts. To accommodate the large withdrawals, Silicon Valley Bank sold its bonds at a loss of $1.8 billion, which marked the beginning of the end for the bank. Less than two months later, in May 2023, First Republic Bank of San Francisco, with assets totaling approximately $229.1 billion, followed suit in failure. In addition to bank closures, numerous large chains in the retail sector filed bankruptcy through 2023, resulting in dozens of store closures throughout the state. It is yet to be seen what the long term impact of these closures will be to California’s economy. While initially thought to be the early symptoms of an impending recession, the state has managed to stabilize its economy somehow; however, these instances exposed the sensitivity of the state, its business community, and its revenues to the actions of the Federal Reserve. Sustained upticks in the Consumer Price Index, the added volatility of the state conforming to the federal actions of postponing payment deadlines on investment and business income taxes, and the highest interest rates in two decades contribute to an uncomfortable uncertainty for California’s future economic outlook. California’s 2022-23 Budget California’s 2022-23 Budget Act was enacted on June 27, 2022. The Budget Act appropriated $307.9 billion; $234.4 billion from the General Fund, $69.1 billion from special funds, and $4.4 billion from bond funds. Budgeted expenditures for the General Fund decreased by $8.6 billion, or 3.5% less than last year’s budget, and General Fund revenues were projected to be $219.7 billion after a $3.0 billion transfer to the Budget Stabilization Account (BSA), the State’s Rainy Day Fund. General Fund revenue comes predominantly from taxes, with personal income taxes expected to provide 61.8% of total revenue in fiscal year 2022-23. California’s major taxes, including personal income taxes, sales and use taxes, and corporation taxes were projected to supply approximately 94.3% of the General Fund’s resources in the 2022-23 fiscal year. The General Fund was projected to end the 2022-2023 fiscal year with $37.2 billion in total reserves, including $23.3 billion in the BSA for fiscal emergencies, $9.5 billion in the Public School System Stabilization Account (PSSSA), $3.5 billion in the state’s operating reserve, and $900 million in the Safety Net Reserve (SNR). The 2022-23 Budget Act increased total state expenditures by $45.8 billion over the 2021-22 budgeted level. General Fund spending increases included $14.1 billion for General Government operations, $12.8 billion for K-12 education, and $10.6 billion for Health and Human Services. While the elevated cost of living in the aftermath of the COVID-19 pandemic exerted economic pressure on millions of California families and small businesses, the Budget provided $17.2 billion in assistance and relief, including $449 million for direct relief and support of small businesses. The General Fund’s share of the Proposition 98 guaranteed minimum funding level for K-12 schools and community colleges decreased by $1.4 billion from the revised 2021-22 level to $82.3 billion The Budget included total funding of $128.6 billion for all K-12 education programs, and $5.1 billion allocated from the General Fund for K-12 school facilities. The Budget allocated $39.0 billion over five years toward climate resilience, and $47.0 billion for infrastructure, including infrastructure funding for schools, higher education, broadband, and clean transportation systems Continuing the State’s comprehensive approach toward services and supports for individuals experiencing homelessness, the Budget provided an additional $3.4 billion over three years. The Budget took measures to improve health care affordability and increase access to Medi-Cal coverage for children, young adults, and older adults regardless of immigration status. This included expanding 28 Management’s Discussion and Analysis Covered California premium subsidies for the middle class, providing greater coverage for preventative services, and taking actions to reduce prescription drug costs. The Budget continued to build resiliency and prepare the State for an uncertain future by strengthening reserves, paying down debt, and prefunding pension and OPEB liabilities. The Budget sought to address the predominant state issues of homelessness, behavioral health challenges, women’s rights and health access, neighborhood safety, and drought and wildfire mitigation. The Budget also included measures to maintain energy reliability, protect energy ratepayers, and accelerate clean energy projects. In June 2023, the 2023-24 Budget Act was enacted, and provided updated estimates of fiscal year 2022-23 General Fund revenues, expenditures, and reserves. The 2023-24 Budget Act projected fiscal year 2022-23 General Fund revenue of $205.1 billion after transfers—$14.6 billion (6.6%) less than projected in the 2022-23 Budget Act — and expenditures of $234.6 billion. Total year-end reserves were estimated at $33.1 billion—$22.3 billion in the BSA, $9.9 billion in the Public School System Stabilization Account, and $900 million in the SNR — which is $621 million less than projected in the 2022-23 Budget Act. California’s 2023-24 Budget California’s fiscal year 2023-24 Budget Act was enacted in June 2023, and includes projections of fiscal year 2023-24 General Fund revenues, expenditures, and reserves. General Fund revenues are anticipated to be $208.7 billion, an increase of $3.0 billion (1.5%) from revised fiscal year 2022-23 revenue estimates, primarily due to projected increases of $7.1 billion in other revenue sources, which are expected to be offset by a $4.6 billion decrease in personal income tax revenues. The reduction in personal income taxes is attributable to a declining stock market, persistently high inflation in 2022, rising interest rates, and job losses in high wage sectors. General Fund expenditures for fiscal year 2023-24 are budgeted at $225.9 billion, a decrease of $8.7 billion (3.7%) compared to the fiscal year 2022-23 estimates. This results in a budget deficit of $17.2 billion for the General Fund. The Budget avoids new significant ongoing commitments and maintains fiscal discipline by preserving a total of $37.8 billion in budgetary reserves: $22.3 billion in the BSA for fiscal emergencies, $10.8 billion in the PSSSA, $3.8 billion in the state’s operating reserve, and $900 million in the SNR. The 2023-24 Budget Act maintains the State’s commitment to increase funding for K-12 schools and higher education, combat the impacts of climate change, and to address homelessness. The Budget allocates total funding of $129.2 billion for all K-12 education programs, and $40.0 billion for all higher education entities in 2023-24. The Budget also includes $52.0 billion in multi-year climate investments to accelerate clean energy projects to meet the State’s ambitious climate goals. Additionally, $3.5 billion in new accountability measures will be added to the State’s $15.3 billion investment to reduce homelessness. After two years of unprecedented General Fund revenue growth, California faces an economic downturn due to slower revenue growth for fiscal year 2023-24 than previously projected. Through prudent planning and budget resilience built into previous budgets, the State is in a solid position to address this downturn and the associated budget deficit. By paying down debt and using on-time surplus funds on one-time commitments, the Budget is able to address the shortfall with balanced solutions that protect core state programs and services. 29 State of California Annual Comprehensive Financial Report Requests for Information The State Controller’s Office designed this financial report to provide interested parties with a general overview of the State of California’s finances. Address questions concerning the information provided in this report or requests for additional information via email to the State Controller’s Office, State Accounting and Reporting Division at StateGovReports@sco.ca.gov. This report is also available on the State Controller’s Office website at www.sco.ca.gov. 30 Basic Financial Statements State of California Annual Comprehensive Financial Report This page intentionally left blank Government-wide Financial Statements State of California Annual Comprehensive Financial Report Statement of Net Position June 30, 2022 (amounts in thousands) Primary Government Governmental Business-type Component Activities Activities Total Units ASSETS Current assets: Cash and pooled investments....................................... $ 182,275,479 $ 8,155,648 $ 190,431,127 $ 5,033,192 Amount on deposit with U.S. Treasury........................ — 480,441 480,441 — Investments................................................................... 1,582,628 3,234,579 4,817,207 15,572,902 Restricted assets: Cash and pooled investments.................................... 570,780 514,017 1,084,797 176,943 Investments................................................................ — — — 48,275 Due from other governments..................................... — 201,236 201,236 — Contracts and installments receivable.......................... 9,998 — 9,998 — Receivables (net).......................................................... 38,929,055 2,985,429 41,914,484 7,252,571 Internal balances........................................................... (1,359) 1,359 — — Due from primary government..................................... — — — 307,167 Due from other governments........................................ 40,830,431 292,979 41,123,410 198,186 Prepaid items................................................................ 190,695 83,744 274,439 3,533 Inventories.................................................................... 81,866 28,048 109,914 382,683 Other current assets...................................................... 390,426 4,881 395,307 722,760 Total current assets.................................................... 264,859,999 15,982,361 280,842,360 29,698,212 Noncurrent assets: Restricted assets: Cash and pooled investments.................................... 117,598 179,052 296,650 55,194 Investments................................................................ — 50,503 50,503 331,522 Loans receivable........................................................ — 4,420,705 4,420,705 — Investments................................................................... — 3,593,580 3,593,580 41,701,614 Contracts and installments receivable.......................... 193,787 — 193,787 — Receivables (net).......................................................... 2,519,767 1,455,262 3,975,029 3,726,820 Loans receivable........................................................... 4,545,883 3,293,342 7,839,225 2,722,968 Long-term prepaid charges........................................... 181 1,018,969 1,019,150 111 Capital assets: Land........................................................................... 21,699,463 448,053 22,147,516 1,718,527 State highway infrastructure...................................... 81,997,377 — 81,997,377 — Collections – nondepreciable.................................... 22,682 35,492 58,174 630,251 Buildings and other depreciable property................. 35,947,695 20,114,457 56,062,152 65,774,461 Intangible assets – amortizable................................. 6,081,345 882,651 6,963,996 5,155,138 Less: accumulated depreciation/amortization........... (18,875,282) (8,170,532) (27,045,814) (34,890,244) Construction/development in progress...................... 20,917,469 3,210,423 24,127,892 4,884,386 Intangible assets – nonamortizable........................... 1,148,029 125,527 1,273,556 5,214 Other noncurrent assets................................................ — 45,950 45,950 587,267 Total noncurrent assets.............................................. 156,315,994 30,703,434 187,019,428 92,403,229 Total assets........................................................... 421,175,993 46,685,795 467,861,788 122,101,441 DEFERRED OUTFLOWS OF RESOURCES........... 29,093,342 3,777,736 32,871,078 11,630,982 Total assets and deferred outflows of resources.................................................... $ 450,269,335 $ 50,463,531 $ 500,732,866 $ 133,732,423 34 The notes to the financial statements are an integral part of this statement. Government-wide Financial Statements Primary Government Governmental Business-type Component Activities Activities Total Units LIABILITIES Current liabilities: Accounts payable.......................................................... $ 50,951,793 $ 1,004,084 $ 51,955,877 $ 3,657,593 Due to component units................................................ 307,167 — 307,167 — Due to other governments............................................. 50,333,045 18,197,662 68,530,707 — Revenues received in advance...................................... 9,841,162 535,939 10,377,101 2,093,878 Tax overpayments......................................................... 26,038,172 — 26,038,172 — Deposits......................................................................... 485,662 — 485,662 229,887 Contracts and notes payable.......................................... 2,840 — 2,840 12,580 Unclaimed property liability......................................... 1,181,367 — 1,181,367 — Interest payable............................................................. 1,037,316 37,239 1,074,555 8,993 Securities lending obligations....................................... — — — 2,162,521 Benefits payable............................................................ 69,614 375,524 445,138 — Current portion of long-term obligations...................... 6,474,713 1,769,514 8,244,227 6,290,056 Other current liabilities................................................. 56,056,528 802,228 56,858,756 3,416,770 Total current liabilities.............................................. 202,779,379 22,722,190 225,501,569 17,872,278 Noncurrent liabilities: Loans payable............................................................... 40,323 — 40,323 13,939 Lottery prizes and annuities.......................................... — 657,795 657,795 — Compensated absences payable.................................... 5,225,979 286,710 5,512,689 521,229 Workers’ compensation benefits payable..................... 4,908,543 14,535 4,923,078 862,838 Commercial paper and other borrowings...................... 1,448,725 306,965 1,755,690 75,490 Lease liability................................................................ 2,090,734 299,526 2,390,260 2,500,876 General obligation bonds payable................................. 72,977,118 533,152 73,510,270 — Revenue bonds payable................................................. 16,310,232 13,857,735 30,167,967 30,639,373 Mandated cost claims payable...................................... 1,922,968 — 1,922,968 — Net other postemployment benefits liability................. 77,369,354 16,913,829 94,283,183 20,445,975 Net pension liability...................................................... 47,920,644 6,248,484 54,169,128 21,647,206 Revenues received in advance...................................... — 5,529 5,529 17,829 Other noncurrent liabilities........................................... 2,967,917 346,122 3,314,039 3,225,353 Total noncurrent liabilities........................................ 233,182,537 39,470,382 272,652,919 79,950,108 Total liabilities..................................................... 435,961,916 62,192,572 498,154,488 97,822,386 DEFERRED INFLOWS OF RESOURCES................ 49,825,591 7,500,845 57,326,436 12,212,899 Total liabilities and deferred inflows of resources.................................................... $ 485,787,507 $ 69,693,417 $ 555,480,924 $ 110,035,285 (continued) The notes to the financial statements are an integral part of this statement. 35 State of California Annual Comprehensive Financial Report Statement of Net Position (continued) June 30, 2022 (amounts in thousands) Primary Government Governmental Business-type Component Activities Activities Total Units NET POSITION Net investment in capital assets................................... $ 125,862,983 $ 3,340,905 $ 129,203,888 $ 12,526,731 Restricted: Nonexpendable – endowments.................................. — 1,641 1,641 9,492,189 Expendable: Endowments and gifts........................................... — — — 17,710,500 General government.............................................. 6,645,255 112,474 6,757,729 — Education............................................................... 1,342,603 144,365 1,486,968 2,315,188 Health and human services.................................... 7,939,856 2,262,988 10,202,844 — Natural resources and environmental protection............................................................. 6,849,035 4,456,847 11,305,882 — Business, consumer services, and housing............ 7,085,032 95 7,085,127 — Transportation....................................................... 9,971,146 2,296 9,973,442 — Corrections and rehabilitation............................... 329,112 7,372 336,484 — Unemployment programs...................................... — 3,653,204 3,653,204 — Indenture................................................................ — — — 709,312 Statute.................................................................... — — — 3,367,884 Budget stabilization............................................... 20,320,422 — 20,320,422 — Other purposes....................................................... — — — 20,752 Total expendable............................................... 60,482,461 10,639,641 71,122,102 24,123,636 Unrestricted.................................................................. (221,863,616) (33,212,073) (255,075,689) (22,445,418) Total net position (deficit)................................... (35,518,172) (19,229,886) (54,748,058) 23,697,138 Total liabilities, deferred inflows of resources, and net position........................... $ 450,269,335 $ 50,463,531 $ 500,732,866 $ 133,732,423 (concluded) 36 The notes to the financial statements are an integral part of this statement. Government-wide Financial Statements This page intentionally left blank The notes to the financial statements are an integral part of this statement. 37 State of California Annual Comprehensive Financial Report Statement of Activities Year Ended June 30, 2022 (amounts in thousands) Program Revenues Operating Capital Charges Grants and Grants and FUNCTIONS/PROGRAMS Expenses for Services Contributions Contributions Primary government Governmental activities: General government................................................. $ 38,760,471 $ 6,167,925 $ 4,893,649 $ — Education................................................................. 108,450,558 65,810 17,877,033 — Health and human services...................................... 216,232,017 11,402,121 139,977,859 — Natural resources and environmental protection............................................................... 12,502,619 8,422,029 1,363,823 — Business, consumer services, and housing.............. 7,364,028 1,671,025 3,979,747 — Transportation.......................................................... 15,792,836 8,479,493 1,938,933 1,895,160 Corrections and rehabilitation.................................. 16,526,318 13,563 631,617 — Interest on long-term debt........................................ 3,508,229 — — — Total governmental activities................................ 419,137,076 36,221,966 170,662,661 1,895,160 Business-type activities: Electric Power.......................................................... 36,239 124,467 — — Water Resources...................................................... 1,233,036 1,295,670 — — State Lottery............................................................. 8,885,370 8,785,557 — — Unemployment Programs........................................ 14,965,703 16,288,566 — — California State University...................................... 10,778,052 3,199,357 3,806,925 — State Water Pollution Control Revolving................ 35,334 69,695 136,956 — Safe Drinking Water State Revolving ..................... 24,608 27,377 66,607 — Housing Loan........................................................... 45,316 45,820 — — Other enterprise programs........................................ 165,655 130,837 — — Total business-type activities................................ 36,169,313 29,967,346 4,010,488 — Total primary government.............................. $ 455,306,389 $ 66,189,312 $ 174,673,149 $ 1,895,160 Component Units University of California.............................................. 48,524,057 30,936,266 13,287,117 78,860 California Housing Finance Agency.......................... 265,146 15,559 — — Nonmajor component units........................................ 2,199,263 699,932 865,950 42,822 Total component units...................................... $ 50,988,466 $ 31,651,757 $ 14,153,067 $ 121,682 General revenues: Personal income taxes.......................................................................................... Sales and use taxes............................................................................................... Corporation taxes................................................................................................. Motor vehicle excise tax...................................................................................... Insurance taxes..................................................................................................... Managed care organization enrollment tax.......................................................... Other taxes............................................................................................................ Investment and interest income (loss).................................................................. Escheat................................................................................................................. Other..................................................................................................................... Gain on early extinguishment of debt...................................................................... Transfers.................................................................................................................. Total general revenues and transfers............................................................... Change in net position ...................................................................................... Net position (deficit) – beginning, restated.......................................................... Net position (deficit) – ending............................................................................... 38 The notes to the financial statements are an integral part of this statement. Government-wide Financial Statements Net (Expenses) Revenues and Changes in Net Position Primary Government Governmental Business-type Component Activities Activities Total Units $ (27,698,897) $ (27,698,897) (90,507,715) (90,507,715) (64,852,037) (64,852,037) (2,716,767) (2,716,767) (1,713,256) (1,713,256) (3,479,250) (3,479,250) (15,881,138) (15,881,138) (3,508,229) (3,508,229) (210,357,289) (210,357,289) $ 88,228 88,228 62,634 62,634 (99,813) (99,813) 1,322,863 1,322,863 (3,771,770) (3,771,770) 171,317 171,317 69,376 69,376 504 504 (34,818) (34,818) (2,191,479) (2,191,479) $ (210,357,289) $ (2,191,479) $ (212,548,768) $ (4,221,814) (249,587) (590,559) $ (5,061,960) $ 126,058,884 $ — $ 126,058,884 $ — 52,328,196 — 52,328,196 — 35,850,573 — 35,850,573 — 8,453,232 — 8,453,232 — 3,516,612 — 3,516,612 — 2,584,077 — 2,584,077 — 4,402,939 — 4,402,939 — 788,612 — 788,612 (4,142,882) 660,143 — 660,143 — — — — 4,658,828 11,576 — 11,576 — (5,465,790) 5,465,790 — — 229,189,054 5,465,790 234,654,844 515,946 18,831,765 3,274,311 22,106,076 (4,546,014) (54,349,937) (22,504,197) (76,854,134) 28,243,152 $ (35,518,172) $ (19,229,886) $ (54,748,058) $ 23,697,138 The notes to the financial statements are an integral part of this statement. 39 State of California Annual Comprehensive Financial Report This page intentionally left blank 40 The notes to the financial statements are an integral part of this statement. Fund Financial Statements State of California Annual Comprehensive Financial Report Balance Sheet Governmental Funds June 30, 2022 (amounts in thousands) General Federal ASSETS Cash and pooled investments............................................................................................... $ 120,294,535 $ 12,258,999 Investments.......................................................................................................................... — — Receivables (net).................................................................................................................. 30,901,376 1,969,773 Due from other funds........................................................................................................... 10,531,227 — Due from other governments............................................................................................... 3,393,042 36,675,364 Interfund receivables............................................................................................................ 2,979,985 — Loans receivable.................................................................................................................. 30,805 268,575 Other assets.......................................................................................................................... 334,682 — Total assets....................................................................................................................... $ 168,465,652 $ 51,172,711 LIABILITIES Accounts payable................................................................................................................. $ 21,512,563 $ 21,450,337 Due to other funds................................................................................................................ 2,017,063 9,250,730 Due to component units....................................................................................................... 266,914 — Due to other governments.................................................................................................... 31,714,994 12,011,316 Interfund payables................................................................................................................ 3,398,838 — Benefits payable................................................................................................................... — 69,614 Revenues received in advance............................................................................................. 21,632 7,717,420 Tax overpayments................................................................................................................ 26,038,172 — Deposits................................................................................................................................ 3,930 — Unclaimed property liability................................................................................................ 1,181,367 — Other liabilities..................................................................................................................... 534,024 55,350,762 Total liabilities................................................................................................................. 86,689,497 105,850,179 DEFERRED INFLOWS OF RESOURCES....................................................................... 7,728,997 19,932 Total liabilities and deferred inflows of resources..................................................... 94,418,494 105,870,111 FUND BALANCES Nonspendable....................................................................................................................... 2,958,319 — Restricted............................................................................................................................. 23,251,079 958,234 Committed............................................................................................................................ 4,024,689 — Assigned............................................................................................................................... 7,290,655 — Unassigned........................................................................................................................... 36,522,416 (55,655,634) Total fund balances (deficit)........................................................................................... 74,047,158 (54,697,400) Total liabilities, deferred inflows of resources, and fund balances.......................... $ 168,465,652 $ 51,172,711 42 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Environmental Health Care and Natural Related Nonmajor Transportation Resources Programs Governmental Total $ 10,276,659 $ 16,035,431 $ 2,708,064 $ 18,302,113 $ 179,875,801 — — — 1,582,628 1,582,628 1,505,899 588,201 4,662,142 1,762,280 41,389,671 1,455,308 187,883 55,957 1,621,865 13,852,240 4,358 10,209 404,474 299,284 40,786,731 168,220 1,893,490 202,479 907,843 6,152,017 144,967 877,520 76,478 3,139,420 4,537,765 13,717 — — 42,027 390,426 $ 13,569,128 $ 19,592,734 $ 8,109,594 $ 27,657,460 $ 288,567,279 $ 1,351,818 $ 784,270 $ 3,347,680 $ 1,231,529 $ 49,678,197 444,387 161,468 2,471,020 510,397 14,855,065 6,449 84 — 33,720 307,167 831,497 395,485 388,222 4,975,198 50,316,712 666 358,400 — 42,200 3,800,104 — — — — 69,614 178,534 230,840 705 328,007 8,477,138 — — — — 26,038,172 2,847 349 — 476,171 483,297 — — — — 1,181,367 514,442 3,340 — 187,628 56,590,196 3,330,640 1,934,236 6,207,627 7,784,850 211,797,029 70,887 15,501 131,829 227,598 8,194,744 3,401,527 1,949,737 6,339,456 8,012,448 219,991,773 — — — 39,130 2,997,449 10,118,064 6,562,285 1,705,333 17,788,410 60,383,405 49,537 11,080,712 64,805 1,754,015 16,973,758 — — — 63,457 7,354,112 — — — — (19,133,218) 10,167,601 17,642,997 1,770,138 19,645,012 68,575,506 $ 13,569,128 $ 19,592,734 $ 8,109,594 $ 27,657,460 $ 288,567,279 The notes to the financial statements are an integral part of this statement. 43 State of California Annual Comprehensive Financial Report Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position (amounts in thousands) Total fund balances – governmental funds $ 68,575,506 Amounts reported for governmental activities in the Statement of Net Position are different from those in the Governmental Funds Balance Sheet because: • The following capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds: Land 21,697,383 State highway infrastructure 81,997,377 Collections – nondepreciable 22,682 Buildings and other depreciable property 35,275,349 Intangible assets – amortizable 5,728,508 Less: accumulated depreciation/amortization (18,295,237) Construction/development in progress 17,945,833 Intangible assets – nonamortizable 1,148,029 145,519,924 • State revenues that are earned and measurable, but not available within 12 months of the end of 2,390,277 the reporting period, are reported as deferred inflows of resources in the funds. • Internal service funds are used by management to charge the costs of certain activities, such as (9,790,670) building construction and architectural services, procurement, and technology services, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Position, excluding amounts for activity between the internal service funds and governmental funds. • Bond premiums/discounts and prepaid insurance charges are amortized over the life of the bonds (8,130,444) and are included in the governmental activities in the Statement of Net Position. • Deferred inflows and outflows of resources related to pension and OPEB transactions are not (15,030,952) reported in the funds. • Deferred inflows and outflows of resources resulting from bond refunding gains and losses, 296,885 respectively, are amortized over the life of the bonds and are not reported in the funds. • General obligation bonds and related accrued interest totaling $70,137,642, revenue bonds totaling (79,600,959) $8,014,592, and commercial paper totaling $1,448,725 are not due and payable in the current period and are not reported in the funds. • The following liabilities are not due and payable in the current period and are not reported in the funds: Compensated absences (5,034,430) Lease liability (2,243,912) Net pension liability (47,072,939) Net other postemployment benefits liability (75,500,252) Mandated cost claims (1,922,968) Workers’ compensation (4,856,241) Pollution remediation obligations (1,678,279) Other noncurrent liabilities (1,438,718) (139,747,739) Net position of governmental activities $ (35,518,172) 44 The notes to the financial statements are an integral part of this statement. Fund Financial Statements This page intentionally left blank The notes to the financial statements are an integral part of this statement. 45 State of California Annual Comprehensive Financial Report Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2022 (amounts in thousands) General Federal REVENUES Personal income taxes.......................................................................................................... $ 123,335,790 $ — Sales and use taxes............................................................................................................... 32,794,344 — Corporation taxes................................................................................................................. 35,824,715 — Motor vehicle excise taxes................................................................................................... 156,593 — Insurance taxes..................................................................................................................... 3,516,612 — Managed care organization enrollment tax.......................................................................... — — Other taxes........................................................................................................................... 702,572 — Intergovernmental................................................................................................................ 1,117 172,554,453 Licenses and permits............................................................................................................ 7,884 — Charges for services............................................................................................................. 302,701 — Fees...................................................................................................................................... 17,634 — Penalties............................................................................................................................... 767,567 3 Investment and interest........................................................................................................ 408,597 61,577 Escheat................................................................................................................................. 660,143 — Other.................................................................................................................................... 663,099 — Total revenues.................................................................................................................. 199,159,368 172,616,033 EXPENDITURES Current: General government.......................................................................................................... 25,791,674 4,263,234 Education........................................................................................................................... 91,985,006 17,984,391 Health and human services................................................................................................ 48,077,423 138,239,878 Natural resources and environmental protection............................................................... 4,491,067 1,394,871 Business, consumer services, and housing........................................................................ 2,422,394 3,987,644 Transportation................................................................................................................... 292,816 3,835,223 Corrections and rehabilitation........................................................................................... 12,671,069 681,687 Capital outlay....................................................................................................................... 67,975 1,106 Debt service: Bond, commercial paper, and lease principal retirement.................................................. 2,841,818 6,339 Interest and fiscal charges................................................................................................. 2,478,618 113 Total expenditures........................................................................................................... 191,119,860 170,394,486 Excess (deficiency) of revenues over (under) expenditures........................................... 8,039,508 2,221,547 OTHER FINANCING SOURCES (USES) General obligation bonds and commercial paper issued...................................................... — — Revenue bonds issued.......................................................................................................... — — Refunding debt issued ......................................................................................................... — — Payment to refund long-term debt....................................................................................... — — Premium on bonds issued.................................................................................................... 94,322 — Proceeds from leases............................................................................................................ 67,971 1,106 Transfers in.......................................................................................................................... 1,232,925 — Transfers out........................................................................................................................ (9,528,023) (982,800) Total other financing sources (uses).............................................................................. (8,132,805) (981,694) Net change in fund balances........................................................................................... (93,297) 1,239,853 Fund balances – beginning.................................................................................................... 74,140,455 * (55,937,253) * Fund balances (deficits) – ending......................................................................................... $ 74,047,158 $ (54,697,400) * Restated 46 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Environmental Health Care and Natural Related Nonmajor Transportation Resources Programs Governmental Total $ — $ — $ — $ 2,579,075 $ 125,914,865 988,138 — — 18,534,894 52,317,376 — — — — 35,824,715 8,062,673 97,472 — 136,494 8,453,232 — — — — 3,516,612 — — 2,584,077 — 2,584,077 — 217,711 — 3,501,072 4,421,355 — — 1,721,478 830,373 175,107,421 5,553,083 478,711 — 4,086,871 10,126,549 131,827 155,062 181 438,976 1,028,747 2,007,852 2,935,970 4,899,137 4,207,243 14,067,836 7,826 48,697 3,929 565,781 1,393,803 38,957 56,235 9,297 68,931 643,594 — — — 1,555 661,698 108,300 5,090,104 421,854 1,579,473 7,862,830 16,898,656 9,079,962 9,639,953 36,530,738 443,924,710 609,138 242,384 4,891 13,338,276 44,249,597 9,708 2,747 137,485 1,644,829 111,764,166 9,540 67,734 9,862,068 19,917,448 216,174,091 191,656 5,796,765 164 301,220 12,175,743 111,584 96,227 — 1,019,618 7,637,467 14,115,447 1,228,597 — 18,922 19,491,005 — — — 2,336,984 15,689,740 41,704 235,526 9,009 327,584 682,904 1,543,724 1,020,969 3,128 7,986,512 13,402,490 39,290 5,377 7,454 1,595,170 4,126,022 16,671,791 8,696,326 10,024,199 48,486,563 445,393,225 226,865 383,636 (384,246) (11,955,825) (1,468,515) 326,935 1,745,805 32,735 2,447,215 4,552,690 — — — 1,050,000 1,050,000 1,160,180 252,220 — 8,599,011 10,011,411 — — — (2,935,087) (2,935,087) 198,587 180,156 13 756,107 1,229,185 41,704 8,124 9,009 15,845 143,759 1,226 416,526 178,997 5,291,528 7,121,202 (1,572,393) (194,459) (94) (269,450) (12,547,219) 156,239 2,408,372 220,660 14,955,169 8,625,941 383,104 2,792,008 (163,586) 2,999,344 7,157,426 9,784,497 14,850,989 1,933,724 16,645,668 61,418,080 $ 10,167,601 $ 17,642,997 $ 1,770,138 $ 19,645,012 $ 68,575,506 The notes to the financial statements are an integral part of this statement. 47 State of California Annual Comprehensive Financial Report Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities (amounts in thousands) Net change in fund balances – total governmental funds $ 7,157,426 Amounts reported for governmental activities in the Statement of Activities are different from those in the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds because: • Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. In the current year, these amounts are: Purchase of assets 5,015,288 Disposal of assets (780,495) Depreciation expense, net of asset disposal (1,231,880) 3,002,913 • Some revenues in the Statement of Activities do not provide current financial resources and, (517,010) therefore, are unavailable in governmental funds. • Internal service funds are used by management to charge the costs of certain activities, such as 301,630 building construction and architectural services, procurement, and technology services, to individual funds. The net revenue (expense) of the internal service funds is reported with governmental activities. • The issuance of long-term debt instruments provides current financial resources to governmental funds, while the repayment of the principal of long-term debt is an expenditure of governmental funds. Neither transaction, however, has any effect on the Statement of Activities. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. The following shows the effect of these differences in the treatment of long-term debt and related items: General Obligation Revenue Commercial Bonds Bonds Paper Total Debt issued (6,639,495) (7,074,571) (1,900,035) (15,614,101) Premium on debt issued (1,229,185) — — (1,229,185) Accreted interest — (35,570) — (35,570) Principal repayments 8,261,145 3,108,024 1,627,545 12,996,714 Payments to refund/remarket long-term debt — 2,935,087 — 2,935,087 Related expenses not reported in governmental funds: Premium/discount amortization 495,927 261,787 — 757,714 Deferred gain/loss on refunding 3,561 282,857 — 286,418 Prepaid insurance — (404) — (404) Accrued interest 16,531 4,529 — 21,060 908,484 (518,261) (272,490) 117,733 (continued) 48 The notes to the financial statements are an integral part of this statement. Fund Financial Statements • The following expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not recognized as expenditures in governmental funds. Once the use of current financial resources is required, expenditures are recognized in governmental funds but are eliminated from the Statement of Activities. In the current period, the net adjustment consists of: Compensated absences 127,394 Lease liability 260,904 Net pension liability 8,365,136 Net other postemployment benefits liability 362,565 Mandated cost claims 120,638 Workers’ compensation (489,151) Proposition 98 funding guarantee — Pollution remediation obligations (161,582) Other noncurrent liabilities 183,169 8,769,073 Change in net position of governmental activities $ 18,831,765 (concluded) The notes to the financial statements are an integral part of this statement. 49 State of California Annual Comprehensive Financial Report Statement of Net Position Proprietary Funds June 30, 2022 (amounts in thousands) Water Electric Power Resources ASSETS Current assets: Cash and pooled investments................................................................................................ $ — $ 760,918 Amount on deposit with U.S. Treasury................................................................................. — — Investments............................................................................................................................ — — Restricted assets: Cash and pooled investments............................................................................................. 113,059 — Due from other governments............................................................................................. — — Contracts and installments receivable................................................................................... — — Receivables (net)................................................................................................................... 198,543 93,790 Due from other funds............................................................................................................. — — Due from other governments................................................................................................. — 94,301 Prepaid items......................................................................................................................... — — Inventories............................................................................................................................. — 5,140 Other current assets............................................................................................................... — — Total current assets............................................................................................................ 311,602 954,149 Noncurrent assets: Restricted assets: Cash and pooled investments............................................................................................. — 179,052 Investments........................................................................................................................ — 50,503 Loans receivable................................................................................................................ — — Investments............................................................................................................................ — — Contracts and installments receivable................................................................................... — — Receivables (net)................................................................................................................... — — Interfund receivables............................................................................................................. — 183,339 Loans receivable.................................................................................................................... — 7,711 Long-term prepaid charges.................................................................................................... — 1,012,113 Capital assets: Land................................................................................................................................... — 209,046 Collections – nondepreciable............................................................................................. — — Buildings and other depreciable property.......................................................................... — 7,257,750 Intangible assets – amortizable.......................................................................................... 641 78,962 Less: accumulated depreciation/amortization.................................................................... (136) (2,619,445) Construction/development in progress.............................................................................. — 1,196,323 Intangible assets – nonamortizable.................................................................................... — 114,144 Other noncurrent assets......................................................................................................... — — Total noncurrent assets...................................................................................................... 505 7,669,498 Total assets.................................................................................................................... 312,107 8,623,647 DEFERRED OUTFLOWS OF RESOURCES.................................................................... 12,625 281,114 Total assets and deferred outflows of resources.................................................... $ 324,732 $ 8,904,761 50 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Governmental Business-type Activities – Enterprise Funds Activities State Unemployment California State Nonmajor Internal Lottery Programs University Enterprise Total Service Funds $ 690,363 $ 4,177,516 $ 1,553,518 $ 973,333 $ 8,155,648 $ 2,399,678 — 480,441 — — 480,441 — 70,250 — 3,164,329 — 3,234,579 — — — — 400,958 514,017 570,780 — — — 201,236 201,236 — — — — — — 533,138 730,174 1,583,689 341,976 37,257 2,985,429 29,480 2,026 167,700 3,241 25,458 198,425 892,341 — 106,805 — 91,873 292,979 43,700 — — 83,723 21 83,744 190,695 17,210 — — 5,698 28,048 81,866 4,881 — — — 4,881 — 1,514,904 6,516,151 5,146,787 1,735,834 16,179,427 4,741,678 — — — — 179,052 117,598 — — — — 50,503 — — — — 4,420,705 4,420,705 — 625,339 — 2,948,679 19,562 3,593,580 — — — — — — 7,861,763 — 813,663 641,599 — 1,455,262 5,136 — 315,970 — 7,538 506,847 37,844 — 85,714 36,764 3,163,153 3,293,342 8,118 6,856 — — — 1,018,969 181 18,798 — 218,936 1,273 448,053 2,080 — — 35,492 — 35,492 — 307,999 29,433 12,492,689 26,586 20,114,457 672,346 18,884 244,118 536,306 3,740 882,651 352,837 (153,715) (85,594) (5,286,218) (25,424) (8,170,532) (580,045) — — 2,013,994 106 3,210,423 2,971,636 — — 11,383 — 125,527 — — — 35,986 9,964 45,950 — 824,161 1,403,304 13,685,610 7,627,203 31,210,281 11,449,494 2,339,065 7,919,455 18,832,397 9,363,037 47,389,708 16,191,172 72,378 87,667 3,312,096 11,856 3,777,736 556,221 $ 2,411,443 $ 8,007,122 $ 22,144,493 $ 9,374,893 $ 51,167,444 $ 16,747,393 (continued) The notes to the financial statements are an integral part of this statement. 51 State of California Annual Comprehensive Financial Report Statement of Net Position (continued) Proprietary Funds June 30, 2022 (amounts in thousands) Water Electric Power Resources LIABILITIES Current liabilities: Accounts payable................................................................................................................... $ 79,618 $ 130,429 Due to other funds................................................................................................................. — 60,205 Due to other governments...................................................................................................... — 331,770 Revenues received in advance............................................................................................... — — Deposits................................................................................................................................. — — Contracts and notes payable.................................................................................................. — — Interest payable...................................................................................................................... — 9,862 Benefits payable.................................................................................................................... — — Current portion of long-term obligations............................................................................... 613 274,791 Other current liabilities.......................................................................................................... — — Total current liabilities........................................................................................................ 80,231 807,057 Noncurrent liabilities: Interfund payables................................................................................................................. — 24,813 Lottery prizes and annuities................................................................................................... — — Compensated absences payable............................................................................................. — 37,221 Workers’ compensation benefits payable.............................................................................. — — Commercial paper and other borrowings.............................................................................. — 207,943 Lease liability........................................................................................................................ 377 24,951 General obligation bonds payable......................................................................................... — 120 Revenue bonds payable......................................................................................................... — 3,297,413 Net other postemployment benefits liability......................................................................... 8,984 787,182 Net pension liability............................................................................................................... 3,712 356,813 Revenues received in advance............................................................................................... — — Other noncurrent liabilities.................................................................................................... — 92,399 Total noncurrent liabilities.................................................................................................. 13,073 4,828,855 Total liabilities............................................................................................................... 93,304 5,635,912 DEFERRED INFLOWS OF RESOURCES......................................................................... 29,138 2,101,646 Total liabilities and deferred inflows of resources................................................. 122,442 7,737,558 NET POSITION Net investment in capital assets............................................................................................. — 1,139,038 Restricted: Nonexpendable – endowments........................................................................................... — — Expendable: Construction.................................................................................................................... — — Debt service.................................................................................................................... — 28,165 Security for revenue bonds............................................................................................. — — Lottery............................................................................................................................ — — Unemployment programs............................................................................................... — — Other purposes................................................................................................................ 202,290 — Total expendable......................................................................................................... 202,290 28,165 Unrestricted........................................................................................................................... — — Total net position (deficit)............................................................................................ 202,290 1,167,203 Total liabilities, deferred inflows of resources, and net position.......................... $ 324,732 $ 8,904,761 52 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Governmental Business-type Activities – Enterprise Funds Activities State Unemployment California State Nonmajor Internal Lottery Programs University Enterprise Total Service Funds $ 93,327 $ 315,831 $ 374,350 $ 10,529 $ 1,004,084 $ 462,019 508,182 — — 24,488 592,875 306,641 — 17,865,577 — 315 18,197,662 69,714 2,599 246,151 287,135 54 535,939 1,364,024 — — — — — 2,365 — — — — — 34,468 — — — 27,377 37,239 98,520 — 375,524 — — 375,524 — 945,274 — 399,690 149,146 1,769,514 631,265 162 157,583 644,483 — 802,228 21,342 1,549,544 18,960,666 1,705,658 211,909 23,315,065 2,990,358 5,579 — 58,153 22,493 111,038 2,825,889 657,795 — — — 657,795 — — 90,692 145,482 13,315 286,710 200,788 9,791 — — 4,744 14,535 52,302 — — 99,022 — 306,965 — — — 274,102 96 299,526 238,365 — — — 533,032 533,152 — — — 9,138,030 1,422,292 13,857,735 8,574,870 246,200 396,575 15,434,384 40,504 16,913,829 1,869,102 92,523 155,907 5,618,682 20,847 6,248,484 847,705 — — 5,529 — 5,529 — — — 236,753 16,970 346,122 22,165 1,011,888 643,174 31,010,137 2,074,293 39,581,420 14,631,186 2,561,432 19,603,840 32,715,795 2,286,202 62,896,485 17,621,544 88,257 134,939 5,115,906 30,959 7,500,845 725,403 2,649,689 19,738,779 37,831,701 2,317,161 70,397,330 18,346,947 191,966 187,957 1,817,665 4,279 3,340,905 705,151 — — 1,641 — 1,641 — — — 23,396 — 23,396 99,056 — — 14,931 373,249 416,345 — — — — 3,853,096 3,853,096 — 7,117 — — — 7,117 — — 3,653,204 — — 3,653,204 — — — 106,038 2,378,155 2,686,483 — 7,117 3,653,204 144,365 6,604,500 10,639,641 99,056 (437,329) (15,572,818) (17,650,879) 448,953 (33,212,073) (2,403,761) (238,246) (11,731,657) (15,687,208) 7,057,732 (19,229,886) (1,599,554) $ 2,411,443 $ 8,007,122 $ 22,144,493 $ 9,374,893 $ 51,167,444 $ 16,747,393 (concluded) The notes to the financial statements are an integral part of this statement. 53 State of California Annual Comprehensive Financial Report Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds Year Ended June 30, 2022 (amounts in thousands) Water Electric Power Resources OPERATING REVENUES Unemployment and disability insurance.................................................................................. $ — $ — Lottery ticket sales................................................................................................................... — — Power sales............................................................................................................................... (140,000) 82,196 Student tuition and fees............................................................................................................ — — Services and sales.................................................................................................................... — 1,207,961 Investment and interest............................................................................................................ — — Rent.......................................................................................................................................... — — Grants and contracts................................................................................................................. — — Other........................................................................................................................................ — — Total operating revenues..................................................................................................... (140,000) 1,290,157 OPERATING EXPENSES Lottery prizes........................................................................................................................... — — Power purchases (net of recoverable power costs).................................................................. (142,000) 167,977 Personal services...................................................................................................................... 2,000 464,559 Supplies.................................................................................................................................... — — Services and charges................................................................................................................ 5,103 28,001 Depreciation............................................................................................................................. 136 140,220 Scholarships and fellowships................................................................................................... — — Distributions to beneficiaries................................................................................................... — — Interest expense........................................................................................................................ — — Amortization of long-term prepaid charges............................................................................. — — Other........................................................................................................................................ — 186,323 Total operating expenses..................................................................................................... (134,761) 987,080 Operating income (loss)...................................................................................................... (5,239) 303,077 NONOPERATING REVENUES (EXPENSES) Donations and grants................................................................................................................ — — Private gifts.............................................................................................................................. — — Investment and interest income (loss)...................................................................................... 171,465 5,513 Interest expense and fiscal charges.......................................................................................... (171,000) (88,217) Lottery payments for education............................................................................................... — — Other........................................................................................................................................ 93,002 (157,739) Total nonoperating revenues (expenses)............................................................................ 93,467 (240,443) Income (loss) before capital contributions and transfers.................................................... 88,228 62,634 Gain on early extinguishment of debt...................................................................................... — — Transfers in.............................................................................................................................. — — Transfers out............................................................................................................................ — — Change in net position......................................................................................................... 88,228 62,634 Total net position (deficit) – beginning................................................................................... 114,062 1,104,569 Total net position (deficit) – ending......................................................................................... $ 202,290 $ 1,167,203 * Restated 54 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Governmental Business-type Activities – Enterprise Funds Activities State Unemployment California State Nonmajor Internal Lottery Programs University Enterprise Total Service Funds $ — $ 16,273,212 $ — $ — $ 16,273,212 $ — 8,853,250 — — — 8,853,250 — — — — — (57,804) — — — 2,331,726 — 2,331,726 — — — 666,125 131,984 2,006,070 4,787,622 — — — 127,741 127,741 4,965 — — — — — 349,797 — — 73,966 — 73,966 — — — 258,134 3,261 261,395 — 8,853,250 16,273,212 3,329,951 262,986 29,869,556 5,142,384 5,825,673 — — — 5,825,673 — — — — — 25,977 — 101,244 — 6,073,140 42,270 6,683,213 891,162 16,924 — 2,189,922 65,463 2,272,309 23,330 878,377 7,588 — 93,868 1,012,937 3,388,262 15,983 10,513 489,479 2,534 658,865 94,799 — — 1,706,130 — 1,706,130 — — 14,947,420 — — 14,947,420 — — — — 26,708 26,708 411,642 — — — — — 42 — — — 7,815 194,138 — 6,838,201 14,965,521 10,458,671 238,658 33,353,370 4,809,237 2,015,049 1,307,691 (7,128,720) 24,328 (3,483,814) 333,147 — — 3,806,925 203,563 4,010,488 — — — 71,860 — 71,860 — (68,305) 15,354 (334,395) 10,641 (199,727) 726 (27,487) (182) (319,381) (32,303) (638,570) (4,042) (2,019,682) — — — (2,019,682) — 612 — 131,941 150 67,966 (4) (2,114,862) 15,172 3,356,950 182,051 1,292,335 (3,320) (99,813) 1,322,863 (3,771,770) 206,379 (2,191,479) 329,827 — — — — — 11,576 — — 5,413,763 52,082 5,465,845 3,711 — — — (55) (55) (43,484) (99,813) 1,322,863 1,641,993 258,406 3,274,311 301,630 (138,433) (13,054,520) * (17,329,201) 6,799,326 (22,504,197) (1,901,184) * $ (238,246) $ (11,731,657) $ (15,687,208) $ 7,057,732 $ (19,229,886) $ (1,599,554) The notes to the financial statements are an integral part of this statement. 55 State of California Annual Comprehensive Financial Report Statement of Cash Flows Proprietary Funds Year Ended June 30, 2022 (amounts in thousands) Water Electric Power Resources CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers/employers..................................................................................... $ (140,000) $ 1,239,371 Receipts from interfund services provided........................................................................... — — Payments to suppliers........................................................................................................... (1,639) (387,509) Payments to employees......................................................................................................... (4,199) (464,559) Payments for interfund services used................................................................................... — — Payments for Lottery prizes.................................................................................................. — — Claims paid to other than employees.................................................................................... — — Other receipts (payments)..................................................................................................... 141,000 (3,009) Net cash provided by (used in) operating activities...................................................... (4,838) 384,294 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Changes in notes receivable and leases receivable............................................................... — — Changes in interfund receivables.......................................................................................... — — Changes in interfund payables and loans payable................................................................ — — Receipt of bond charges........................................................................................................ (171,000) — Retirement of general obligation bonds................................................................................ — — Proceeds from revenue bonds............................................................................................... — — Retirement of revenue bonds................................................................................................ — — Interest received.................................................................................................................... — — Interest paid........................................................................................................................... — — Transfers in........................................................................................................................... — — Transfers out......................................................................................................................... — — Grants received..................................................................................................................... — — Lottery payments for education............................................................................................ — — Other receipts (payments)..................................................................................................... (57,436) — Net cash provided by (used in) noncapital financing activities.................................... (228,436) — CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets.................................................................................................. — (361,846) Proceeds from sale of capital assets...................................................................................... — — Proceeds from notes payable and commercial paper............................................................ — 102,242 Principal paid on notes payable and commercial paper........................................................ — (232,252) Proceeds from long-term capital financing........................................................................... — — Payment on long-term capital financing............................................................................... (141) — Retirement of general obligation bonds................................................................................ — (1,885) Proceeds from revenue bonds............................................................................................... — — Retirement of revenue bonds................................................................................................ — (160,300) Interest paid........................................................................................................................... — (127,204) Grants received..................................................................................................................... — 4,996 Net cash used in capital and related financing activities .............................................. (141) (776,249) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments........................................................................................................ — (153,337) Proceeds from maturity and sale of investments.................................................................. — 153,369 Change in loans receivable................................................................................................... — 790 Earnings on investments....................................................................................................... 355 5,102 Net cash provided by (used in) investing activities........................................................ 355 5,924 Net increase (decrease) in cash and pooled investments................................................. (233,060) (386,031) Cash and pooled investments – beginning............................................................................ 346,119 1,326,001 Cash and pooled investments – ending................................................................................. $ 113,059 $ 939,970 56 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Governmental Business-type Activities – Enterprise Funds Activities State Unemployment California State Nonmajor Internal Lottery Programs University Enterprise Total Service Funds $ 8,805,269 $ 15,900,807 $ 2,924,867 $ 480,163 $ 29,210,477 $ 12,212 — — — 3,995 3,995 6,018,417 (255,273) (10,649) (2,169,587) (166,982) (2,991,639) (2,758,346) (104,464) (168,040) (5,824,841) (32,718) (6,598,821) (1,049,880) (16,212) (107,250) — (2,990) (126,452) (39,943) (6,663,937) — — — (6,663,937) — (614,727) (15,468,618) — — (16,083,345) (655,842) 859,644 462,948 (1,407,807) (483,378) (430,602) (427,224) 2,010,300 609,198 (6,477,368) (201,910) (3,680,324) 1,099,394 — — (48,599) — (48,599) — — 84,462 — 15,610 100,072 12,999 — — (60,203) 762 (59,441) 7,965 — — — — (171,000) — — — — (59,270) (59,270) — — — 168,627 108,565 277,192 — — — (117,132) (235,640) (352,772) — — — 18,256 — 18,256 — — — (16,339) (55,371) (71,710) (61) — — 5,024,669 52,082 5,076,751 3,711 — — — (55) (55) (43,484) — — 3,841,184 201,060 4,042,244 — (2,063,977) — — — (2,063,977) — — — — 102 (57,334) 4,367 (2,063,977) 84,462 8,810,463 27,845 6,630,357 (14,503) (3,114) (1,025) (1,171,042) (2,420) (1,539,447) (1,570,838) 59 193 14,405 7 14,664 8,380 — — — — 102,242 — — — — — (232,252) — — — 88,610 1,014 89,624 270,804 — — (645,281) — (645,422) — — — — — (1,885) — — — 1,769,683 — 1,769,683 2,434,342 — — (741,196) — (901,496) (1,922,085) — (182) — (4) (127,390) (3,979) — — 138,788 — 143,784 — (3,055) (1,014) (546,033) (1,403) (1,327,895) (783,376) (22,035) — (12,138,315) (2,675) (12,316,362) — 67,538 386,412 10,492,566 3,221 11,103,106 — — — — — 790 (2) 10,229 15,354 114,651 9,879 155,570 731 55,732 401,766 (1,531,098) 10,425 (1,056,896) 729 (1,000) 1,094,412 255,964 (165,043) 565,242 302,244 691,363 3,083,104 1,297,554 1,539,334 8,283,475 2,785,812 $ 690,363 $ 4,177,516 $ 1,553,518 $ 1,374,291 $ 8,848,717 $ 3,088,056 (continued) The notes to the financial statements are an integral part of this statement. 57 State of California Annual Comprehensive Financial Report Statement of Cash Flows (continued) Proprietary Funds Year Ended June 30, 2022 (amounts in thousands) Water Electric Power Resources RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss)........................................................................................................... $ (5,239) $ 303,077 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation......................................................................................................................... 136 140,220 Provisions and allowances................................................................................................... — — Amortization of premiums and discounts............................................................................ — — Amortization of long-term prepaid charges and credits....................................................... — 336,880 Other..................................................................................................................................... — (3,009) Change in account balances: Receivables......................................................................................................................... — (71,200) Due from other funds.......................................................................................................... — — Due from other governments.............................................................................................. — (1,395) Prepaid items...................................................................................................................... — — Inventories.......................................................................................................................... — (365) Contracts and installments receivable................................................................................ — — Leases receivable................................................................................................................ — — Recoverable power costs (net)............................................................................................ (1,000) — Other current assets............................................................................................................ — — Loans receivable................................................................................................................. — — Deferred outflow of resources............................................................................................ (11,625) — Accounts payable................................................................................................................ 56 (320,730) Due to other funds.............................................................................................................. — (9,636) Due to component units...................................................................................................... — — Due to other governments................................................................................................... — 21,406 Deposits.............................................................................................................................. — — Contracts and notes payable............................................................................................... — — Interest payable................................................................................................................... — — Revenues received in advance............................................................................................ — — Other current liabilities....................................................................................................... — — Benefits payable................................................................................................................. — — Lottery prizes and annuities................................................................................................ — — Compensated absences payable.......................................................................................... — — Other noncurrent liabilities................................................................................................. 8,696 (10,954) Deferred inflow of resources.............................................................................................. 4,138 — Total adjustments.............................................................................................................. 401 81,217 Net cash provided by (used in) operating activities............................................................ $ (4,838) $ 384,294 Noncash investing, capital, and financing activities: Change in capital assets........................................................................................................ $ — $ — Unrealized loss on investments............................................................................................ — — State's contribution for pension and OPEB.......................................................................... — — Amortization/defeasance of bond premium and discount.................................................... 12,000 51,022 Other assets paid through long-term debt............................................................................ — — Gifts in-kind......................................................................................................................... — — Unclaimed lottery prizes directly allocated to another entity.............................................. — — Amortization of deferred loss on refundings........................................................................ 12,000 16,744 Other miscellaneous noncash transactions........................................................................... — — 58 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Governmental Business-type Activities – Enterprise Funds Activities State Unemployment California State Nonmajor Internal Lottery Programs University Enterprise Total Service Funds $ 2,015,049 $ 1,307,691 $ (7,128,720) $ 24,328 $ (3,483,814) $ 333,147 15,983 10,513 489,479 2,534 658,865 94,799 38,019 — — (6) 38,013 — — — — (1,326) (1,326) (107,355) — — — — 336,880 42 565 — (8,117) (14,046) (24,607) 11,491 (107,899) (384,498) (46,430) 2,141 (607,886) 38,103 (28) 76,461 (8,614) (1,051) 66,768 (241,387) — (54,067) — 7,088 (48,374) (11,428) (6,499) — (21,963) — (28,462) (39,955) 494 — — (965) (836) (8,568) — — — — — 578,355 — — — — — (5,287) — — — — (1,000) — (1,725) — — (5,699) (7,424) — — — — (209,674) (209,674) — — 20,011 166,712 412 175,510 (15,005) 41,360 239,639 62,843 887 24,055 29,069 (1,491) (40,976) — 5,143 (46,960) 176,709 — — — — — 1,015 — 277,912 — 60 299,378 31,143 — — — — — 26 — — — — — 7,025 — — — (388) (388) 6,593 264 12,093 (47,754) (8) (35,405) 360,480 3,964 96,368 (6,168) (3,888) 90,276 9,521 — (603,537) 34,401 (613) (569,749) 1 20,628 — — — 20,628 — — (44,294) (9,936) (4,547) (58,777) (21,039) (8,384) (359,035) (2,603,054) (13,525) (2,986,256) (556,965) — 54,917 2,649,953 11,233 2,720,241 428,864 (4,749) (698,493) 651,352 (226,238) (196,510) 766,247 $ 2,010,300 $ 609,198 $ (6,477,368) $ (201,910) $ (3,680,324) $ 1,099,394 (concluded) $ — $ — $ 633,088 $ — $ 633,088 $ — 98,716 — 474,374 — 573,090 — — — 389,094 — 389,094 — — — 41,888 — 104,910 — — — 82,378 — 82,378 — — — 71,822 — 71,822 — 57,691 — — — 57,691 — — — 8,643 — 37,387 — 46,512 — 2,224 169 48,905 3,784 The notes to the financial statements are an integral part of this statement. 59 State of California Annual Comprehensive Financial Report Statement of Fiduciary Net Position Fiduciary Funds and Similar Component Units June 30, 2022 (amounts in thousands) Pension and Other Employee Private Benefit Purpose Investment Trust Trust Trust Custodial ASSETS Cash and pooled investments.................................... $ 3,658,730 $ 98,076 $ 35,829,554 $ 2,511,099 Investments, at fair value: Short-term............................................................... 30,691,989 426,667 9,153 — Equity securities..................................................... 326,057,025 6,195,815 27,711 — Debt securities........................................................ 163,546,023 3,020,599 47,122 — Real estate.............................................................. 122,063,988 323,663 — — Securities lending collateral................................... 39,605,270 — — — Other....................................................................... 142,001,627 2,594,641 — — Total investments................................................. 823,965,922 12,561,385 83,986 — Receivables (net)....................................................... 24,315,291 8,081 1,117 2,322,961 Due from other funds................................................ 810,805 55 — 715 Due from other governments.................................... — — — 51 Interfund receivable.................................................. — — — 40,323 Loans receivable....................................................... 5,503,712 — — 10,559 Other assets............................................................... 853,782 249,476 — 15 Total assets............................................................ 859,108,242 12,917,073 35,914,657 4,885,723 DEFERRED OUTFLOWS OF RESOURCES....... 208,806 — 19 18 Total assets and deferred outflows of resources....................................................... 859,317,048 12,917,073 35,914,676 4,885,741 LIABILITIES Accounts payable...................................................... 13,395,301 21,750 30 20,937 Due to other governments......................................... 6 6,160 67,382 3,087,467 Tax overpayments..................................................... — — — — Benefits payable........................................................ 4,377,521 — — — Revenues received in advance.................................. — 19,876 — 675 Deposits..................................................................... — 249,459 — 1,065,985 Securities lending obligations................................... 39,584,962 — — — Loans payable........................................................... 5,510,766 — — — Other liabilities.......................................................... 17,081,759 — 15 20,399 Total liabilities...................................................... 79,950,315 297,245 67,427 4,195,463 DEFERRED INFLOWS OF RESOURCES........... 593,468 — 85 420 Total liabilities and deferred inflows of resources....................................................... 80,543,783 297,245 67,512 4,195,883 NET POSITION Restricted: Pension and other postemployment benefits............. 757,144,831 — 85,069 — Deferred compensation participants......................... 21,620,467 — — — Pool participants........................................................ — — 35,762,095 — Individuals, organizations, or other governments..... 7,967 12,619,828 — 689,858 Total net position.................................................. $ 778,773,265 $ 12,619,828 $ 35,847,164 $ 689,858 60 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Statement of Changes in Fiduciary Net Position Fiduciary Funds and Similar Component Units Year Ended June 30, 2022 (amounts in thousands) Pension and Other Employee Private Benefit Purpose Investment Trust Trust Trust Custodial ADDITIONS Contributions: Employer................................................................. $ 35,043,283 $ — $ 36,474 $ 37,072 Plan member............................................................ 10,375,684 — — — Non-employer.......................................................... 4,279,964 — — — Total contributions................................................ 49,698,931 — 36,474 37,072 Investment income: Net appreciation (depreciation) in fair value of investments.............................................................. (62,036,425) (1,712,311) (9,532) — Interest, dividends, and other investment income... 14,750,420 373,581 140,426 972 Less: investment expense........................................ (1,881,988) (4,452) (21) — Net investment income (loss)................................ (49,167,993) (1,343,182) 130,873 972 Receipts from depositors............................................ — 3,903,287 25,058,778 — Other........................................................................... 180,846 — 154 9,364 Total additions....................................................... 711,784 2,560,105 25,226,279 47,408 DEDUCTIONS Distributions paid and payable to participants........... 50,303,119 — 138,418 37,071 Refunds of contributions............................................ 448,263 — — — Administrative expense.............................................. 530,040 1,920 2,042 1,397 Interest expense.......................................................... 123,067 — — — Payments to and for depositors.................................. 745,661 2,690,815 26,363,290 30,908 Total deductions..................................................... 52,150,150 2,692,735 26,503,750 69,376 Change in net position.......................................... (51,438,366) (132,630) (1,277,471) (21,968) Net position – beginning............................................. 830,211,631 * 12,752,458 37,124,635 * 711,826 Net position – ending.................................................. $ 778,773,265 $ 12,619,828 $ 35,847,164 $ 689,858 * Restated The notes to the financial statements are an integral part of this statement. 61 State of California Annual Comprehensive Financial Report This page intentionally left blank 62 The notes to the financial statements are an integral part of this statement. Discretely Presented Component Units Financial Statements State of California Annual Comprehensive Financial Report Statement of Net Position Discretely Presented Component Units – Enterprise Activity June 30, 2022 (amounts in thousands) California University Housing Nonmajor of Finance Component California Agency Units Total ASSETS Current assets: Cash and pooled investments...................................... $ 1,656,366 $ 1,769,048 $ 1,607,778 $ 5,033,192 Investments................................................................. 14,933,556 — 639,346 15,572,902 Restricted assets: Cash and pooled investments................................... — — 176,943 176,943 Investments............................................................... — — 48,275 48,275 Receivables (net)......................................................... 6,443,806 234,069 574,696 7,252,571 Due from primary government................................... 307,083 — 84 307,167 Due from other governments...................................... 196,186 — 2,000 198,186 Prepaid items............................................................... — 399 3,134 3,533 Inventories................................................................... 382,683 — — 382,683 Other current assets..................................................... 594,776 93,513 34,471 722,760 Total current assets................................................... 24,514,456 2,097,029 3,086,727 29,698,212 Noncurrent assets: Restricted assets: Cash and pooled investments................................... — — 55,194 55,194 Investments............................................................... — — 331,522 331,522 Investments................................................................. 38,378,181 236,080 3,087,353 41,701,614 Receivables (net)......................................................... 3,026,206 — 700,614 3,726,820 Loans receivable......................................................... — 2,280,513 442,455 2,722,968 Long-term prepaid charges......................................... — — 111 111 Capital assets: Land.......................................................................... 1,544,104 — 174,423 1,718,527 Collections – nondepreciable................................... 618,141 — 12,110 630,251 Buildings and other depreciable property................ 63,567,190 868 2,206,403 65,774,461 Intangible assets – amortizable................................ 4,925,981 27,990 201,167 5,155,138 Less: accumulated depreciation/amortization.......... (33,614,742) (2,760) (1,272,742) (34,890,244) Construction/development in progress..................... 4,634,766 — 249,620 4,884,386 Intangible assets – nonamortizable.......................... — — 5,214 5,214 Other noncurrent assets............................................... 493,610 14,263 79,394 587,267 Total noncurrent assets............................................. 83,573,437 2,556,954 6,272,838 92,403,229 Total assets........................................................... 108,087,893 4,653,983 9,359,565 122,101,441 DEFERRED OUTFLOWS OF RESOURCES......... 11,498,564 14,775 117,643 11,630,982 Total assets and deferred outflows of resources..................................................... $ 119,586,457 $ 4,668,758 $ 9,477,208 $ 133,732,423 64 The notes to the financial statements are an integral part of this statement. Component Unit Financial Statements California University Housing Nonmajor of Finance Component California Agency Units Total LIABILITIES Current liabilities: Accounts payable.......................................................... $ 2,668,668 $ 44,534 $ 944,391 $ 3,657,593 Revenues received in advance....................................... 1,928,589 — 165,289 2,093,878 Deposits......................................................................... — 228,704 1,183 229,887 Contracts and notes payable.......................................... — — 12,580 12,580 Interest payable............................................................. — 7,239 1,754 8,993 Securities lending obligations....................................... 2,162,521 — — 2,162,521 Current portion of long-term obligations...................... 6,133,649 27,118 129,289 6,290,056 Other current liabilities.................................................. 3,149,923 107,168 159,679 3,416,770 Total current liabilities............................................... 16,043,350 414,763 1,414,165 17,872,278 Noncurrent liabilities: Compensated absences payable.................................... 504,283 2,793 14,153 521,229 Workers’ compensation benefits payable..................... 854,774 — 8,064 862,838 Loans payable................................................................ — 2,180 11,759 13,939 Commercial paper and other borrowings...................... — — 75,490 75,490 Lease liability................................................................ 2,258,370 23,547 218,959 2,500,876 Revenue bonds payable................................................. 29,733,296 99,530 806,547 30,639,373 Net other postemployment benefits liability................. 20,171,887 63,998 210,090 20,445,975 Net pension liability...................................................... 21,403,045 23,622 220,539 21,647,206 Revenues received in advance....................................... — — 17,829 17,829 Other noncurrent liabilities............................................ 1,923,114 588,364 713,875 3,225,353 Total noncurrent liabilities......................................... 76,848,769 804,034 2,297,305 79,950,108 Total liabilities........................................................ 92,892,119 1,218,797 3,711,470 97,822,386 DEFERRED INFLOWS OF RESOURCES................ 11,633,217 41,609 538,073 12,212,899 Total liabilities and deferred inflows of resources........................................................ 104,525,336 1,260,406 4,249,543 110,035,285 NET POSITION Net investment in capital assets.................................... 11,804,936 305 721,490 12,526,731 Restricted: Nonexpendable – endowments................................... 7,735,222 — 1,756,967 9,492,189 Expendable: Endowments and gifts............................................. 17,692,863 — 17,637 17,710,500 Education................................................................. 1,025,523 — 1,289,665 2,315,188 Indenture.................................................................. — 709,312 — 709,312 Statute...................................................................... — 2,739,956 627,928 3,367,884 Other purposes......................................................... — — 20,752 20,752 Total expendable................................................... 18,718,386 3,449,268 1,955,982 24,123,636 Unrestricted................................................................... (23,197,423) (41,221) 793,226 (22,445,418) Total net position...................................................... 15,061,121 3,408,352 5,227,665 23,697,138 Total liabilities, deferred inflows of resources, and net position................................................. $ 119,586,457 $ 4,668,758 $ 9,477,208 $ 133,732,423 (concluded) The notes to the financial statements are an integral part of this statement. 65 State of California Annual Comprehensive Financial Report Statement of Activities Discretely Presented Component Units – Enterprise Activity Year Ended June 30, 2022 (amounts in thousands) California University Housing Nonmajor of Finance Component California Agency Units Total OPERATING EXPENSES Personal services.......................................................... $ 30,077,938 $ 22,487 $ 511,073 $ 30,611,498 Scholarships and fellowships....................................... 1,182,024 — 106,824 1,288,848 Supplies........................................................................ 5,361,451 — 17,909 5,379,360 Services and charges.................................................... 463,127 223,170 1,318,083 2,004,380 Department of Energy laboratories.............................. 990,713 — — 990,713 Depreciation................................................................. 2,626,612 2,574 99,186 2,728,372 Interest expense and fiscal charges.............................. 1,126,368 14,283 50,702 1,191,353 Other............................................................................. 6,695,824 2,632 95,486 6,793,942 Total operating expenses........................................ 48,524,057 265,146 2,199,263 50,988,466 PROGRAM REVENUES Charges for services..................................................... 30,936,266 15,559 699,932 31,651,757 Operating grants and contributions.............................. 13,287,117 — 865,950 14,153,067 Capital grants and contributions................................... 78,860 — 42,822 121,682 Total program revenues.......................................... 44,302,243 15,559 1,608,704 45,926,506 Net revenues (expenses)......................................... (4,221,814) (249,587) (590,559) (5,061,960) GENERAL REVENUES Investment and interest income (loss).......................... (3,981,479) 189,018 (350,421) (4,142,882) Other............................................................................. 3,654,517 32,843 971,468 4,658,828 Total general revenues............................................ (326,962) 221,861 621,047 515,946 Change in net position............................................ (4,548,776) (27,726) 30,488 (4,546,014) Net position – beginning............................................... 19,609,897 * 3,436,078 5,197,177 * 28,243,152 Net position – ending..................................................... $ 15,061,121 $ 3,408,352 $ 5,227,665 $ 23,697,138 * Restated 66 The notes to the financial statements are an integral part of this statement. Notes to the Financial Statements Notes to the Financial Statements – Index Note 1. Summary of Significant Accounting Policies.................................................................... 71 A. Reporting Entity................................................................................................. 73 1. Blended Component Units...................................................................... 73 2. Fiduciary Component Units.................................................................... 73 3. Discretely Presented Component Units.................................................. 74 4. Joint Venture........................................................................................... 75 5. Related Organizations............................................................................. 76 B. Government-wide and Fund Financial Statements............................................ 78 C. Measurement Focus and Basis of Accounting................................................... 81 1. Government-wide Financial Statements................................................. 81 2. Fund Financial Statements...................................................................... 81 D. Cash and Investments......................................................................................... 82 E. Receivables......................................................................................................... 82 F. Inventories......................................................................................................... 82 G. Long-term Prepaid Charges............................................................................... 82 H. Capital Assets and Right-to-Use Assets............................................................ 82 I. Long-term Obligations ....................................................................................... 84 J. Compensated Absences....................................................................................... 85 K. Deferred Outflows and Deferred Inflows of Resources..................................... 85 1. Deferred Outflows of Resources.............................................................. 85 2. Deferred Inflows of Resources................................................................ 86 L. Nonmajor Enterprise Segment Information....................................................... 88 M. Net Position and Fund Balance......................................................................... 88 1. Net Position.............................................................................................. 88 2. Fund Balance ........................................................................................... 88 3. Stabilization Arrangements...................................................................... 89 a. Budget Stabilization Account ..................................................... 89 b. Special Fund for Economic Uncertainties.................................. 90 c. Public School System Stabilization Account.............................. 90 N. Restatement of Beginning Fund Balances and Net Position.............................. 90 1. Fund Financial Statements....................................................................... 90 2. Government-wide Financial Statements.................................................. 91 O. Guaranty Deposits.............................................................................................. 91 67 State of California Annual Comprehensive Financial Report Note 2. Budgetary and Legal Compliance...................................................................................... 91 A. Budgeting and Budgetary Control........................................................................ 91 B. Legal Compliance................................................................................................. 92 Note 3. Deposits and Investments................................................................................................... 92 A. Primary Government............................................................................................ 92 1. Control of State Funds............................................................................. 92 2. Valuation of State Investments................................................................ 93 3. Oversight of Investing Activities............................................................. 95 4. Risk of Investments.................................................................................. 96 a. Interest Rate Risk........................................................................ 97 b. Credit Risk.................................................................................. 98 c. Custodial Credit Risk.................................................................. 98 d. Concentration of Credit Risk...................................................... 98 B. Fiduciary Funds.................................................................................................... 99 C. Discretely Presented Component Units................................................................ 99 Note 4. Accounts Receivable.......................................................................................................... 100 Note 5. Restricted Assets................................................................................................................ 102 Note 6. Capital Assets..................................................................................................................... 103 Note 7. Deferred Outflows and Deferred Inflows of Resources..................................................... 107 Note 8. Accounts Payable............................................................................................................... 108 Note 9. Long-term Obligations....................................................................................................... 110 Note 10. Pension Trusts.................................................................................................................... 114 A. California Public Employees’ Retirement System............................................... 115 1. Public Employees’ Retirement Fund (PERF)......................................... 115 2. Single-employer Plans............................................................................ 125 B. California State Teachers’ Retirement System..................................................... 134 C. Trial Court Pension Plans..................................................................................... 138 Note 11. Other Postemployment Benefits......................................................................................... 140 A. Retiree Health Benefits Program.......................................................................... 140 B. Trial Court OPEB Plans....................................................................................... 156 Note 12. Commercial Paper and Other Long-term Borrowings....................................................... 158 Note 13. Leases................................................................................................................................. 158 Note 14. Commitments..................................................................................................................... 159 68 Notes to the Financial Statements Note 15. General Obligation Bonds.................................................................................................. 161 A. Variable-rate General Obligation Bonds.............................................................. 161 B. Mandatory Tender Bonds..................................................................................... 162 C. Build America Bonds........................................................................................... 162 D. Debt Service Requirements.................................................................................. 163 E. General Obligation Bond Defeasances................................................................. 163 1. Current Year Activity ............................................................................. 163 2. Outstanding Balance............................................................................... 164 Note 16. Revenue Bonds................................................................................................................... 164 A. Governmental Activities ...................................................................................... 164 B. Business-type Activities....................................................................................... 165 C. Discretely Presented Component Units................................................................ 166 D. Revenue Bond Defeasances................................................................................. 167 1. Current Year – Governmental Activities................................................ 167 2. Current Year – Business-type Activities................................................. 168 3. Outstanding Balances.............................................................................. 168 Note 17. Risk Management............................................................................................................... 168 Note 18. Interfund Balances and Transfers....................................................................................... 170 A. Interfund Balances................................................................................................ 170 B. Interfund Transfers............................................................................................... 176 Note 19. Fund Balances, Net Position Deficits, and Endowments................................................... 178 A. Fund Balances...................................................................................................... 178 B. Net Position Deficits............................................................................................. 179 C. Discretely Presented Component Unit Endowments and Gifts............................ 179 Note 20. No Commitment Debt........................................................................................................ 179 Note 21. Contingent Liabilities......................................................................................................... 180 A. Litigation.............................................................................................................. 180 B. Federal Audit Exceptions..................................................................................... 184 Note 22. Subsequent Events.............................................................................................................. 184 A. Debt Issuances...................................................................................................... 184 B. Other..................................................................................................................... 185 69 State of California Annual Comprehensive Financial Report This page intentionally left blank 70 Notes to the Financial Statements Notes to the Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements present information on the financial activities of the State of California over which the Governor, the Legislature, and other elected officials have direct or indirect governing and fiscal control. These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The provisions of the following Governmental Accounting Standards Board (GASB) Statements have been implemented for the fiscal year ended June 30, 2022: GASB Statement No. 87, Leases, as amended, is effective for the fiscal year ended June 30, 2022. This Statement better meets the information needs of financial statement users by improving accounting and financial reporting for leases by governments. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. GASB Statement No. 87 defines a lease as a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. Any contract that meets this definition should be accounted for under the leases guidance, unless specifically excluded in the Statement. Implementation of GASB Statement No. 87 resulted in a restatement of beginning net position, recognition of right-to-use lease assets, lease receivables, lease liabilities, deferred inflows of resources, and additional note disclosures related to leases where the State is a lessee or a lessor. GASB Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period, as amended, is effective for the fiscal year ended June 30, 2022. This Statement enhances the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and simplifies accounting for interest cost incurred before the end of a construction period. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business-type activity or enterprise fund. This Statement also reiterates that in financial statements prepared using the current financial resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expenditure on a basis consistent with governmental fund accounting principles. Implementation of GASB Statement No. 89 resulted in an immaterial impact on the State’s Annual Comprehensive Financial Report (ACFR). 71 State of California Annual Comprehensive Financial Report GASB Statement No. 92, Omnibus 2020, as amended, is effective for the fiscal year ended June 30, 2022. This Statement enhances comparability in accounting and financial reporting and improves the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics and includes specific provisions about the following: a. The effective date of Statement No. 87, Leases, and Implementation Guide No. 2019-3, Leases, for interim financial reports. b. Reporting of intra-entity transfers of assets between a primary government employer and a component unit defined benefit pension plan or defined benefit other postemployment benefit (OPEB) plan. c. The applicability of Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, as amended, and Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, to reporting assets accumulated for postemployment benefits. d. The applicability of certain requirements of Statement No. 84, Fiduciary Activities, to postemployment benefit arrangements. e. Measurement of liabilities (and assets, if any) related to asset retirement obligations in a government acquisition. f. Reporting by public entity risk pools for amounts that are recoverable from reinsurers or excess insurers. g. Reference to nonrecurring fair value measurements of assets or liabilities in authoritative literature. h. Terminology used to refer to derivative instrument. Implementation of GASB Statement No. 92 had an insignificant impact to the State’s ACFR and resulted in the replacement of the word “derivatives” with “derivative instruments” in the Notes to the Financial Statements. GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, is effective for the fiscal year ended June 30, 2022. The objectives of this Statement are to (a) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (b) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution OPEB plans, and employee benefit plans other than pension plans or OPEB plans as fiduciary component units in fiduciary fund financial statements; and (c) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code Section 457 deferred compensation plans that meet the definition of a pension plan and for benefits provided through those plans. Implementation of GASB Statement No. 97 resulted in an insignificant impact to the State’s ACFR. 72 Notes to the Financial Statements A. Reporting Entity These financial statements present the primary government of the State and its component units. The primary government consists of all funds, organizations, institutions, agencies, departments, and offices that are not legally separate from the State. Component units are organizations that are legally separate from the State, but for which the State is financially accountable, or organizations whose relationship with the State is such that exclusion would cause the State’s financial statements to be misleading. Following is information on the blended, fiduciary, and discretely presented component units of the State. 1. Blended Component Units Blended component units, although legally separate entities, are in substance part of the primary government’s operations. Therefore, data from these blended component units are integrated into the appropriate funds for reporting purposes. Building authorities are blended component units because they have been created through the use of joint exercise of powers agreements with various cities to finance the construction of state buildings. The building authorities’ financial activities are reported in capital projects funds. As a result, contracts receivable arrangements between the building authorities and the State have been eliminated from the financial statements. Instead, only the underlying capital assets and the debt used to acquire them are reported in the government-wide financial statements. For information regarding obtaining copies of the financial statements of the building authorities, email the State Controller’s Office, State Accounting and Reporting Division at StateGovReports@sco.ca.gov. The Golden State Tobacco Securitization Corporation (GSTSC) is a not-for-profit corporation established through legislation in September 2002 solely for the purpose of purchasing Tobacco Settlement Revenues from the State. The five voting members of the State Public Works Board serve ex officio as the directors of the corporation. The GSTSC is authorized to issue bonds as necessary to provide sufficient funds for carrying out its purpose. The GSTSC’s financial activity is reported in the combining statements in the Nonmajor Governmental Funds section as a special revenue fund. For information regarding obtaining copies of the financial statements of GSTSC, contact the Department of Finance, Natural Resources, Energy, Environmental, and Capital Outlay Section, 915 L Street, 9th Floor, Sacramento, California 95814. 2. Fiduciary Component Units The State has two legally separate fiduciary component units that administer pension and other employee benefit trust funds. The State appoints a voting majority of the board members of both plans which, due to their fiduciary nature, are presented in the fiduciary fund statements as pension and other employee benefit trust funds, along with other primary government fiduciary funds. The California Public Employees’ Retirement System (CalPERS) administers pension and health benefit plans for state employees, non-teaching school employees, and employees of California public agencies. Its Board of Administration has plenary authority and fiduciary responsibility for the investment of monies and the administration of the plans. CalPERS administers the following seven pension and other employee benefit trust funds: the Public Employees’ Retirement Fund, the Judges’ Retirement Fund, the Judges’ Retirement Fund II, the Legislators’ Retirement Fund, the Public Employees’ Deferred Compensation Fund, the public employee Supplemental Contributions Program Fund, and the California 73 State of California Annual Comprehensive Financial Report Employers’ Retiree Benefit Trust Fund. CalPERS administers one investment trust fund: the California Employers' Pension Prefunding Trust Fund. CalPERS also maintains two custodial funds: the Replacement Benefit Fund, and the Old Age and Survivors’ Insurance Revolving Fund. CalPERS’ separately issued financial statements may be found on its website at www.CalPERS.ca.gov. The California State Teachers’ Retirement System (CalSTRS) administers pension benefit plans for California public school teachers and certain other employees of the public school system. The State is financially accountable for CalSTRS. CalSTRS administers a hybrid retirement system consisting of the State Teachers’ Retirement Plan, a defined benefit plan, composed of the Defined Benefit Program, the Defined Benefit Supplement Program, the Cash Balance Benefit Program, and the Replacement Benefits Program; two defined contribution plans; a postemployment benefit plan; and a fund used to account for ancillary activities associated with various deferred compensation plans and programs. CalSTRS’ separately issued financial statements may be found on its website at www.CalSTRS.com. 3. Discretely Presented Component Units Enterprise activity of discretely presented component units is reported in a separate column in the government-wide financial statements. Discretely presented component units are legally separate from the primary government and usually provide services to entities and individuals outside the primary government. Discretely presented component units that report enterprise activity include the University of California, the California Housing Finance Agency, and nonmajor component units. Most component units separately issue their own financial statements. In general, the notes to the financial statements in this publication do not include information found in the component units’ separately issued financial statements. Instead, references to the individual component unit financial statements are provided where applicable. The University of California was founded in 1868 as a public, state-supported, land-grant institution. It was written into the State Constitution of 1879 as a public trust to be administered by a governing board, the Regents of the University of California (Regents). The University is a component unit of the State because the State appoints a voting majority of the Regents and provides financial assistance to the University. The University offers defined benefit pension plans and defined contribution pension plans to its employees through the University of California Retirement System (UCRS), a fiduciary responsibility of the Regents. The financial information of the UCRS is not included in the financial statements of this report due to its fiduciary nature. The University’s financial statements may be found on its website at www.ucop.edu. The California Housing Finance Agency (CalHFA) was created by the Zenovich-Moscone-Chacon Housing and Home Finance Act, as amended. CalHFA’s purpose is to finance the housing needs of persons and families of low and moderate income. It is a component unit of the State because the State appoints a voting majority of CalHFA’s governing board and the executive director, who administers the day-to-day operations. CalHFA’s financial statements may be found on its website at www.CalHFA.ca.gov. State legislation created various nonmajor component units to provide certain services outside the primary government and to provide certain private and public entities with a low-cost source of financing for programs deemed to be in the public interest. California State University Auxiliary Organizations are considered component units because they exist entirely or almost entirely for the direct benefit of the universities. The remaining nonmajor component units are considered component units because the majority of members of their governing boards are appointed by or are members of the 74 Notes to the Financial Statements primary government, and the primary government can impose its will on the entity; or the entity provides a specific financial benefit to or imposes a financial burden on the primary government. For information regarding obtaining copies of the financial statements of these component units, email the State Controller’s Office, State Accounting and Reporting Division at StateGovReports@sco.ca.gov. The nonmajor consolidated component unit segments are: California State University Auxiliary Organizations, which provide services primarily to university students through foundations, associated student organizations, student unions, food service entities, book stores, and similar organizations. Financing authorities, which provide financing for specific purposes. These agencies include: • The California Alternative Energy and Advanced Transportation Financing Authority, which provides financing for alternative energy and advanced transportation technologies; • The California Infrastructure and Economic Development Bank, which provides financing for business development and public improvements; and • The California Urban Waterfront Area Restoration Financing Authority, which provides financing for coastal and inland urban waterfront restoration projects. District agricultural associations, which exhibit all of the industries, industrial enterprises, resources, and products of the State (the district agricultural associations’ financial report is as of and for the year ended December 31, 2021). Other component units, which include the following entities: • The University of California Hastings College of the Law, which was established as the law department of the University of California to provide legal education programs and operates independently under its own board of directors. The college has a discretely presented component unit, the Foundation, which provides private sources of funds for academic programs, scholarships, and faculty research; • The State Assistance Fund for Enterprise, Business and Industrial Development Corporation, which provides financial assistance to small business; and • The Public Employees’ Contingency Reserve, which provides health benefit plans for state employees and annuitants. 4. Joint Venture A joint venture is an entity resulting from a contractual arrangement; it is owned, operated, or governed by two or more participants as a separate and specific activity subject to joint control. In such an arrangement, the participants retain an ongoing financial interest or an ongoing financial responsibility in the entity. These entities are not part of the primary government or a component unit. The State participates in a joint venture called the Capitol Area Development Authority (CADA). CADA was created in 1978 by the joint exercise of powers agreement between the primary government and the City of Sacramento for the location of state buildings and other improvements. CADA is a public entity, 75 State of California Annual Comprehensive Financial Report separate from the primary government and the city; it is administered by a board composed of five members—two appointed by the primary government, two appointed by the city, and one appointed by the affirmative vote of at least three of the other four members of the board. The primary government designates the chairperson of the board. Although the primary government does not have an equity interest in CADA, it does have an ongoing financial interest. The primary government subsidizes CADA’s operations by leasing land to CADA without consideration; however, the primary government is not obligated to do so. At June 30, 2022, CADA had total assets and deferred outflows of resources of $76.9 million, total liabilities and deferred inflows of resources of $55.0 million, and total net position of $21.9 million. Total revenues for the fiscal year were $15.9 million and expenses were $12.9 million, resulting in an increase in net position of $3.0 million. As the primary government does not have equity interest in CADA, CADA’s financial information is not included in the financial statements of this report. Separately issued financial statements may be obtained on CADA’s website at www.cadanet.org. 5. Related Organizations A related organization is an organization for which a primary government is accountable because that government appoints a voting majority of the organization’s governing board, but for which the primary government is not financially accountable. Chapter 854 of the Statutes of 1996 created an Independent System Operator (ISO), a state-chartered, nonprofit market institution. The ISO provides centralized control of the statewide electrical transmission grid to ensure the efficient use and reliable operation of the transmission system. The ISO is governed by a five-member board, the members of which are appointed by the Governor and confirmed by the Senate. The State’s accountability for this institution does not extend beyond making the initial oversight board appointments. As the primary government is not financially accountable for the ISO, the financial information of this institution is not included in the financial statements of this report. For information regarding obtaining copies of the financial statements of the ISO, go to its website at www.caiso.com. The California Earthquake Authority (CEA), a legally separate organization, offers earthquake insurance for California homeowners, renters, condominium owners, and mobilehome owners. A three-member board composed of state-elected officials governs the CEA. The State’s accountability for this institution does not extend beyond making the appointments. As the primary government is not financially accountable for the CEA, the financial information of this institution is not included in the financial statements of this report. For information regarding obtaining copies of the financial statements of the CEA, go to its website at www.earthquakeauthority.com. The State Compensation Insurance Fund (State Fund) was established by the State through legislation enacted in 1913 to provide an available market for workers’ compensation insurance to employees located in California. State Fund operates in competition with other insurance carriers to serve California businesses. The State appoints all 11 members of the State Fund’s governing board. The State’s accountability for this institution does not extend beyond making the initial oversight board appointments. As the primary government is not financially accountable for the State Fund, the financial information of this institution is not included in the financial statements of this report. For information regarding obtaining copies of the financial statements of the State Fund, go to its website at www.statefundca.com. The California Health Benefit Exchange (Exchange), an independent public entity, offers health insurance to individuals, families, and small businesses. A five-member board of state-appointed officials governs the Exchange. The State’s accountability for this institution does not extend beyond 76 Notes to the Financial Statements making the appointments. As the primary government is not financially accountable for the Exchange, the financial information of this institution is not included in the financial statements of this report. For information regarding obtaining copies of the financial statements of the Exchange, go to its website at https://hbex.coveredca.com. The California Pollution Control Financing Authority (CPCFA) was created through the California Pollution Control Financing Authority Act of 1972. The CPCFA is a legally separate entity that provides financing for pollution control facilities. A three-member board composed of state-elected officials and an appointee governs the CPCFA. The State’s accountability for this institution does not extend beyond making the appointments. As the primary government is not financially accountable for the CPCFA, the financial information of this institution is not included in the financial statements of this report. For information regarding obtaining copies of the financial statements of the CPCFA, go to its website at www.treasurer.ca.gov/cpcfa. The California Health Facilities Financing Authority (CHFFA) was established by the State through legislation enacted in 1979. The CHFFA is a legally separate entity that provides financing for the construction, equipping, and acquisition of health facilities. A nine-member board composed of state- elected officials and appointees govern the CHFFA. The State’s accountability for this institution does not extend beyond making the appointments. As the primary government is not financially accountable for the CHFFA, the financial information of this institution is not included in the financial statements of this report. For information regarding obtaining copies of the financial statements of the CHFFA, go to its website at www.treasurer.ca.gov/chffa. The California Educational Facilities Authority (CEFA) was created by the State through legislation effective in 1973. The CEFA is a legally separate entity established to issue revenue bonds to finance loans for students attending public and private colleges and universities, and to assist private educational institutions of higher learning in financing the expansion and construction of educational facilities. A five-member board composed of state-elected officials and appointees govern the CEFA. The State’s accountability for this institution does not extend beyond making the appointments. As the primary government is not financially accountable for the CEFA, the financial information of this institution is not included in the financial statements of this report. For information regarding obtaining copies of the financial statements for the CEFA, go to its website at www.treasurer.ca.gov/cefa. The California School Finance Authority (CSFA) was created in 1985. The CSFA is a legally separate entity that provides loans to school and community college districts to assist them in obtaining equipment and facilities. A three-member board composed of state-elected officials and an appointee governs the CSFA. The State’s accountability for this institution does not extend beyond making the appointments. As the primary government is not financially accountable for the CSFA, the financial information for this institution is not included in the financial statements of this report. For information regarding obtaining copies of the financial statements of the CSFA, go to its website at www.treasurer.ca.gov/csfa. 77 State of California Annual Comprehensive Financial Report B. Government-wide and Fund Financial Statements Government-wide financial statements (the Statement of Net Position and the Statement of Activities) provide information on all of the nonfiduciary activities of the primary government and its component units. The primary government is reported separately from legally separate component units for which the State is financially accountable. Within the primary government, the State’s governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The effect of interfund activity has been removed from the statements, with the exception of amounts between governmental and business-type activities, which are presented as internal balances and transfers. Centralized services provided by the General Fund for other funds are charged as direct costs to the funds that received those services. Also, the General Fund recovers the cost of centralized services provided to federal programs from the federal government. The Statement of Net Position reports all of the financial and capital resources of the government as a whole in a format in which assets and deferred outflows of resources equal liabilities and deferred inflows of resources, plus net position. The Statement of Activities demonstrates the degree to which the expenses of a given function are offset by program revenues. Program revenues include charges to customers who purchase, use, or directly benefit from goods, services, or privileges provided by a given function. Program revenues also include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items that are not program- related are reported as general revenues. Fund financial statements are provided for governmental funds, proprietary funds, fiduciary funds and similar component units, and discretely presented component units. A fund is a fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The State maintains the minimum number of funds consistent with legal and managerial requirements. Fiduciary funds, although excluded from the government-wide statements, are included in the fund financial statements. Major governmental and enterprise funds are reported in separate columns in the fund financial statements. Nonmajor governmental and proprietary funds are grouped into separate columns. Discretely presented component unit statements, which follow the fiduciary fund statements, also separately report the enterprise activity of the major discretely presented component units. In this report, the enterprise activity of nonmajor discretely presented component units is grouped in a separate column. Governmental fund types are used to account for activities primarily supported by taxes, grants, and similar revenue sources. The State reports the following major governmental funds: The General Fund is the main operating fund of the State. It accounts for transactions related to resources obtained and used for those services that need not be accounted for in another fund. The Federal Fund accounts for the receipt and use of grants, entitlements, and shared revenues received from the federal government that are all restricted by federal regulations. The Transportation Fund accounts for fuel taxes, including the State’s diesel, motor vehicle, and fuel 78 Notes to the Financial Statements use taxes; bond proceeds; automobile registration fees; and other revenues that are restricted for transportation purposes, including highway and passenger rail construction and transportation safety programs. The Environmental and Natural Resources Fund accounts for fees, bond proceeds, and other revenues that are restricted for maintaining the State’s natural resources and improving the environmental quality of its air, land, and water. The Health Care Related Programs Fund accounts for fees, taxes, intergovernmental revenue, bond proceeds, transfers from other state funds, and other revenue used for the Medi-Cal program, medical research, and other health and human services programs. Proprietary fund types focus on the determination of operating income, changes in net position, financial position, and cash flows. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. Operating expenses include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. For its proprietary funds, the State applies all applicable GASB pronouncements. The State has two proprietary fund types: enterprise funds and internal service funds. Enterprise funds record business-type activity for which a fee is charged to external users for goods and services. In addition, the State is required to report activities as enterprise funds in the context of the activity’s principal revenue sources when any of the following criteria are met: • The activity’s debt is secured solely by fees and charges of the activity; • There is a legal requirement to recover costs; or • The pricing policies of fees and charges are designed to recover costs. The State reports the following major enterprise funds: The Electric Power Fund accounts for the acquisition and resale of electric power to retail end-use customers, and charges to public utilities for wildfire prevention and recovery. The Water Resources Fund accounts for charges to local water districts and the sale of excess power to public utilities. The State Lottery Fund accounts for the sale of California State Lottery (Lottery) tickets and the Lottery’s payments for education. The Unemployment Programs Fund accounts for employer and worker contributions used for payments of unemployment insurance and disability benefits. The California State University Fund accounts for student fees and other receipts from gifts, bequests, donations, federal and state grants, and loans that are used for educational purposes. 79 State of California Annual Comprehensive Financial Report Nonmajor enterprise funds account for additional operations that are financed and operated in a manner similar to private business enterprises. Additionally, the State reports internal service funds as a proprietary fund type with governmental activities. Internal service funds account for goods or services provided to other agencies, departments, or governments on a cost-reimbursement basis. The goods and services provided include architectural services, public building construction and improvements, printing and procurement services, goods produced by inmates of state prisons, data processing services, and administrative services related to water delivery. Internal service funds are included in the governmental activities at the government- wide level. Fiduciary fund types are used to account for assets held by the State. The State acts as a trustee or as a custodian for individuals, private organizations, other governments, or other funds. Fiduciary funds, including fiduciary component units, are not included in the government-wide financial statements. The State has the following four fiduciary fund types: Private purpose trust funds account for all trust arrangements, other than those properly reported in pension or investment trust funds, whereby principal and income benefit individuals, private organizations, or other governments. The following are the State’s largest private purpose trust funds: The Scholarshare Program Trust Fund accounts for money received from participants to fund their beneficiaries’ higher education expenses at certain postsecondary educational institutions. The Unclaimed Property Fund accounts for unclaimed money and properties held in trust by the State. Unclaimed money is remitted to the General Fund where it can be used by the State until it is claimed. Pension and other employee benefit trust funds of the primary government and fiduciary component units account for transactions, assets, liabilities, and net position available for plan benefits of the retirement systems and for other employee benefit programs. Investment trust funds consist of the external portion of investment pools and account for the deposits, withdrawals, and earnings of local governments and public agencies. Custodial funds account for fiduciary activities that are not required to be reported in private purpose trust funds, pension and other employee benefit trust funds, or investment trust funds, and therefore are generally fiduciary activities that are not held under a trust agreement or equivalent arrangement. Discretely presented component units consist of certain organizations that have enterprise activity. The enterprise activity component units are the University of California, the California Housing Finance Agency, and nonmajor component units. In this report, all of the enterprise activity of the discretely presented component units is reported in a separate column in the government-wide financial statements and on separate pages following the fund financial statements. 80 Notes to the Financial Statements C. Measurement Focus and Basis of Accounting 1. Government-wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when they are earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar transactions are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 2. Fund Financial Statements The measurement focus and basis of accounting for the fund financial statements vary with the type of fund. Governmental fund types are presented using the current financial resources measurement focus. With this measurement focus, operating statements present increases and decreases in net current assets; the unassigned fund balance is a measure of available, spendable resources. The accounts of the governmental fund types are reported using the modified accrual basis of accounting. Under the modified accrual basis, revenues are recorded as they become measurable and available, and expenditures are recorded at the time the liabilities are incurred. The State records revenue sources when they are earned or when they are due, provided they are measurable and available within the ensuing 12 months. When an asset is recorded in a governmental fund statement, but the revenue is not available within the ensuing 12 months, the State reports a deferred inflow of resources until such time as the revenue becomes available. Principal tax revenues susceptible to accrual are recorded as taxpayers earn income (personal income and corporation taxes), as sales are made (consumption and use taxes), and as a taxable event occurs (miscellaneous taxes), net of estimated tax overpayments. Principal tax revenues are reported net of immaterial tax abatements from programs that promote economic development and otherwise benefit the State, such as the Film and Television Tax Credit, the California Competes Tax Credit, the Low-Income Housing Tax Credit, and the Sales and Use Tax Exclusion Program. Proprietary fund types and fiduciary fund types are accounted for using the economic resources measurement focus. The accounts of the proprietary fund types and fiduciary fund types are reported using the accrual basis of accounting. Under the accrual basis, most transactions are recorded when they occur, regardless of when cash is received or disbursed. Lottery revenue and the related prize expenses are recognized when sales are made. Certain prizes are payable in deferred installments. Such liabilities are recorded at the present value of amounts payable in the future. Discretely presented component units are accounted for using the economic resources measurement focus and the accrual basis of accounting. 81 State of California Annual Comprehensive Financial Report D. Cash and Investments The State considers cash and pooled investments, for the purpose of the Statement of Cash Flows, as cash and cash equivalents. Cash and cash equivalents are considered to be cash on hand; deposits in the State’s pooled investment program; restricted cash and pooled investments for debt service, construction, and operations; restricted cash on deposit with fiscal agents (for example, revenue bond trustees); and highly liquid investments with an original maturity date of three months or less. The State reports investments at fair value, as prescribed by GAAP. Additional information on the State’s investments and fair value measurement can be found in Note 3, Deposits and Investments. E. Receivables Amounts are aggregated into a single receivables account net of allowance for uncollectible amounts. The detail of the primary government’s accounts receivable can be found in Note 4, Accounts Receivable. F. Inventories Inventories of supplies are reported at cost and inventories held for resale are stated at the lower of average cost or market. In the government-wide financial statements, inventories for both governmental and business-type activities are expensed when they are consumed and unused inventories are reported as an asset on the Statement of Net Position. In the fund financial statements, governmental funds report inventories as expenditures when purchased, and proprietary funds report inventories as expenditures when consumed. The discretely presented component units have inventory policies similar to those of the primary government. G. Long-term Prepaid Charges The long-term prepaid charges account in the enterprise funds primarily represents operating and maintenance costs that will be recognized in the Water Resources Fund as expenses over the remaining life of long-term state water supply contracts. These costs are billable in future years. In addition, the account includes unbilled interest earnings on unrecovered capital costs that are recorded as long-term prepaid charges. These charges are recognized when billed in the future years under the terms of water supply contracts. Long-term prepaid charges are also included in the State Lottery Fund. These prepaid charges are incurred in connection with certain contracts that extend beyond a one-year period, which are amortized as expenses over the remaining life of the contracts. The long-term prepaid charges for the Public Buildings Construction Fund, an internal service fund, include prepaid insurance costs on revenue bonds issued. In the government-wide financial statements, the prepaid charges for governmental activities include prepaid insurance costs on revenue bonds issued. H. Capital Assets and Right-to-Use Assets Capital assets are categorized into land, state highway infrastructure, collections, buildings and other depreciable property, intangible assets, and construction in progress. The buildings and other depreciable property account includes buildings, improvements other than buildings, equipment, certain infrastructure assets, certain books, and other capitalized and depreciable property. Intangible assets include computer software, land-use rights, patents, copyrights, trademarks, and right-to-use assets. The value of the capital assets, including the related accumulated depreciation and amortization, is reported 82 Notes to the Financial Statements in the applicable governmental, business-type, or component unit activities columns in the government- wide Statement of Net Position. The primary government has a large collection of historical and contemporary treasures that have important documentary and artistic value. These assets are not capitalized or depreciated because they are cultural resources and cannot reasonably be valued and/or the assets have inexhaustible useful lives. These treasures and works of art include furnishings, portraits and other paintings, books, statues, photographs, and miscellaneous artifacts. These collections meet the conditions for exemption from capitalization because the collections are held for public exhibition, education, or research in furtherance of public service, rather than financial gain; protected, kept unencumbered, cared for, and preserved; and subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections. In general, capital assets of the primary government are defined as assets that have a normal useful life of at least one year and a unit cost of at least $5,000. These assets are recorded at historical cost or estimated historical cost, including all costs related to the acquisition. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are recorded at acquisition value on the date received. Major capital asset outlays are capitalized as projects are constructed. Buildings and other depreciable or amortizable capital assets are depreciated using the straight-line method with no salvage value for governmental activities. Generally, buildings and other improvements are depreciated over 40 years, equipment is depreciated over 5 years, and intangible assets are amortized over 10 to 20 years. Depreciable or amortizable assets of business-type activities are depreciated or amortized using the straight-line method over their estimated useful or service lives, ranging from 1 to 100 years. California has elected to use the modified approach for capitalizing the infrastructure assets of the state highway system. The state highway system is maintained by the California Department of Transportation. By using the modified approach, the infrastructure assets of the state highway system are not depreciated and all expenditures made for those assets, except for additions and improvements, are expensed in the period incurred. All additions and improvements made after June 30, 2001 are capitalized. All infrastructure assets that are related to projects completed prior to July 1, 2001 are recorded at the historical costs contained in annual reports of the American Association of State Highway and Transportation Officials and the Federal Highway Administration. The capital assets of the discretely presented component units are reported at cost at the date of acquisition or at fair market value at the date of donation, in the case of gifts. They are depreciated or amortized over their estimated useful service lives. The State is a lessee for various noncancelable leases of land, buildings, equipment. For leases that meet the capitalization threshold of $100,000 or greater in total payments over the lease term, the State recognizes right-to-use lease assets at the commencement of a lease. Right-to-use lease assets represent the State’s right to use an underlying asset for the lease term. Right-to-use lease assets are measured at the initial value of the lease liability plus any payments made to the lessor before commencement of the lease term, less any lease incentives received from the lessor at or before the commencement of the lease term, plus any initial direct costs necessary to place the lease asset into service. Right-to-use lease assets are amortized over the shorter of the lease term or useful life of the underlying asset, ranging from 2 to 83 State of California Annual Comprehensive Financial Report 50 years, using the straight-line method. Leases below the capitalization threshold and leases with a maximum possible term of 12 months or less at commencement are expended or expensed as incurred. I. Long-term Obligations Long-term obligations consist of various types of bonds and other long-term payables including unmatured general obligation bond, unmatured revenue bonds, lease liabilities, certificates of participation, commercial paper, net pension liability, net other postemployment benefits liability, employees’ compensated absences and workers’ compensation claims, pollution remediation obligations, asset retirement obligations, amounts owed for lawsuits, reimbursement for costs mandated by the State, outstanding Proposition 98 funding guarantee owed to schools, the liability for lottery prizes and annuities, loans from other governments, and the primary government’s share of the University of California’s pension liability that is due in more than one year. In the government-wide financial statements, the obligations are reported as liabilities in the applicable governmental activities, business-type activities, and component units columns of the Statement of Net Position. The current portion—amount due within one year—of the long-term obligations is reported under current liabilities. Pollution remediation obligations are recorded by the State when one or more of the GASB Statement No. 49 obligating events have occurred and when a reasonable estimate of the remediation cost is available. These liabilities are measured using actual contract costs, where no change in cost is expected, or the expected cash flow technique. The remediation obligation estimates that appear in this report are subject to change over time. Costs may vary due to price fluctuations, changes in technology, changes in potential responsible parties, results of environmental studies, changes to statutes or regulations, and other factors that could result in revisions to these estimates. Prospective recoveries from responsible parties may reduce the State’s obligation. Asset retirement obligations are recorded by the State when the internal and external obligating events described in GASB Statement No. 83 have occurred and when a reasonable estimate of the cost to retire certain tangible capital assets is available. The types of underlying assets include above ground and underground fuel and chemical storage tanks, various medical equipment, dams, water treatment facilities, bridges and other infrastructure, and electric power generating equipment. Asset retirement obligation estimates are based on professional judgment, experience, and historical cost data, and are subject to change over time due to price fluctuations, changes in technology, updated information from engineering studies or other evaluations, changes to statutes or regulations, and other factors that could result in revisions to these estimates. Bond premiums and discounts for business-type activities and component units are deferred and amortized over the life of the bonds. In these instances, bonds payable is reported net of the applicable premium and discount. Bond premiums and discounts for governmental funds are reported as other financing sources (uses). However, in the government-wide financial statements, the bonds payable for governmental activities is reported net of the applicable unamortized premium and discount. Bond issuance costs, excluding prepaid insurance, are expensed when incurred. With advance approval from the Legislature, certain authorities and state agencies may issue revenue bonds. Principal and interest on revenue bonds are payable from the pledged revenues of the respective funds, building authorities, and agencies. The General Fund has no legal liability for payment of principal and interest on revenue bonds. With the exception of certain special revenue funds (Transportation and the Golden State Tobacco Securitization Corporation) and the building authorities capital projects fund, the liability for revenue bonds is recorded in the respective fund. 84 Notes to the Financial Statements Lease liabilities represent the State’s obligation to make lease payments arising from a lease contract. Lease liabilities are recognized by the State at the lease commencement date based on the present value of future lease payments expected to be made during the lease term. The present value of lease payments is discounted based on a borrowing rate explicitly stated in the lease contract, the incremental borrowing rate published on the State Controller’s website, or other determined incremental borrowing rates. Variable lease payments based on future performance of the lessee or usage of the underlying asset are expensed as incurred, and are not included in the measurement of the lease liability. Subsequent to their initial measurement, lease liabilities are reduced by the principal portion of lease payments made. The State assesses each lease liability annually for changes in the terms of the lease, interest rate, impairment of the underlying leased asset, or other factors that may impact the expected future lease payments. Lease amendments and other modifications could necessitate remeasuring the lease liability. J. Compensated Absences The government-wide financial statements report both the current and the noncurrent liabilities for compensated absences, which are vested unpaid vacation, annual leave, and other paid leave programs. However, unused sick-leave balances are not included in the compensated absences because they do not vest to employees. In the governmental fund financial statements, only the compensated absences liability for employees who have left state service and have unused reimbursable leave at fiscal year-end is included. The amounts of vested unpaid vacation and annual leave accumulated by state employees are accrued in proprietary funds when incurred. In the discretely presented component units, the compensated absences are accounted for in the same manner as in the proprietary funds of the primary government. K. Deferred Outflows and Deferred Inflows of Resources The government-wide and fund financial statements report deferred outflows of resources and deferred inflows of resources. 1. Deferred Outflows of Resources Deferred outflows of resources are the consumption of assets that are applicable to future reporting periods. Deferred outflows of resources are presented separately after “Total Assets” in the Balance Sheet and Statement of Net Position. Deferred outflows of resources consist of the following transactions: • Loss on Refunding of Debt: The defeasance of previously outstanding general obligation and revenue bonds results in deferred refunding losses for governmental activities, business-type activities, and component units. These deferred losses are recognized as a component of interest expense over the remaining life of the old debt or the life of the new debt, whichever is shorter. • Decrease in Fair Value of Hedging Derivative Instruments: Negative changes in the fair value of hedging derivative instruments are reported for component units. • Net Pension Liability: Increases in net pension liability that are not recognized in pension expense for the reporting period are reported as deferred outflows of resources related to pensions. Differences between expected and actual experience with regard to economic or demographic factors; changes of assumptions about future economic or demographic factors, or of other inputs 85 State of California Annual Comprehensive Financial Report used by the actuaries to determine total pension liability; and increases in the State’s proportionate share of net pension liability for plans that have a special funding situation, such as CalSTRS, are all recognized in pension expense over the average of the expected remaining service lives of participating employees. A deferred outflow of resources is also reported when projected earnings on pension plan investments exceed actual earnings, with the net difference amortized to pension expense over a five-year period beginning in the current reporting period. Employer contributions, and state contributions in the case of CalSTRS’ special funding situation, made subsequent to the measurement date are reported as deferred outflows of resources related to pensions and reduce net pension liability in the following year. Deferred outflows of resources related to net pension liability are reported for governmental activities, business-type activities, fiduciary funds, and component units. • Net Other Postemployment Benefits Liability: Increases in net OPEB liability that are not recognized in OPEB expense for the reporting period are reported as deferred outflows of resources related to OPEB. Differences between expected and actual experience with regard to economic or demographic factors; changes of assumptions about future economic or demographic factors, or of other inputs used by the actuaries to determine total OPEB liability; and differences between the actual and proportionate share of OPEB contribution amounts, are all recognized as OPEB expense over the average of the expected remaining service lives of participating employees. A deferred outflow of resources is also reported when projected earnings on OPEB plan investments exceed actual earnings, with the net difference amortized to OPEB expense over a five-year period beginning in the current reporting period. Employer contributions made subsequent to the measurement date are reported as deferred outflows of resources related to OPEB and reduce net OPEB liability in the following year. Deferred outflows of resources related to net OPEB liability are reported for governmental activities, business-type activities, fiduciary funds, and component units. • Asset Retirement Obligations: Increases in asset retirement obligations that are not recognized as expense in the current reporting period are reported as deferred outflows of resources for component units. 2. Deferred Inflows of Resources Deferred inflows of resources are the acquisition of assets that are applicable to future reporting periods. Deferred inflows of resources are presented separately after “Total Liabilities” in the Balance Sheet and Statement of Net Position. The State’s deferred inflows of resources consist of the following transactions: • Unavailable Revenues: Governmental funds report deferred inflows of resources for earned and measurable revenue from long-term receivables that is not available within 12 months of the end of the reporting period. These deferred amounts are recognized as revenue in the periods that they become available. • Gain on Refunding of Debt: The defeasance of previously outstanding general obligation and revenue bonds results in deferred refunding gains for governmental activities and discretely presented component units. These deferred gains are recognized as a component of interest expense over the remaining life of the old debt or the life of the new debt, whichever is shorter. 86 Notes to the Financial Statements • Service Concession Arrangements: The State and its component units have entered into service concession arrangements with third parties for park facility services, student housing, and certain other services. The upfront payment received or present value of installment payments expected to be received from the third parties are reported as deferred inflows of resources. • Irrevocable Split-Interest Agreements: The State and its discretely presented component units have entered into irrevocable split-interest agreements with third parties to receive donations of monetary assets and real property. The value of assets received or expected to be received from the third parties are reported as deferred inflows of resources. • Net Pension Liability: Reductions in net pension liability that are not recognized in pension expense for the reporting period are reported as deferred inflows of resources related to pensions. Differences between expected and actual experience with regard to economic or demographic factors; changes of assumptions about future economic or demographic factors, or of other inputs used by the actuaries to determine total pension liability; and decreases in the State’s proportionate share of net pension liability for plans that have a special funding situation, such as CalSTRS, are all recognized against pension expense over the average of the expected remaining service lives of participating employees. A deferred inflow of resources is also reported when actual earnings on pension plan investments exceed projected earnings, with the net difference amortized against pension expense over a five-year period beginning in the current reporting period. Deferred inflows of resources related to net pension liability are reported for governmental activities, business-type activities, fiduciary funds, and component units. • Net Other Postemployment Benefits Liability: Reductions in net OPEB liability that are not recognized in OPEB expense for the reporting period are reported as deferred inflows of resources related to OPEB. Differences between expected and actual experience with regard to economic or demographic factors; changes of assumptions about future economic or demographic factors, or of other inputs used by the actuaries to determine total OPEB liability; and differences between the actual and proportionate share of OPEB contribution amounts, are all recognized against OPEB expense over the average of the expected remaining service lives of participating employees. A deferred inflow of resources is also reported when actual earnings on OPEB plan investments exceed projected earnings, with the net difference amortized against OPEB expense over a five- year period beginning in the current reporting period. Deferred inflows of resources related to net OPEB liability are reported for governmental activities, business-type activities, fiduciary funds, and component units. • Deferred Inflows of Resources Related to Leases: For lease contracts where the State is a lessor, deferred inflows of resources are reported for governmental and proprietary funds, governmental activities, business-type activities, and component units. Deferred inflows of resources related to leases are recognized as inflows of resources (revenue) on a straight-line basis over the term of each lease contract. • Other Deferred Inflows of Resources: Revenues generated from current rates charged by regulated business-type activities that are intended to recover costs expected to be incurred in the future are reported in the government-wide Statement of Net Position. A component unit’s sale of future royalty payments and nonexchange transactions are reported as a deferred inflow of resources. 87 State of California Annual Comprehensive Financial Report L. Nonmajor Enterprise Segment Information Three nonmajor enterprise fund segments are displayed discretely in the Combining Statement of Net Position; the Combining Statement of Revenues, Expenses, and Changes in Fund Net Position; and the Combining Statement of Cash Flows of the nonmajor enterprise funds. A segment is an identifiable activity reported as or within an enterprise fund or another stand-alone entity for which debt is outstanding and a revenue stream has been pledged in support of that debt. In addition, to qualify as a segment, an activity must be subject to an external requirement to separately account for revenues, expenses, gains and losses, assets and deferred outflows of resources, and liabilities and deferred inflows of resources. All of the activities reported for the fund segments listed below meet these requirements. State Water Pollution Control Revolving Fund: Interest charged on loans to communities for construction of water pollution control facilities and projects. Safe Drinking Water State Revolving Fund: Interest charged on loans to communities for construction of water systems for drinking water infrastructure projects. Housing Loan Fund: Interest payments from low-interest, long-term farm and home mortgage loan contracts to eligible veterans living in California. M. Net Position and Fund Balance The difference between fund assets, deferred outflows of resources, liabilities, and deferred inflows of resources is called “net position” on the government-wide financial statements, the proprietary and fiduciary fund statements, and the component unit statements; it is called “fund balance” on the governmental fund statements. 1. Net Position The government-wide financial statements include the following categories of net position: Net investment in capital assets represents capital assets, net of accumulated depreciation, reduced by the outstanding debt attributable to the acquisition, construction, or improvement of those assets. Restricted net position results from transactions with purpose restrictions and is designated as either nonexpendable or expendable. Nonexpendable restricted net position is subject to externally imposed restrictions that must be retained in perpetuity. Expendable restricted net position is subject to externally imposed restrictions that can be fulfilled by actions of the State. As of June 30, 2022, the government-wide financial statements show restricted net position for the primary government of $71.1 billion, of which $18.2 billion is due to enabling legislation. Unrestricted net position is neither restricted nor invested in capital assets. 2. Fund Balance In the fund financial statements, proprietary funds include categories of net position similar to those in the government-wide financial statements. Fund balance amounts for governmental funds are reported as nonspendable, restricted, committed, assigned, or unassigned. 88 Notes to the Financial Statements Nonspendable fund balance includes amounts that cannot be spent because they are not in spendable form (inventories; prepaid amounts; long-term portion of loans or notes receivable; or property held for resale unless the proceeds are restricted, committed, or assigned) or they are legally or contractually required to remain intact. Restricted fund balance has constraints placed upon the use of the resources either by an external party (creditors, grantors, contributors, or laws and regulations of other governments) or through a constitutional provision or enabling legislation. Committed fund balance can be used only for specific purposes pursuant to constraints imposed by state law as adopted by the California State Legislature. The state law that commits fund balance to a specific purpose must have been adopted prior to the end of the reporting period, but the amount subject to the constraint may be determined in a subsequent period. Committed fund balance incorporates contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned fund balance: California does not have a formal policy to delegate authority to assign resources. However, fund balance can be classified as assigned when a purchase order creates an outstanding encumbrance amount, unless the purchase order relates to restricted or committed resources. Furthermore, in governmental funds created by state law for a specific purpose, other than the General Fund, all resources that are not reported as nonspendable, restricted, or committed are classified as assigned for the purpose of the respective funds. Unassigned fund balance is the residual amount of the General Fund not included in the four classifications described above. In other governmental funds in which expenditures incurred for specific purposes exceeded amounts restricted, committed, or assigned to those purposes, a negative unassigned fund balance is reported. Fund balance spending order: For the purpose of reporting fund balance in this financial report under GASB Statement No. 54, the State considers resources to be spent in the following order when an expenditure is incurred for which these classifications are available: restricted, committed, assigned, and unassigned. Fiduciary fund net position represents amounts held in trust for pension and other postemployment benefits, deferred compensation or pool participants, individuals, organizations, or other governments. 3. Stabilization Arrangements a. Budget Stabilization Account In accordance with Article 16, Section 20 of the California State Constitution, the State maintains the Budget Stabilization Account. The Budget Stabilization Account is reported in the General Fund. By October 1 of each fiscal year, a transfer must be made from the General Fund to the Budget Stabilization Account in an amount equal to one-half of (a) 1.5% of the estimated General Fund revenues for that fiscal year and (b) personal capital gains tax revenues in excess of 8.0% of estimated General Fund taxes for that fiscal year less amounts that must be spent on Proposition 98. The remaining half of the calculated amount is used as appropriated by the State Legislature to pay down (1) interfund loans, (2) specified debts to local governments, and (3) debts for pension and retiree health benefits. 89 State of California Annual Comprehensive Financial Report The State Legislature may suspend or reduce the transfer of funds to, or withdrawal of funds from, the Budget Stabilization Account if the Governor declares a budget emergency. For this purpose, budget emergency means either (1) a natural disaster or other event that creates a condition of extreme peril to the safety of persons or property, or (2) there is not enough money to keep General Fund spending at the highest level of the past three fiscal years (adjusted for changes in state population and cost of living). The amount of the withdrawal from the Budget Stabilization Account is limited to the actual amount needed for the natural disaster or to keep General Fund spending at the highest level of the past three years. In addition, if there was no budget emergency in the prior fiscal year, no more than one-half of the Budget Stabilization Account balance may be withdrawn; the entire remaining balance could be withdrawn in the second straight year of a budget emergency. When the balance of the Budget Stabilization Account reaches 10% of the estimated General Fund revenues for that fiscal year, the amount that would have been transferred to the Budget Stabilization Account would instead be used to build and maintain infrastructure. At June 30, 2022, the Budget Stabilization Account had a restricted fund balance of $20.3 billion. b. Special Fund for Economic Uncertainties State law established the Special Fund for Economic Uncertainties (SFEU) as a contingency reserve to help the State meet its General Fund obligations in the event of declining revenues or unanticipated expenditures. A control section of the State’s Budget Act establishes the annual reserve balance of the SFEU, but that amount would be reduced if certain constitutionally defined excess revenue limits are met during the fiscal year. In addition, SFEU funds may be set aside in a separate account and committed for disaster response operation costs incurred by state agencies as a result of a proclamation of a state of emergency by the Governor. The SFEU is a discretionary budget reserve and is available without additional legislative action to meet the cash needs of the General Fund and to eliminate any General Fund deficit at the end of a fiscal year. The SFEU is reported in the General Fund, and at June 30, 2022, the SFEU represented $4.0 billion of the unassigned balance of the General Fund. c. Public School System Stabilization Account State law established the Public School System Stabilization Account (PSSSA) as a reserve specifically for schools and community colleges. The State deposits Proposition 98 funding into this reserve when it receives high levels of capital gains revenue and the minimum guarantee is growing relatively quickly, and will withdraw funding from the reserve under certain conditions—generally when the guarantee is growing slowly relative to inflation and student attendance. If the Governor declares a budget emergency, the Legislature can make discretionary withdrawals. At June 30, 2022, the PSSSA represented $4.5 billion of cash reported in the General Fund, all of which was due to other governments. Accordingly, the PSSSA reported no fund balance as of June 30, 2022. N. Restatement of Beginning Fund Balances and Net Position 1. Fund Financial Statements The beginning fund balance of governmental funds decreased by $47.4 billion. This decrease primarily consists of a $47.4 billion restatement reducing the Federal Fund beginning balance for a correction due to unemployment insurance eligibility. In addition, a reduction of receivables for pandemic relief benefit overpayments caused a $5 million decrease to the beginning balance of the General Fund. 90 Notes to the Financial Statements The beginning net position of internal service funds decreased by $1 million due to prior period corrections to capital asset balances. The beginning net position of enterprise funds increased by $19.8 billion. The increase is comprised of a $19.8 billion restatement of the loan payable to the U.S. Department of Labor and $63 million in net adjustments to prior period unemployment benefit payments in the Unemployment Programs Fund. The beginning net position of discretely presented component units decreased by $65 million. The restatement is comprised of an $80 million decrease for the University of California, and a $15 million increase for a nonmajor component unit, due to the implementation of GASB Statement No. 87, Leases. Further information related to the University’s restatement is included in its separately issued financial statements, which can be obtained from its website at www.ucop.edu. 2. Government-wide Financial Statements The beginning net position of governmental activities decreased by $47.0 billion. In addition to the restatements described in the previous section for governmental funds and internal services funds, the restatement also includes a $360 million increase in beginning net position resulting from the elimination of former capital lease obligations in the implementation of GASB Statement No. 87, a $2 million decrease due to understatement of prior period pollution remediation obligations, a $326 million decrease due to overstatement of prior period capital assets, and a $342 million increase due to overstatement of prior period accumulated depreciation. The beginning net positions of business-type activities and discretely presented component units were restated as described in the previous sections for enterprise funds and discretely presented component units, respectively. O. Guaranty Deposits The State is the custodian of guaranty deposits held to protect consumers, to secure the State’s deposits in financial institutions, and to ensure payment of taxes and fulfillment of obligations to the State. Guaranty deposits of securities and other properties are not shown on the financial statements. NOTE 2: BUDGETARY AND LEGAL COMPLIANCE A. Budgeting and Budgetary Control The State’s annual budget is primarily prepared on a modified accrual basis for governmental funds. The Governor recommends a budget for approval by the Legislature each year. This recommended budget includes estimated revenues, but revenues are not included in the annual budget bill adopted by the Legislature. Under state law, the State cannot adopt a spending plan that exceeds estimated revenues. Under the State Constitution, money may be drawn from the treasury only through a legal appropriation. The appropriations contained in the Budget Act, as approved by the Legislature and signed by the Governor, are the primary sources of annual expenditure authorizations and establish the legal level of control for the annual operating budget. The budget can be amended throughout the year by special legislative action, budget revisions by the Department of Finance, or executive orders of the Governor. Amendments to the original budget for the fiscal year ended June 30, 2022, increased spending authority for the budgetary/legal basis-reported General Fund, Transportation Funds, Environmental and Natural Resources Funds, and the Health Care Related Programs Funds. 91 State of California Annual Comprehensive Financial Report Appropriations are generally available for expenditure or encumbrance either in the year appropriated or for a period of three years if the legislation does not specify a period of availability. At the end of the availability period, the encumbering authority for the unencumbered balance lapses. Some appropriations continue indefinitely, while others are available until fully spent. Generally, encumbrances must be liquidated within two years from the end of the period in which the appropriation is available. If the encumbrances are not liquidated within this additional two-year period, the spending authority for these encumbrances lapses. B. Legal Compliance State agencies are responsible for exercising basic budgetary control and ensuring that appropriations are not overspent. The State Controller’s Office is responsible for overall appropriation control and does not allow expenditures in excess of authorized appropriations. Financial activities are mainly controlled at the appropriation level but can vary, depending on the presentation and wording contained in the Budget Act. The Budget Act appropriations are identified by department, reference item, and fund. The annual appropriated budget may establish detailed allocations to specific programs, projects, or sources of reimbursement within an appropriation. The Department of Finance can authorize adjustments between the detail allocations but cannot increase the amount of the overall appropriation. While the financial activities are controlled at various levels, the legal level of budgetary control—the extent to which management may amend the budget without seeking approval of the governing body—has been established in the Budget Act for the annual operating budget. The Budgetary Comparison Schedule is not presented in this document at the legal level of budgetary control because such a presentation would be extremely lengthy and cumbersome. The State prepares a separate report, the Annual Comprehensive Financial Report Supplement, which includes statements that demonstrate compliance with the legal level of budgetary control in accordance with GASB’s Codification of Governmental Accounting and Financial Reporting Standards, section 2400.121. The supplement includes the comparison of the annual appropriated budget with expenditures at the legal level of control. A copy of the Annual Comprehensive Financial Report Supplement is available upon email request to the State Controller’s Office, State Accounting and Reporting Division at StateGovReports@sco.ca.gov. NOTE 3: DEPOSITS AND INVESTMENTS Cash balances not required for immediate use are invested by the State Treasurer. The State Treasurer administers a single pooled investment program comprising both an internal investment pool and an external investment pool (the Local Agency Investment Fund). A single portfolio of investments exists, with all participants having an undivided interest in the portfolio. Both pools are administered in the same manner. A. Primary Government 1. Control of State Funds The State’s pooled investment program and certain funds of the primary government are allowed by state statutes, bond resolutions, and investment policy resolutions to invest in U.S. government securities, federal agency securities, negotiable certificates of deposit, bankers’ acceptances, commercial 92 Notes to the Financial Statements paper, corporate bonds, bank notes, other debt securities, repurchase agreements, reverse repurchase agreements, and other investments. Certain discretely presented component units and related organizations participate in the State Treasurer’s Office pooled investment program. As of June 30, 2022, these discretely presented component units and related organizations account for approximately 1.4% of the State Treasurer’s pooled investment portfolio. This program enables the State Treasurer’s Office to combine available cash from all funds and to invest cash that exceeds current needs. Both deposits and investments are included in the State’s investment program. For certain banks, the State Treasurer’s Office maintains cash deposits that cover uncleared checks deposited in the State’s accounts and earn income that compensates the banks for their services. Demand and time deposits held by financial institutions as of June 30, 2022, totaling approximately $5.9 billion, were insured by federal depository insurance or by collateral held by the State Treasurer’s Office or an agent of the State Treasurer’s Office in the State’s name. The California Government Code requires that collateral pledged for demand and time deposits be deposited with the State Treasurer. As of June 30, 2022, the State Treasurer’s Office had on deposit with a fiscal agent amounts totaling $20 million related to principal and interest payments to bondholders. These deposits were insured by federal depository insurance or by collateral held by an agent of the State Treasurer’s Office in the State’s name. Certain funds have elected to participate in the pooled investment program even though they have the authority to invest on their own. Others may be required by legislation to participate in the program; as a result, the deposits of these funds may be considered involuntary. However, these funds are part of the State’s reporting entity. The remaining participant in the pool, the Local Agency Investment Fund, is voluntary. Certain funds that have deposits in the State Treasurer’s pooled investment program do not receive the interest earnings on their deposits. Instead, by law, the earnings are assigned to the State’s General Fund. Most of the $342 million in interest revenue received by the General Fund from the pooled investment program in fiscal year 2021-22 was earned on balances in these funds. Enterprise funds and special revenue funds also make separate investments, which are presented at fair value. 2. Valuation of State Investments The State Treasurer’s Office reports its investments at fair value. The State Treasurer’s Office performs a quarterly fair market valuation of the pooled investment program portfolio. The fair value of securities in the State Treasurer’s pooled investment program is generally based on quoted market prices. In addition, the State Treasurer’s Office performs a monthly fair market valuation of all securities held against carrying cost. These valuations can be obtained from the State Treasurer’s Office website at www.treasurer.ca.gov. 93 State of California Annual Comprehensive Financial Report Table 1 categorizes fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets and liabilities. Level 1 inputs are quoted prices for identical assets or liabilities in active markets at the date of measurement. Level 2 inputs are significant other directly or indirectly observable inputs other than quoted prices. Debt securities classified in Level 2 are valued using a matrix pricing technique. Matrix pricing is used to value securities based on its relationship to similar securities with an active market. Level 3 inputs are significant unobservable inputs. The State has no investments measured at Level 3. Table 1 Schedule of Investments – Primary Government – Investments by Fair Value Level June 30, 2022 (amounts in thousands) Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Identical Observable Assets Inputs June 30, 2022 (Level 1) (Level 2) Pooled Investments U.S. Treasury bills and notes................................................................. $ 156,942,317 $ 156,942,317 $ — U.S. Agency bonds and discount notes.................................................. 34,469,111 34,469,111 — Supranational debentures and discount notes........................................ 9,205,209 9,205,209 — Small Business Administration loans.................................................... 308,985 308,985 — Mortgage-backed securities................................................................... 4,761 4,761 — Certificates of deposit............................................................................ 13,259,761 — 13,259,761 Bank notes.............................................................................................. 100,127 — 100,127 Commercial paper.................................................................................. 11,525,498 — 11,525,498 Corporate bonds..................................................................................... 473,146 — 473,146 Total pooled investments at fair value............................................. 226,288,915 $ 200,930,383 $ 25,358,532 Other primary government investments U.S. Treasuries and agencies ................................................................ 3,920,432 $ 1,782,400 $ 2,138,032 Commercial paper.................................................................................. 66,743 — 66,743 Corporate debt securities ...................................................................... 1,761,525 — 1,761,525 Other...................................................................................................... 2,169,509 145,113 2,024,396 Total other primary government investments at fair value........... 7,918,209 $ 1,927,513 $ 5,990,696 Investments measured at the net asset value (NAV) Money market funds/2a-7 money market funds.................................... 544,720 Total investments measured at the NAV......................................... 544,720 Other investment instruments State and Local Government Series securities1..................................... 3,863,402 Total other investment instruments................................................. 3,863,402 Funds outside primary government included in pooled investments Less: investment trust funds ................................................................. 35,829,502 Less: other trust and custodial funds...................................................... 5,092,974 Less: discretely presented component units and related organizations. 3,052,750 Total primary government investments .......................................... $ 194,640,020 1 Reported at carrying value 94 Notes to the Financial Statements As of June 30, 2022, the weighted average maturity of the securities in the pooled investment program administered by the State Treasurer’s Office was approximately 315 days. Weighted average maturity is the average number of days, given a dollar-weighted value of individual investments, that the securities in the portfolio have remaining from evaluation date to stated maturity. 3. Oversight of Investing Activities The Pooled Money Investment Board (PMIB) provides oversight of the State Treasurer’s pooled investment program. The purpose of the board is to design and administer an effective cash management and investment program, using all monies flowing through the State Treasurer’s Office bank accounts and keeping all available funds invested in a manner consistent with the goals of safety, liquidity, and yield. The PMIB is comprised of the State Treasurer as chair, the State Controller, and the Director of Finance. This board designates the amounts of money available for investment. The State Treasurer is charged with making the actual investment transactions for this program. This investment program is not registered with the Securities and Exchange Commission as an investment company. The value of the deposits in the State Treasurer’s pooled investment program, including the Local Agency Investment Fund, is equal to the dollars deposited in the program. The fair value of the position in the program may be greater or less than the value of the deposits, with the difference representing the unrealized gain or loss. As of June 30, 2022, this difference was immaterial to the valuation of the program. The pool is run with “dollar-in, dollar-out” participation. There are no share-value adjustments to reflect changes in fair value. The State Treasurer’s pooled investment program values participants’ shares on an amortized cost basis. Specifically, the program distributes income to participants quarterly, based on their relative participation during the quarter. This participation is calculated based on (1) realized investment gains and losses calculated on an amortized cost basis, (2) interest income based on stated rates (both paid and accrued), (3) amortization of discounts and premiums on a straight-line basis, and (4) investment and administrative expenses. This amortized cost method differs from the fair value method used to value investments in these financial statements; the amortized cost method is not designed to distribute to participants all unrealized gains and losses in the fair value of the pool’s investments. Because the total difference between the fair value of the investments in the pool and the value distributed to pool participants using the amortized cost method described above is not material, no adjustment was made to the financial statements. The State Treasurer’s Office also reports participant fair value as a ratio of amortized cost on a quarterly basis. The State Treasurer’s Office has not provided or obtained a legally binding guarantee to support the principal invested in the investment program. As of June 30, 2022, structured notes and medium-term asset-backed securities comprised approximately 1.18% of the pooled investments. A portion of the structured notes was callable agency securities, which represented 1.04% of the pooled investments. The asset-backed securities consist of mortgage-backed securities, Small Business Administration (SBA) pools, and asset-backed commercial paper. The mortgage-backed securities, called real estate mortgage investment conduits (REMICs), are securities backed by pools of mortgages. The REMICs in the State’s portfolio have a fixed principal payment schedule. A portion of the asset-backed securities consisted of floating-rate SBA notes. For floating-rate SBA notes held in the portfolio during the fiscal year, the interest received by the State Treasurer’s pooled investment program rose or fell as the underlying index rate rose or fell. The structure of the floating-rate SBA notes in the State Treasurer’s pooled investment program portfolio provided a hedge against the risk of increasing interest rates. A portion of the asset-backed portfolio 95 State of California Annual Comprehensive Financial Report holdings were short-term, asset-backed commercial paper (ABCP), which represented 0.8% of the pooled investments. Table 2 identifies the investment types that are authorized by the California Government Code and the State Treasurer’s Office Investment Policy for the Pooled Investment Program. Maturities are limited by the State Treasurer’s Office Investment Policy for the Pooled Money Investment Program. For commercial paper, the Investment Policy matches the Government Code. For corporate bonds and notes, the Government Code requires that a security falls within the top three ratings of a nationally recognized statistical ratings organization (NRSRO). Items reported as N/A have no limitation in either the Government Code or the State Treasurer’s Office Investment Policy. Table 2 Authorized Investments Maximum Maximum Maximum Percentage Investment Credit Authorized Investment Type Maturity of Portfolio in One Issuer Rating U.S. Treasury securities 5 years N/A N/A N/A Federal agency and supranational securities 5 years N/A N/A N/A Certificates of deposit 5 years N/A N/A N/A Bankers’ acceptances 180 days N/A N/A N/A Commercial paper 270 days 30% 10% of issuer’s outstanding A-3/P-3/F-3 Commercial paper Corporate bonds/notes 5 years N/A N/A A-/A3/A- Repurchase agreements 1 year N/A N/A N/A Reverse repurchase agreements 1 year 10% N/A N/A 4. Risk of Investments The following types of risks are common in deposits and investments, including those of the State: Interest Rate Risk is the risk that the value of fixed-income securities will decline because of changing interest rates. The prices of fixed-income securities with longer time to maturity tend to be more sensitive to changes in interest rates than those with shorter durations. Credit Risk is the risk that a debt issuer will fail to pay interest or principal in a timely manner, or that negative perceptions of the issuer’s ability to make these payments will cause security prices to decline. Custodial Credit Risk is the risk that, in the event a financial institution or counterparty fails, the investor will not be able to recover the value of deposits, investments, or collateral. Concentration of Credit Risk is the risk of loss attributed to the magnitude of an investor’s holdings in a single issuer. Foreign Currency Risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. 96 Notes to the Financial Statements a. Interest Rate Risk Table 3 presents the interest rate risk of the primary government’s investments. In calculating SBA holdings’ weighted average maturity, the State Treasurer’s Office assumes that stated maturity is the quarterly reset date. Total pooled investments do not include $4.5 billion of time deposits and $828 million of internal loans to state funds. Most mortgage-backed securities are issued by U.S. government agencies, or government-sponsored enterprises such as the Federal National Mortgage Association, and entitle the purchaser to receive a share of the cash flows, such as principal and interest payments, from a pool of mortgages. Mortgage-backed securities are highly sensitive to interest rate changes because principal prepayments either increase (in a low interest rate environment) or decrease (in a high interest rate environment) the security yield. As of June 30, 2022, only $5 million, or 0.01% of the total pooled investments, was invested in mortgage-backed securities. Table 3 Schedule of Investments – Primary Government – Interest Rate Risk June 30, 2022 (amounts in thousands) Weighted Average Fair Value Maturity at Year End (in years) Pooled investments U.S. Treasury bills and notes............................................................................................... $ 156,942,317 1.01 U.S. Agency bonds and discount notes................................................................................ 34,469,111 0.71 Supranational debentures and discount notes...................................................................... 9,205,209 0.52 Small Business Administration loans.................................................................................. 308,985 0.25 Mortgage-backed securities................................................................................................. 4,761 0.40 Certificates of deposit.......................................................................................................... 13,259,761 0.26 Bank notes............................................................................................................................ 100,127 0.51 Commercial paper................................................................................................................ 11,525,498 0.24 Corporate bonds................................................................................................................... 473,146 2.13 Total pooled investments................................................................................................ 226,288,915 Other primary government investments U.S. Treasuries and agencies............................................................................................... 3,920,432 2.59 State and Local Government S eries securities1................................................................... 3,863,402 — Corporate debt securities..................................................................................................... 1,761,526 2.70 Other.................................................................................................................................... 2,780,971 2.10 Total other primary government investments.............................................................. 12,326,331 Funds outside primary government included in pooled investments Less: investment trust funds................................................................................................ 35,829,502 Less: other trust and custodial funds.................................................................................... 5,092,974 Less: discretely presented component units and related organizations............................... 3,052,750 Total primary government investments........................................................................ $ 194,640,020 1 Reported at carrying value 97 State of California Annual Comprehensive Financial Report b. Credit Risk Table 4 presents the credit risk of the primary government’s debt securities. If a particular security has multiple ratings, the lowest rating of the three major NRSROs is used. Similar to interest rate risk shown in Table 3, time deposits and internal loans to state funds are not included. Table 4 Schedule of Investments in Debt Securities – Primary Government – Credit Risk June 30, 2022 (amounts in thousands) Credit Rating as of Year End Short-term Long-term Fair Value Pooled investments A-1+/P-1/F-1+ AAA/Aaa/AAA $ 38,124,503 A-1/P-1/F-1 AA/Aa/AA 30,453,637 A-2/P-2/F-2 A/A/A 459,473 Not rated ..................................................................... — Not applicable.............................................................. 157,251,302 Total pooled investments ....................................... $ 226,288,915 Other primary government investments A-1+/P-1/F-1+ AAA/Aaa/AAA $ 1,283,342 A-1/P-1/F-1 AA/Aa/AA 2,728,020 A-2/P-2/F-2 A/A/A 1,762,241 A-3/P-3/F-3 BBB/Baa/BBB 12,459 B/NP/B BB/Ba/BB 42,662 B/NP/B B2/B 123,741 Not rated...................................................................... 6,373,866 Total other primary government investments..... $ 12,326,331 c. Custodial Credit Risk The State has a deposit policy for custodial credit risk that requires deposits held by financial institutions to be insured by federal depository insurance or secured by collateral. As of June 30, 2022, there were no guaranteed investment contracts. d. Concentration of Credit Risk The investment policy of the State Treasurer’s Office contains no limitations on the amount that can be invested in any one issuer beyond those limitations stipulated in the California Government Code. As of June 30, 2022, the State had investments in the Federal Home Loan Bank totaling 10.4% of the total pooled investments and other primary government investments. 98 Notes to the Financial Statements B. Fiduciary Funds The fiduciary funds include investment and pension and other employee benefit trust funds of the following fiduciary funds and component units: California Public Employees’ Retirement System (CalPERS), California State Teachers’ Retirement System (CalSTRS), the fund for the California Scholarshare program, and various other funds. CalPERS and CalSTRS account for 96.36% of these separately invested funds. CalPERS and CalSTRS exercise their authority under the State Constitution and invest in stocks, bonds, mortgages, real estate, and other investments, including derivative instruments. Additional disclosures for CalPERS’ investments and derivative instruments are included in CalPERS’ separately issued financial statements, which may be found on its website at www.CalPERS.ca.gov. Additional disclosures for CalSTRS’ investments and derivative instruments are included in CalSTRS’ separately issued financial statements, which may be found on its website at www.CalSTRS.com. C. Discretely Presented Component Units The discretely presented component units consist of the University of California and its foundation, the California Housing Finance Agency (CalHFA), and various nonmajor component units. The University and CalHFA constitute 92.88% of the total investments of discretely presented component units. State law, bond resolutions, and investment policy resolutions allow component units to invest in U.S. government securities, state and municipal securities, commercial paper, corporate bonds, investment agreements, real estate, and other investments. Additionally, a portion of the cash and pooled investments of CalHFA, and other nonmajor component units are invested in the State Treasurer’s pooled investment program. Additional disclosures for the University of California’s investments and derivative instruments are included in the University’s separately issued financial statements, which may be found on its website at www.ucop.edu. Additional disclosures for CalHFA’s investments and derivative instruments are included in CalHFA’s separately issued financial statements, which may be found on its website at www.CalHFA.ca.gov. 99 State of California Annual Comprehensive Financial Report NOTE 4: ACCOUNTS RECEIVABLE Table 5 presents the disaggregation of accounts receivable attributable to taxes; licenses, permits, and fees; Lottery retailer collections; unemployment program receipts; and the California State University. Other receivables are for interest, gifts, grants, penalties, and other charges. Table 5 Schedule of Accounts Receivable June 30, 2022 (amounts in thousands) Licenses, Permits, Lottery Taxes and Fees Retailers Current governmental activities General Fund ...................................................................... $ 28,493,709 $ — $ — Federal Fund ....................................................................... — — — Transportation Fund ........................................................... 820,732 367,488 — Environmental and Natural Resources Fund ...................... 29,302 417,425 — Health Care Related Programs Fund................................... 646,008 3,738,940 — Nonmajor governmental funds............................................ 249,098 1,081,361 — Internal service funds.......................................................... — — — Adjustment: Unavailable revenue¹........................................................ (1,884,165) (16,133) — Leases receivable.............................................................. — — — Total current governmental activities........................... $ 28,354,684 $ 5,589,081 $ — Amounts not scheduled for collection during the subsequent year (unavailable revenue)..................... $ 1,884,165 $ 16,133 $ — Current business-type activities Electric Power Fund............................................................ $ — $ — $ — Water Resources Fund........................................................ — — — State Lottery Fund .............................................................. — — 730,174 Unemployment Programs Fund ......................................... — — — California State University ................................................. — — — Nonmajor enterprise funds.................................................. — — — Total current business-type activities........................... $ — $ — $ 730,174 Amounts not scheduled for collection during the subsequent year (unavailable revenue)..................... $ — $ — $ — 1 The unavailable revenue reported in the governmental fund financial statements represents revenues that are earned and measurable, but not available within 12 months of the end of the reporting period. 2 Amount includes noncurrent receivables for service concession arrangements of $25 million that were not included in the governmental fund financial statements. 100 Notes to the Financial Statements California Unemployment State Programs University Other Total $ 656,128 $ — $ 1,751,539 $ 30,901,376 — — 1,969,773 1,969,773 — — 317,679 1,505,899 — — 141,474 588,201 — — 277,194 4,662,142 — — 431,821 1,762,280 — — 29,480 29,480 (222,684) — (267,295) (2,390,277) — — (99,819) (99,819) $ 433,444 $ — $ 4,551,846 $ 38,929,055 $ 222,684 $ — $ 396,785 ²$ 2,519,767 $ — $ — $ 198,543 $ 198,543 — — 93,790 93,790 — — — 730,174 1,583,689 — — 1,583,689 — 341,976 — 341,976 — — 37,257 37,257 $ 1,583,689 $ 341,976 $ 329,590 $ 2,985,429 $ 813,663 $ 641,599 $ — $ 1,455,262 101 State of California Annual Comprehensive Financial Report NOTE 5: RESTRICTED ASSETS Table 6 presents a summary of the legal restrictions placed on assets of the primary government and the discretely presented component units. Table 6 Schedule of Restricted Assets June 30, 2022 (amounts in thousands) Cash Due From and Pooled Other Loans Investments Investments Governments Receivable Total Primary government Debt service............................................. $ 607,656 $ 50,503 $ 201,236 $ 4,420,705 $ 5,280,100 Construction............................................. 660,529 — — — 660,529 Operations................................................ 113,059 — — — 113,059 Other........................................................ 203 — — — 203 Total primary government................. 1,381,447 50,503 201,236 4,420,705 6,053,891 Discretely presented component units Debt service............................................. 154,596 379,797 — — 534,393 Other........................................................ 77,541 — — — 77,541 Total discretely presented component units................................ 232,137 379,797 — — 611,934 Total restricted assets....................... $ 1,613,584 $ 430,300 $ 201,236 $ 4,420,705 $ 6,665,825 102 Notes to the Financial Statements NOTE 6: CAPITAL ASSETS Table 7 summarizes the capital activity for the primary government. Table 7 Schedule of Changes in Capital Assets – Primary Government June 30, 2022 (amounts in thousands) Beginning Ending Balance Additions Deductions Balance Governmental activities Capital assets not being depreciated/amortized Land..................................................................................... $ 21,501,907 * $ 200,544 $ 2,988 $ 21,699,463 State highway infrastructure................................................ 80,847,105 * 1,160,883 10,611 81,997,377 Collections........................................................................... 22,682 — — 22,682 Construction/development in progress................................ 19,076,936 * 4,001,494 2,160,961 20,917,469 Intangible assets................................................................... 928,380 * 219,649 — 1,148,029 Total capital assets not being depreciated/amortized.... 122,377,010 5,582,570 2,174,560 125,785,020 Capital assets being depreciated/amortized Buildings and improvements............................................... 28,165,325 * 1,451,883 612,928 29,004,280 Infrastructure....................................................................... 752,156 * 844 220 752,780 Equipment and other depreciable assets.............................. 5,925,879 * 468,214 203,458 6,190,635 Other intangible assets......................................................... 2,969,629 * 162,032 2,948 3,128,713 Total capital assets being depreciated/amortized........... 37,812,989 2,082,973 819,554 39,076,408 Less accumulated depreciation/amortization for: Buildings and improvements............................................... 10,964,934 * 696,531 398,240 11,263,225 Infrastructure....................................................................... 452,810 * 15,079 71 467,818 Equipment and other depreciable assets.............................. 4,890,450 * 400,537 189,474 5,101,513 Other intangible assets......................................................... 1,296,216 * 275,858 1,399 1,570,675 Total accumulated depreciation/amortization................ 17,604,410 1,388,005 589,184 18,403,231 Right to use leased assets being amortized Right to use leased land....................................................... 31,282 * 6,971 — 38,253 Right to use leased buildings............................................... 2,766,967 * 140,846 — 2,907,813 Right to use leased equipment............................................. 6,566 * — — 6,566 Total right to use leased assets being amortized............. 2,804,815 147,817 — 2,952,632 Less accumulated amortization for: Right to use leased land....................................................... — 2,784 — 2,784 Right to use leased buildings............................................... — 466,168 — 466,168 Right to use leased equipment............................................. — 3,099 — 3,099 Total accumulated amortization...................................... — 472,051 — 472,051 Net right to use leased assets............................................. 2,804,815 (324,234) — 2,480,581 Total capital assets being depreciated/amortized, net.... 23,013,394 370,734 230,370 23,153,758 Governmental activities, capital assets, net.......................... $ 145,390,404 $ 5,953,304 $ 2,404,930 $ 148,938,778 *Restated (continued) 103 State of California Annual Comprehensive Financial Report Table 7 (continued) Schedule of Changes in Capital Assets – Primary Government (continued) June 30, 2022 (amounts in thousands) Beginning Ending Balance Additions Deductions Balance Business-type activities Capital assets not being depreciated/amortized Land..................................................................................... $ 423,324 $ 29,506 $ 4,777 $ 448,053 Collections........................................................................... 34,431 1,061 — 35,492 Construction/development in progress................................ 2,968,926 1,316,853 1,075,356 3,210,423 Intangible assets................................................................... 123,800 5,621 3,894 125,527 Total capital assets not being depreciated/amortized.... 3,550,481 1,353,041 1,084,027 3,819,495 Capital assets being depreciated/amortized Buildings and improvements............................................... 17,228,198 * 1,243,007 114,499 18,356,706 Infrastructure....................................................................... 578,629 61,714 16,302 624,041 Equipment and other assets................................................. 1,088,048 * 65,885 20,223 1,133,710 Other intangible assets......................................................... 476,154 * 21,330 734 496,750 Total capital assets being depreciated/amortized .......... 19,371,029 1,391,936 151,758 20,611,207 Less accumulated depreciation/amortization for: Buildings and improvements............................................... 6,372,091 * 487,781 20,169 6,839,703 Infrastructure....................................................................... 171,942 23,908 12,680 183,170 Equipment and other assets................................................. 771,899 * 82,616 18,304 836,211 Other intangible assets......................................................... 247,668 * 21,003 690 267,981 Total accumulated depreciation/amortization................ 7,563,600 615,308 51,843 8,127,065 Right to use leased assets being amortized Right to use leased land....................................................... 6,757 * 202 — 6,959 Right to use leased buildings............................................... 361,035 * 9,525 480 370,080 Right to use leased equipment............................................. 5,548 * 3,314 — 8,862 Total right to use leased assets being amortized............. 373,340 13,041 480 385,901 Less accumulated amortization for: Right to use leased land....................................................... — 472 — 472 Right to use leased buildings............................................... — 40,708 90 40,618 Right to use leased equipment............................................. — 2,377 — 2,377 Total accumulated amortization...................................... — 43,557 90 43,467 Net right to use leased assets............................................. 373,340 (30,516) 390 342,434 Total capital assets being depreciated/amortized, net.... 12,180,769 746,112 100,305 12,826,576 Business-type activities, capital assets, net........................... $ 15,731,250 $ 2,099,153 $ 1,184,332 $ 16,646,071 * Restated (concluded) 104 Notes to the Financial Statements Table 8 summarizes the depreciation expense charged to the activities of the primary government. Table 8 Schedule of Depreciation Expense – Primary Government June 30, 2022 (amounts in thousands) Amount Governmental activities General government.................................................................................................................................................. $ 457,315 Education................................................................................................................................................................... 120,671 Health and human services........................................................................................................................................ 282,335 Natural resources and environmental protection....................................................................................................... 176,211 Business, consumer services, and housing................................................................................................................ 33,060 Transportation............................................................................................................................................................ 306,472 Corrections and rehabilitation................................................................................................................................... 368,435 Internal service funds (charged to the activities that utilize the fund)....................................................................... 94,799 Total governmental activities............................................................................................................................... 1,839,298 Business-type activities............................................................................................................................................... 658,865 Total primary government................................................................................................................................ $ 2,498,163 105 State of California Annual Comprehensive Financial Report Table 9 summarizes the capital activity for discretely presented component units. Table 9 Schedule of Changes in Capital Assets – Discretely Presented Component Units June 30, 2022 (amounts in thousands) Beginning Ending Balance Additions Deductions Balance Capital assets not being depreciated/amortized Land..................................................................................... $ 1,648,822 $ 69,812 $ 107 $ 1,718,527 Collections........................................................................... 618,290 12,725 764 630,251 Construction/development in progress................................ 4,623,454 * 288,909 27,977 4,884,386 Intangible assets................................................................... 5,214 — — 5,214 Total capital assets not being depreciated/amortized..... 6,895,780 371,446 28,848 7,238,378 Capital assets being depreciated/amortized Buildings and improvements............................................... 48,992,306 * 2,686,408 150,797 51,527,917 Infrastructure........................................................................ 1,029,419 23,502 58,976 993,945 Equipment and other depreciable assets.............................. 12,958,964 * 739,871 446,236 13,252,599 Other intangible assets......................................................... 1,827,522 143,364 105,584 1,865,302 Total capital assets being depreciated/amortized........... 64,808,211 3,593,145 761,593 67,639,763 Less accumulated depreciation/amortization for: Buildings and improvements............................................... 21,317,933 * 1,559,256 169,571 22,707,618 Infrastructure........................................................................ 521,368 31,478 26,908 525,938 Equipment and other depreciable assets.............................. 9,398,454 * 658,783 442,186 9,615,051 Other intangible assets......................................................... 1,173,245 180,777 95,644 1,258,378 Total accumulated depreciation/amortization................ 32,411,000 2,430,294 734,309 34,106,985 Right to use leased assets being amortized Right to use leased land....................................................... 59,933 * 47,058 — 106,991 Right to use leased buildings............................................... 2,776,123 * 449,813 214,507 3,011,429 Right to use leased equipment............................................. 160,786 * 29,974 19,344 171,416 Total right to use leased assets being amortized............. 2,996,842 526,845 233,851 3,289,836 Less accumulated amortization for: Right to use leased land....................................................... 3,476 * 5,944 — 9,420 Right to use leased buildings............................................... 494,031 * 253,082 50,660 696,453 Right to use leased equipment............................................. 59,348 * 44,717 26,679 77,386 Total accumulated amortization....................................... 556,855 303,743 77,339 783,259 Net right to use leased assets............................................. 2,439,987 223,102 156,512 2,506,577 Total capital assets being depreciated/amortized, net.... 34,837,198 1,385,953 183,796 36,039,355 Capital assets, net.................................................................... $ 41,732,978 $ 1,757,399 $ 212,644 $ 43,277,733 * Restated 106 Notes to the Financial Statements NOTE 7: DEFERRED OUTFLOWS AND DEFERRED INFLOWS OF RESOURCES In the fund financial statements, governmental funds reported deferred inflows of resources of $8.2 billion. This amount represents revenues that are earned and measurable, but not available within 12 months of the end of the reporting period. Table 10 shows the detail of the deferred outflows of resources and deferred inflows of resources reported in the government-wide Statement of Net Position. For descriptions of the deferred outflows and deferred inflows of resources transactions, see Note 1.K. Table 10 Schedule of Deferred Outflows and Deferred Inflows of Resources June 30, 2022 (amounts in thousands) Primary Government Governmental Business-type Component Activities Activities Total Units Deferred outflows of resources: Loss on refunding of debt..................................... $ 1,043,607 $ 202,083 $ 1,245,690 $ 258,560 Decrease in fair value of hedging derivative instruments............................................................ — — — 89,066 Net pension liability.............................................. 17,531,106 1,749,352 19,280,458 6,296,296 Net other postemployment benefits liability......... 10,518,629 1,826,301 12,344,930 4,882,715 Deferred asset retirement obligation..................... — — — 101,622 Other deferred outflows........................................ — — — 2,723 Total deferred outflows of resources.............. $ 29,093,342 $ 3,777,736 $ 32,871,078 $ 11,630,982 Deferred inflows of resources: Gain on refunding of debt..................................... $ 643,127 $ 4,262 $ 647,389 $ 41,106 Service concession arrangements......................... 24,533 — 24,533 232,380 Irrevocable split-interest agreements.................... — — — 299,860 Net pension liability.............................................. 30,570,718 2,693,132 33,263,850 216,746 Net other postemployment benefits liability......... 12,777,528 2,856,416 15,633,944 10,072,495 Increase in fair value of hedging derivatives........ — — — 13,935 Other deferred inflows.......................................... 5,809,685 1,947,035 7,756,720 1,336,377 Total deferred inflows of resources................ $ 49,825,591 $ 7,500,845 $ 57,326,436 $ 12,212,899 107 State of California Annual Comprehensive Financial Report NOTE 8: ACCOUNTS PAYABLE Accounts payable are amounts, related to different programs, that are due taxpayers, vendors, customers, beneficiaries, and employees. Table 11 presents details related to accounts payable. The adjustment for the fiduciary funds represents amounts due fiduciary funds that were reclassified as external payables on the government-wide Statement of Net Position. Table 11 Schedule of Accounts Payable June 30, 2022 (amounts in thousands) General Health and Government Education Human Services Governmental activities General Fund ......................................................... $ 10,876,828 $ 844,336 $ 8,309,909 Federal Fund ......................................................... 245,417 913,558 19,937,900 Transportation Fund............................................... 13,103 6,449 1,810 Environmental and Natural Resources Fund......... 3,279 — 8,584 Health Care Related Programs Fund..................... — 2,962 3,344,718 Nonmajor governmental funds.............................. 944,568 23,808 113,339 Internal service funds ............................................ 246,580 — 181,849 Adjustment: Fiduciary funds.................................................... 790,287 — — Total governmental activities ....................... $ 13,120,062 $ 1,791,113 $ 31,898,109 Business-type activities Electric Power Fund............................................... $ — $ — $ — Water Resources Fund .......................................... — — — State Lottery Fund................................................. 93,327 — — Unemployment Programs Fund ............................ — — 315,831 California State University.................................... — 374,350 — Nonmajor enterprise funds .................................... 173 871 144 Total business-type activities........................ $ 93,500 $ 375,221 $ 315,975 108 Notes to the Financial Statements Natural Resources and Environmental Protection Transportation Other Total $ 382,628 $ 3,529 $ 1,095,333 $ 21,512,563 63,095 116,230 174,137 21,450,337 1,101 1,327,587 1,768 1,351,818 483,704 279,372 9,331 784,270 — — — 3,347,680 10,756 575 138,483 1,231,529 17,571 — 16,019 462,019 — 20,587 701 811,575 $ 958,855 $ 1,747,880 $ 1,435,772 $ 50,951,791 $ 79,618 $ — $ — $ 79,618 130,429 — — 130,429 — — — 93,327 — — — 315,831 — — — 374,350 3,678 — 5,663 10,529 $ 213,725 $ — $ 5,663 $ 1,004,084 109 State of California Annual Comprehensive Financial Report NOTE 9: LONG-TERM OBLIGATIONS As of June 30, 2022, the primary government had long-term obligations totaling $280.9 billion. Of that amount, $8.2 billion is due within one year. Governmental activities had a net decrease in long-term obligations of $36.2 billion, primarily due to a decrease of $36.8 billion in net pension liability. Other significant decreases included general obligation bonds payable of $1.1 billion. Increases to governmental activities included $2.9 billion in lease liability due to the implementation of GASB Statement No. 87, which caused a $2.4 billion net restatement to the beginning lease liability after elimination of the prior year lease liability of $360 million. Other notable increases included $1.2 billion in revenue bonds payable and $517 million in worker’s compensation benefits payable. Not included in the mandated cost claims payable shown in Table 12 are certain state-mandated programs that are in the adjudication process. Until the Commission on State Mandates rules on a test claim and the claim’s parameters and guidelines are established, expected costs cannot be reasonably determined; however, a positive finding for any of the claimants could individually or in aggregate pose a significant cost to the State. As of June 30, 2022, pollution remediation obligations increased by $160 million, to $1.7 billion. Under federal Superfund law, responsibility for pollution remediation is placed on current and previous owners or operators of polluted sites. Currently, the State’s most significant Superfund site is the Stringfellow Class 1 Hazardous Waste Disposal Facility (Stringfellow) located in Riverside County. As of June 30, 2022, the State estimates that remediation costs at Stringfellow will total $578 million. At BKK Landfill in Los Angeles County, an obligating event has occurred that will likely result in a liability to the State, but a reasonable estimate of the remediation cost cannot be determined at this time. BKK is a closed Class 1 landfill site at which the State is conducting post-closure care. In addition to Superfund sites, the State’s other pollution remediation efforts include underground storage tank removal and cleanup, cleanup of polluted groundwater, and contaminated soil removal and cleanup as required by state law. The primary government has identified tangible capital assets with associated retirement obligations. Some of these assets have a legally enforceable liability associated with their retirement, but the liability is not yet reasonably estimable. Examples include dams, sewer systems, waste ponds, bridges, roadways, and certain long-term use equipment. The State either has no prior experience decommissioning these types of assets to develop an estimate, or the assets are maintained indefinitely so an estimated useful life cannot be determined. The State will record the asset retirement obligations for such assets once they are reasonably estimable. The remaining measurable asset retirement obligations are immaterial. The State receives a share of net profits generated by the operations of the Wilmington Oil Field. Various unit and production agreements control the character of the oil operations, including the liability associated with the future abandonment of the oil and gas wells and facilities. The State’s share of the liability is apportioned based on its net profit interest, among other factors. The State retains a large majority of the total abandonment liability at the end of oil operations. As of June 30, 2022, the State estimates that the oil field abandonment liability is $940 million, and the State has reserves of $300 million in the Environmental and Natural Resources Fund (a special revenue fund) to liquidate future oil field abandonment costs. The other long-term obligations for governmental activities consist of a Transportation Fund performance obligation of $473 million, Water Resources Revolving Fund notes payable of $33 million, 110 Notes to the Financial Statements Lessee-type Financed Purchase as a result of GASB 87 of $26 million, Technology Services Revolving Fund notes payable of $21 million, and $9 million to settle lawsuits. The net pension liability, net OPEB liability, and compensated absences will be liquidated by the General Fund, special revenue funds, capital projects funds, and internal service funds. Workers’ compensation and leases will be liquidated by the General Fund, special revenue funds, and internal service funds. The General Fund will liquidate the Proposition 98 funding guarantee, lawsuits, and reimbursement of costs incurred by local agencies and school districts for costs mandated by the State. Overall, business-type activities experienced a net decrease in long-term obligations of $3.8 billion. Significant decreases included $3.3 billion in net pension liability. The implementation of GASB Statement No. 87 resulted in a $40 million restatement (increase) to the beginning lease liability after elimination of the prior year lease liability of $336 million. 111 State of California Annual Comprehensive Financial Report Table 12 summarizes the changes in long-term obligations during the fiscal year ended June 30, 2022. Table 12 Schedule of Changes in Long-term Obligations (amounts in thousands) Balance July 1, 2021 Additions Governmental activities Loans payable adjustment for fiduciary funds........................................................ $ 46,062 $ — Compensated absences payable.............................................................................. 5,393,765 1,798,879 Workers’ compensation benefits payable............................................................... 4,941,058 1,110,640 Commercial paper and other borrowings................................................................ 1,176,235 1,900,035 Lease liability.......................................................................................................... 2,804,645 * 147,814 General obligation bonds outstanding.................................................................... 70,837,455 6,639,495 Premiums................................................................................................................ 7,643,953 1,229,185 Total general obligation bonds payable................................................................ 78,481,408 7,868,680 Revenue bonds outstanding.................................................................................... 14,492,161 9,130,151 Accreted interest..................................................................................................... 704,017 35,570 Premiums................................................................................................................ 803,573 378,761 Discounts................................................................................................................. (1,512) 725 Total revenue bonds payable................................................................................ 15,998,239 9,545,207 Mandated cost claims payable................................................................................ 2,086,941 123,380 Net other postemployment benefits liability........................................................... 76,991,715 9,524,317 Net pension liability................................................................................................ 84,713,135 28,071,117 Other long-term obligations: Oil field abandonment liability............................................................................. 966,384 — Proposition 98 funding guarantee......................................................................... 708 — Pollution remediation obligations......................................................................... 1,519,279 * 231,690 Other..................................................................................................................... 733,433 * 12,373 Total other long-term obligations..................................................................... 3,219,804 244,063 Total governmental activities......................................................................... $ 275,853,007 $ 60,334,132 Business-type activities Loans payable ......................................................................................................... $ — * $ — Lottery prizes and annuities.................................................................................... 1,597,014 6,712,052 Compensated absences payable.............................................................................. 513,368 171,214 Workers’ compensation benefits payable............................................................... 12,662 1,873 Commercial paper and other borrowings................................................................ 401,219 216,976 Lease liability.......................................................................................................... 375,991 * 13,043 General obligation bonds outstanding.................................................................... 586,850 — Premiums................................................................................................................ 12,185 — Discounts................................................................................................................. (651) — Total general obligation bonds payable................................................................ 598,384 — Revenue bonds outstanding.................................................................................... 13,460,795 1,896,885 Premiums................................................................................................................ 1,346,231 23,528 Discounts................................................................................................................. (381) — Total revenue bonds payable................................................................................ 14,806,645 1,920,413 Net other postemployment benefits liability........................................................... 16,959,981 1,756,023 Net pension liability................................................................................................ 9,542,625 3,452,613 Other long-term obligations.................................................................................... 246,227 283,027 Total business-type activities......................................................................... $ 45,054,116 $ 14,527,234 * Restated 112 Notes to the Financial Statements Balance Due Within Noncurrent Deductions June 30, 2022 One Year Liabilities $ 5,739 $ 40,323 $ — $ 40,323 1,947,311 5,245,333 19,354 5,225,979 594,006 5,457,692 549,149 4,908,543 1,627,545 1,448,725 — 1,448,725 437,745 2,514,714 423,980 2,090,734 8,261,145 69,215,805 3,372,605 65,843,200 742,813 8,130,325 996,407 7,133,918 9,003,958 77,346,130 4,369,012 72,977,118 8,005,741 15,616,571 728,626 14,887,945 — 739,587 — 739,587 380,315 802,019 118,601 683,418 (1) (786) (68) (718) 8,386,055 17,157,391 847,159 16,310,232 233,972 1,976,349 53,381 1,922,968 9,146,678 77,369,354 — 77,369,354 64,863,608 47,920,644 — 47,920,644 26,724 939,660 — 939,660 708 — — — 71,504 1,679,465 72,846 1,606,619 184,336 561,470 139,832 421,638 283,272 3,180,595 212,678 2,967,917 $ 96,529,889 $ 239,657,250 $ 6,474,713 $ 233,182,537 $ — $ — $ — $ — 6,721,629 1,587,437 929,642 657,795 228,524 456,058 169,348 286,710 — 14,535 — 14,535 294,882 323,313 16,348 306,965 56,420 332,614 33,088 299,526 61,155 525,695 3,200 522,495 948 11,237 — 11,237 (71) (580) — (580) 62,032 536,352 3,200 533,152 2,108,685 13,248,995 543,835 12,705,160 196,911 1,172,848 19,931 1,152,917 (39) (342) — (342) 2,305,557 14,421,501 563,766 13,857,735 1,802,175 16,913,829 — 16,913,829 6,746,754 6,248,484 — 6,248,484 123,481 405,773 54,122 351,651 $ 18,341,454 $ 41,239,896 $ 1,769,514 $ 39,470,382 113 State of California Annual Comprehensive Financial Report NOTE 10: PENSION TRUSTS The California Public Employees’ Retirement System (CalPERS) provides retirement benefits to eligible employees of the State, public agencies, and public schools through single-employer, agent multiple- employer, and cost-sharing plans. The California State Teachers’ Retirement System (CalSTRS) provides pension benefits to full-time and part-time employees of the State’s public school system. Both are fiduciary component units of the State, and their financial activity is included in the pension and other employee benefit trust funds column of the fiduciary funds and similar component units’ financial statements of this report. CalPERS administers four defined benefit retirement plans: the Public Employees’ Retirement Fund (PERF), the Judges’ Retirement Fund (Judges’), the Judges’ Retirement Fund II (Judges’ II), and the Legislators’ Retirement Fund (Legislators’). CalPERS also administers two defined contribution plans: the Public Employees’ Deferred Compensation Fund and the Supplemental Contributions Program Fund. The PERF accounts for the majority of assets and liabilities reported for CalPERS’ plans. CalPERS issues a publicly available financial report that includes financial statements and required supplementary information for these plans. The report may be found on CalPERS’ website at www.CalPERS.ca.gov. Contributions to CalPERS’ pension trust funds are recognized in the period in which the contributions are due, pursuant to legal requirements. Benefits and refunds in the defined benefit plans are recognized when due and payable in accordance with the terms of each plan. CalSTRS administers four defined benefit retirement plans within the State Teachers’ Retirement Plan: the Defined Benefit Program, the Defined Benefit Supplement Program, the Cash Balance Benefit Program, and the Replacement Benefits Program. CalSTRS also administers two defined contribution plans: the Pension2 403(b) Plan and the Pension2 457(b) Plan. CalSTRS issues a publicly available financial report that includes financial statements and required supplementary information for these plans. This report may be found on its website at www.CalSTRS.com. Member, employer, and state contributions to CalSTRS’ pension plans are recognized in the period in which the contributions are required by statute. Benefits and refunds are recognized when due and payable, in accordance with the retirement and benefits programs. Fifty-eight county superior courts (trial courts) are included in the primary government. Either CalPERS or the counties administer the pension plans in which the trial courts participate. For the purpose of measuring net pension liability, deferred outflows and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net positions of CalPERS’ plans and CalSTRS’ plans, and changes to the plans’ fiduciary net positions have been determined on the same basis as reported by the plans. The University of California, a discretely presented component unit, administers the University of California Retirement System (UCRS), which consists of two defined benefit plans funded with University and employee contributions, and four defined contribution plans with options to participate in internally or externally managed investment portfolios generally funded with employee non-elective and elective contributions. The State does not directly contribute to the UCRS. Additional information on the 114 Notes to the Financial Statements UCRS can be found in the University’s separately issued financial statements on its website at www.ucop.edu. A. California Public Employees’ Retirement System 1. Public Employees’ Retirement Fund (PERF) Plan Description: The PERF is comprised of and reported as three separate entities for financial reporting purposes, of which the State reports only PERF A. PERF A is comprised of agent multiple- employer plans, which include the State of California and most public agencies’ rate plans with more than 100 active members. PERF B is a cost-sharing multiple-employer plan comprised of school employers and consisting of non-teaching and non-certified employee members. PERF C is a cost- sharing multiple-employer plan comprised of public agencies’ plans that generally have fewer than 100 active members. Employers participating in the PERF as of June 30, 2021, included the primary government and certain discretely presented component units; 1,329 school employers, including charter schools; and 1,608 public agencies. As the State is not an employer in PERF B or PERF C, the term PERF is used hereafter to refer exclusively to the agent multiple-employer plans that include employees of the primary government and certain discretely presented component units. CalPERS acts as the common investment and administrative agent for participating employers. State employees served by the PERF include first- and second-tier miscellaneous and industrial employees, California Highway Patrol (CHP) employees, peace officers and firefighters, and other safety members. Benefits Provided: All employees in a covered class of employment who work half-time or more are eligible to participate in the PERF. The PERF provides retirement, death, disability, and survivor benefits. Vesting occurs after five years, or after ten years for second-tier employees. The benefit provisions are established by the Public Employees’ Retirement Law (PERL) and the Public Employees’ Pension Reform Act of 2013 (PEPRA), and are summarized in Appendix B of the State’s June 30, 2020 Actuarial Valuation Report, which may be found at www.CalPERS.ca.gov/docs/forms- publications/2020-state-valuation.pdf. In general, retirement benefits for the PERF plans are based on a formula using a member’s years of service credit, age at retirement, and final compensation (average salary for a defined period of employment). Retirement formulas vary based on: • Classification (e.g., miscellaneous, safety, industrial, CHP, or peace officers and firefighters); • Membership category (pre-PEPRA and post-PEPRA); and • Specific provisions in employees’ contracts. The four basic types of retirement are: • Service Retirement – The normal retirement is a lifetime benefit. In most cases, employees become eligible for service retirement as early as age 50 with five years of service credit. If the employee became a member on or after January 1, 2013, he or she must be at least 52 years old with at least five years of service to retire. Second-tier employees (miscellaneous and industrial) become eligible at age 55 with at least 10 years of service credit. • Vested Deferred Retirement – Vested members who leave employment but keep their contribution balances on deposit with CalPERS are eligible for this benefit. • Disability Retirement – Vested members who can no longer perform the usual duties of their current position due to illness or injury may receive this benefit. 115 State of California Annual Comprehensive Financial Report • Industrial Disability Retirement – This benefit is available for eligible safety members, industrial employees, CHP employees, and peace officers and firefighters who are unable to perform the usual duties of their current position due to job-related illness or injury. Employees Covered by Benefit Terms: The State’s June 30, 2021 Actuarial Valuation Report provides information about the number of employees by type covered within the various PERF plans. Table 13 shows the number of employees covered by the benefit terms of each of the PERF plans as of the most recent valuation. Table 13 Number of Employees by Type Covered by Benefit Terms – PERF Plans June 30, 2021 State Peace California State State State Officers and Highway Total Miscellaneous Industrial Safety Firefighters Patrol PERF Plans Inactive employees or beneficiaries currently receiving benefits................. 206,393 16,788 29,168 45,937 9,786 308,072 Inactive employees entitled to but not yet receiving benefits.................... 68,270 4,043 8,971 8,085 562 89,931 Active employees.................................. 208,286 19,235 33,996 46,527 6,912 314,956 Total................................................... 482,949 40,066 72,135 100,549 17,260 712,959 Contributions: Section 20814(c) of PERL requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by pension plan terms as plan member contribution requirements are classified as plan member contributions. 116 Notes to the Financial Statements Table 14 shows the average active employee and the employer contribution rates for each of the PERF plans as a percentage of annual pay for the measurement period ended June 30, 2021. Table 14 Contribution Rates – PERF Plans June 30, 2021 State Peace California State State State Officers and Highway Miscellaneous Industrial Safety Firefighters Patrol Average active employee rate..................... 7.12 % 8.16 % 10.58 % 11.62 % 11.56 % Employer rate of annual payroll................. 29.37 18.19 19.95 36.10 61.05 Total........................................................ 36.49 % 26.35 % 30.53 % 47.72 % 72.61 % Actuarial Methods and Assumptions: The total pension liability for PERF plans was measured as of June 30, 2021 (measurement date), by rolling forward the total pension liability determined by the June 30, 2020 actuarial valuation (valuation date), based on the actuarial methods and assumptions shown in Table 15. Table 15 Actuarial Methods and Assumptions – PERF Plans Valuation date: June 30, 2020 Actuarial cost method: Entry age normal in accordance with the requirements of GASB 68 Actuarial assumptions: Discount rate 7.15% Inflation 2.50% Salary increases Varies by entry age and service Investment rate of return 7.15% net of pension plan investment expense but without reduction for administrative expenses; includes inflation Mortality Mortality rates are based on the 2017 CalPERS Experience Study adopted by the CalPERS Board and include 15 years of mortality improvements using the Society of Actuaries 90% of Scale MP 2016. Post-retirement benefit The lesser of Contract COLA or 2.50% until Purchasing Power Protection Allowance adjustments (COLAs) floor on purchasing power applies, 2.50% thereafter Discount Rate: The discount rate used to measure the total pension liability was 7.15% for the PERF. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at actuarially determined statutorily required rates. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied 117 State of California Annual Comprehensive Financial Report to all periods of projected benefit payments to determine the total pension liability. The stress test results are presented in the GASB Crossover Testing Report, which may be found on CalPERS’ website at www.CalPERS.ca.gov/docs/gasb-crossover-testing-2021.pdf. The long-term expected rate of return on pension plan investments was determined using a building- block method in which expected ranges of future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short and long- term market return expectations as well as the expected pension fund cash flows. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the short- term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. Table 16 shows the long-term expected geometric real rate of return by asset class for all plans in the PERF. Table 16 Long-term Expected Real Rate of Return by Asset Class – PERF Plans Policy Target Real Return Real Return Asset Class Allocation Years 1 – 10 1 Years 11+ 2 Global equity................................................................................. 50.0 % 4.80 % 5.98 % Fixed income................................................................................. 28.0 1.00 2.62 Inflation assets............................................................................... — 0.77 1.81 Private equity................................................................................. 8.0 6.30 7.23 Real assets...................................................................................... 13.0 3.75 4.93 Liquidity........................................................................................ 1.0 — (0.92) Total........................................................................................... 100.0 % 1 An expected inflation rate of 2.00% used for this period. 2 An expected inflation rate of 2.92% used for this period. 118 Notes to the Financial Statements This page intentionally left blank 119 State of California Annual Comprehensive Financial Report Changes in Net Pension Liability: Table 17 shows changes in net pension liability recognized over the measurement period for the PERF plans. Table 17 Changes in Net Pension Liability – PERF Plans (amounts in thousands) State Miscellaneous State Industrial Total Plan Net Total Plan Net Pension Fiduciary Pension Pension Fiduciary Pension Liability Net Position Liability Liability Net Position Liability Balance at June 30, 2020 .............................. $ 122,015,859 $ 87,254,200 $ 34,761,659 $ 5,108,928 $ 4,093,297 $ 1,015,631 Changes recognized for the measurement period: Service cost.............................................. 2,212,280 — 2,212,280 136,918 — 136,918 Interest on total pension liability ............. 8,603,225 — 8,603,225 363,230 — 363,230 Changes of assumptions .......................... — — — — — — Difference between expected and actual experience ................................... 628,341 — 628,341 21,852 — 21,852 Plan to plan resource movement.............. — (2,558) 2,558 — (662) 662 Employer contributions .......................... — 3,778,435 (3,778,435) — 128,161 (128,161) Employee contributions........................... — 928,152 (928,152) — 58,867 (58,867) Net investment income............................ — 19,299,095 (19,299,095) — 911,995 (911,995) Benefit payments, including refunds of employee contributions ..................... (6,851,024) (6,851,024) — (238,188) (238,188) — Administrative expense .......................... — (87,165) 87,165 — (4,090) 4,090 Other Miscellaneous Income/(Expense).. — 2 (2) — — — Net changes................................................. 4,592,822 17,064,937 (12,472,115) 283,812 856,083 (572,271) Balance at June 30, 2021 (Measurement Date) ................................. $ 126,608,681 $ 104,319,137 $ 22,289,544 $ 5,392,740 $ 4,949,380 $ 443,360 120 Notes to the Financial Statements State Safety State Peace Officers and Firefighters Total Plan Net Total Plan Net Pension Fiduciary Pension Pension Fiduciary Pension Liability Net Position Liability Liability Net Position Liability $ 15,112,709 $ 12,284,515 $ 2,828,194 $ 52,516,967 $ 38,434,941 $ 14,082,026 564,198 — 564,198 1,111,888 — 1,111,888 1,072,105 — 1,072,105 3,745,062 — 3,745,062 — — — — — — (33,477) — (33,477) 585,665 — 585,665 — 1,513 (1,513) — (66) 66 — 429,347 (429,347) — 1,310,946 (1,310,946) — 223,408 (223,408) — 423,995 (423,995) — 2,758,504 (2,758,504) — 8,602,827 (8,602,827) (733,697) (733,697) — (2,560,165) (2,560,165) — — (12,272) 12,272 — (38,396) 38,396 — — — — — 869,129 2,666,803 (1,797,674) 2,882,450 7,739,141 (4,856,691) $ 15,981,838 $ 14,951,318 $ 1,030,520 $ 55,399,417 $ 46,174,082 $ 9,225,335 (continued) 121 State of California Annual Comprehensive Financial Report Table 17 (continued) Changes in Net Pension Liability – PERF Plans (continued) (amounts in thousands) California Highway Patrol Total PERF Plans Total Plan Net Total Plan Net Pension Fiduciary Pension Pension Fiduciary Pension Liability Net Position Liability Liability Net Position Liability Balance at June 30, 2020 .............................. $ 14,409,697 $ 9,529,052 $ 4,880,645 $ 209,164,160 $ 151,596,005 $ 57,568,155 Changes recognized for the measurement period: Service cost.............................................. 268,009 — 268,009 4,293,293 — 4,293,293 Interest on total pension liability ............. 1,022,074 — 1,022,074 14,805,696 — 14,805,696 Changes of assumptions .......................... — — — — — — Difference between expected and actual experience ................................... 98,575 — 98,575 1,300,956 — 1,300,956 Plan to plan resource movement.............. — 1,773 (1,773) — — — Employer contributions .......................... — 802,064 (802,064) — 6,448,953 (6,448,953) Employee contributions........................... — 95,784 (95,784) — 1,730,206 (1,730,206) Net investment income............................ — 2,200,671 (2,200,671) — 33,773,092 (33,773,092) Benefit payments, including refunds of employee contributions ..................... (695,055) (695,055) — (11,078,129) (11,078,129) — Administrative expense .......................... — (9,519) 9,519 — (151,442) 151,442 Other Miscellaneous Income/(Expense).. — — — — 2 (2) Net changes................................................. 693,603 2,395,718 (1,702,115) 9,321,816 30,722,682 (21,400,866) Balance at June 30, 2021 (Measurement Date) ................................. $ 15,103,300 $ 11,924,770 $ 3,178,530 $ 218,485,976 $ 182,318,687 $ 36,167,289 Reported in governmental activities $ 28,610,285 Reported in business-type activities 6,248,484 Reported by discretely presented component units 159,636 Not reported in government-wide Statement of Net Position 1 1,148,884 Total net pension liability – PERF plans $ 36,167,289 (concluded) 1 Includes amounts allocated to related organizations and fiduciary funds. Also includes the difference in net pension liability for discretely presented component units with a reporting period ended December 31, 2021; and minor differences related to amounts reported in separately issued financial statements of proprietary funds and discretely presented component units. 122 Notes to the Financial Statements Sensitivity of the Net Pension Liability to Changes in the Discount Rate: Table 18 shows the net pension liability of the State, with regard to the PERF plans, calculated using the discount rate of 7.15%, as well as what the State’s net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.15%) or one percentage point higher (8.15%) than the current rate. Table 18 Net Pension Liability Sensitivity – PERF Plans June 30, 2022 (amounts in thousands) Current Rate Current Rate Current Rate -1% 7.15% +1% State Miscellaneous..................................................................... $ 37,559,147 $ 22,289,544 $ 9,488,722 State Industrial............................................................................. 1,175,133 443,360 (160,038) State Safety.................................................................................. 3,123,670 1,030,520 (703,229) State Peace Officers and Firefighters.......................................... 16,806,307 9,225,335 2,999,222 California Highway Patrol........................................................... 5,282,278 3,178,530 1,454,517 Total PERF plans................................................................... $ 63,946,535 $ 36,167,289 $ 13,079,194 Pension Plans Fiduciary Net Position: Detailed information about the PERF plans’ fiduciary net position is available in the separately issued CalPERS financial report. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions: For the PERF plans, for the fiscal year ended June 30, 2022, the State recognized pension expense of $3.5 billion. At June 30, 2022, the State reported deferred outflows of resources from contributions made by the State to the PERF plans subsequent to the measurement date of June 30, 2021, but prior to the fiscal year ended June 30, 2022. Differences between expected and actual experience are recognized as deferred outflows and inflows of resources. The changes of assumptions are recognized as deferred outflows and inflows of resources. The aggregate differences (positive and negative) between projected and actual earnings on pension plan investments arising in different measurement periods are reported as net deferred outflows of resources. Deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the subsequent year. 123 State of California Annual Comprehensive Financial Report Table 19 shows pension expense and sources of deferred outflows and deferred inflows of resources related to each PERF plan. Table 19 Pension Expense and Sources of Deferred Outflows and Deferred Inflows of Resources Related to Pensions – PERF Plans June 30, 2022 (amounts in thousands) State Peace California Total State State State Officers and Highway PERF Miscellaneous Industrial Safety Firefighters Patrol Plans Pension Expense........................... $ 1,554,441 $ 57,419 $ 260,195 $ 1,287,029 $ 367,269 $ 3,526,353 Deferred Outflows of Resources: Employer contributions.............. 5,110,276 187,745 561,229 2,171,675 628,308 8,659,233 Changes of assumptions............. — — — 100,337 17,646 117,983 Difference between expected and actual experience................ 1,427,299 40,734 88,135 903,183 242,586 2,701,937 Deferred Inflows of Resources: Difference between expected and actual experience.................. — — (27,066) (11,020) (3,106) (41,192) Changes of assumptions............. (33,599) — (1,963) (5,021) — (40,583) Net difference between projected and actual earnings on pension plan investments............ (9,414,939) (446,564) (1,354,867) (4,254,445) (1,089,119) (16,559,934) Table 20 shows amounts reported as deferred outflows and inflows of resources related to pensions that will be recognized as pension expense in future years for the PERF plans. Increases to pension expense are shown as positive amounts and decreases to pension expense are shown as negative amounts. Table 20 Recognition of Deferred Outflows and Deferred Inflows of Resources – PERF Plans (amounts in thousands) State Peace California Total State State State Officers and Highway PERF Year Ending June 30 Miscellaneous Industrial Safety Firefighters Patrol Plans 2023................................. $ (1,554,450) $ (82,329) $ (294,456) $ (618,737) $ (171,395) $ (2,721,367) 2024................................. (1,795,016) (93,912) (288,025) (699,297) (172,212) (3,048,462) 2025................................. (2,085,505) (105,181) (332,702) (878,577) (210,140) (3,612,105) 2026................................. (2,586,268) (124,408) (380,578) (1,070,355) (278,246) (4,439,855) Payable to the Pension Plans: At June 30, 2022, the State reported a payable of $837 million for the outstanding amount of contributions to the PERF pension plans required for the fiscal year ended June 30, 2022. 124 Notes to the Financial Statements 2. Single-employer Plans Plan Description: CalPERS administers three single-employer defined benefit retirement plans. Judges’ – Judges’ membership includes judges working in the California Supreme Court, the courts of appeal, and the superior courts who were appointed or elected prior to November 9, 1994. Judges’ is funded on a “pay-as-you-go” basis, where short-term investments, contributions received during the year, and a General Fund augmentation are used to provide funding for benefit payments. Judges’ II – Judges’ II membership includes judges working in the California Supreme Court, the courts of appeal, and the superior courts, who were appointed or elected on or after November 9, 1994. There are two types of service retirement available for plan members: the Defined Benefit Plan and the Monetary Credit Plan, in which members can choose a single lump sum payment or annuity at retirement. Legislators’ – Legislators’ was established in 1947; its members consist of state legislators, constitutional officers, and legislative statutory officers. The PEPRA closed Legislators’ to new participants effective January 1, 2013. Benefits Provided: All employees in a covered class of employment who work on a half-time basis or more are eligible to participate. The benefits for the defined benefit plans are based on a member’s years of service, age, final compensation, and a benefit formula. Benefits are provided for disability, death, and survivors of eligible members or beneficiaries. Members become fully vested in their retirement benefits earned to date after five years of credited service. Benefits are established in accordance with the provisions of the Judges’ Retirement Law, Judges’ Retirement System II Law, and Legislators’ Retirement Law. Additional information is available in the Actuarial Valuation Report for each plan, which may be found on CalPERS’ website at www.CalPERS.ca.gov. Judges’ – The four basic types of retirement are: • Service Retirement – Members must be at least age 60 with 20 years of service or age 70 with at least 10 years of service. • Deferred Retirement – Vested members are eligible for deferred retirement at any age with at least five years of service. • Disability Retirement (non-work related) – There is no age requirement, but there may be a service requirement depending on when the member became a judge. The retirement allowance is 65% of a judge’s final salary, or 75% of his or her final salary if the judge has 20 or more years of service. • Disability Retirement (work-related) – There is no age or service requirement if the disability is a result of work-related injury or disease. The retirement allowance is the same as non-work related disability retirement. • Death Benefits – Beneficiaries may receive 25% of a current active judge’s salary for life if the judge was not eligible for retirement. Beneficiaries receive one-half of what the retirement allowance would have been if the judge was retired on the date of death. 125 State of California Annual Comprehensive Financial Report Judges’ II – The four basic types of retirement are: • Service Retirement – Judges must be at least age 65 with 20 years of service or age 70 with a minimum of five years of service to receive the defined benefit plan. Judges must have at least five years of service to receive the monetary credit plan. • Disability Retirement (non-work related) – Judges who have five years of service and become permanently disabled because of a mental or physical disability may apply to the Commission on Judicial Performance for disability retirement. • Disability Retirement (work related) – Judges receive 65% of their average monthly salary earned during the 12 or 36 months preceding their retirement date, regardless of age or length of service. • Death Benefits – Beneficiaries receive the judge’s monetary credits or three times the annual salary at the time of death, whichever is greater, if the judge was not eligible for retirement. Beneficiaries receive one-half of the retirement pension for life if the judge was retired on the date of death. Legislators’ – The three basic types of retirement are: • Service Retirement – Members must be age 60, with four or more years of service credit, or any age with 20 or more years. The retirement age for legislative statutory officers is 55, or any age with 20 years or more of service credit. • Disability Retirement – Disability retirement uses the same formula as service retirement. There is no reduction for members of the Legislature if retirement is before age 60. • Death Benefits – Beneficiaries have multiple options depending on whether the member was eligible for retirement or was retired at the time of death. Employees Covered by Benefit Terms: The June 30, 2021 actuarial valuation reports for each single- employer plan provide information about the number of employees by type covered within the plans. Table 21 shows the number of employees covered by the benefit terms of each of the single-employer plans as of the most recent valuation. Table 21 Number of Employees by Type Covered by Benefit Terms – Single-employer Plans June 30, 2021 Judges’ Judges’ II Legislators’ Total Inactive employees or beneficiaries currently receiving benefits........... 1,697 374 202 2,273 Inactive employees entitled to but not yet receiving benefits................. 2 2 4 8 Active employees.................................................................................... 110 1,625 2 1,737 Total.................................................................................................... 1,809 2,001 208 4,018 Contributions: As Judges’ is funded on a “pay-as-you-go” basis, the contributions made will be less than the actuarially determined contribution requirement of normal cost plus a 10-year amortization of the unfunded accrued liability. The actual contribution is the estimated amount of benefit payouts during the year. Currently, Judges’ member contributions are 8.0% of pay. In certain situations, employers make member contributions. 126 Notes to the Financial Statements Judges’ II contribution rates are determined through CalPERS’ annual actuarial valuation process as required by section 75600.5(c) of the PERL. Classic members contribute 8.0% of their annual compensation to the plan. The base total normal cost rate for PEPRA new members was re-determined in the June 30, 2021 actuarial valuation as 32.10%. The percentage changes in any given year only once the change to the total normal cost is greater than 1.0% from the base total normal cost. The new member rate should be 50% of the new normal cost rounded to the nearest quarter percentage. For Legislators’, contribution rates are determined through CalPERS’ annual actuarial valuation process as required by section 9358 of the PERL. The minimum employer contribution rate under PEPRA is the greater of the actuarially determined employer rate or the employer normal cost. Table 22 shows the average active employee and the employer contribution rates for each of the single-employer plans as a percentage of annual pay for the measurement period ended June 30, 2021. Table 22 Contribution Rates – Single-employer Plans June 30, 2021 Judges’ Judges’ II Legislators’ Average active employee rate.................................................................. “Pay- 9.490 % 8.000 % Employer rate of annual payroll.............................................................. as-you- 24.400 29.380 Total..................................................................................................... go” 33.890 % 37.380 % 127 State of California Annual Comprehensive Financial Report Actuarial Methods and Assumptions: The total pension liability for single-employer plans was measured as of June 30, 2021 (measurement date), by rolling forward the total pension liability determined by the June 30, 2020 actuarial valuations (valuation date), based on the actuarial methods and assumptions shown in Table 23. Table 23 Actuarial Methods and Assumptions – Single-employer Plans Valuation date: June 30, 2020 Actuarial cost method: Entry age normal in accordance with the requirements of GASB 68 Actuarial assumptions: Discount rate Judges’ 1.92%, Judges’ II 6.65%, Legislators’ 5.25% Inflation All single-employer plans – 2.50% Salary increases All single-employer plans – 2.75% Investment rate of return Judges’ 1.92%, Judges’ II 6.65%, Legislators’ 5.25%, net of pension plan investment without reduction of administrative expense Mortality Mortality rates are based on the 2017 CalPERS Experience Study adopted by the CalPERS Board and include 15 years of mortality improvements using the Society of Actuaries 90% of Scale MP 2016. Post-retirement benefit Judges’ – 2.75% adjustments (COLAs) Judges’ II – 2.50% Legislators’ – 2.50% Discount Rate: To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress-tested plans that would most likely result in a discount rate that would differ from the actuarially assumed discount rate. For the single-employer plans, the following rates were used: Judges’ – 1.92%, reflecting the short-term nature of the assets. As the plan is insufficiently funded, CalPERS uses a discount rate of 1.92%, which falls within a reasonable range of yields on 20-year tax-exempt general obligation municipal bonds with an average rating of AA. Judges’II – 6.65% Legislators’ – 5.25% With the exception of Judges’, which uses a lower rate of return, the information regarding the discount rate and the long-term expected real rate of return described previously for the PERF plans is also applicable to the single-employer plans. GAAP requires that the long-term discount rate should be determined without reduction for pension plan administrative expense. 128 Notes to the Financial Statements Table 24 shows long-term expected real rates of return by asset class for Judges’ II and Legislators’. Table 24 Long-term Expected Real Rate of Return by Asset Class – Judges’ II and Legislators’ Plans Judges’ II Legislators’ Current Target Current Target Real Return Real Return Asset Class Allocation Allocation Years 1 – 10 1 Years 11+ 2 Public equity ................................................ 52.0 % 22.0 % 4.80 % 5.98 % Global fixed income .................................... 32.0 49.0 1.10 2.62 Inflation sensitive ........................................ 5.0 16.0 0.25 1.46 Commodities ............................................... 3.0 5.0 1.50 2.87 Real estate .................................................... 8.0 8.0 3.50 5.00 Total ......................................................... 100.0 % 100.0 % 1 An expected inflation rate of 2.00% used for this period. 2 An expected inflation rate of 2.92% used for this period. 129 State of California Annual Comprehensive Financial Report Changes in Net Pension Liability: Table 25 shows the changes in net pension liability recognized over the measurement period for the single-employer plans. Table 25 Changes in Net Pension Liability – Single-employer Plans (amounts in thousands) Judges’ Judges’ II Total Plan Net Total Plan Net Pension Fiduciary Pension Pension Fiduciary Pension Liability Net Position Liability/(Asset) Liability Net Position Liability/(Asset) Balance at June 30, 2020 (Valuation Date) ..................................... $ 3,235,470 $ 43,726 $ 3,191,744 $ 1,892,581 $ 1,880,007 $ 12,574 Changes recognized for the measurement period: Service cost ........................................ 17,861 — 17,861 116,782 — 116,782 Interest on total pension liability ........ 64,481 — 64,481 126,949 — 126,949 Difference between expected and actual experience........................ 40,006 — 40,006 (10,976) — (10,976) Changes of assumptions...................... 179,421 — 179,421 — — — Employer contributions....................... — 225,824 (225,824) — 84,147 (84,147) Employee contributions ...................... — 2,146 (2,146) — 34,094 (34,094) Net investment income........................ — 163 (163) — 463,478 (463,478) Benefit payments, including refunds of employee contributions.... (210,950) (210,950) — (61,994) (61,994) — Administrative expense....................... — (1,731) 1,731 — (1,703) 1,703 Other miscellaneous income............... — 2,462 (2,462) — — — Net changes ............................................ 90,819 17,914 72,905 170,761 518,022 (347,261) Balance at June 30, 2021 (Measurement Date)............................... $ 3,326,289 $ 61,640 $ 3,264,649 $ 2,063,342 $ 2,398,029 $ (334,687) 130 Notes to the Financial Statements Legislators’ Total Single-employer Plans Total Plan Net Total Plan Net Pension Fiduciary Pension Pension Fiduciary Pension Liability Net Position Liability/(Asset) Liability Net Position Liability/(Asset) $ 94,510 $ 114,048 $ (19,538) $ 5,222,561 $ 2,037,781 $ 3,184,780 101 — 101 134,744 — 134,744 4,749 — 4,749 196,179 — 196,179 (732) — (732) 28,298 — 28,298 — — — 179,421 — 179,421 — 78 (78) — 310,049 (310,049) — 21 (21) — 36,261 (36,261) — 15,099 (15,099) — 478,740 (478,740) (6,761) (6,761) — (279,705) (279,705) — — (450) 450 — (3,884) 3,884 — 13 (13) — 2,475 (2,475) (2,643) 8,000 (10,643) 258,937 543,936 (284,999) $ 91,867 $ 122,048 $ (30,181) $ 5,481,498 $ 2,581,717 $ 2,899,781 Reported in governmental activities $ 2,899,781 131 State of California Annual Comprehensive Financial Report Sensitivity of the Net Pension Liability to Changes in the Discount Rate: Judges’ net pension liability was calculated using a discount rate of 1.92%; Judges’ II used 6.65%; and Legislators’ used 5.25%. Table 26 shows the net pension liability for each single-employer plan, calculated using the current discount rate, as well as what the net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate. Table 26 Net Pension Liability/Asset Sensitivity – Single-employer Plans June 30, 2022 (amounts in thousands) Current Rate Current Rate Current Rate -1% +1% Judges’ (1.92%) .......................................................................... $ 3,636,049 $ 3,264,649 $ 2,950,760 Judges’ II (6.65%)....................................................................... (86,598) (334,687) (536,562) Legislators’ (5.25%) ................................................................... (19,242) (30,181) (39,068) Total Single-employer Plans................................................. $ 3,530,209 $ 2,899,781 $ 2,375,130 Pension Plans Fiduciary Net Position: Detailed information about the single-employer plans’ fiduciary net position is available in the separately issued CalPERS financial report. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions: For the single-employer plans, for the fiscal year ended June 30, 2020, the State recognized pension expense of $298 million. At June 30, 2022, the State reported deferred outflows of resources from contributions made by the State to the single-employer plans subsequent to the measurement date of June 30, 2021, but prior to the fiscal year ended June 30, 2022, which will be recognized as a reduction of the net pension liability in the subsequent year. 132 Notes to the Financial Statements Table 27 shows pension expense and sources of deferred outflows and deferred inflows of resources related to each single-employer plan. Table 27 Pension Expense and Sources of Deferred Outflows and Deferred Inflows of Resources Related to Pensions – Single-employer Plans June 30, 2022 (amounts in thousands) Judges’ Judges’ II Legislators’ Total Pension Expense............................................................................ $ 297,400 $ 4,382 $ (3,493) $ 298,289 Deferred Outflows of Resources: Employer contributions subsequent to the measurement date..... 193,763 81,960 85 275,808 Changes of assumptions.............................................................. — 25,962 — 25,962 Difference between expected and actual experience................... — 17,492 — 17,492 Net difference between projected and actual earnings on pension plan investments...................................................... 521 — — 521 Deferred Inflows of Resources: Difference between expected and actual experience................... — (39,337) — (39,337) Changes of assumptions.............................................................. — (24,231) — (24,231) Net difference between projected and actual earnings on pension plan investments...................................................... — (250,312) (8,900) (259,212) Table 28 shows amounts reported as deferred outflows and deferred inflows of resources related to pensions that will be recognized in pension expense in future years for the single-employer plans. Increases to pension expense are shown as positive amounts and decreases to pension expense are shown as negative amounts. Table 28 Recognition of Deferred Outflows and Deferred Inflows of Resources – Single-employer Plans (amounts in thousands) Deferred Outflows of Resources Deferred Inflows of Resources Year Ending June 30 Judges’ Judges’ II Legislators’ Total 2023.................................................... $ 188 $ (67,802) $ (2,428) $ (70,042) 2024.................................................... 42 (64,345) (2,514) (66,817) 2025.................................................... 122 (61,044) (2,099) (63,021) 2026.................................................... 169 (73,563) (1,859) (75,253) 2027.................................................... — (2,448) — (2,448) Thereafter............................................ — (1,224) — (1,224) 133 State of California Annual Comprehensive Financial Report B. California State Teachers’ Retirement System The State reports a net pension liability, deferred outflows and deferred inflows of resources, and expenses as a result of its statutory requirement to contribute to the State Teachers’ Retirement Fund as a non-employer contributing entity. Plan Description: CalSTRS administers the State Teachers’ Retirement Fund, which is an employee benefit trust fund created to finance the State Teachers’ Retirement Plan (STRP). The STRP is a cost- sharing multiple-employer defined benefit pension plan that provides retirement, disability, and survivor benefits to teachers and certain other employees of the California public school system. Four programs comprise the STRP: the Defined Benefit (DB) Program, the Defined Benefit Supplement (DBS) Program, the Cash Balance Benefit (CBB) Program, and the Replacement Benefits (RB) Program. CalSTRS issues a publicly available financial report, which may be found on CalSTRS’ website at www.CalSTRS.com. Benefits Provided: Membership in the DB Program is mandatory for all employees meeting certain statutory requirements. The DB Program provides retirement benefits based on a member’s age, final compensation, and years of service credit. In addition, the retirement program provides benefits to members upon disability and to their survivors or beneficiaries upon the death of eligible members. The Teachers’ Retirement Law establishes the benefits for the DB Program. The DB Program had 1,800 contributing employers, 449,000 active and 227,000 inactive program members, and 326,000 benefit recipients as of June 30, 2022. The payroll for employees covered by the DB Program for the fiscal year ended June 30, 2021, was approximately $36.7 billion. Membership in the DBS Program is automatic for all members of the DB Program. The DBS Program provides benefits based on the amount of funds contributed. Vesting in the DBS Program occurs automatically with vesting in the DB Program. The Teachers’ Retirement Law establishes the benefits for the DBS Program. The primary government does not contribute to the DBS Program. Contributions: The DB Program contribution rates are based on the provisions of AB 1469 and Education Code section 22955.1(b). The Legislature may amend these provisions at any time and submit the amendment to the Governor for approval. The contribution rates for members and employers for the reporting period were 10.21% and 16.15% of creditable compensation, respectively. The General Fund contributed an additional 5.811% of total creditable compensation of the fiscal year ending in the prior calendar year. Contributions will increase to 6.311% in the next year and may increase until fiscal year 2045-46. Accordingly, the State contributed $4.3 billion for fiscal year 2021-22. CalSTRS’ June 30, 2020 Defined Benefit Actuarial Valuation Report may be found on CalSTRS’ website at www.calstrs.com/files/b24f5a107/db-valuation-2020.pdf. The CBB Program is designed for employees of California public schools who are hired to perform creditable service for less than 50% of the full-time equivalent for the position. Employer participation in the CBB Program is optional. However, if the employer elects to offer the CBB Program, then each eligible employee will automatically be covered by the CBB Program, unless the member elects to participate in the DB Program or an alternative plan provided by the employer within 60 days of hire or the election period determined by the employer. At June 30, 2021, the CBB Program had 29 contributing school districts and 41,108 contributing participants. 134 Notes to the Financial Statements The RB Program is a qualified excess benefits arrangement for DB Program members that is administered through a separate pension trust apart from the other three STRP programs; it was established in accordance with Internal Revenue Code section 415(m). Internal Revenue Code section 415(b) imposes a dollar limit on the annual retirement benefits an individual may receive from a qualified defined benefit pension plan. Monthly contributions that would otherwise be credited to the DB program are instead credited to the RB Program to fund monthly program costs. Monthly employer contributions are received and paid to members in amounts equal to the benefits not paid as a result of Internal Revenue Code section 415(b), subject to withholding for any applicable income or employment taxes. At June 30, 2021, 392 individuals were receiving benefits from the RB program. Actuarial Methods and Assumptions: The total pension liability in the June 30, 2020 actuarial valuation (valuation date) was determined using the actuarial methods and assumptions shown in Table 29, applied to the measurement period ended June 30, 2021. Table 29 Actuarial Methods and Assumptions – CalSTRS Valuation date.............................................................................................................. June 30, 2020 Experience study.......................................................................................................... July 1, 2015 through June 30, 2018 Actuarial cost method.................................................................................................. Entry age normal Investment rate of return.............................................................................................. 7.10% Consumer price inflation.............................................................................................. 2.75% Wage growth................................................................................................................ 3.50% Post-retirement benefit increases (COLAs)................................................................. 2.00% simple CalSTRS uses a generational mortality assumption, which involves the use of a base mortality table and projection scales to reflect expected annual reductions in mortality rate at each age, resulting in increases in future life expectancies. CalSTRS uses base mortality tables customized to best fit the patterns of mortality among its members. The projection scale was set to equal to 110% of the ultimate improvement factor from the Mortality Improvement Scale table, issued by the Society of Actuaries. Discount Rate: The discount rate used to measure the total pension liability was 7.10%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates in accordance with the rate increases created by AB 1469. Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7.10%) and assuming that contributions, benefit payments, and administrative expense occur midyear. Based on those assumptions, the STRP’s fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long- term assumed investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The best estimate ranges were developed using capital market assumptions from CalSTRS’ general investment consultant as an input to the process. The actuarial investment rate of return assumption was adopted by the board in 2020 in conjunction with the most recent experience study. For each future valuation, 135 State of California Annual Comprehensive Financial Report CalSTRS’ consulting actuary reviews the return assumption for reasonableness based on the current capital market assumptions. Table 30 shows the assumed allocation and best estimates of the 20-year geometric real rate of return for each major asset class. Table 30 Long-term Expected Real Rate of Return by Asset Class – CalSTRS Assumed Asset Long-term Expected Asset Class Allocation Real Rate of Return Public equity............................................................................. 42.0 % 4.80 % Real estate................................................................................. 15.0 3.60 Private equity............................................................................ 13.0 6.30 Fixed income............................................................................ 12.0 1.30 Risk mitigating strategies......................................................... 10.0 1.80 Inflation sensitive..................................................................... 6.0 3.30 Cash/liquidity............................................................................ 2.0 (0.40) Total....................................................................................... 100.0 % Pension Liabilities, Pension Expense, and Deferred Outflows and Deferred Inflows of Resources Related to Pensions: CalSTRS’ net pension liability was measured as of June 30, 2021 (measurement date), by applying update procedures and rolling forward the total pension liability determined by the actuarial valuation as of June 30, 2020 (valuation date). The State’s proportion of the net pension liability was based on CalSTRS’ calculated non-employer contributions to the pension plan relative to the total contributions of the State and all participating school districts. Per CalSTRS’ revenue recognition policy, CalSTRS recognizes state contributions for the entire fiscal year at the beginning of each fiscal year. Contributions excluded from the proportionate share per CalSTRS’ policy include employer contributions for retirement incentives, additional service credit, and unused sick leave. As of June 30, 2021, the State’s proportionate share of the CalSTRS’ net pension liability was 33.47%, or $15.2 billion; this amount is reported in the governmental activities column of the government-wide Statement of Net Position as of June 30, 2022. 136 Notes to the Financial Statements As a result of its requirement to contribute to CalSTRS, the State recognized expense of $594 million for the fiscal year ended June 30, 2022, and reported deferred outflows and deferred inflows of resources as shown in Table 31. Table 31 Sources of Deferred Outflows and Deferred Inflows of Resources Related to Pensions – CalSTRS June 30, 2022 (amounts in thousands) Deferred Outflows Deferred Inflows of Resources of Resources Changes of assumptions................................................................................. $ 2,158,404 $ — Net difference between projected and actual earnings on pension plan investments......................................................................... — 12,049,971 Difference between expected and actual experiences.................................... 38,160 1,621,146 Proportionate share change............................................................................. 372,524 1,962,899 State contributions subsequent to the measurement date............................... 4,279,964 — Total............................................................................................................ $ 6,849,052 $ 15,634,016 The $4.3 billion reported as deferred outflows of resources resulting from state contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2023. Table 32 shows amounts reported as deferred outflows and deferred inflows of resources related to pensions that will be recognized in pension expense in future years as a result of the State’s requirement to contribute to CalSTRS. Increases to pension expense are shown as positive amounts and decreases to pension expense are shown as negative amounts. Table 32 Recognition of Deferred Outflows and Deferred Inflows of Resources – CalSTRS (amounts in thousands) Year Ending June 30 Amount 2023............................................................................................................................................................ $ (2,557,855) 2024............................................................................................................................................................ (2,416,366) 2025............................................................................................................................................................ (3,559,261) 2026............................................................................................................................................................ (3,921,841) 2027............................................................................................................................................................ (380,131) Thereafter................................................................................................................................................... (229,474) 137 State of California Annual Comprehensive Financial Report Sensitivity of the State’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate: Table 33 shows the State’s proportionate share of the net pension liability calculated using the discount rate of 7.10%, as well as what the State’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.10%) or one percentage point higher (8.10%) than the current rate. Table 33 Net Pension Liability Sensitivity – CalSTRS June 30, 2022 (amounts in thousands) Current Rate Current Rate Current Rate –1% 7.10% +1% State’s proportionate share of net pension liability...................... $ 31,009,644 $ 15,233,348 $ 2,139,323 Pension Plan Fiduciary Net Position: Detailed information about CalSTRS’ pension plans’ fiduciary net position is available in the separately issued CalSTRS financial report. C. Trial Court Pension Plans Plan Description: The 58 trial courts are reported as part of the primary government. Twenty-two of the trial courts provide pension benefits to their respective employees through cost-sharing multiple- employer defined benefit plans administered by their respective county public employee retirement systems. Thirty-six of the trial courts participate in county retirement plans administered by CalPERS. Of those participating in CalPERS plans, 32 trial courts provide pension benefits to their respective employees through agent multiple-employer defined benefit plans, and one trial court provides pension benefits to its respective employees through a cost-sharing multiple-employer defined benefit plan. Information pertaining to the remaining three trial courts that participate in county retirement plans administered by CalPERS will be presented in future reporting years as available. Benefits Provided, Contributions, and Employees Covered by Benefit Terms: To obtain information on eligibility terms, benefits provided, contributions, and actuarial assumptions from individual trial court pension actuarial valuation reports, email the State Controller’s Office, State Accounting and Reporting Division at StateGovReports@sco.ca.gov. Net Pension Liability Actuarial Methods and Assumptions: The net pension liability of 53 trial courts was measured as of each individual plan’s measurement date, by applying update procedures and rolling forward the total pension liability determined by the actuarial valuation as of each individual plan’s valuation date, based on the actuarial methods and assumptions used by each plan. For the 32 agent multiple-employer defined benefit plans, the net pension liability was measured as of June 30, 2021, and valued as of June 30, 2020. For 12 of the cost-sharing multiple-employer defined benefit plans, the net pension liability was measured as of June 30, 2021, and valued as of June 30, 2020. Five of the cost- sharing multiple-employer plans had a measurement date of December 31, 2021; three of these plans had an actuarial valuation date of December 31, 2020, and two had a valuation date of January 1, 2021. 138 Notes to the Financial Statements For the remaining six cost-sharing multiple-employer defined benefit trial court pension plans, the net pension liability was measured as of the same date the total pension liability was valued for each individual plan. One of the trial court plans had an actuarial valuation and measurement date of December 31, 2021, and five plans had an actuarial valuation and measurement date of June 30, 2021. Table 34 shows selected actuarial assumptions for the trial court pension plans, by plan type. Table 34 Actuarial Methods and Assumptions – Trial Court Pension Plans Agent Multiple-Employer Defined Cost-Sharing Multiple-Employer Benefit Pension Plans Defined Benefit Pension Plans Number of Plans: 32 23 Valuation date(s): June 30, 2020 Twelve plans as of June 30, 2020. Three plans as of December 31, 2020. Two plans as of January 1, 2021. Five plans as of June 30, 2021. One plan as of December 31, 2021. Actuarial assumptions: Discount rate 7.15% Rates ranging from 6.42% to 7.40% Discount Rates: The discount rate used to measure the total pension liability of the trial courts that participate in the agent multiple-employer defined benefit pension plan was 7.15%. The discount rates used to measure the total pension liability of each trial court that participates in a cost-sharing multiple employer defined benefit plan ranged from 6.42% to 7.40% as of the respective measurement date. Pension Accounting Elements: For the trial court pension plans, the State reported total pension liability of $11.1 billion and fiduciary net position of $9.9 billion, which resulted in a net pension liability of $1.2 billion as of June 30, 2022. For the fiscal year ended June 30, 2022, the State recognized pension expense of $13 million. At June 30, 2022, the State reported deferred outflows of resources of $705 million and deferred inflows of resources of $1.2 billion. The reported deferred outflows of resources included $334 million from pension contributions the trial courts made subsequent to the measurement date. These contributions will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2023. 139 State of California Annual Comprehensive Financial Report NOTE 11: OTHER POSTEMPLOYMENT BENEFITS The State provides medical and prescription drug benefits to annuitants and their dependents under the Public Employees’ Medical and Hospital Care Act, and dental benefits under the State Employees’ Dental Care Act, through the State of California Retiree Health Benefits Program (Retiree Health Benefits Program). The Retiree Health Benefits Program consists of a number of defined benefit other postemployment benefit (OPEB) plans, to which the State contributes as an employer. The State also offers life insurance, long-term care, and vision benefits to retirees; however, because these benefits are completely paid for by the retirees, the State has no liability. The design of health and dental benefit plans can be amended by the CalPERS Board of Administration and the California Department of Human Resources, respectively. CalPERS is a fiduciary component unit of the State, and its financial activity is included in the pension and other employee benefit trust funds column of the fiduciary funds and similar component units’ financial statements of this report. Fifty-eight county superior courts (trial courts) are included in the primary government. The trial courts offer OPEB outside of the Retiree Health Benefits Program and have separately issued actuarial valuation reports. Additional information related to the trial courts is provided in section B. For the purpose of measuring net OPEB liability, deferred outflows and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net positions of the Retiree Health Benefits Program and the trial court OPEB plans, and changes to the plans’ fiduciary net positions, have been determined on the same basis as reported by the plans. The University of California, a discretely presented component unit, administers the University of California Retiree Health Benefit Trust (UCRHBT), which consists of single-employer OPEB plans that provide medical, dental, and vision benefits to eligible retirees and their dependents. The costs of medical and dental benefits are shared between the University and participating retirees. These costs are funded on a pay-as-you-go basis, and the University does not contribute toward the cost of other benefits available to retirees. The State does not directly contribute to the UCRHBT. Additional information on the UCRHBT can be found in the University’s separately issued financial statements on its website at www.ucop.edu. A. Retiree Health Benefits Program Plan Description: Employer and retiree contributions to the Retiree Health Benefits Program (the Program) are established and amended by state law for different groups of employees. Through the collective bargaining process and through state law, certain bargaining units, judicial employees, and Exempt, Excluded, and Executive (EEE) employees (valuation groups) have begun prefunding retiree healthcare and dental benefits. Assets are held in separate state subaccounts by valuation group within the California Employers’ Retiree Benefit Trust Fund (CERBTF), an agent multiple-employer trust administered by CalPERS for the prefunding of health, dental, and other non-pension benefits. In accordance with California Government Code section 22940, assets accumulated in the CERBTF will be invested and are not available to pay benefits until the earlier of 2046, or the date the funded ratio of the subaccount of a particular valuation group reaches at least 100% of the actuarially determined liability for the valuation group, and then only for the purposes of paying benefits of annuitants and dependents associated with that valuation group. 140 Notes to the Financial Statements The Program has 17 different valuation groups that include different categories of employees. Effective July 1, 2018, valuation groups 1, 3, 4, 11, 14, 15, 17, 20 and 21, were consolidated as one actuarial valuation group, Service Employees International Union (SEIU). Valuation groups that have accumulated prefunding assets in a CERBTF subaccount are reported as separate OPEB plans. As of the June 30, 2022 reporting date, these valuation groups included SEIU as well as Bargaining Units 2, 5, 6, 7, 8, 9, 10, 12, 13, 16, 18, 19, the Judicial Branch, and EEE employees. The OPEB plans for SEIU as well as Bargaining Units 5, 6, 9, and 12 are each reported discretely. The OPEB plans for Bargaining Units 2, 7, 8, 10, 13, 16, 18, 19, the Judicial Branch, and EEE employees are collectively reported as “Other Funded Plans.” The remaining valuation groups (the California State University and Other) for which the State made contributions through the CERBTF on a “pay-as-you-go” basis to fund benefit payments are collectively reported as the “Unfunded Plan.” Prefunding contributions to the CERBTF are nonrefundable, and state employees have no claims or rights to the assets. CalPERS reports on the CERBTF as part of its separately issued annual financial statements, which can be obtained from CalPERS on its website at www.CalPERS.ca.gov. The OPEB plans have common benefit terms and are valued using common actuarial methods and assumptions, with the exception of certain demographic and economic assumptions that are specific to certain valuation groups. The valuation groups also have different prefunding contribution rates determined through collective bargaining and state law. Benefits Provided: Benefit terms are governed by state law and can be amended by the Legislature. To be eligible for OPEB benefits, annuitants must retire within 120 days of separation from employment. Survivors of eligible annuitants may also enroll within 60 days of the annuitant’s death. Dependents of annuitants who are enrolled or eligible to enroll at the time of the annuitant’s death qualify for benefits. Annuitants who qualify for premium-free Medicare Part A, either on their own or through a spouse, must enroll in Medicare Part B coverage as soon as they qualify for Medicare Part A. The annuitant must then enroll in a Medicare supplemental insurance plan sponsored by CalPERS, which lowers the costs of retirees’ health care premiums and provides some coverage beyond Medicare. Employees Covered by Benefit Terms: Detailed information about the number of employees covered within the OPEB plans is provided in the State of California Retiree Health Benefits Program GASB Nos. 74 and 75 Actuarial Valuation Report as of June 30, 2021 (June 30, 2021 Actuarial Valuation Report), on the State Controller’s Office website, at www.sco.ca.gov. 141 State of California Annual Comprehensive Financial Report Table 35 shows the number of employees covered by the benefit terms. Table 35 Number of Employees by Type Covered by Benefit Terms – Retiree Health Benefits Program June 30, 2021 Inactive employees or beneficiaries currently receiving Active OPEB Plan benefits Employees Total Service Employees International Union (SEIU) Plan.................................. 74,744 116,774 191,518 Bargaining Unit 5 Plan................................................................................. 7,332 6,838 14,170 Bargaining Unit 6 Plan................................................................................. 27,402 29,897 57,299 Bargaining Unit 9 Plan................................................................................. 8,305 13,205 21,510 Bargaining Unit 12 Plan............................................................................... 10,395 12,278 22,673 Other Funded Plans...................................................................................... 31,768 47,718 79,486 Unfunded Plan.............................................................................................. 43,474 53,439 96,913 Total.......................................................................................................... 203,420 280,149 483,569 Note: Inactive employees that are entitled to, but not receiving benefits are not currently being tracked. Contributions: The contribution requirements of plan members and the State are established and may be amended by the Legislature, and can be subject to collective bargaining. In accordance with the California Government Code, the State generally pays 100% of the health insurance premium cost for annuitants, plus 90% of the additional premium required for the enrollment of annuitants’ family members. The State generally pays all or a portion of the dental insurance premium cost for annuitants, depending on the completed years of credited state service at retirement and the dental coverage selected by the annuitant, as specified in the California Government Code. The State funds the cost of providing health and dental insurance to annuitants primarily on a “pay-as-you-go” basis, with a modest amount of prefunding for members of SEIU, Bargaining Units 5, 6, 9, 12, and other funded plans. See Table 38 for details on the fiduciary net positions of the OPEB plans. The maximum 2021 monthly State contribution was $798 for one-party coverage, $1,519 for two-party coverage, and $1,937 for family coverage. For the fiscal year ended June 30, 2021, the State contributed $3.1 billion toward annuitants’ health and dental benefits. Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes for the OPEB plans include the types of benefits provided at the time of each valuation and the established pattern of sharing benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used are consistent with a long-term perspective. 142 Notes to the Financial Statements For the measurement period ended June 30, 2021 (the measurement date), total OPEB liability for each plan was based on the actuarial methods and assumptions shown in Table 36. Table 36 Actuarial Methods and Assumptions – Retiree Health Benefits Program Valuation date: June 30, 2021 Actuarial cost method: Entry age normal in accordance with the requirements of GASB Statement No. 75 Actuarial assumptions: Discount rate Blended rate for each valuation group, consisting of 6.0% when assets are available to pay benefits, otherwise 20-year Municipal G.O. Bond AA Index rate of 1.92% Inflation 2.30% Salary increases Varies by entry age and service Investment rate of return 6.00%, net of OPEB plan investment expenses but without reduction for OPEB plan administrative expenses Healthcare cost trend rates Pre-Medicare coverage: Actual rates for 2022, increasing to 7.50% in 2023, grading down to 4.50% from 2029 to 2037, and 4.25% for 2038 and later years. Post-Medicare coverage: Actual rates for 2022, increasing to rates ranging from 7.50% to 8.42% in 2023, grading down to 4.50% from 2031 to 2037, and 4.25% for 2038 and later years. Dental coverage: 0.00% for 2022, 2.00% for 2023, 3.00% for 2024, 4.00% for 2025, and 4.25% for 2026 and later years. Mortality Derived using CalPERS’ membership data for all members Other demographic assumptions used in the June 30, 2021 valuation were based on the results of the 2021 CalPERS Experience Study and Review of Actuarial Assumptions report for the period from 2000 to 2019 and included updates to termination, disability, and retirement rates. The CalPERS experience study can be obtained from CalPERS’ website at www.CalPERS.ca.gov. Healthcare-related assumptions such as plan participation, aging factors, adjustments for disabled members, and adjustments for children of current retirees and survivors are based on the State of California Retiree Health Benefits Program 2018 Experience Review performed by Gabriel, Roeder, Smith and Company (GRS) for the period from 2014 to 2018. Other healthcare assumptions such as member healthcare plan selection, coverage and continuance, select and ultimate healthcare cost trend rates, and per capita claim costs and expenses, are based on the most current information available. The 2018 GRS Experience Review can be obtained from the State Controller’s Office website, at www.sco.ca.gov. Investment Rate of Return: The long-term expected rate of return on OPEB plan investments was determined by GRS using a building-block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. Expected compound (geometric) returns were calculated over a closed period. Based on separate expected real returns for the short-term (first 5 years) and the long-term (6-20 years), and an average inflation assumption of 2.30%, a single expected return rate of 6.00% was calculated for the combined short-term and long-term periods. If applied to expected cash flows during that period, the 143 State of California Annual Comprehensive Financial Report resulting present value of benefits is expected to be consistent with the present value of benefits that would be determined by applying the short and long-term expected rates to the same cash flows. Table 37 shows the long-term expected real rate of return by asset class. Table 37 Long-term Expected Real Rate of Return by Asset Class Target Asset Real Return Real Return Asset Class Allocation Years 1 – 5 Years 6 - 20 Global Equity ............................................................................... 49.0 % 4.40 % 4.50 % Fixed Income ................................................................................ 23.0 (1.00) 2.20 Treasury Inflation-Protected Securities......................................... 5.0 (1.80) 1.30 Real Estate Investment Trusts....................................................... 20.0 3.00 3.90 Commodities.................................................................................. 3.0 0.80 1.20 Total........................................................................................... 100.0 % Discount Rates: The blended rates used to measure the June 30, 2021 total OPEB liability consist of the 20-year Municipal G.O. Bond AA Index rate of 1.92% as of June 30, 2021, as reported by Fidelity, when prefunding assets are not available to pay benefits, and 6.00% when prefunding assets are available to pay benefits. The cash flow projections used to calculate the blended discount rates were developed assuming that prefunding agreements in which actuarial determined normal costs are shared between employees and the State will continue and that the required contributions will be made on time and as scheduled in future years. The actuarial valuation as of June 30, 2021 includes the impact of the temporary suspensions of employee contributions under the Personal Leave Program that was in effect during the fiscal years ended June 30, 2021. The prefunding agreements are subject to collective bargaining and legislative approval. Detailed information on the blended discount rates by valuation group is available in the State of California Retiree Health Benefits Program GASB Nos. 74 and 75 Actuarial Valuation Report as of June 30, 2021, on the State Controller’s Office website, at www.sco.ca.gov. Blended rates for the June 30, 2022 valuation will be determined using the Fidelity Index 20-year Municipal G.O. Bond AA Index rate of 3.69% when prefunding assets are not available to pay benefits. 144 Notes to the Financial Statements This page intentionally left blank 145 State of California Annual Comprehensive Financial Report Changes in Net OPEB Liability: Table 38 shows the changes in net OPEB liability for the OPEB plans, recognized over the measurement period. Table 38 Changes in Net OPEB Liability (amounts in thousands) SEIU Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Balance at June 30, 2020........................................................ $ 32,726,807 $ 509,722 $ 32,217,085 Changes recognized for the measurement period: Service cost .......................................................................... 1,190,049 — 1,190,049 Interest on total OPEB liability ........................................... 1,028,924 — 1,028,924 Difference between expected and actual experiences.......... (2,498,623) — (2,498,623) Changes of assumptions....................................................... 1,275,481 — 1,275,481 Employer contributions........................................................ — 1,204,613 (1,204,613) Employee contributions........................................................ — — — Net investment income......................................................... — 162,795 (162,795) Benefit payments.................................................................. (962,640) (962,640) — Administrative expense........................................................ — (229) 229 Net changes............................................................................ 33,191 404,539 (371,348) Balance at June 30, 2021 (Measurement Date)............................................................. $ 32,759,998 $ 914,261 $ 31,845,737 146 Notes to the Financial Statements Bargaining Unit 5 Plan Bargaining Unit 6 Plan Total OPEB Plan Fiduciary Net OPEB Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Liability Net Position Liability $ 5,862,843 $ 495,528 $ 5,367,315 $ 17,091,273 $ 862,035 $ 16,229,238 183,703 — 183,703 578,629 — 578,629 202,901 — 202,901 562,522 — 562,522 (699,133) — (699,133) (1,113,335) — (1,113,335) 531,615 — 531,615 1,438,841 — 1,438,841 — 87,873 (87,873) — 480,133 (480,133) — — — — — — — 136,197 (136,197) — 247,525 (247,525) (87,872) (87,872) — (370,922) (370,922) — — (188) 188 — (343) 343 131,214 136,010 (4,796) 1,095,735 356,393 739,342 $ 5,994,057 $ 631,538 $ 5,362,519 $ 18,187,008 $ 1,218,428 $ 16,968,580 (continued) 147 State of California Annual Comprehensive Financial Report Table 38 (continued) Changes in Net OPEB Liability (continued) (amounts in thousands) Bargaining Unit 9 Plan Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Balance at June 30, 2020........................................................ $ 4,597,247 $ 151,824 $ 4,445,423 Changes recognized for the measurement period: Service cost .......................................................................... 155,301 — 155,301 Interest on total OPEB liability............................................ 144,901 — 144,901 Difference between expected and actual experiences.......... (308,759) — (308,759) Changes of assumptions....................................................... 166,566 — 166,566 Employer contributions........................................................ — 137,944 (137,944) Employee contributions........................................................ — — — Net investment income......................................................... — 44,511 (44,511) Benefit payments.................................................................. (109,002) (109,002) — Administrative expense........................................................ — (62) 62 Net changes............................................................................ 49,007 73,391 (24,384) Balance at June 30, 2021 (Measurement Date)............................................................ $ 4,646,254 $ 225,215 $ 4,421,039 148 Notes to the Financial Statements Bargaining Unit 12 Other Funded Plans Total OPEB Plan Fiduciary Net OPEB Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Liability Net Position Liability $ 4,254,764 $ 119,456 $ 4,135,308 $ 15,638,817 $ 550,763 $ 15,088,054 137,010 — 137,010 597,140 — 597,140 135,412 — 135,412 508,583 — 508,583 (348,753) — (348,753) (1,092,126) — (1,092,126) 165,715 — 165,715 811,046 — 811,046 — 163,285 (163,285) — 528,551 (528,551) — — — — — — — 36,034 (36,034) — 163,783 (163,783) (132,052) (132,052) — (401,508) (401,508) — — (52) 52 — (230) 230 (42,668) 67,215 (109,883) 423,135 290,596 132,539 $ 4,212,096 $ 186,671 $ 4,025,425 $ 16,061,952 $ 841,359 $ 15,220,593 (continued) 149 State of California Annual Comprehensive Financial Report Table 38 (continued) Changes in Net OPEB Liability (continued) (amounts in thousands) Unfunded Plan Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Balance at June 30, 2020........................................................ $ 17,708,942 $ — $ 17,708,942 Changes recognized for the measurement period: Service cost .......................................................................... 826,026 — 826,026 Interest on total OPEB liability ........................................... 447,744 — 447,744 Difference between expected and actual experiences.......... (1,270,439) — (1,270,439) Changes of assumptions....................................................... 476,706 — 476,706 Employer contributions........................................................ — 522,538 (522,538) Employee contributions........................................................ — — — Net investment income......................................................... — — — Benefit payments.................................................................. (522,538) (522,538) — Administrative expense........................................................ — — — Net changes............................................................................ (42,501) — (42,501) Balance at June 30, 2021 (Measurement Date)............................................................ $ 17,666,441 $ — $ 17,666,441 Reported in business-type activities 1 Includes amounts allocated to related organizations and fiduciary funds. Also includes the difference in net OPEB liability for discretely presented component units with a reporting period ended December 31, 2021; and minor differences related to amounts reported in separately issued financial statements of proprietary funds and discretely presented component units. Reported by discretely presented component units 150 Notes to the Financial Statements Total Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability $ 97,880,693 $ 2,689,328 $ 95,191,365 3,667,858 — 3,667,858 3,030,987 — 3,030,987 (7,331,168) — (7,331,168) 4,865,970 — 4,865,970 — 3,124,937 (3,124,937) — — — — 790,845 (790,845) (2,586,534) (2,586,534) — — (1,104) 1,104 1,647,113 1,328,144 318,969 $ 99,527,806 $ 4,017,472 $ 95,510,334 Reported in governmental activities $ 75,505,231 Reported in business-type activities 16,913,829 Reported by discretely presented component units 186,422 Not reported in government-wide Statement of Net Position1 2,904,852 Total net OPEB liability $ 95,510,334 (concluded) 151 State of California Annual Comprehensive Financial Report Sensitivity of the Net OPEB Liability to Changes in Blended Discount Rates: Table 39 shows the net OPEB liability for each plan as of the measurement date, calculated using their respective blended discount rates ranging from 1.92% to 2.95%, as well as what the net OPEB liability would be if it were calculated using rates that are one percentage-point lower or one percentage-point higher than the blended discount rates. Table 39 Net OPEB Liability Sensitivity to Changes in Blended Discount Rates June 30, 2022 (amounts in thousands) Blended Blended Discount Rates Blended Discount Rates OPEB Plan Blended Rate -1% Discount Rates +1% Service Employees International Union (SEIU) Plan.............................. 2.71% $ 37,684,808 $ 31,845,737 $ 27,152,875 Bargaining Unit 5 Plan........................ 2.95% 6,654,957 5,362,519 4,371,324 Bargaining Unit 6 Plan........................ 2.85% 20,625,622 16,968,580 14,135,865 Bargaining Unit 9 Plan........................ 2.73% 5,239,201 4,421,039 3,762,316 Bargaining Unit 12 Plan...................... 2.77% 4,746,048 4,025,425 3,446,335 Other Funded Plans............................. 2.595% to 2.951% 18,220,821 15,220,593 12,846,032 Unfunded Plan..................................... 1.92% 20,743,462 17,666,441 15,191,032 Total.................................................................................. $ 113,914,919 $ 95,510,334 $ 80,905,779 Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates: Table 40 shows the net OPEB liability for each plan as of the measurement date, calculated using the select and ultimate healthcare cost trend rates presented in Table 36, as well as what the net OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage-point lower or one percentage- point higher than the healthcare cost trend rates presented in Table 36. Table 40 Net OPEB Liability Sensitivity to Changes in the Healthcare Cost Trend Rates June 30, 2022 (amounts in thousands) Healthcare Cost Healthcare Cost Trend Rates Healthcare Cost Trend Rates OPEB Plan -1% Trend Rates +1% Service Employees International Union (SEIU) Plan ............ $ 26,657,657 $ 31,845,737 $ 38,567,194 Bargaining Unit 5 Plan............................................................ 4,318,662 5,362,519 6,746,326 Bargaining Unit 6 Plan............................................................ 13,982,839 16,968,580 20,875,875 Bargaining Unit 9 Plan............................................................ 3,696,112 4,421,039 5,353,374 Bargaining Unit 12 Plan.......................................................... 3,407,318 4,025,425 4,815,177 Other Funded Plans................................................................. 12,626,688 15,220,593 18,606,024 Unfunded Plan......................................................................... 14,944,770 17,666,441 21,190,700 Total.................................................................................. $ 79,634,046 $ 95,510,334 $ 116,154,670 152 Notes to the Financial Statements OPEB Plan Fiduciary Net Position: Detailed information about the OPEB plans’ fiduciary net positions is available in the separate report issued by CalPERS, at www.CalPERS.ca.gov. OPEB Expense and Deferred Outflows and Deferred Inflows of Resources Related to OPEB: The State recognized OPEB expense for the OPEB plans of $3.6 billion for the fiscal year ended June 30, 2022. Deferred outflows of resources are recognized for changes of assumptions, for employer contributions subsequent to the measurement date, and for the difference between expected and actual experience. Deferred inflows of resources are recognized for changes of assumptions and for the difference between expected and actual experience. Net deferred outflows of resources are recognized for the aggregate difference (positive and negative) between projected and actual earnings on the OPEB plans’ investments occurring in different measurement periods. 153 State of California Annual Comprehensive Financial Report As of June 30, 2022, the State reported OPEB expense and deferred outflows and deferred inflows of resources as shown in Table 41. Table 41 OPEB Expense and Sources of Deferred Outflows and Deferred Inflows of Resources Related to OPEB June 30, 2022 (amounts in thousands) Service Employees International Union (SEIU) Bargaining Bargaining Bargaining Description Plan Unit 5 Plan Unit 6 Plan Unit 9 Plan OPEB Expense........................................................................ $ 1,017,039 $ 317,086 $ 761,950 $ 109,891 Deferred Outflows of Resources: Employer contributions subsequent to the measurement date...................................................... 1,576,969 212,763 623,643 182,205 Difference between expected and actual experiences........... — 22,886 — — Changes of assumptions........................................................ 2,161,794 939,173 2,149,271 284,542 Deferred Inflows of Resources: Difference between expected and actual experiences........... (4,158,417) (670,398) (1,868,493) (470,436) Changes of assumptions........................................................ (1,367,088) (187,054) (453,939) (142,815) Net difference between projected and actual earnings on OPEB plan investments................................................. (90,390) (73,298) (135,474) (24,281) The $4.0 billion reported as deferred outflows of resources resulting from state contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the fiscal year ended June 30, 2023. 154 Notes to the Financial Statements Bargaining Other Funded Unit 12 Plan Plans Unfunded Plan Total $ 56,776 $ 564,621 $ 768,737 $ 3,596,100 203,007 698,669 516,945 4,014,201 — 15,857 — 38,743 234,350 1,251,598 1,271,544 8,292,272 (572,827) (1,965,996) (2,025,885) (11,732,452) (116,116) (608,735) (682,215) (3,557,962) (19,837) (90,005) — (433,285) 155 State of California Annual Comprehensive Financial Report Table 42 shows amounts for each plan reported as deferred outflows and deferred inflows of resources related to OPEB that will be recognized as OPEB expense in future years. Increases to OPEB expense are shown as positive amounts and decreases to OPEB expense are shown as negative amounts. Table 42 Recognition of Deferred Outflows and Deferred Inflows of Resources Related to OPEB (amounts in thousands) Year Ending June 30 OPEB Plan 2023 2024 2025 2026 2027 Thereafter Service Employees International Union (SEIU) Plan....................... $ (1,159,731) $ (1,049,060) $ (667,844) $ (154,789) $ (176,131) $ (246,546) Bargaining Unit 5.............. (34,772) (25,023) 35,769 52,320 3,015 — Bargaining Unit 6.............. (316,303) (209,351) 47,009 97,542 70,932 1,536 Bargaining Unit 9.............. (167,265) (97,539) (37,444) (17,581) (18,756) (14,405) Bargaining Unit 12............ (189,533) (131,436) (56,731) (51,796) (34,798) (10,136) Other Funded Plans........... (477,250) (408,257) (257,965) (149,831) (86,457) (17,521) Unfunded Plan................... (558,688) (472,350) (231,917) (18,576) (47,411) (107,614) Total............................... $ (2,903,542) $ (2,393,016) $ (1,169,123) $ (242,711) $ (289,606) $ (394,686) B. Trial Court OPEB Plans Plan Description: The 58 trial courts are reported as part of the primary government, but each trial court may utilize a separate OPEB plan, where OPEB is offered to employees, and obtain a separate actuarial valuation report for GASB Statement No. 75 reporting purposes. One trial court (Los Angeles) participates in both an agent multiple-employer defined benefit OPEB plan and a single-employer plan, three trial courts (Alameda, Orange, and San Diego) participate in county administered cost-sharing multiple-employer defined benefit OPEB plans, 39 trial courts participate in an agent multiple-employer defined benefit OPEB plan, and 11 trial courts participate in single-employer defined benefit OPEB plans. Four trial courts (Fresno, Mendocino, San Benito, and Stanislaus) do not have an OPEB plan. Benefits Provided, Contributions, and Employees Covered by Benefit Terms: To obtain information on eligibility terms, benefits provided, contributions, and actuarial assumptions from individual trial court OPEB actuarial valuation reports, email the State Controller’s Office, State Accounting and Reporting Division at StateGovReports@sco.ca.gov. Net OPEB Liability Actuarial Methods and Assumptions: For two of the trial court valuations, the net OPEB liability was measured as of December 31, 2021 (measurement date), and the remaining 52 valuations had a measurement date of June 30, 2021. One of the courts had an actuarial valuation date of December 31, 2021, and 53 courts were valued as of June 30, 2021. 156 Notes to the Financial Statements Table 43 shows selected actuarial assumptions for the trial court OPEB plans, by plan type. Table 43 Actuarial Methods and Assumptions – Trial Court OPEB Plans Single-Employer Defined Benefit Agent Multiple-Employer Defined Cost-Sharing Multiple-Employer OPEB Plans Benefit OPEB Plan Defined Benefit OPEB Plans Valuation date: June 30, 2021 June 30, 2021 Two plans as of June 30, 2021. One plan as of December 31, 2021. Actuarial assumptions: Discount rate Single rate of 1.92%. Blended and single rates ranging from Single rate of 7.00% 1.92% to 7.00%.. Healthcare cost trend rates Initial rate of 6.70% in 2022, Initial rate of 6.70% in 2022, Initial rates ranging from 6.50 to gradually decreasing to an ultimate gradually decreasing to an ultimate 7.50%, decreasing gradually to rate of 3.70% over 53 years per the rate of 3.70% over 53 years per the ultimate rates ranging from 3.75% to Society of Actuaries Getzen model. Society of Actuaries Getzen model. 4.50% in 2028 and later years. Discount Rates: The discount rates used to measure the total OPEB liability were based on either a single or a blended rate for each trial court. The blended rates used to measure the June 30, 2021 total OPEB liability consist of the 20-year Municipal G.O. Bond AA Index rate of 1.92% as of June 30, 2021, when prefunding assets are not available to pay benefits, and full funding discount rates ranging from 4.45% to 7.00% when prefunding assets are available to pay benefits. Single rates range from 1.92% to 7.00%. The projections of cash flows used to determine the discount rates assumed that plan contributions will be made according to funding policy, benefits will be paid out of OPEB trusts until assets are depleted, and employer contributions will first be applied to employee service costs in each period. OPEB Accounting Elements: For the trial court OPEB plans, the State reported total OPEB liability of $2.2 billion and fiduciary net position of $333 million, which resulted in a net OPEB liability of $1.9 billion as of June 30, 2022, reported in governmental activities. For the fiscal year ended June 30, 2022, the State recognized OPEB expense of $96 million. At June 30, 2022, the State reported deferred outflows of resources of $289 million and deferred inflows of resources of $299 million. Deferred outflows of resources included $77 million from OPEB contributions made subsequent to the measurement date, which will be recognized as a reduction of the net OPEB liability in the fiscal year ended June 30, 2023. 157 State of California Annual Comprehensive Financial Report NOTE 12: COMMERCIAL PAPER AND OTHER LONG-TERM BORROWINGS The primary government has two commercial paper borrowing programs: a general obligation commercial paper program and an enterprise fund commercial paper program for the Department of Water Resources. Commercial paper (new issuance or rollover notes that replace maturing new issuances) may be issued at the prevailing market rate, not to exceed 11% for the general obligation and 12% for the Department of Water Resources enterprise fund program, for periods not to exceed 270 days from the date of issuance. The proceeds from the initial issuance of commercial paper are used for voter-approved projects of the general obligation bond program and certain state water projects. For both commercial paper borrowing programs, the commercial paper is retired by the issuance of long-term debt, so commercial paper is considered a noncurrent liability. To provide liquidity for the programs, the State has entered into revolving credit agreements with credit providers such as commercial banks, which total the maximum authorized issuance of general obligation and enterprise fund commercial paper notes. As of June 30, 2022, there were no borrowings with the banks under the revolving credit agreements. The current “Letter of Credit” agreements for the general obligation commercial paper program authorize the issuance of notes in an aggregate principal amount not to exceed $2.3 billion. As of June 30, 2022, the general obligation commercial paper program had $1.4 billion in outstanding commercial paper notes for governmental activities. The current agreements for the enterprise fund commercial paper program authorize the issuance of notes in an aggregate principal amount not to exceed $1.4 billion. As of June 30, 2022, the enterprise fund commercial paper program had $208 million in outstanding notes. The primary government has a bond anticipation note program that consists of borrowing for capital improvements on certain California State University campuses. As of June 30, 2022, $115 million in outstanding bond anticipation notes existed in anticipation of the primary government issuing revenue bonds to the public. The University of California, a discretely presented component unit, has a commercial paper program and other uncollateralized borrowings. Additional disclosures for the University’s commercial paper and other long-term borrowings are included in the University’s separately issued financial statements, which can be obtained from the University on its website at www.ucop.edu. NOTE 13: LEASES The State leases land, buildings, equipment, and other assets as a lessee under a variety of non- cancelable, long-term lease agreements. As of June 30, 2022, the primary government’s lease liability was $2.5 billion for governmental activities and $333 million for business-type activities. The State is required to make principal and interest payments through maturity of the lease agreements. For governmental activities, the required payments are discounted using either the rates explicit in the lease agreements or the State’s incremental borrowing rates. As of June 30, 2022, the State’s incremental borrowing rates ranged from 0.2% to 1.50%, depending on the duration of the lease term at the inception of each lease agreement. Required payments for business-type activities are discounted using the rates explicit in the lease agreements, the State’s incremental borrowing rates, or other determined incremental borrowing rates. 158 Notes to the Financial Statements Table 44 includes the principal and interest requirements to maturity for the lease liability of the primary government. Table 44 Schedule of Principal and Interest Requirements to Maturity (amounts in thousands) Primary Government Governmental Activities Business-type Activities Total Year Ending June 30 Principal Interest Principal Interest Principal Interest 2023..................................................... $ 423,980 $ 26,685 $ 33,088 $ 7,662 $ 457,068 $ 34,347 2024..................................................... 369,748 23,305 29,691 7,172 399,439 30,477 2025..................................................... 315,218 20,211 27,768 6,678 342,986 26,889 2026..................................................... 270,462 17,646 25,462 6,192 295,924 23,838 2027..................................................... 227,800 15,220 21,019 5,724 248,819 20,944 2028-2032............................................ 610,570 46,681 22,772 5,607 633,342 52,288 2033-2037............................................ 230,517 13,422 44,195 13,338 274,712 26,760 2038-2042............................................ 54,791 2,487 52,580 15,318 107,371 17,805 2043-2047............................................ 5,166 706 47,932 8,302 53,098 9,008 2048-2052............................................ 4,343 325 18,621 3,307 22,964 3,632 Thereafter............................................. 2,119 283 9,486 537 11,605 820 Total........................................................... $ 2,514,714 $ 166,971 $ 332,614 $ 79,837 $ 2,847,328 $ 246,808 Less: current portion................................... 423,980 33,088 457,068 Lease liability, net of current portion..... $ 2,090,734 $ 299,526 2,390,260 Certain lease agreements require variable payments that are not included in the lease liabilities or related right-to-use lease assets. The primary government recognized $93 million as expenses from these variable payments for the year ended June 30, 2022. As of June 30, 2022, the discretely presented component units, including the University of California and its foundation, the California Housing Finance Agency (CalHFA), and various nonmajor component units, reported lease liabilities for land, buildings, equipment, and other assets. Additional disclosures for the University of California’s lease liability are included in the University’s separately issued financial statements, which may be found on its website at www.ucop.edu. Additional disclosures for CalHFA’s lease liability are included in CalHFA’s separately issued financial statements, which may be found on its website at www.CalHFA.ca.gov. NOTE 14: COMMITMENTS As of June 30, 2022, the primary government had commitments of $7.3 billion for certain highway construction projects. These commitments are not included as a liability in the Federal Fund or the Transportation Fund because future expenditures related to these commitments will be reimbursed with $6.2 billion from proceeds of approved federal grants and $1.1 billion from local governments. The primary government also had other commitments for which the future expenditures will be reimbursed by the proceeds of approved federal grants of $2.5 billion for housing and community development programs, $1.2 billion for various education programs, $691 million for services provided under various 159 State of California Annual Comprehensive Financial Report public health programs, $616 million for terrorism prevention and disaster-preparedness response projects, $444 million for community service programs, $325 million for services under the workforce development program, and $28 million for services provided under the child support program. The primary government had other commitments, totaling $23.0 billion, that are not included as a liability on the Balance Sheet or the Statement of Net Position. The $23.0 billion in commitments includes grant agreements totaling approximately $15.3 billion to reimburse other entities for construction projects for school building aid, parks, transportation-related infrastructure, housing, and other improvements; and to reimburse counties and cities for costs associated with various programs. Any assets that have been constructed will not belong to the primary government, whose payments are contingent upon the other entities entering into construction contracts. The $23.0 billion in commitments includes $3.4 billion in undisbursed loan commitments to qualified agencies for clean water projects and $1.6 billion in undisbursed loan commitments for various programs aimed at providing housing and emergency shelter to persons in need. The $23.0 billion in commitments also includes contracts of $931 million for the construction of water projects and the purchase and transmission of power that are not included as a liability on the Statement of Net Position of the Water Resources Fund. Included in this amount are certain power purchase, sale, and exchange contracts. The primary government had commitments of $934 million for CSU construction projects. In addition, CSU participates in forward-purchase contracts of electricity. As of June 30, 2022, CSU’s obligation under these special purchase arrangements requires it to purchase at fixed prices an estimated total of $39 million in electricity through December 2023. The California State Lottery Commission had commitments of $740 million for gaming and telecommunication systems and services. The primary government also had commitments of $47 million to veterans for the purchase of properties under contracts of sale. These are long-term projects, and all of the contracts’ needs may not have been defined. The projects will be funded with existing and future program resources or with the proceeds of revenue and general obligation bonds. As of June 30, 2022, the primary government encumbered expenditures of $7.4 billion for the General Fund, $4.5 billion for the Transportation Fund, $3.8 billion for the Environmental and Natural Resources Fund, $17 million for the Health Care Related Programs Fund, and $1.1 billion for the nonmajor governmental funds. See Note 2A, Budgeting and Budgetary Control, for an explanation of the primary government’s policy concerning encumbrances. As of June 30, 2022, the discretely presented and fiduciary component units had other commitments that were not included as liabilities on the corresponding Statement of Net Position. Additional disclosure for the University of California’s commitments is included in its separately issued financial statements, which may be found on its website at www.ucop.edu. Additional disclosure for the California Housing Finance Agency’s (CalHFA) commitments is included in its separately issued financial statements, which may be found on its website at www.CalHFA.ca.gov. Additional disclosure for the California Public Employees’ Retirement System’s (CalPERS) commitments is included in its separately issued financial statements, which may be found on its website at www.CalPERS.ca.gov. Additional disclosure for the California State Teachers’ Retirement System’s (CalSTRS) commitments is included in its separately issued financial statements, which may be found on its website at www.CalSTRS.com. 160 Notes to the Financial Statements NOTE 15: GENERAL OBLIGATION BONDS The State Constitution permits the primary government to issue general obligation bonds for specific purposes and in such amounts as approved by a two-thirds vote of both houses of the Legislature and by a majority of voters in a general or direct primary election. The debt service for general obligation bonds is appropriated from the General Fund. Under the State Constitution, the General Fund is used first to support the public school system and public institutions of higher education; the General Fund can then be used to service the debt on outstanding general obligation bonds. Enterprise funds and certain other funds reimburse the General Fund for any debt service that it provides on their behalf. General obligation bonds that are directly related to, and are expected to be paid from, the resources of enterprise funds are included as a liability of such funds in the financial statements. However, the General Fund may be liable for the payment of any principal and interest on these bonds that is not met from the resources of such enterprise funds. As of June 30, 2022, the State had $69.2 billion in outstanding general obligation bonds related to governmental activities and $526 million related to business-type activities. In addition, $32.0 billion in long-term general obligation bonds had been authorized but not issued, of which $31.0 billion is related to governmental activities and $971 million is related to business-type activities. The total amount authorized but not issued includes $12.4 billion authorized by the applicable finance committees for issuance in the form of commercial paper notes or bonds. Of this amount, $1.4 billion in general obligation indebtedness in the form of commercial paper notes had been issued but not yet retired by long-term bonds as of June 30, 2022. A. Variable-rate General Obligation Bonds The State issues both fixed and variable-rate general obligation bonds. As of June 30, 2022, the State had $949 million in variable-rate general obligation bonds outstanding, consisting of $229 million in daily-rate bonds with credit enhancement, $620 million in weekly-rate bonds with credit enhancement, and $100 million in weekly- index floating rate bonds without credit enhancement. The interest rates associated with the credit-enhanced bonds are determined by the remarketing agents, or for the Series 2020A by an electronic bidding system through a market agent, to be the lowest rate that would allow the bonds to sell on the effective date of such rate at a price (without regard to accrued interest) equal to 100% of the principal amount. The interest rates associated with the unenhanced index floating rate bonds are determined by a rate based on the Securities Industry and Financial Markets Association (SIFMA) Index rate then in effect plus a pre-determined spread. The interest on variable-rate bonds is generally paid on the first business day of each calendar month. The credit-enhanced bonds are secured by letters of credit that secure payment of principal and interest on the bonds and, as applicable, payment of purchase price upon tender by the holder. The State has entered into different credit agreements with various banks (credit providers) for one or more series of credit-enhanced bonds. Under these credit agreements, the credit providers agree to pay all principal and interest payments to the bondholders up to a commitment amount identified in the applicable credit agreement; the State is then required to reimburse the credit providers for the amounts paid. In return, the credit providers are compensated with commitment fees that are calculated as a percentage of the applicable commitment amount. The bondholders have the right to tender the bonds on any business day in accordance with the applicable bonds documents. Upon a tender, the remarketing agent or market agent, as applicable, will attempt to remarket the tendered bond to a new investor. If the remarketing of the tendered bond is unsuccessful, the bond will be purchased by the applicable credit provider and 161 State of California Annual Comprehensive Financial Report become a bank bond and accrue interest at higher rates, which cannot exceed 11% as permitted by law until remarketed, redeemed, or paid at maturity. If a bond cannot be remarketed and remains a bank bond for a period ranging from 90 days to 180 days, the bond will be subject to amortization payments in equal installments under the terms stated in the applicable credit agreement. The amortization period may exceed the expiration date of the applicable credit agreement. A bank bond may be remarketed at any time during the amortization period. There were no bank bonds during the 2021-22 fiscal year. The letters of credit for the Series 2003 variable-rate bonds have expiration dates of August 28, 2023; December 16, 2024; and August 25, 2025. The letter of credit for the Series 2004 variable-rate bonds has an expiration date of January 16, 2024. The letters of credit for the Series 2005 variable-rate bonds have expiration dates of September 22, 2023; November 18, 2024; and April 22, 2025. The letter of credit for the Series 2020A variable-rate bond has an expiration date of November 18, 2022. The Series 2013E index floating rate bonds have a scheduled mandatory purchase date on December 1, 2023. Sinking fund deposits for the variable-rate general obligation bonds are set aside in a sinking fund at the beginning of each fiscal year; such deposits are required and will continue for each fiscal year with scheduled sinking fund payments. The deposits set aside in any fiscal year may be applied, with approval of the State Treasurer and the appropriate bond finance committees, to the redemption or purchase and retirement of any other general obligation bonds (bonds other than the bonds to which the sinking fund deposits relate) then outstanding. If a sinking fund deposit is not applied by January 31 of that fiscal year to such other bonds, the State Treasurer will select the related variable-rate general obligation bonds that will be redeemed in whole or in part on an interest payment date in that fiscal year. The required sinking fund deposits were set aside for the 2021-22 fiscal year. B. Mandatory Tender Bonds As of June 30, 2022, the State had $100 million in outstanding index floating rate general obligation bonds with a scheduled mandatory tender date (discussed in Section A). On the scheduled mandatory tender date, these bonds are subject to mandatory tender for purchase at a price equal to 100% of the principal amount, plus accrued interest, without premium, unless the bonds have been called for redemption or remarketed on or prior to that day. The scheduled mandatory tender date is December 1, 2023. In the event bonds are not redeemed or there is an unsuccessful remarketing of all the outstanding bonds for a particular scheduled mandatory tender date, there is no event of default, however, the bonds will enter into a delayed remarketing period and accrue interest at a higher effective interest rate, gradually increasing on a stepped basis until they are remarketed, redeemed, or paid at maturity. Bonds in this delayed remarketing period can be redeemed or remarketed on any business day, with limited prior notice. Current state laws limit interest rates to 11% per annum. C. Build America Bonds As of June 30, 2022, the State had $11.3 billion in taxable various-purpose general obligation bonds outstanding that were issued as “Build America Bonds” under the American Recovery and Reinvestment Act of 2009 (ARRA) signed into law on February 17, 2009. The bonds have scheduled maturity dates in the fiscal years ended June 30, 2027, 2034 and 2039 to 2041. Pursuant to ARRA, the State receives a cash subsidy payment from the U. S. Treasury equal to 35% of the interest payable by the State on the Build America Bonds on or near each interest payment date. Subsequent federal legislation reduced the Build America Bonds subsidy by 5.7% for the federal fiscal years ending September 30, 2021 to September 30, 2030. The cash payment does not constitute a full faith and credit guarantee of the federal 162 Notes to the Financial Statements government, but is required to be paid by the U. S. Treasury under ARRA. The subsidy payments are deposited into the State’s General Fund. D. Debt Service Requirements Table 45 shows the debt service requirements for all general obligation bonds as of June 30, 2022. The estimated debt service requirements for the $949 million variable-rate general obligation bonds are calculated using the actual interest rates in effect on June 30, 2022. For mandatory tender bonds, the debt service requirements shown in Table 45 are based on the assumption that the interest rate will remain in effect until the reset date and that the bonds will be fully redeemed on the scheduled maturity date. The amounts include scheduled mandatory sinking fund redemptions but do not reflect any interest subsidy under the Build America Bonds program or any other offsets to general fund costs of debt service. Table 45 Schedule of Debt Service Requirements for General Obligation Bonds (amounts in thousands) Governmental Activities Business-type Activities Year Ending June 30 Principal Interest Total Principal Interest Total 2023................................. $ 3,372,605 $ 3,361,321 $ 6,733,926 $ 3,200 $ 16,430 $ 19,630 2024................................. 3,243,130 3,212,684 6,455,814 2,145 16,410 18,555 2025................................. 3,235,835 3,070,738 6,306,573 7,770 16,340 24,110 2026................................. 3,320,905 2,922,501 6,243,406 4,380 16,248 20,628 2027................................. 3,317,695 2,764,098 6,081,793 23,855 15,895 39,750 2028 - 2032...................... 17,440,190 11,520,276 28,960,466 155,480 66,876 222,356 2033 - 2037...................... 15,999,970 7,554,236 23,554,206 99,545 43,844 143,389 2038 - 2042...................... 11,773,065 3,346,775 15,119,840 71,795 33,149 104,944 2043 - 2047...................... 5,077,410 1,002,824 6,080,234 116,135 17,442 133,577 2048 - 2052...................... 2,435,000 192,240 2,627,240 41,390 1,912 43,302 Total.................................. $ 69,215,805 $ 38,947,693 $ 108,163,498 $ 525,695 $ 244,546 $ 770,241 E. General Obligation Bond Defeasances 1. Current Year Activity On September 2, 2021, the primary government issued $1.1 billion in general obligation bonds to current refund $1.3 billion in outstanding fixed rate general obligation bonds with principal redemptions scheduled in the fiscal years ended June 30, 2023 to 2033, and 2042. As a result, the refunded bonds are considered defeased and the liability for those bonds has been removed from the financial statements. The refunding decreased overall debt service by $416 million and resulted in an economic gain of $369 million. The economic gain is the difference between the present value of the old debt service requirements and the present value of the new debt service requirements, discounted at 1.28% per year over the life of the new bonds. On September 22, 2021, the primary government issued $1.1 billion in general obligation bonds to current refund $1.3 billion in outstanding fixed and variable-rate general obligation bonds with principal redemptions scheduled in the fiscal years ended June 30, 2024 to 2039, and 2042. As a result, the 163 State of California Annual Comprehensive Financial Report refunded bonds are considered defeased and the liability for those bonds has been removed from the financial statements. The refunding decreased overall debt service by $381 million and resulted in an economic gain of $324 million. The economic gain is the difference between the present value of the old debt service requirements and the present value of the new debt service requirements, discounted at 1.55% per year over the life of the new bonds. On November 17, 2021, the primary government issued $1.1 billion in general obligation bonds to current refund $1.3 billion in outstanding fixed and variable-rate general obligation bonds with principal redemptions scheduled in the fiscal years ended June 30, 2023 to 2033, 2038, and 2047. As a result, the refunded bonds are considered defeased and the liability for those bonds has been removed from the financial statements. The refunding decreased overall debt service by $282 million and resulted in an economic gain of $246 million. The economic gain is the difference between the present value of the old debt service requirements and the present value of the new debt service requirements, discounted at 1.47% per year over the life of the new bonds. On March 17, 2022, the primary government issued $769 million in general obligation bonds to current refund $878 million in outstanding fixed rate general obligation bonds with principal redemptions scheduled in the fiscal years ended June 30, 2023 to 2024, 2035, 2037, and 2042. As a result, the refunded bonds are considered defeased and the liability for those bonds has been removed from the financial statements. The refunding decreased overall debt service by $237 million and resulted in an economic gain of $179 million. The economic gain is the difference between the present value of the old debt service requirements and the present value of the new debt service requirements, discounted at 2.46% per year over the life of the new bonds. 2. Outstanding Balance In the current and prior years, the primary government placed the proceeds of the refunding bonds and other resources in a special irrevocable escrow trust account with the State Treasury to provide for all future debt service payments on defeased bonds. The assets of the trust accounts and liability for defeased bonds are not included in the State’s financial statements. As of June 30, 2022, there are no outstanding defeased general obligation bonds. NOTE 16: REVENUE BONDS A. Governmental Activities The California Alternative Energy and Advanced Transportation Financing Authority is authorized to issue Clean Renewable Energy Bonds to fund the acquisition and installation of certain transportation- related solar energy facilities located throughout the State. These bonds finance activity in the Transportation Fund and are included in the governmental activities column of the government-wide Statement of Net Position. The California Health Facilities Financing Authority (CHFFA) is authorized to issue No Place Like Home Program Senior Revenue Bonds to provide permanent supportive housing for persons experiencing homelessness or chronic homelessness, or who are at-risk for chronic homelessness, and who are in need of mental health services. These bonds are secured by and payable from a portion of Proposition 63 Tax Transfers. The primary government has no legal liability for the payment of principal and interest on these revenue bonds. Total principal and interest remaining on the bonds are 164 Notes to the Financial Statements $2.5 billion, payable through 2041. Interest paid in the current year totaled $23 million. These bonds are included in the governmental activities column of the government-wide Statement of Net Position. The Golden State Tobacco Securitization Corporation (GSTSC), a blended component unit, as authorized by state law, has issued asset-backed bonds to purchase 100% of the State’s rights to future revenues from the Master Settlement Agreement with participating tobacco companies. These bonds are secured by and payable solely from future Tobacco Settlement Revenue and interest earned on that revenue. The primary government has no legal liability for the payment of principal and interest on the bonds. The Legislature has annually granted a General Fund appropriation for payment of debt service in the event tobacco settlement revenues and other available amounts prove insufficient to make these payments during the next fiscal year. However, the use of the appropriated monies has never been required. Total principal and interest remaining on all asset-backed bonds is $9.9 billion, payable through 2067. All of the Tobacco Settlement Revenue and interest has been pledged in support of these asset-backed bonds. Principal and interest paid in the current year totaled $3.8 billion, while Tobacco Settlement Revenue and interest earned totaled $482 million. These bonds are included in the governmental activities column of the government-wide Statement of Net Position. Under state law, the State Public Works Board (SPWB), an agency that accounts for its activity in the Public Buildings Construction Fund, an internal service fund, and certain building authorities may issue revenue bonds. These bonds are issued for the purpose of designing, acquiring, or constructing state buildings, related improvements, and equipment. Leases with state agencies pay the principal and interest on the revenue bonds issued by the Public Buildings Construction Fund and building authorities. The General Fund has no legal liability for the payment of principal and interest on these revenue bonds. Total principal and interest remaining on the bonds is $11.9 billion, payable through 2047. These revenue bonds are included in the governmental activities column of the government-wide Statement of Net Position. For the specific debt service coverage ratios, refer to the Schedule of Pledged Revenue Coverage in the Statistical Section. B. Business-type Activities Revenue bonds that are directly related to, and are expected to be paid from, the resources of enterprise funds are included in the accounts of such funds. Principal and interest on revenue bonds are payable from the pledged revenues of the respective funds of agencies that issued the bonds. The General Fund has no legal liability for payment of principal and interest on revenue bonds. For specific debt service coverage ratios, refer to the Schedule of Pledged Revenue Coverage in the Statistical Section. Revenue bonds to acquire, construct, or renovate state facilities or to refund outstanding revenue bonds in advance of maturity are issued for water resources, financing of electric power purchases for resale to utility customers, state university campuses, and certain nonmajor enterprise funds. Revenue bonds related to two enterprise funds contain provisions that define events of default related to punctuality of the payment of the outstanding principal and interest, which could result in acceleration of debt payments. 165 State of California Annual Comprehensive Financial Report C. Discretely Presented Component Units The University of California issues revenue bonds to finance various auxiliary, administrative, academic, medical center, and research facilities. The revenue bonds are not collateralized by any encumbrance, mortgage, or other pledge of property except pledged revenues, and do not constitute general obligations of the University. For more information regarding revenue bonds, current year defeasances, and outstanding defeasances of the University, refer to its separately issued financial report for fiscal year 2021-22, which may be found on its website at www.ucop.edu. Under state law, the California Housing Finance Agency (CalHFA) issues fixed-rate and variable-rate revenue bonds to fund loans to qualified borrowers for single-family houses and multifamily developments. Variable-rate debt is typically related to remarketed rates or common indices, such as the Securities Industry and Financial Markets Association (SIFMA) or the London Interbank Offered Rate (LIBOR) and is reset periodically. As of June 2022, CalHFA redeemed all outstanding variable rate debt. CalHFA issues both federally taxable and tax-exempt bonds. The bonds issued by CalHFA are payable solely from and collateralized by revenues and other pledged assets. For more information regarding revenue bonds, current year defeasances, and outstanding defeasances of the CalHFA, refer to its separately issued financial report for fiscal year 2021-22, which may be found on its website at www.CalHFA.ca.gov. Table 46 shows outstanding revenue bonds of the primary government and the discretely presented component units. Table 46 Schedule of Revenue Bonds Payable June 30, 2022 (amounts in thousands) Primary government Governmental activities Transportation Fund....................................................................................................................... $ 852 Public Buildings Construction Fund.............................................................................................. 9,159,638 Nonmajor governmental funds: Golden State Tobacco Securitization Corporation Fund............................................................ 6,162,636 No Place Like Home Program.................................................................................................... 1,823,495 Building authorities..................................................................................................................... 10,770 Total governmental activities................................................................................................... 17,157,391 Business-type activities Water Resources Fund................................................................................................................... 3,520,598 California State University............................................................................................................. 9,341,440 Nonmajor enterprise funds............................................................................................................. 1,559,463 Total business-type activities.................................................................................................... 14,421,501 Total primary government.................................................................................................... 31,578,892 Discretely presented component units University of California................................................................................................................. 31,383,010 California Housing Finance Agency.............................................................................................. 121,255 Nonmajor component units............................................................................................................ 829,732 Total discretely presented component units........................................................................ 32,333,997 Total revenue bonds payable............................................................................................... $ 63,912,889 166 Notes to the Financial Statements Table 47 shows the debt service requirements for fixed-rate and variable-rate bonds. It excludes unamortized premiums and discounts that are included in Table 46. Table 47 Schedule of Debt Service Requirements for Revenue Bonds (amounts in thousands) Primary Government Discretely Presented Governmental Activities Business-type Activities Component Units Year Ending June 30 Principal Interest Principal Interest Principal Interest * 2023......................... $ 728,626 $ 608,124 $ 543,835 $ 491,994 $ 614,185 $ 1,274,720 2024......................... 710,811 584,606 567,830 468,657 663,603 1,244,638 2025......................... 728,975 557,354 578,835 446,707 1,088,334 1,219,619 2026......................... 753,975 527,825 578,750 425,522 1,181,343 1,181,545 2027......................... 787,485 496,824 591,625 419,036 1,204,445 1,145,879 2028-2032............... 4,177,366 2,116,310 2,926,855 1,706,174 5,280,425 5,174,019 2033-2037 ............... 3,637,069 1,396,261 2,536,900 1,156,394 4,541,768 4,103,860 2038-2042 ............... 2,634,527 878,449 1,670,975 764,007 4,680,666 3,001,534 2043-2047 ............... 1,483,587 704,158 1,704,065 428,299 4,378,084 1,961,329 2048-2052 ............... 685,487 151,287 1,359,980 137,236 3,635,795 1,121,410 2053-2057 ............... — — 189,345 18,801 658,960 620,821 2058-2122 ............... 28,250 — — — 2,643,076 4,493,057 Total........................... $ 16,356,158 $ 8,021,198 $ 13,248,995 $ 6,462,827 $ 30,570,684 $ 26,542,431 * Includes interest on variable-rate bonds based on rates in effect on June 30, 2022. D. Revenue Bond Defeasances 1. Current Year – Governmental Activities During the 2021-22 fiscal year, the SPWB issued $1.2 billion in lease revenue refunding bonds. The bond proceeds were used to refund $1.5 billion in outstanding lease revenue bonds. The net proceeds of the refunding bonds, along with additional resources, were deposited in an escrow account to provide for all future debt service payments on the refunded bonds. As a result, the refunded bonds are considered defeased and the liabilities for those bonds have been removed from the financial statements. The refunding decreased debt service payments by $341 million and resulted in an economic gain of $271 million. The lease revenue bonds are reported in the Public Buildings Construction Fund, an internal service fund. During the 2021-22 fiscal year, the GSTSC issued $6.0 billion in Enhanced Tobacco Settlement Asset- Backed refunding bonds. The bond proceeds were used to advance refund $5.6 billion in outstanding Enhanced Tobacco Settlement Asset-Backed bonds. The net proceeds of the refunding bonds were deposited in an escrow account to provide for all future debt service payments on the refunded bonds. As a result, the refunded bonds are considered defeased and the liabilities for those bonds have been removed from the financial statements. The refunding decreased debt service payments by $3 million and resulted in an economic gain of $1 million. 167 State of California Annual Comprehensive Financial Report 2. Current Year – Business-type Activities In July 2021, the California State University issued $728 million in systemwide revenue bonds to advance refund certain outstanding systemwide revenue bonds. Portions of the proceeds from the refunding bonds were deposited in escrow accounts to provide for all future debt service payments on the refunded bonds. As a result, the refunded bonds are considered defeased and the liability for those bonds has been removed from the financial statements. The refunding decreased debt service payments by $106 million and resulted in an economic gain of $95 million. 3. Outstanding Balances In current and prior fiscal years, the primary government placed the proceeds of the refunding bonds and other resources in irrevocable trust accounts to provide for all future debt service requirements. Accordingly, the assets and liabilities for these defeased bonds are not included in the financial statements. As of June 30, 2022, the outstanding balance of defeased revenue bonds was $1.6 billion for business-type activities. Of this amount, the outstanding balance of bonds that were defeased using the State’s own existing resources was $10 million. All defeased revenue bonds for governmental activities were redeemed by June 30, 2022. NOTE 17: RISK MANAGEMENT The primary government has elected, with a few exceptions, to be self-insured against loss or liability. The primary government generally does not maintain reserves. Losses are covered by appropriations from each fund responsible for payment in the year in which the payment occurs. The State is permissively self-insured and, barring any extraordinary catastrophic event, the potential amount of loss faced by the State is not considered material in relation to the primary government’s financial position. Generally, the exceptions are when a bond resolution or a contract requires the primary government to purchase commercial insurance for coverage against property loss or liability. There have been no significant reductions in insurance coverage from the prior year. In addition, no insurance settlement in the last three years has exceeded insurance coverage. All claim payments are on a “pay-as-you-go” basis, with workers’ compensation benefits for self-insured agencies initially being paid by the State Compensation Insurance Fund. The discounted liability for unpaid self-insurance claims of the primary government is estimated to be $5.5 billion as of June 30, 2022. This estimate is primarily based on actuarial reviews of the State’s workers’ compensation program and includes indemnity payments to claimants, as well as all other costs of providing workers’ compensation benefits, such as medical care and rehabilitation. The estimate also includes the liability for unpaid services fees, industrial disability leave benefits, and incurred-but-not- reported amounts. The estimated total liability of approximately $7.6 billion is discounted to $5.5 billion using a 3.5% interest rate. Of the total discounted liability, $550 million is a current liability, of which $407 million is included in the General Fund, $139 million in the special revenue funds, and $4 million in the internal service funds. The remaining $4.9 billion is reported as other noncurrent liabilities in the government-wide Statement of Net Position. The University of California, a discretely presented component unit, is self-insured or insured through a wholly-owned captive insurance company. Additional disclosures for the University’s risk management and self-insurance claims liability are included in its separately issued financial statements, which can be obtained from the University on its website at www.ucop.edu. 168 Notes to the Financial Statements Table 48 shows the changes in the self-insurance claims liability for the primary government. Table 48 Schedule of Changes in Self-insurance Claims Year Ended June 30 (amounts in thousands) 2022 2021 Unpaid claims, beginning..................................................................................................... $ 4,953,720 $ 4,688,013 Incurred claims..................................................................................................................... 1,112,513 831,985 Claim payments.................................................................................................................... (594,006) (566,278) Unpaid claims, ending..................................................................................................... $ 5,472,227 $ 4,953,720 169 State of California Annual Comprehensive Financial Report NOTE 18: INTERFUND BALANCES AND TRANSFERS A. Interfund Balances Short-term interfund receivables and payables result from the time lag between the dates on which goods and services are delivered and the dates on which payments between entities are made. In addition, interfund borrowing, mainly from nonmajor governmental funds, is used to meet temporary imbalances of receipts and disbursements in the General Fund. Table 49 shows the amounts due from and due to other funds. Table 49 Schedule of Due From Other Funds and Due To Other Funds June 30, 2022 (amounts in thousands) Due To Environmental Health Care and Natural Related Nonmajor General Transportation Resources Programs Governmental Due From Fund Fund Fund Fund Fund Governmental funds General Fund ........................................ $ — $ 112,991 $ — $ — $ 607,092 Federal Fund......................................... 7,675,091 1,314,444 104,201 6,916 30,797 Transportation Fund ............................. — — — — 431,377 Environmental and Natural Resources Fund .................................. 89,530 — — — 229 Health Care Related Programs Fund.................................... 2,447,197 — 8 — 2,341 Nonmajor governmental funds............. 302,200 2,473 33,181 47,292 19,316 Total governmental funds............... 10,514,018 1,429,908 137,390 54,208 1,091,152 Enterprise funds Water Resources Fund.......................... — — 1,577 — — State Lottery Fund ................................ 454 — — — 507,728 Nonmajor enterprise funds ................... 2,375 24 21,488 — 463 Total enterprise funds.................... 2,829 24 23,065 — 508,191 Internal service funds........................... 14,380 25,376 27,428 1,749 22,522 Total due from other funds........ $ 10,531,227 $ 1,455,308 $ 187,883 $ 55,957 $ 1,621,865 170 Notes to the Financial Statements Due To California State Unemployment State Nonmajor Internal Total Lottery Programs University Enterprise Service Fiduciary Due To Fund Fund Fund Funds Funds Funds Other Funds $ — $ 100,423 $ 3,241 $ — $ 382,718 $ 810,598 $ 2,017,063 — 60,157 — 21,533 37,412 179 9,250,730 — — — — 12,961 49 444,387 — — — 1,935 69,750 24 161,468 — — — — 21,474 — 2,471,020 — — — — 105,920 15 510,397 — 160,580 3,241 23,468 630,235 810,865 14,855,065 — — — — 58,628 — 60,205 — — — — — — 508,182 — — — — 138 — 24,488 — — — — 58,766 — 592,875 2,026 7,120 — 1,990 203,340 710 306,641 $ 2,026 $ 167,700 $ 3,241 $ 25,458 $ 892,341 $ 811,575 $ 15,754,581 171 State of California Annual Comprehensive Financial Report Interfund receivables and payables are the result of interfund loans that are not expected to be repaid within one year. In addition to the temporary interfund cash-flow borrowing shown in Table 49, annual enacted budgets provide for long-term loans from many of the State’s special funds—mainly the Environmental and Natural Resources Fund, nonmajor governmental funds, and Unemployment Programs Fund—to the General Fund. In fiscal year 2017-18, a supplemental employer contribution was made to the California Public Employees’ Retirement System (CalPERS) to help reduce the State’s net pension liability. The supplemental employer contribution was funded through a cash loan from borrowable deposits in the State’s internal investment pool—mainly from the Environmental and Natural Resources Fund and nonmajor governmental funds. The General Fund and other funds that normally contribute to CalPERS and benefit from the supplemental contribution will repay the loan and replenish the internal investment pool deposits. The table below includes an outstanding balance of $2.2 billion of interfund loans. There is an additional $100 million reported as loans receivable from entities outside of the State’s primary government. Table 50 shows the primary government’s interfund receivables and payables. Table 50 Schedule of Interfund Receivables and Payables June 30, 2022 (amounts in thousands) Interfund Payables Environmental Health Care and Natural Related General Transportation Resources Programs Interfund Receivables Fund Fund Fund Fund Governmental funds General Fund............................................................ $ — $ 130,247 $ 1,833,131 $ 191,435 Transportation Fund.................................................. — — — — Environmental and Natural Resources Fund....................................................... 345,889 10,000 — — Nonmajor governmental funds................................. 18,752 23,448 — — Total governmental funds................................... 364,641 163,695 1,833,131 191,435 Enterprise funds Water Resources Fund.............................................. — 928 12,364 2,262 State Lottery Fund.................................................... — 208 2,780 509 California State University Fund.............................. — 2,172 28,978 5,303 Nonmajor enterprise funds....................................... 21,720 29 385 70 Total enterprise funds.......................................... 21,720 3,337 44,507 8,144 Internal service funds............................................... 2,593,624 1,188 15,852 2,900 Total interfund receivables............................... $ 2,979,985 $ 168,220 $ 1,893,490 $ 202,479 172 Notes to the Financial Statements Interfund Payables Nonmajor Water Unemployment Nonmajor Internal Total Governmental Resources Programs Enterprise Service Fiduciary Interfund Funds Fund Fund Funds Funds Funds Payables $ 882,484 $ — $ 298,737 $ 7,127 $ 17,554 $ 38,123 $ 3,398,838 — — — — 666 — 666 — — — — 2,511 — 358,400 — — — — — — 42,200 882,484 — 298,737 7,127 20,731 38,123 3,800,104 5,194 — 3,530 84 — 451 24,813 1,168 — 794 19 — 101 5,579 12,174 — 8,273 197 — 1,056 58,153 162 — 110 3 — 14 22,493 18,698 — 12,707 303 — 1,622 111,038 6,661 183,339 4,526 108 17,113 578 2,825,889 $ 907,843 $ 183,339 $ 315,970 $ 7,538 $ 37,844 $ 40,323 $ 6,737,031 173 State of California Annual Comprehensive Financial Report The amounts shown as due from primary government and due to component units represent short-term receivables and payables between the primary government and component units resulting from the time lag between the dates on which goods and services are provided and received and the dates on which payments between entities are made. Table 51 shows the amounts due from the primary government and due to component units. Table 51 Schedule of Due From Primary Government and Due To Component Units June 30, 2022 (amounts in thousands) Due To Component Units University Nonmajor of Component Due From California Units Total Governmental funds General Fund............................................................................... $ 266,914 $ — $ 266,914 Transportation Fund.................................................................... 6,449 — 6,449 Environmental and Natural Resources Fund............................... — 84 84 Nonmajor governmental funds.................................................... 33,720 — 33,720 Total governmental funds...................................................... 307,083 84 307,167 Total due from primary government................................ $ 307,083 $ 84 $ 307,167 174 Notes to the Financial Statements This page intentionally left blank 175 State of California Annual Comprehensive Financial Report B. Interfund Transfers Transfers move money collected by one fund to another fund, which then disburses it as required by law. The General Fund and certain other funds transfer money to support various programs accounted for in other funds. The largest transfer from the General Fund was $5.4 billion to the California State University, an enterprise fund. The General Fund also transferred $3.5 billion to nonmajor governmental funds, mainly for support of trial courts and mental health services. The Transportation Fund transferred $1.6 billion in weight fee revenues to the Transportation Debt Service Fund, a nonmajor governmental fund, for transportation-related debt service costs. The Federal Fund transferred $945 million to the General Fund for administration of the Unemployment Insurance Program. Table 52 shows interfund transfers of the primary government. Table 52 Schedule of Interfund Transfers June 30, 2022 (amounts in thousands) Transferred To Environmental and Natural General Transportation Resources Transferred From Fund Fund Fund Governmental funds General Fund.................................................................................. $ — $ 331 $ 368,373 Federal Fund................................................................................... 944,718 — 15,241 Transportation Fund....................................................................... 31 — 3,435 Environmental and Natural Resources Fund.................................. 187,378 851 — Health Care Related Programs Fund.............................................. 94 — — Nonmajor governmental funds....................................................... 70,710 44 29,477 Total governmental funds................................................ 1,202,931 1,226 416,526 Nonmajor enterprise funds............................................................ 55 — — Internal service funds...................................................................... 29,939 — — Total transfers from other funds.................................. $ 1,232,925 $ 1,226 $ 416,526 176 Notes to the Financial Statements Transferred To Health Care California Related Nonmajor State Nonmajor Internal Total Programs Governmental University Enterprise Service Transfers To Fund Funds Fund Funds Funds Other Funds $ 174,157 $ 3,523,247 $ 5,413,763 $ 47,000 $ 1,152 $ 9,528,023 — 17,759 — 5,082 — 982,800 — 1,568,927 — — — 1,572,393 — 6,230 — — — 194,459 — — — — — 94 4,840 164,379 — — — 269,450 178,997 5,280,542 5,413,763 52,082 1,152 12,547,219 — — — — — 55 — 10,986 — — 2,559 43,484 $ 178,997 $ 5,291,528 $ 5,413,763 $ 52,082 $ 3,711 $ 12,590,758 177 State of California Annual Comprehensive Financial Report NOTE 19: FUND BALANCES, NET POSITION DEFICITS, AND ENDOWMENTS A. Fund Balances Table 53 shows the composition of the governmental fund balances. Table 53 Schedule of Fund Balances by Function June 30, 2022 (amounts in thousands) Environmental Health Care and Natural Related Nonmajor General Federal Transportation Resources Programs Governmental Fund Fund Fund Fund Fund Funds Nonspendable Long-term interfund receivables.... $ 2,951,414 $ — $ — $ — $ — $ — Long-term loans receivable ........... 6,905 — — — — — Other .............................................. — — — — — 39,130 Total nonspendable................... 2,958,319 — — — — 39,130 Restricted General government....................... 123,919 363,670 — 9,667 1 6,048,942 Education ...................................... 82,880 — 1,226 — 208,523 1,049,974 Health and human services ........... 2,554,307 325,287 — 80,502 1,496,409 3,483,351 Natural resources and environmental protection............. 769 702 — 6,435,462 400 411,702 Business, consumer services, and housing.................................. 1,453 268,575 222,965 36,654 — 6,555,385 Transportatio n ................................ — — 9,893,873 — — 77,273 Corrections and rehabilitation........ 167,329 — — — — 161,783 Budget stabilization ...................... 20,320,422 — — — — — Total restricted .......................... 23,251,079 958,234 10,118,064 6,562,285 1,705,333 17,788,410 Committed General government....................... 2,275,092 — — 17,921 — 601,712 Education ...................................... 499,163 — — — — 51,271 Health and human services ........... 1,237,288 — 1 — 64,805 334,672 Natural resources and environmental protection............. 5,830 — 3 10,965,537 — 492,108 Business, consumer services, and housing.................................. — — — 97,254 — 269,676 Transportation................................ — — 49,533 — — 3,760 Corrections and rehabilitation........ 7,316 — — — — 816 Total committed 4,024,689 — 49,537 11,080,712 64,805 1,754,015 Assigned General government....................... 1,216,548 — — — — 63,457 Education ...................................... 36,806 — — — — — Health and human services ........... 3,751,038 — — — — — Natural resources and environmental protection............. 1,367,628 — — — — — Business, consumer services, and housing.................................. 91,763 — — — — — Transportation................................ 190,851 — — — — — Corrections and rehabilitation........ 636,021 — — — — — Total assigned 7,290,655 — — — — 63,457 Unassigned....................................... 36,522,416 (55,655,634) — — — — Total fund balances......................... $ 74,047,158 $ (54,697,400) $ 10,167,601 $ 17,642,997 $ 1,770,138 $ 19,645,012 178 Notes to the Financial Statements B. Net Position Deficits Table 54 shows the net position deficit balances. Table 54 Schedule of Net Position Deficits June 30, 2022 (amounts in thousands) Governmental Internal Service Enterprise Funds Funds Funds Federal Fund.............................................................................. $ 54,697,400 $ — $ — Service Revo lving Fund ........................................................... — 756,451 — Technology Services Revolving Fund...................................... — 411,676 — Water Resources Revolving Fund............................................. — 32,259 — Other Internal Service Programs Fund...................................... — 930,346 — State Lottery Fund............................... . ..................................... — — 238,246 Unemployment Programs Fund ............................................... — — 11,731,657 California State University Fund ............................................... — — 15,687,208 Total net position deficits..................................................... $ 54,697,400 $ 2,130,732 $ 27,657,111 C. Discretely Presented Component Unit Endowments and Gifts The University of California, a discretely presented component unit, administers certain restricted nonexpendable, restricted expendable, and unrestricted endowments that are included in the related net position categories of the government-wide and fund financial statements. As of June 30, 2022, the value of restricted endowments and gifts totaled $25.4 billion, and unrestricted endowments and gifts totaled $8.7 billion. The University’s policy is to retain realized and unrealized appreciation on investments with the endowment after an annual income distribution. The net appreciation available to meet future spending needs upon approval by the Board of Regents amounted to $3.4 billion at June 30, 2022. The portion of investment returns earned on endowments and distributed each year to support current operations is based on a rate approved by the Board of Regents. In addition, the California State University Auxiliary Organizations and the University of California Hastings College of the Law, nonmajor component units, have restricted nonexpendable and restricted expendable endowments of $1.8 billion and $18 million, respectively. NOTE 20: NO COMMITMENT DEBT The California Housing Finance Agency (CalHFA), a major component unit, issued conduit debt to provide financial assistance for the acquisition, construction, and development of multifamily rental housing. As of June 30, 2022, the CalHFA had $4.6 billion of conduit debt obligations outstanding, which is not debt of the State. Certain debt of the nonmajor component units is issued to finance activities such as the promotion of renewable energy sources and financing for economic development projects. This debt is secured by the credit of private and public entities and is administered by trustees independent of the State. As of June 30, 2022, these component units had approximately $4.6 billion of debt outstanding, which is not debt of the State. 179 State of California Annual Comprehensive Financial Report NOTE 21: CONTINGENT LIABILITIES A. Litigation The primary government is a party to numerous legal proceedings, many of which are not unusual for governmental operations. To the extent they existed, the following legal proceedings were accrued as a liability in the government-wide financial statements: those decided against the primary government before June 30, 2022; those in progress as of June 30, 2022, and settled or decided against the primary government as of March 8, 2024; and those having a high probability of resulting in a decision against the primary government as of March 8, 2024 and for which amounts could be estimated. In the governmental fund financial statements, the portion of the liability that is expected to be paid within the next 12 months is recorded as a liability in the fund from which payment will be made. In the proprietary fund financial statements, the entire liability is recorded in the fund from which payment will be made. In addition, the primary government is involved in certain other legal proceedings that, if decided against the primary government, may impair its revenue sources or require it to make significant expenditures. Because of the prospective nature of these proceedings, no provision for the potential liability has been made in the financial statements. Following are descriptions of the more significant lawsuits pending against the primary government: A writ petition, Bekkerman et al. v. California Department of Tax and Fee Administration (formerly the California Board of Equalization), was filed against the primary government challenging the validity of a California Department of Tax and Fee Administration (CDTFA) sales tax regulation (California Code of Regulations, Title 18, section 1585) that requires the sales tax charged on a mobile telephone to be based on the full retail price of the phone, rather than any discounted price that is contingent on a service plan contract. Two companion class actions have been filed (Class Action and Class Action II). The primary government filed a demurrer that was sustained on September 5, 2017, which resulted in the dismissal of the state defendants from the Class Action. The plaintiffs appealed that order and subsequently dismissed that appeal voluntarily. In the writ action, plaintiffs amended the writ petition to add class action claims for refunds of sales tax. On September 14, 2018, the court granted the State’s motion to strike the class action claims for refunds from the writ petition. CDTFA filed an answer to the amended petition on September 20, 2018. In the writ action, the court granted the writ on September 4, 2020, and ordered that Rule 1585 may not be applied to bundled sales in which the retailer is also the service carrier. The State appealed on March 17, 2021, and plaintiff’s cross-appealed on April 6, 2021. On September 20, 2021, the Court of Appeal granted a stay of judgement in the writ of action pending appeal. CDTFA’s opening brief was filed May 11, 2022. The plaintiffs’ corrected combination opposition and opening brief was filed on January 4, 2023, and CDTFA’s combination opposition and reply brief was filed June 7, 2023. Plantiffs’ cross reply was filed August 21, 2023. On February 27, 2024, in a published opinion, the Court of Appeal reversed, reinstating Rule 1585, and denied plaintiffs’ cross-appeal. In Class Action II, the same four plaintiffs seek to overturn the State’s denial of their administrative claims demanding refunds to plaintiffs and all similarly situated persons of all purportedly excess sales tax reimbursement paid pursuant to Rule 1585. The claims and demands in Class Action II are based upon the judgment reversed on appeal in the Writ Action. Class Action II, in addition to seeking essentially the same relief as the Class Action, alleges a cause of action against the state officials for violations of plaintiffs’ state and federal constitutional rights as a result of the denials of their administrative claims and demands for refund. As of November 3, 2022, Class Action II was 180 Notes to the Financial Statements stayed pending the outcome of the appeal in the Writ Action. If the sales tax regulation is invalidated, Class Action II could lead to an order requiring CDTFA to refund approximately $1.0 billion in sales tax collections, with estimated future revenue loss of as much as $190 million in the absence of legislation. The primary government is a defendant in a case, Perea, et al. v. Dooley, et al. The petitioners sued the primary government alleging that reimbursements paid to providers under the Medi-Cal program are too low and therefore impair access to care and services for Medi-Cal patients. The petitioners argue that this constitutes discrimination against Latinos, senior citizens, and persons with disabilities. The petitioners do not seek damages but seek prospective declaratory and injunctive relief that would require the State to increase the reimbursement rates paid to providers by the Medi-Cal program. The State filed a demurrer to petitioners’ Third and First Amended Complaints in 2019. A hearing for the First Amended Complaint was held on February 13, 2020. The Third Amended Complaint was overruled on June 21, 2019, and the matter was actively litigated until April 2020, when the parties stipulated to a stay in light of the COVID-19 pandemic. The stay was lifted on April 10, 2021, and the parties resumed prepounding and responding to written discovery. A demurrer for the First Amended Complaint was scheduled for a hearing on November 24, 2020; however, following the court’s tentative favorable ruling to the State prior to the hearing, the petitioner proceeded in pro per, and filed a series of Americans with Disabilities Act accommodation requests that continued until December 2020. A demurrer hearing was scheduled for September 14, 2021. On October 25, 2021, judgment was entered in favor of defendants. The deadline for petitioners to move for class certification was December 10, 2021. Defendants filed their motion for judgment on the pleadings on November 19, 2021. Plaintiffs filed their opposition on December 6, 2021 and the State’s reply brief was filed on December 10, 2021. The hearing on the motion for judgment on the pleadings and the next case management conference was continued to February 2, 2022. On June 29, 2022, the Superior Court issued judgment in favor of defendants. On August 19, 2022, petitioners filed their notice of appeal. The appeal is fully briefed and oral argument is scheduled for April 2, 2024. The estimated impact to prospective rates is not possible to ascertain at this time. The estimated potential loss in the case of Perea, et al. v. Dooley, et al, is more than $1.0 billion annually. The primary government was a defendant in the following cases: Anthem Blue Cross v. David Maxwell- Jolly, et al.; Molina Family Health Plan v. Department of Health Care Services; and Health Net of California v. Department of Health Care Services regarding application of budget reduction factors to managed-care capitated rates. These cases were settled on a contingent basis based on the plans’ profitability. The estimated combined total potential loss is more than $400 million based on three separate settlement agreements that were entered into in 2013 and 2014. The primary government is a defendant in three similar cases: Metropolitan Water District of Southern California, et al. v. Dept. of Fish and Wildlife, et al.; State Water Contractors, et al. v. Dept. of Fish and Wildlife, et al.; San Bernardino Valley Municipal Water Dist. v. Cal. Dept. of Water Resources, et al. The plaintiffs filed lawsuits against the primary government seeking to rescind an incidental take permit under the California Endangered Species Act issued by Department of Fish and Wildlife to the Department of Water Resources concerning its operation of the State Water Project, and to rescind DWR’s environmental review of the same under the California Environmental Quality Act. The plaintiffs also claim that DWR breached its water supply contracts by accepting the permit. One plaintiff asserts that the permit constitutes taking without just compensation. Five other consolidated cases are 181 State of California Annual Comprehensive Financial Report seeking non-contract-based (writ of mandamus) relief. DWR and the Department of Fish and Wildlife have prepared the administrative records relative to their administrative decisions that are being challenged, and are opposing a motion to augment the administrative records. The court bifurcated the writ of mandamus claims from the non-writ of mandamus claims, and ordered the writ of mandamus claims tried first. Discovery is stayed until after completion of the writ of mandamus trial. No trial date has been set for the writ of mandamus trial, and the administrative records are not yet certified. The estimated range of loss is not possible to ascertain at this time. One plaintiff has estimated damages at $100 million, and the other plaintiffs have not estimated their claimed damages. The primary government is a defendant in a case, Amalgamated Transit Union International, et al. v. U.S. Department of Labor, et al. Under federal law, as a condition of receiving certain federal transit grants, transit agencies must demonstrate to the Department of Labor’s (DOL) satisfaction that they provide fair and equitable labor arrangements for transit workers, including arrangements that ensure the “continuation of collective bargaining rights.” After California enacted PEPRA in 2012, DOL issued a certification decision finding that PEPRA interfered with the continuation of transit workers’ bargaining rights. The State successfully challenged this determination as violating the Administrative Procedure Act, and the Eastern District of California permanently enjoined DOL from relying on PEPRA as a basis to deny grants to two transit agencies. In 2019, DOL began certifying grants in conformity with the district court’s orders. A transit union objected to these certifications and filed the pending case, asking the same federal judge to reconsider the earlier ruling and reach the opposite conclusion. The State of California intervened in the case to defend DOL’s certification decision. The parties filed and briefed cross-motions for summary judgment, but after the change in presidential administrations in 2020, DOL sought and obtained a voluntary remand of proceedings so it could reconsider its position. In October 2021, DOL issued a new decision reverting to its prior view that PEPRA precludes certification under section 13(c) of the Urban Mass Transportation Act of 1964. The October 2021 reconsideration again finds, in spite of the court’s prior contrary rulings, that PEPRA interferes with the collective bargaining rights of transit workers. The reconsideration states that DOL will decline to certify any future grant applications from local transit agencies who are subject to PEPRA. Media reports have estimated the anticipated loss to California transit agencies of funds under the American Rescue Plan Act to be around $2.5 billion, along with around $9.5 billion of anticipated funds under the Infrastructure Improvement and Jobs Act. The State filed a cross-complaint against DOL challenging the reconsidered certification decision as arbitrary and capricious in violation of the Administrative Procedure Act. The Attorney General represents the State of California. The State expeditiously asserted cross-claims challenging the reconsidered determination and moved successfully to stay its implementation and obtained summary judgement in the State’s favor. The State moved for leave to file a cross-complaint on November 12, 2021; leave was granted on December 3, 2021, with the cross- complaint deemed filed. The court preliminary enjoined DOL from denying or delaying certification of transit grants on the basis of PEPRA on December 20, 2021. Cross-motions for summary judgment were heard on February 11, 2022. On December 28, 2022, the court granted the State’s cross-motion for summary judgment, finding that (1) DOL exceeded its authority by adopting a categorical rule precluding certification; (2) DOL violated the Administrative Procedure Act by ignoring evidence that PEPRA does not interfere with the collective bargaining rights of transit workers; and (3) DOL’s interpretation and application of the Urban Mass Transportation Act of 1964 lack support in the text and legislative history of the statute, and are arbitrary and capricious. On February 22, 2023, the district court entered final judgment including a permanent injunction preventing DOL from relying on PEPRA as a basis not to certify grants. The plaintiff and DOL appealed and filed opening briefs in August 2023. The case will be argued on April 10, 2024. If upheld by the courts, DOL’s policy could cost California transit agencies several billion dollars in federal grant funds each year. 182 Notes to the Financial Statements The primary government is a defendant in a case, Bear Mountain Development Company, LLC v. State of California, for breach of contract regarding cancellation of a contract for delivery of Personal Protective Equipment (PPE). The State filed a demurrer on August 13, 2021. The court heard the demurrer on December 15, 2021 and the demurrer was granted with leave to amend. On July 27, 2022, the court heard the State’s second demurrer to the Second Amended Complaint, and the demurrer was overruled. The court ordered the plaintiff to file a third amended complaint by August 8, 2022. The State filed an answer to the Third Amended Complaint and filed a cross complaint alleging fraud and misrepresentation. Plaintiff demurred to the State’s cross complaint. On March 9, 2023, the court overruled the demurrer to the fraud cause of action. The court sustained the demurrer to the negligent misrepresentation cause of action with leave to amend. The court granted the State’s motion for summary judgement on March 1, 2024, dismissing Bear Mountain’s breach of contract action. Plaintiff is seeking damages of $799 million for the State’s cancellation of a contract for delivery of PPE. The primary government is a defendant in a case, California Rental Housing Association v. Gavin Newsom. The plaintiffs are an association representing over 19,000 landlords that own more than 536,000 units throughout the state, challenging the State’s temporary eviction moratorium during the COVID-19 pandemic. The plaintiffs allege that the moratorium violated the Due Process Clause, the Contract Clause, and the Takings Clause of the United States Constitution. The trial court dismissed the case as moot, and the plaintiffs appealed. On January 25, 2024, the Court of Appeals affirmed the trial court’s decision to dismiss, holding that a challenge to the State’s temporary COVID-19 eviction moratorium was moot because the moratorium had expired. Plaintiff’s deadline to seek review from the Supreme Court is April 24, 2024. The estimated range of loss is not possible to ascertain at this time. The primary government is a defendant in a case, Harkey-Kirk, et al. v. California Department of Public Health, for alleged disclosure of private medical information after plaintiffs sought and received prenatal testing for the detection of birth defects facilitated by the California Department of Public Health’s Prenatal Screening Program (PNS Program). Following the testing, the PNS Program mailed correspondence to the plaintiffs’ mailing addresses they voluntarily provided to the PNS Program for the purpose of receiving communications regarding their testing. In the correspondence, the program used its statutorily given name in its return address: Prenatal Screening Program. Plaintiffs allege anyone viewing the correspondence would be apprised of their pregnancy, and therefore seek damages for alleged violations under the Confidentiality of Medical Information Act (CMIA). Following the granting of the primary government’s motion for judgement, the plaintiff filed an amended complaint deleting dismissed causes of action. The State’s demurrer to the First Amended Complaint was overruled as to plaintiff’s CMIA and constitutional causes of action. The State filed an answer on March 1, 2021. On December 9, 2021, the class was certified to include: “All persons enrolled as patients in Defendant’s prenatal screening program who were sent U.S. Mail by Defendant California Department of Public Health with an address driver containing the phrase ‘Prenatal Screening Program’, in an envelope with a plastic window, at any time from four years prior to the filing of this action.” The State filed a motion for summary judgment on the remaining two causes of action. On July 19, 2022, the Superior Court granted the State’s motion for summary judgment as to the constitutional cause of action, but denied summary judgment as to the CMIA cause of action. The State filed another motion for summary judgment regarding the CMIA claim, which was denied. On September 25, 2023, the State filed a motion to narrow the time period of the class to have the class period begin on January 16, 2019, or, in the alternative, September 29, 2018. Also on September 25, 2023, the State filed a motion for judgement on the pleadings arguing that the State is exempt from the CMIA. On November 17, 2023, the Court entered orders denying the State’s motion for judgment on the pleadings, but granted the State's motion to modify the class period to have the class period begin on September 29, 2018. The State filed a 183 State of California Annual Comprehensive Financial Report motion to decertify the class on February 23, 2024, which will be heard on April 26, 2024. The parties also plan to conduct a mediation on March 27, 2024. A trial is set for June 26, 2024. The CMIA allows for nominal damages of $1,000 per violation. However, the size of the class has not yet been determined. Assuming the class goes forward as currently defined, damages under the CMIA could total well over $1.0 billion. Further, in their prayer for relief, plaintiffs seek not only the nominal damages available under the CMIA, but also general, special, and consequential damages and attorneys’ fees. In light of plaintiffs’ broad, nonspecific requests for relief and the unknown class size, an estimated range of loss is not possible to ascertain at this time. B. Federal Audit Exceptions The primary government receives substantial funding from the federal government in the form of grants and other federal assistance. The primary government, the University of California, California Housing Finance Agency (CalHFA), and certain nonmajor discretely presented component units are entitled to these resources only if they comply with the terms and conditions of the grants and contracts and with the applicable federal laws and regulations; they may spend these resources only for eligible purposes. If audits disclose exceptions, the primary government, the University, CalHFA, and certain nonmajor discretely presented component units may incur a liability to the federal government. NOTE 22: SUBSEQUENT EVENTS The following information describes significant events that occurred subsequent to June 30, 2022, but prior to the date of the auditor’s report. A. Debt Issuances In August 2022 and February and August 2023, and January 2024 the University of California, a major component unit, through its conduit, issued a total of $5.4 billion in revenue bonds to finance or refinance certain capital projects of the University and its medical centers, pay refunded bonds and bonds scheduled to mature in 2024, purchase obligations of the United States and certain federal agencies, and pay related issuance costs. In September, October, and November 2022, and March, April, September, October, and November 2023, the primary government issued a total of $12.8 billion in general obligation bonds to fund various capital projects related to K-12 schools and higher education facilities, transportation improvements and high-speed rail, water quality and environmental protection, and other public purposes, to pay certain commercial paper notes as they mature, to pay related issuance costs, and to refund outstanding bonds to effect a favorable reorganization of the state’s debt structure. In September 2022, the Department of Water Resources issued $248 million in revenue bonds to fund construction of water system projects, refund certain outstanding water system revenue bonds, repay some of the outstanding commercial paper, fund interest on a portion of outstanding bonds, fund a deposit to the debt service reserve account and pay related issuance costs. In October 2022, the primary government issued a total of $256 million in Veterans general obligation and revenue bonds to finance the acquisition of residential property for California military veterans, reimburse the department for contracts funded by the 1943 fund, and refund outstanding home purchase revenue bonds to reduce the department’s cost of borrowing. 184 Notes to the Financial Statements In October 2022, the California Earthquake Authority issued $500 million in revenue bonds to enhance its claim-paying capacity. In December 2022, January 2023, and February 2024, the California Infrastructure and Economic Development Bank, a component unit, issued a total of $938 million in revenue bonds to finance or refinance loans for infrastructure projects pursuant to the Infrastructure State Revolving Fund Program, complete the construction, furnishing and equipping of an expansion to the existing headquarters of the California State Teachers’ Retirement System, financing Clean Water State Revolving Fund project obligations, and pay related costs of issuance. In December 2022, the Golden State Tobacco Securitization Corporation, a blended component unit, issued a total of $218 million of its aggregate principal amount of Enhanced Tobacco Settlement Asset- Backed Bonds to refund a portion of its outstanding asset-backed bonds and pay related issuance costs. In April, September and October 2023, the State Public Works Board issued a total of $1.5 billion in lease revenue bonds to finance and refinance the design and/or construction of various projects, refund and defease previously issued lease revenue bonds, reimburse interim loans from the General Fund and the Pooled Money Investment Account, fund capitalized interest on bonds, and pay related issuance costs. In July 2023, the California State University (CSU) issued $899 million in revenue bonds to finance and refinance projects to acquire, construct, improve, and renovate certain CSU facilities, to refund certain outstanding system-wide revenue bonds, and to pay related issuance costs. B. Other In recent years California has faced historically lengthy and severe wildfire seasons, with millions of acres burned annually. The 2022 fire season was less catastrophic by comparison, with just under 7,500 fires and 364,000 acres burned. The 2023-24 Budget Act maintains $2.7 billion in investments over four years for the restoration of forest and wildland health, in an effort to reduce the risk of wildfires. Following three years of extreme drought conditions, California experienced a series of atmospheric river storms during December 2022 continuing into January 2023 that brought record flooding to several locations. The 2023-24 Budget Act maintains a total of $8.1 billion of investments committed in the 2021 and 2022 Budget Acts over multiple years to improve the state’s capacity to endure droughts and floods. In response to the state of emergency caused by the aforementioned 2023 storms, the federal government extended the 2022 tax filing deadline for Californians residing in impacted areas from April 15, 2023, to November 16, 2023. The California Franchise Tax Board followed suit by extending the State’s tax filing deadlines to the same dates. The extension will impact revenues available to the state during the 2022-23 and 2023-24 fiscal years. In the November 8, 2022, general election, voters passed Proposition 28 authorizing additional funding for arts and music education in all K-12 public schools (including charter schools), with a greater 185 State of California Annual Comprehensive Financial Report proportion going to schools with more economically disadvantage students. This will result in increased state education costs of about $1.0 billion annually. The United States federal government has provided California with over $43.0 billion in combined recovery funds through the American Rescue Plan Act of 2021, to cover costs incurred by the state between March 3, 2021, and December 31, 2024, to mitigate the impacts of the COVID-19 pandemic. Of the $43.0 billion, $27.0 billion has been allocated to the Coronavirus State Fiscal Recovery Fund (SFRF) to help California build back a stronger, more equitable economy and address the disproportionate negative economic impacts of the pandemic to low-wage earners. Funds from the SFRF have been used to address public health impacts, address negative economic impacts, invest in broadband infrastructure projects, and replace lost state revenue. To meet the surge in demand for unemployment insurance benefits during the COVID-19 pandemic, California borrowed larger than normal amounts from the U.S. Department of Labor. As of June 30, 2022, the State had $17.9 billion in such loans, which were used to cover the deficits in the Unemployment Programs Fund and continue to provide benefit payments to displaced California workers. Loans outstanding from the U.S. Department of Labor increased by $1.5 billion after the fiscal year to a balance of approximately $19.4 billion as of December 8, 2023. In August 2023, the State’s contracted actuary published the State of California Retiree Health Benefits Program GASB Nos. 74 and 75 Actuarial Valuation Report as of June 30, 2022, which will be used to measure the State’s net Other Post-Employment Benefits (OPEB) liability as of June 30, 2023. Based on the Actuarial Valuation Report, the State will report a net OPEB liability as of June 30, 2023, of $82.4 billion, a decrease of $13.1 billion from the net OPEB liability reported as of June 30, 2022. The report is available on the State Controller’s Office website, at www.sco.ca.gov. On December 27, 2022, the Superior Court of California granted the approval of the final distribution and dissolution of the State Assistance Fund for Enterprise, Business and Industrial Development Corporation (SAFE-BIDCO), which was previously reported as a nonmajor discretely presented component unit. In December 2023, the U.S. Department of Labor (DOL) released Unemployment Insurance Program Letter 05-24 raising the possibility for states to apply their finality laws to Coronavirus Aid, Relief, and Economic Security (CARES) Act Unemployment Compensation (UC) claims. Due to this guidance, the Employment Development Department issued a letter to DOL in February 2024 requesting that three groups of CARES Act UC claims be considered resolved and no further work would be performed related to these claims. EDD is waiting on final federal approval of EDD’s request as indicated in the February 2024 letter before the event can be recognized in the financial statements as a forgiveness of debt. Once federal approval is received approximately $29.0 billion of potential federal liabilities will be removed from future financial statements in addition to a portion of the remaining $26.0 billion in federal liabilities which would also be subject to state finality laws. These amounts were reported in other liabilities in the Federal Fund at June 30, 2022. 186 Required Supplementary Information State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios For the Past Eight Fiscal Years1 (amounts in thousands) 20143 20153 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE MISCELLANEOUS2 Total pension liability Service cost................................................................................................... $ 1,477,762 $ 1,576,695 Interest on total pension liability.................................................................. 6,670,928 6,970,837 Differences between expected and actual experience................................... — 693,639 Changes of assumptions............................................................................... — — Benefit payments, including refunds of employee contributions................. (4,844,631) (5,098,222) Net change in total pension liability......................................................... 3,304,059 4,142,949 Total pension liability – beginning................................................................ 88,885,115 92,189,174 Total pension liability – ending (a)............................................................... $ 92,189,174 $ 96,332,123 Plan fiduciary net position Contributions – employer............................................................................. $ 2,156,312 $ 2,608,785 Contributions – employee............................................................................. 766,896 771,046 Net investment income................................................................................. 10,370,838 1,505,042 Benefit payments, including refunds of employee contributions................. (4,844,631) (5,098,222) Net plan to plan resource movement............................................................ — (354) Administrative expense................................................................................ (86,473) (76,678) Other miscellaneous income/(expense) — — Net change in plan fiduciary net position................................................. 8,362,942 (290,381) Plan fiduciary net position – beginning........................................................ 60,017,620 68,380,562 Plan fiduciary net position – ending (b)....................................................... $ 68,380,562 $ 68,090,181 State’s net pension liability – ending (a) – (b).............................................. $ 23,808,612 $ 28,241,942 Plan fiduciary net position as a percentage of the total pension liability...................................................................................... 74.17 % 70.68 % Covered payroll................................................................................................ $ 10,019,739 $ 10,640,884 State’s net pension liability as a percentage of covered payroll....................... 237.62 % 265.41 % 1 This schedule will be built prospectively until it contains ten years of data. 2 This schedule includes amounts attributable to related organizations, fiduciary component units, and discretely presented component units, which are not part of the primary government. 3 The date in the column heading represents the end of the measurement period of the net pension liability, which is one year prior to the reporting period. 188 Required Supplementary Information 20163 20173 20183 20193 20203 20213 $ 1,668,682 $ 1,927,531 $ 1,953,761 $ 2,042,862 $ 2,125,738 $ 2,212,280 7,220,961 7,381,049 7,571,997 7,970,572 8,288,391 8,603,225 (101,381) (387,041) 445,743 2,032,459 742,481 628,341 — 5,667,561 (1,377,556) — — — (5,346,864) (5,572,707) (5,865,849) (6,190,738) (6,513,916) (6,851,024) 3,441,398 9,016,393 2,728,096 5,855,155 4,642,694 4,592,822 96,332,123 99,773,521 108,789,914 111,518,010 117,373,165 122,015,859 $ 99,773,521 $ 108,789,914 $ 111,518,010 $ 117,373,165 $ 122,015,859 $ 126,608,681 $ 2,818,406 $ 3,094,941 $ 7,044,360 $ 3,777,484 $ 5,008,537 $ 3,778,435 801,023 843,772 870,402 942,980 1,005,830 928,152 339,588 7,329,859 6,127,761 5,163,147 4,138,143 19,299,096 (5,346,864) (5,572,707) (5,865,849) (6,190,738) (6,513,916) (6,851,024) (1,154) (2,737) (1,340) (1,344) (4,213) (2,558) (41,497) (98,419) (112,592) (57,163) (118,050) (87,165) — — (213,815) 185 — — (1,430,498) 5,594,709 7,848,927 3,634,551 3,516,331 17,064,936 68,090,181 66,659,683 72,254,392 80,103,319 83,737,870 87,254,201 $ 66,659,683 $ 72,254,392 $ 80,103,319 $ 83,737,870 $ 87,254,201 $ 104,319,137 $ 33,113,838 $ 36,535,522 $ 31,414,691 $ 33,635,295 $ 34,761,658 $ 22,289,544 66.81 % 66.42 % 71.83 % 71.34 % 71.51 % 82.39 % $ 11,189,932 $ 11,591,576 $ 12,254,527 $ 12,913,195 $ 13,579,610 $ 12,909,399 295.93 % 315.19 % 256.35 % 260.47 % 255.98 % 172.66 % (continued) 189 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Eight Fiscal Years1 (amounts in thousands) 20143 20153 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE INDUSTRIAL2 Total pension liability Service cost.................................................................................................. $ 92,324 $ 100,006 Interest on total pension liability.................................................................. 241,278 257,527 Differences between expected and actual experience.................................. — 26,976 Changes of assumptions............................................................................... — — Benefit payments, including refunds of employee contributions................ (146,977) (157,029) Net change in total pension liability......................................................... 186,625 227,480 Total pension liability – beginning............................................................... 3,181,282 3,367,907 Total pension liability – ending (a)............................................................... $ 3,367,907 $ 3,595,387 Plan fiduciary net position Contributions – employer............................................................................ $ 88,516 $ 107,238 Contributions – employee............................................................................ 44,459 49,482 Net investment income................................................................................ 423,076 62,385 Benefit payments, including refunds of employee contributions................ (146,977) (157,029) Net plan to plan resource movement........................................................... — 30 Administrative expense................................................................................ (3,583) (3,252) Other miscellaneous income/(expense)....................................................... — — Net change in plan fiduciary net position................................................. 405,491 58,854 Plan fiduciary net position – beginning....................................................... 2,420,958 2,826,449 Plan fiduciary net position – ending (b)....................................................... $ 2,826,449 $ 2,885,303 State’s net pension liability – ending (a) – (b)............................................. $ 541,458 $ 710,084 Plan fiduciary net position as a percentage of the total pension liability..................................................................................... 83.92 % 80.25 % Covered payroll............................................................................................... $ 532,490 $ 577,711 State’s net pension liability as a percentage of covered payroll...................... 101.68 % 122.91 % 190 Required Supplementary Information 20163 20173 20183 20193 20203 20213 $ 107,868 $ 124,792 $ 119,521 $ 127,006 $ 131,508 $ 136,918 273,308 290,058 301,134 324,909 343,896 363,230 7,009 21,516 (19,063) 106,233 24,610 21,852 — 245,450 (54,062) — — — (167,359) (177,654) (190,683) (205,544) (220,912) (238,188) 220,826 504,162 156,847 352,604 279,102 283,812 3,595,387 3,816,213 4,320,375 4,477,222 4,829,826 5,108,928 $ 3,816,213 $ 4,320,375 $ 4,477,222 $ 4,829,826 $ 5,108,928 $ 5,392,740 $ 116,730 $ 123,163 $ 241,062 $ 148,494 $ 244,773 $ 128,161 52,775 54,114 58,404 61,338 65,268 58,867 14,444 322,150 272,379 233,027 191,982 911,996 (167,359) (177,654) (190,683) (205,544) (220,912) (238,188) 216 (141) 268 (754) (1,037) (663) (1,758) (4,282) (5,014) (2,558) (5,383) (4,090) — — (9,522) 8 — — 15,048 317,350 366,894 234,011 274,691 856,083 2,885,303 2,900,351 3,217,701 3,584,595 3,818,606 4,093,297 $ 2,900,351 $ 3,217,701 $ 3,584,595 $ 3,818,606 $ 4,093,297 $ 4,949,380 $ 915,862 $ 1,102,674 $ 892,627 $ 1,011,220 $ 1,015,631 $ 443,360 76.00 % 74.48 % 80.06 % 79.06 % 80.12 % 91.78 % $ 625,220 $ 643,295 $ 695,014 $ 728,609 $ 765,840 $ 706,128 146.49 % 171.41 % 128.43 % 138.79 % 132.62 % 62.79 % (continued) 191 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Eight Fiscal Years1 (amounts in thousands) 20143 20153 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE SAFETY2 Total pension liability Service cost.................................................................................................. $ 402,902 $ 422,634 Interest on total pension liability.................................................................. 663,219 734,333 Differences between expected and actual experience.................................. — (4,150) Changes of assumptions............................................................................... — — Benefit payments, including refunds of employee contributions................ (429,353) (469,275) Net change in total pension liability......................................................... 636,768 683,542 Total pension liability – beginning............................................................... 8,682,750 9,626,597 Total pension liability – ending (a)............................................................... $ 9,319,518 $ 10,310,139 Plan fiduciary net position Contributions – employer............................................................................ $ 339,232 $ 393,925 Contributions – employee............................................................................ 196,148 215,482 Net investment income................................................................................ 1,162,050 175,677 Benefit payments, including refunds of employee contributions................ (429,353) (469,275) Net plan to plan resource movement........................................................... — 499 Administrative expense................................................................................ (9,945) (9,200) Other miscellaneous income/(expense)....................................................... — — Net change in plan fiduciary net position................................................. 1,258,132 307,108 Plan fiduciary net position – beginning....................................................... 6,583,260 7,841,392 Plan fiduciary net position – ending (b)....................................................... $ 7,841,392 $ 8,148,500 State’s net pension liability – ending (a) – (b)............................................. $ 1,478,126 $ 2,161,639 Plan fiduciary net position as a percentage of the total pension liability..................................................................................... 84.14 % 79.03 % Covered payroll............................................................................................... $ 1,901,235 $ 2,003,777 State’s net pension liability as a percentage of covered payroll...................... 77.75 % 107.88 % 192 Required Supplementary Information 20163 20173 20183 20193 20203 20213 $ 438,147 $ 497,129 $ 504,383 $ 536,173 $ 553,316 $ 564,198 786,096 827,412 877,944 951,075 1,012,593 1,072,105 (2,235) (109,901) (21,592) 227,078 16,473 (33,477) — 673,183 (41,225) — — — (502,427) (538,735) (578,504) (626,451) (677,362) (733,697) 719,581 1,349,088 741,006 1,087,875 905,020 869,129 10,310,139 11,029,720 12,378,808 13,119,814 14,207,689 15,112,709 $ 11,029,720 $ 12,378,808 $ 13,119,814 $ 14,207,689 $ 15,112,709 $ 15,981,838 $ 401,108 $ 433,232 $ 774,759 $ 523,076 $ 747,441 $ 429,347 221,615 231,364 245,021 257,071 267,822 223,408 42,258 926,106 797,214 691,911 575,732 2,758,504 (502,427) (538,735) (578,504) (626,451) (677,362) (733,697) 548 295 532 1,482 3,907 1,513 (4,966) (12,264) (14,565) (7,524) (16,047) (12,272) — — (27,658) 24 — — 158,136 1,039,998 1,196,799 839,589 901,493 2,666,803 8,148,500 8,306,636 9,346,634 10,543,433 11,383,022 12,284,515 $ 8,306,636 $ 9,346,634 $ 10,543,433 $ 11,383,022 $ 12,284,515 $ 14,951,318 $ 2,723,084 $ 3,032,174 $ 2,576,381 $ 2,824,667 $ 2,828,194 $ 1,030,520 75.31 % 75.51 % 80.36 % 80.12 % 81.29 % 93.55 % $ 2,100,295 $ 2,167,429 $ 2,339,642 $ 2,468,018 $ 2,566,403 $ 2,367,960 129.65 % 139.90 % 110.12 % 114.45 % 110.20 % 43.52 % (continued) 193 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Eight Fiscal Years1 (amounts in thousands) 20143 20153 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE PEACE OFFICERS AND FIREFIGHTERS2 Total pension liability Service cost.................................................................................................. $ 816,836 $ 838,628 Interest on total pension liability.................................................................. 2,622,406 2,759,982 Differences between expected and actual experience.................................. — 288,526 Changes of assumptions............................................................................... — — Benefit payments, including refunds of employee contributions................ (1,568,738) (1,697,676) Net change in total pension liability......................................................... 1,870,504 2,189,460 Total pension liability – beginning............................................................... 34,655,771 36,219,196 Total pension liability – ending (a).............................................................. $ 36,526,275 $ 38,408,656 Plan fiduciary net position Contributions – employer............................................................................ $ 959,741 $ 1,146,192 Contributions – employee............................................................................ 331,956 366,419 Net investment income................................................................................ 3,964,754 584,142 Benefit payments, including refunds of employee contributions................ (1,568,738) (1,697,676) Net plan to plan resource movement........................................................... — 194 Administrative expense................................................................................ (33,334) (30,069) Other miscellaneous income/(expense)....................................................... — — Net change in plan fiduciary net position................................................. 3,654,379 369,202 Plan fiduciary net position – beginning....................................................... 22,713,610 26,367,989 Plan fiduciary net position – ending (b)...................................................... $ 26,367,989 $ 26,737,191 State’s net pension liability – ending (a) – (b)............................................. $ 10,158,286 $ 11,671,465 Plan fiduciary net position as a percentage of the total pension liability..................................................................................... 72.19 % 69.61 % Covered payroll............................................................................................... $ 3,030,525 $ 3,115,287 State’s net pension liability as a percentage of covered payroll..................... 335.20 % 374.65 % 194 Required Supplementary Information 20163 20173 20183 20193 20203 20213 $ 861,694 $ 980,897 $ 1,011,482 $ 1,044,955 $ 1,062,486 $ 1,111,888 2,902,900 3,018,186 3,185,628 3,381,608 3,547,687 3,745,062 18,316 (286,527) 354,089 664,430 172,204 585,665 — 2,608,752 (25,104) — — — (1,822,841) (1,938,027) (2,065,007) (2,209,557) (2,359,940) (2,560,165) 1,960,069 4,383,281 2,461,088 2,881,436 2,422,437 2,882,450 38,408,656 40,368,725 44,752,006 47,213,094 50,094,530 52,516,967 $ 40,368,725 $ 44,752,006 $ 47,213,094 $ 50,094,530 $ 52,516,967 $ 55,399,417 $ 1,265,145 $ 1,427,240 $ 3,068,270 $ 1,665,872 $ 3,220,740 $ 1,310,946 381,185 399,946 421,662 437,937 462,370 423,995 137,927 2,954,170 2,522,044 2,175,528 1,812,785 8,602,827 (1,822,841) (1,938,027) (2,065,007) (2,209,557) (2,359,941) (2,560,165) 114 1,628 (104) 350 735 (66) (16,295) (39,395) (45,950) (23,765) (49,832) (38,396) — — (87,261) 77 — — (54,765) 2,805,562 3,813,654 2,046,442 3,086,857 7,739,141 26,737,191 26,682,426 29,487,988 33,301,642 35,348,084 38,434,941 $ 26,682,426 $ 29,487,988 $ 33,301,642 $ 35,348,084 $ 38,434,941 $ 46,174,082 $ 13,686,299 $ 15,264,018 $ 13,911,452 $ 14,746,446 $ 14,082,026 $ 9,225,335 66.10 % 65.89 % 70.53 % 70.56 % 73.19 % 83.35 % $ 3,241,895 $ 3,416,627 $ 3,557,011 $ 3,676,854 $ 3,904,615 $ 3,629,097 422.17 % 446.76 % 391.10 % 401.06 % 360.65 % 254.20 % (continued) 195 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Eight Fiscal Years1 (amounts in thousands) 20143 20153 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS CALIFORNIA HIGHWAY PATROL Total pension liability Service cost.................................................................................................. $ 191,730 $ 198,665 Interest on total pension liability.................................................................. 724,474 764,348 Differences between expected and actual experience.................................. — 75,593 Changes of assumptions............................................................................... — — Benefit payments, including refunds of employee contributions................ (460,991) (487,061) Net change in total pension liability......................................................... 455,213 551,545 Total pension liability – beginning............................................................... 9,604,872 10,060,085 Total pension liability – ending (a)............................................................... $ 10,060,085 $ 10,611,630 Plan fiduciary net position Contributions – employer............................................................................ $ 277,702 $ 351,197 Contributions – employee............................................................................ 83,161 85,791 Net investment income................................................................................ 1,005,007 146,782 Benefit payments, including refunds of employee contributions................ (460,991) (487,061) Net plan to plan resource movement........................................................... — (214) Administrative expense................................................................................ (8,417) (7,600) Other miscellaneous income/(expense)....................................................... — — Net change in plan fiduciary net position................................................. 896,462 88,895 Plan fiduciary net position – beginning....................................................... 5,759,985 6,656,447 Plan fiduciary net position – ending (b)....................................................... $ 6,656,447 $ 6,745,342 State’s net pension liability – ending (a) – (b)............................................. $ 3,403,638 $ 3,866,288 Plan fiduciary net position as a percentage of the total pension liability..................................................................................... 66.17 % 63.57 % Covered payroll............................................................................................... $ 765,283 $ 809,610 State’s net pension liability as a percentage of covered payroll...................... 444.76 % 477.55 % 196 Required Supplementary Information 20163 20173 20183 20193 20203 20213 $ 210,619 $ 237,064 $ 248,531 $ 257,384 $ 266,192 $ 268,009 809,691 833,062 878,113 926,056 974,410 1,022,074 125,614 (158,392) 103,283 135,148 120,496 98,575 — 721,972 12,213 — — — (516,723) (543,456) (579,080) (612,298) (651,832) (695,055) 629,201 1,090,250 663,060 706,290 709,266 693,603 10,611,630 11,240,831 12,331,081 12,994,141 13,700,431 14,409,697 $ 11,240,831 $ 12,331,081 $ 12,994,141 $ 13,700,431 $ 14,409,697 $ 15,103,300 $ 375,928 $ 426,603 $ 978,060 $ 507,055 $ 559,585 $ 802,064 86,111 91,116 95,482 100,080 103,159 95,784 33,918 747,272 639,591 556,379 450,669 2,200,671 (516,723) (543,456) (579,080) (612,298) (651,832) (695,055) 292 1,050 330 265 638 1,773 (4,111) (9,923) (11,583) (6,090) (12,800) (9,519) — — (21,997) 20 — — (24,585) 712,662 1,100,803 545,411 449,419 2,395,718 6,745,342 6,720,757 7,433,419 8,534,222 9,079,633 9,529,052 $ 6,720,757 $ 7,433,419 $ 8,534,222 $ 9,079,633 $ 9,529,052 $ 11,924,770 $ 4,520,074 $ 4,897,662 $ 4,459,919 $ 4,620,798 $ 4,880,645 $ 3,178,530 59.79 % 60.28 % 65.68 % 66.27 % 66.13 % 78.95 % $ 808,032 $ 851,427 $ 884,197 $ 933,689 $ 948,000 $ 882,119 559.39 % 575.23 % 504.40 % 494.90 % 514.84 % 360.33 % (continued) 197 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Eight Fiscal Years1 (amounts in thousands) 20143 20153 SINGLE-EMPLOYER PLANS JUDGES’ Total pension liability Service cost.................................................................................................. $ 27,581 $ 27,841 Interest on total pension liability.................................................................. 140,256 133,181 Differences between expected and actual experience.................................. — 57,568 Changes of assumptions............................................................................... — 158,646 Benefit payments, including refunds of employee contributions................ (193,935) (201,868) Net change in total pension liability......................................................... (26,098) 175,368 Total pension liability – beginning............................................................... 3,383,310 3,357,212 Total pension liability – ending (a)............................................................... $ 3,357,212 $ 3,532,580 Plan fiduciary net position Contributions – employer............................................................................ $ 191,148 $ 180,910 Contributions – employee............................................................................ 7,248 3,877 Net investment income................................................................................ 59 88 Benefit payments, including refunds of employee contributions................ (193,935) (201,867) Administrative expense................................................................................ (1,141) (1,227) Other miscellaneous income/(expense)....................................................... — 2,198 Net change in plan fiduciary net position................................................. 3,379 (16,021) Plan fiduciary net position – beginning....................................................... 53,820 57,199 Plan fiduciary net position – ending (b)....................................................... $ 57,199 $ 41,178 State’s net pension liability – ending (a) – (b)............................................. $ 3,300,013 $ 3,491,402 Plan fiduciary net position as a percentage of the total pension liability..................................................................................... 1.70 % 1.17 % Covered payroll............................................................................................... $ 163,574 $ 28,770 State’s net pension liability as a percentage of covered payroll...................... 2017.44 % 12135.56 % 198 Required Supplementary Information 20163 20173 20183 20193 20203 20213 $ 29,314 $ 22,733 $ 19,131 $ 20,073 $ 17,026 $ 17,861 107,514 115,067 109,395 99,427 79,720 64,481 (59,421) (366,200) (121,259) 86,873 (41,794) 40,006 384,306 (107,670) (20,879) 153,651 218,684 179,421 (199,349) (200,440) (207,823) (221,954) (213,234) (210,951) 262,364 (536,510) (221,435) 138,070 60,402 90,818 3,532,580 3,794,944 3,258,434 3,036,999 3,175,069 3,235,471 $ 3,794,944 $ 3,258,434 $ 3,036,999 $ 3,175,069 $ 3,235,471 $ 3,326,289 $ 192,287 $ 204,475 $ 199,241 $ 195,903 $ 243,132 $ 225,824 3,559 3,398 3,061 2,679 2,843 2,146 193 424 846 1,166 885 163 (199,349) (200,440) (207,823) (221,954) (213,234) (210,951) (642) (1,771) (2,106) (10,032) (2,270) (1,731) 2,568 2,395 (1,863) 2,776 2,202 2,462 (1,384) 8,481 (8,644) (29,462) 33,558 17,913 41,178 39,794 48,275 39,631 10,169 43,727 $ 39,794 $ 48,275 $ 39,631 $ 10,169 $ 43,727 $ 61,640 $ 3,755,150 $ 3,210,159 $ 2,997,368 $ 3,164,900 $ 3,191,744 $ 3,264,649 1.05 % 1.48 % 1.30 % 0.32 % 1.35 % 1.85 % $ 23,537 $ 26,102 $ 24,007 $ 22,117 $ 16,017 $ 13,444 15954.24 % 12298.52 % 12485.39 % 14309.81 % 19927.23 % 24283.32 % (continued) 199 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Eight Fiscal Years1 (amounts in thousands) 20143 20153 SINGLE-EMPLOYER PLANS JUDGES’ II Total pension liability Service cost.................................................................................................. $ 78,670 $ 79,641 Interest on total pension liability.................................................................. 61,044 69,128 Differences between expected and actual experience.................................. — (17,319) Changes of assumptions............................................................................... — (16,619) Benefit payments, including refunds of employee contributions................ (8,950) (14,041) Net change in total pension liability......................................................... 130,764 100,790 Total pension liability – beginning............................................................... 837,198 967,962 Total pension liability – ending (a)............................................................... $ 967,962 $ 1,068,752 Plan fiduciary net position Contributions – employer............................................................................ $ 57,027 $ 65,629 Contributions – employee............................................................................ 20,413 22,242 Net investment income................................................................................ 150,168 (2,402) Benefit payments, including refunds of employee contributions................ (8,950) (14,041) Administrative expense................................................................................ (785) (1,127) Other miscellaneous income/(expense)....................................................... — — Net change in plan fiduciary net position................................................. 217,873 70,301 Plan fiduciary net position – beginning....................................................... 795,967 1,013,840 Plan fiduciary net position – ending (b)....................................................... $ 1,013,840 $ 1,084,141 State’s net pension liability/(asset) – ending (a) – (b)................................. $ (45,878) $ (15,389) Plan fiduciary net position as a percentage of the total pension liability..................................................................................... 104.74 % 101.44 % Covered payroll............................................................................................... $ 40,476 $ 180,230 State’s net pension liability as a percentage of covered payroll...................... -113.35 % -8.54 % 200 Required Supplementary Information 20163 20173 20183 20193 20203 20213 $ 86,635 $ 97,679 $ 95,843 $ 103,791 $ 114,486 $ 116,782 78,412 85,654 91,418 103,889 115,517 126,949 (4,546) (26,382) (26,875) 30,292 (2,797) (10,976) — 69,233 (41,763) — — — (21,704) (22,406) (31,795) (36,204) (34,547) (61,994) 138,797 203,778 86,828 201,768 192,659 170,761 1,068,752 1,207,549 1,411,327 1,498,154 1,699,922 1,892,581 $ 1,207,549 $ 1,411,327 $ 1,498,155 $ 1,699,922 $ 1,892,581 $ 2,063,342 $ 65,839 $ 67,102 $ 79,699 $ 84,099 $ 91,147 $ 84,147 24,598 25,076 27,514 31,375 35,796 34,094 20,810 115,057 101,820 106,781 80,074 463,478 (21,704) (22,406) (31,795) (36,204) (34,547) (61,994) (732) (1,682) (2,370) (1,477) (2,552) (1,703) — — (5,451) — — — 88,811 183,147 169,417 184,574 169,918 518,022 1,084,141 1,172,952 1,356,099 1,525,515 1,710,089 1,880,007 $ 1,172,952 $ 1,356,099 $ 1,525,516 $ 1,710,089 $ 1,880,007 $ 2,398,029 $ 34,597 $ 55,228 $ (27,361) $ (10,167) $ 12,574 $ (334,687) 97.13 % 96.09 % 101.83 % 100.60 % 99.34 % 116.22 % $ 192,739 $ 192,786 $ 202,433 $ 220,742 $ 246,968 $ 233,316 17.95 % 28.65 % -13.52 % -4.61 % 5.09 % -143.45 % (continued) 201 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Eight Fiscal Years1 (amounts in thousands) 20143 20153 SINGLE-EMPLOYER PLANS LEGISLATORS’ Total pension liability Service cost..................................................................................................................... $ 732 $ 769 Interest on total pension liability..................................................................................... 6,465 6,268 Differences between expected and actual experience..................................................... — (4,246) Changes of assumptions.................................................................................................. — (2,654) Benefit payments, including refunds of employee contributions.................................... (7,482) (9,087) Net change in total pension liability............................................................................ (285) (8,950) Total pension liability – beginning.................................................................................. 115,806 115,521 Total pension liability – ending (a).................................................................................. $ 115,521 $ 106,571 Plan fiduciary net position Contributions – employer................................................................................................ $ 565 $ 590 Contributions – employee............................................................................................... 113 105 Net investment income.................................................................................................... 15,372 (94) Benefit payments, including refunds of employee contributions.................................... (7,482) (9,087) Administrative expense................................................................................................... (362) (399) Other miscellaneous income/(expense)........................................................................... — — Net change in plan fiduciary net position.................................................................... 8,206 (8,885) Plan fiduciary net position – beginning.......................................................................... 122,148 130,354 Plan fiduciary net position – ending (b).......................................................................... $ 130,354 $ 121,469 State’s net pension liability/(asset) – ending (a) – (b).................................................... $ (14,833) $ (14,898) Plan fiduciary net position as a percentage of the total pension liability......................................................................................................... 112.84 % 113.98 % Covered payroll................................................................................................................... $ 1,471 $ 1,397 State’s net pension liability as a percentage of covered payroll......................................... -1008.36 % -1066.43 % 202 Required Supplementary Information 20163 20173 20183 20193 20203 20213 $ 608 $ 639 $ 542 $ 268 $ 100 $ 101 5,978 5,291 4,987 4,873 4,885 4,749 (3,530) (5,998) (2,061) (427) 2,320 (732) — 7,857 (2,529) — — — (7,407) (7,249) (6,918) (7,350) (6,939) (6,761) (4,351) 540 (5,979) (2,636) 366 (2,643) 106,571 102,220 102,760 96,780 94,144 94,510 $ 102,220 $ 102,760 $ 96,781 $ 94,144 $ 94,510 $ 91,867 $ 549 $ 517 $ 467 $ 250 $ 98 $ 78 96 94 82 92 22 21 4,545 5,047 5,486 7,860 7,011 15,099 (7,407) (7,249) (6,918) (7,350) (6,939) (6,761) (202) (575) (670) (324) (550) (450) — — (1,454) — 2 13 (2,419) (2,166) (3,007) 528 (356) 8,000 121,469 119,050 116,884 113,876 114,404 114,048 $ 119,050 $ 116,884 $ 113,877 $ 114,404 $ 114,048 $ 122,048 $ (16,830) $ (14,124) $ (17,096) $ (20,260) $ (19,538) $ (30,181) 116.46 % 113.74 % 117.66 % 121.52 % 120.67 % 132.85 % $ 1,298 $ 1,270 $ 1,121 $ 684 $ 284 $ 267 -1296.61 % -1112.13 % -1525.07 % -2961.99 % -6879.58 % -11303.75 % (concluded) 203 State of California Annual Comprehensive Financial Report Schedule of State Pension Contributions For the Past Eight Fiscal Years1 (amounts in thousands) 2015 2016 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE MISCELLANEOUS2 Actuarially determined contribution................................................................................... $ 2,421,157 $ 2,718,895 Contributions in relation to the actuarially determined contribution.................................................................................................... (2,583,400) (2,814,126) Contribution deficiency (excess)...................................................................................... $ (162,243) $ (95,231) Covered payroll................................................................................................................... $ 10,655,117 $ 11,197,607 Contributions as a percentage of covered payroll.................................................................................................................. 24.25 % 25.13 % STATE INDUSTRIAL2 Actuarially determined contribution................................................................................... $ 92,024 $ 103,293 Contributions in relation to the actuarially determined contribution.................................................................................................... (104,769) (116,594) Contribution deficiency (excess)...................................................................................... $ (12,745) $ (13,301) Covered payroll................................................................................................................... $ 577,713 $ 625,220 Contributions as a percentage of covered payroll.................................................................................................................. 18.14 % 18.65 % STATE SAFETY2 Actuarially determined contribution................................................................................... $ 341,509 $ 368,444 Contributions in relation to the actuarially determined contribution.................................................................................................... (387,508) (404,595) Contribution deficiency (excess)...................................................................................... $ (45,999) $ (36,151) Covered payroll................................................................................................................... $ 2,003,716 $ 2,100,289 Contributions as a percentage of covered payroll.................................................................................................................. 19.34 % 19.26 % STATE PEACE OFFICERS AND FIREFIGHTERS2 Actuarially determined contribution................................................................................... $ 1,086,102 $ 1,197,160 Contributions in relation to the actuarially determined contribution.................................................................................................... (1,148,597) (1,263,436) Contribution deficiency (excess)...................................................................................... $ (62,495) $ (66,276) Covered payroll................................................................................................................... $ 3,115,364 $ 3,241,763 Contributions as a percentage of covered payroll.................................................................................................................. 36.87 % 38.97 % 1 This schedule will be built prospectively until it contains ten years of data. 2 This schedule includes amounts attributable to related organizations, fiduciary component units, and discretely presented component units, which are not part of the primary government. 204 Required Supplementary Information 2017 2018 2019 2020 2021 2022 $ 3,078,232 $ 3,397,736 $ 3,631,721 $ 4,006,672 $ 4,324,789 $ 4,160,143 (3,098,305) (3,482,291) (3,794,379) (5,032,209) (3,791,620) (4,281,402) $ (20,073) $ (84,555) $ (162,658) $ (1,025,537) $ 533,169 $ (121,259) $ 11,591,576 $ 12,254,527 $ 12,913,195 $ 13,579,610 $ 12,909,399 $ 14,727,596 26.73 % 28.42 % 29.38 % 37.06 % 29.37 % 29.07 % $ 116,880 $ 131,131 $ 134,969 $ 153,724 $ 166,535 $ 132,980 (123,789) (141,832) (148,790) (245,757) (128,407) (138,688) $ (6,909) $ (10,701) $ (13,821) $ (92,033) $ 38,128 $ (5,708) $ 643,295 $ 695,014 $ 728,609 $ 765,840 $ 706,128 $ 802,709 19.24 % 20.41 % 20.42 % 32.09 % 18.18 % 17.28 % $ 400,379 $ 435,662 $ 466,765 $ 526,375 $ 553,298 $ 476,457 (431,991) (481,479) (531,360) (759,505) (473,147) (499,621) $ (31,612) $ (45,817) $ (64,595) $ (233,130) $ 80,151 $ (23,164) $ 2,167,429 $ 2,339,642 $ 2,468,018 $ 2,566,403 $ 2,367,960 $ 2,633,568 19.93 % 20.58 % 21.53 % 29.59 % 19.98 % 18.97 % $ 1,343,177 $ 1,462,630 $ 1,581,049 $ 1,755,306 $ 1,871,841 $ 1,262,871 (1,431,851) (1,573,299) (1,667,839) (3,234,348) (1,312,046) (1,325,451) $ (88,674) $ (110,669) $ (86,790) $ (1,479,042) $ 559,795 $ (62,580) $ 3,416,627 $ 3,557,011 $ 3,676,854 $ 3,904,615 $ 3,629,097 $ 4,035,339 41.91 % 44.23 % 45.36 % 82.83 % 36.15 % 32.85 % (continued) 205 State of California Annual Comprehensive Financial Report Schedule of State Pension Contributions (continued) For the Past Eight Fiscal Years1 (amounts in thousands) 2015 2016 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS CALIFORNIA HIGHWAY PATROL Actuarially determined contribution................................................................ $ 323,393 $ 363,634 Contributions in relation to the actuarially determined contribution................................................................................. (352,139) (377,534) Contribution deficiency (excess)................................................................... $ (28,746) $ (13,900) Covered payroll............................................................................................... $ 809,610 $ 808,032 Contributions as a percentage of covered payroll.............................................................................................. 43.49 % 46.72 % SINGLE-EMPLOYER PLANS JUDGES’ Actuarially determined contribution................................................................ $ 1,884,555 $ 463,073 Contributions in relation to the actuarially determined contribution................................................................................. (3,598) (3,252) Contribution deficiency (excess)................................................................... $ 1,880,957 $ 459,821 Covered payroll............................................................................................... $ 167,542 $ 29,771 Contributions as a percentage of covered payroll.............................................................................................. 2.15 % 10.92 % JUDGES’ II Actuarially determined contribution................................................................ $ 63,193 $ 58,362 Contributions in relation to the actuarially determined contribution................................................................................. (59,982) (60,476) Contribution deficiency (excess)................................................................... $ 3,211 $ (2,114) Covered payroll............................................................................................... $ 41,458 $ 186,505 Contributions as a percentage of covered payroll.............................................................................................. 144.68 % 32.43 % LEGISLATORS’ Actuarially determined contribution................................................................ $ 260 $ 141 Contributions in relation to the actuarially determined contribution................................................................................. (544) (549) Contribution deficiency (excess)................................................................... $ (284) $ (408) Covered payroll............................................................................................... $ 1,397 $ 1,298 Contributions as a percentage of covered payroll.............................................................................................. 38.94 % 42.30 % 206 Required Supplementary Information 2017 2018 2019 2020 2021 2022 $ 414,975 $ 447,376 $ 484,056 $ 532,159 $ 574,509 $ 600,841 (426,014) (478,354) (514,683) (560,538) (530,587) (590,087) $ (11,039) $ (30,978) $ (30,627) $ (28,379) $ 43,922 $ 10,754 $ 851,427 $ 884,197 $ 933,689 $ 948,000 $ 882,119 $ 936,496 50.04 % 54.10 % 55.12 % 59.13 % 60.15 % 63.01 % $ 448,636 $ 438,156 $ 415,110 $ 414,849 $ 366,446 $ 352,881 (202,368) (197,017) (194,189) (241,993) (224,928) (193,763) $ 246,268 $ 241,139 $ 220,921 $ 172,856 $ 141,518 $ 159,118 $ 23,822 $ 27,003 $ 25,748 $ 16,017 $ 13,444 $ 14,061 849.50 % 729.61 % 754.19 % 1,510.85 % 1,673.07 % 1,378.02 % $ 66,951 $ 79,181 $ 75,862 $ 81,782 $ 88,439 $ 99,938 (55,965) (73,916) (76,155) (83,872) (78,784) (81,960) $ 10,986 $ 5,265 $ (293) $ (2,090) $ 9,655 $ 17,978 $ 195,066 $ 199,438 $ 217,112 $ 246,968 $ 233,316 $ 242,525 28.69 % 37.06 % 35.08 % 33.96 % 33.77 % 33.79 % $ — $ 20 $ — $ 101 $ 84 $ 88 (516) (467) (261) (100) (79) (85) $ (516) $ (447) $ (261) $ 1 $ 5 $ 3 $ 1,270 $ 1,121 $ 684 $ 284 $ 267 $ 290 40.63 % 41.66 % 38.16 % 35.21 % 29.59 % 29.31 % (continued) 207 State of California Annual Comprehensive Financial Report Schedule of State Pension Contributions (continued) For the Past Eight Fiscal Years1 (amounts in thousands) Notes to Required Supplementary Information for the most recent fiscal year presented: Public Employees’ Retirement Fund (PERF) and Single-Employer Plans Actual contribution amounts: Based on statutorily required contributions as outlined in California Government Code section 20683.2, which dictates that any excess employer contributions due to increased employee contributions must be allocated to the unfunded liability. Covered payroll: Pensionable earnings provided by the employer. Valuation date: Actuarially determined contribution rates were calculated as of June 30, 2020. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal Amortization method See each plan’s June 30, 2019 Actuarial Valuation Report. Asset valuation method PERF – Fair value of assets; for details see plan’s June 30, 2019 Actuarial Valuation Report. Judges’ – Market value of assets Judges’ II – Market value of assets Legislators’ – Market value of assets Inflation PERF – 2.50% Judges’ – 2.50% Judges’ II – 2.50% Legislators’ – 2.50% Salary increases PERF – varies by entry age and service Judges’ – 2.75% Judges’ II – 2.75% Legislators’ – 2.75% Payroll growth PERF – 2.75% Judges’ – 2.75% Judges’ II – 2.75% Legislators’ – 2.75% Investment rate of return Net of pension plan investment expenses and administrative expenses; includes inflation: PERF – 7.00%, which is used for contribution purposes Judges’ – 1.92% Judges’ II – 6.65% Legislators’ – 5.25% Retirement age The probabilities of retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Mortality Mortality rates are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015 adopted by the CalPERS Board and post-retirement mortality rates include 15 years of projected mortality improvements using 90% of Scale MP-2016 published by the Society of Actuaries. (concluded) 208 Required Supplementary Information This page intentionally left blank 209 State of California Annual Comprehensive Financial Report Schedule of the State’s Proportionate Share of Net Pension Liability – CalSTRS For the Past Eight Fiscal Years1 (amounts in thousands) 20142 20152 State’s proportion of CalSTRS’ net pension liability............................................................. 37.65 % 34.59 % State’s proportionate share of CalSTRS’ net pension liability............................................... $ 22,001,531 $ 23,289,391 Plan fiduciary net position as a percentage of the total pension liability.................................................................................................................................. 76.52 % 74.02 % 1 This schedule will be built prospectively until it contains ten years of data. 2 The date in the column heading represents the end of the measurement period of the net pension liability, which is one year prior to the reporting period. Schedule of the State’s Contributions – CalSTRS For the Past Eight Fiscal Years1 (amounts in thousands) 2015 2016 Statutorily required contribution.............................................................................................. $ 1,486,004 $ 1,935,288 Contributions in relation to the statutorily required contribution............................................ 1,486,004 1,935,288 Annual contribution deficiency/(excess).............................................................................. $ — $ — 1 This schedule will be built prospectively until it contains ten years of data. Notes to Required Supplementary Information for the most recent fiscal year presented: State’s Participation in CalSTRS Actual contribution amounts: Based on statutorily required contributions as outlined in California Education Code sections 22954, 22955 and 22955.1, as well as California Public Resources Code section 6217. Additionally, contributions for fiscal year 2021-22 include a supplemental contribution of $583.7 million for the State, pursuant to Assembly Bill 128. Valuation date: Actuarially determined contribution rates were calculated as of June 30, 2020. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal Amortization method/period Level percent of payroll, closed period, ending June 30, 2046 Asset valuation method Adjustment to fair value Consumer price inflation 2.75% Payroll growth 3.50% Investment rate of return For calculating the actuarially determined contribution: 7.00%, net of pension plan investment and administrative expenses For calculating total pension liability: 7.10%, net of pension plan investment expenses, but gross of administrative expenses Interest on accounts 3.00% Post-retirement benefit increases (COLAs) 2.00% simple 210 Required Supplementary Information 20162 20172 20182 20192 20202 20212 36.28 % 37.17 % 36.41 % 35.30 % 34.02 % 33.47 % $ 29,343,626 $ 34,374,816 $ 33,462,419 $ 31,880,645 $ 32,963,596 $ 15,233,348 70.04 % 69.46 % 70.99 % 72.56 % 71.82 % 87.21 % 2017 2018 2019 2020 2021 2022 $ 2,472,993 $ 2,790,444 $ 3,082,316 $ 4,446,836 $ 3,730,902 $ 4,279,964 2,472,993 2,790,444 3,082,316 4,446,836 3,730,902 4,279,964 $ — $ — $ — $ — $ — $ — 211 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios For the Past Fiscal Years1 (amounts in thousands) 20192,6 20202 RETIREE HEALTH BENEFITS PROGRAM SERVICE EMPLOYEES INTERNATIONAL UNION (SEIU)3 Total OPEB liability Service cost............................................................................................................................. $ 1,078,364 $ 1,116,519 Interest on total OPEB liability.............................................................................................. 1,201,673 1,162,741 Differences between expected and actual experiences5......................................................... (525,007) (720,036) Changes in assumptions......................................................................................................... 1,213,332 480,992 Benefit payments.................................................................................................................... (856,494) (910,765) Net change in total OPEB liability..................................................................................... 2,111,868 1,129,451 Total OPEB liability – beginning............................................................................................ 29,485,488 31,597,356 Total OPEB liability – ending (a)........................................................................................... $ 31,597,356 $ 32,726,807 Plan fiduciary net position Contributions – employer....................................................................................................... $ 856,494 $ 910,765 Contributions – prefunding.................................................................................................... 71,712 174,235 Contributions – employee...................................................................................................... 71,712 174,235 Net investment income........................................................................................................... 8,202 9,788 Benefit payments.................................................................................................................... (856,494) (910,765) Administrative expense.......................................................................................................... (14) (148) Other expenses....................................................................................................................... — — Net change in plan fiduciary net position........................................................................... 151,612 358,110 Plan fiduciary net position – beginning.................................................................................. — 151,612 Plan fiduciary net position – ending (b)................................................................................. $ 151,612 $ 509,722 State’s net OPEB liability – ending (a) – (b).......................................................................... $ 31,445,744 $ 32,217,085 Plan fiduciary net position as a percentage of the total OPEB liability..................................... 0.48 % 1.56 % Covered payroll.......................................................................................................................... $ 7,317,203 $ 7,701,525 State’s net OPEB liability as a percentage of covered payroll................................................... 429.75 % 418.32 % 1 This schedule will be built prospectively until it contains ten years of data. 2 The date in the column heading represents the end of the measurement period of the net OPEB liability, which is one year prior to the reporting period. 3 This schedule includes amounts attributable to related organizations, fiduciary component units, and discretely presented component units, which are not part of the primary government. 4 The valuation groups that comprise the Unfunded and Other Funded plans shifted from the prior year. 5 Includes differences between projected pay-as-you-go contributions, based on expected benefit payments, disclosed in the State of California Retiree Health Benefits Program - GASB Nos. 74 and 75 Actuarial Valuation Report as of June 30, 2021, and the actual pay-as-you-go contributions allocated to plans. 6 This is the first year the SEIU valuation group is presented as it began prefunding in the 2018-19 measurement period and shifted from the Unfunded plan from the prior year. 212 Required Supplementary Information 20212 $ 1,190,049 1,028,924 (2,498,623) 1,275,481 (962,640) 33,191 32,726,807 $ 32,759,998 $ 962,640 241,973 — 162,795 (962,640) (229) — 404,539 509,722 $ 914,261 $ 31,845,737 2.79 % $ 7,477,126 425.91 % (continued) 213 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Fiscal Years1 (amounts in thousands) 20172 20182 RETIREE HEALTH BENEFITS PROGRAM BARGAINING UNIT 5 PLAN Total OPEB liability Service cost............................................................................................................................. $ 168,057 $ 146,042 Interest on total OPEB liability.............................................................................................. 179,397 195,713 Differences between expected and actual experiences5......................................................... — (108,271) Changes in assumptions......................................................................................................... (474,646) (137,150) Benefit payments.................................................................................................................... (95,517) (77,897) Net change in total OPEB liability..................................................................................... (222,709) 18,437 Total OPEB liability – beginning............................................................................................ 4,764,812 4,542,103 Total OPEB liability – ending (a)........................................................................................... $ 4,542,103 $ 4,560,540 Plan fiduciary net position Contributions – employer....................................................................................................... $ 95,517 $ 77,897 Contributions – prefunding.................................................................................................... 77,454 59,697 Contributions – employee...................................................................................................... 12,783 4,089 Net investment income........................................................................................................... 21,109 20,988 Benefit payments.................................................................................................................... (95,517) (77,897) Administrative expense.......................................................................................................... (95) (144) Other expenses....................................................................................................................... (290) — Net change in plan fiduciary net position........................................................................... 110,961 84,630 Plan fiduciary net position – beginning.................................................................................. 135,701 246,662 Plan fiduciary net position – ending (b)................................................................................. $ 246,662 $ 331,292 State’s net OPEB liability – ending (a) – (b).......................................................................... $ 4,295,441 $ 4,229,248 Plan fiduciary net position as a percentage of the total OPEB liability..................................... 5.43 % 7.26 % Covered payroll.......................................................................................................................... $ 866,040 $ 895,430 State’s net OPEB liability as a percentage of covered payroll................................................... 495.99 % 472.31 % * Restated 214 Required Supplementary Information 20192 20202 20212 $ 140,545 $ 159,410 $ 183,703 199,637 204,078 202,901 41,288 (64,174) (699,133) 318,292 466,272 531,615 (78,501) (84,544) (87,872) 621,261 681,042 131,214 4,560,540 5,181,801 5,862,843 $ 5,181,801 $ 5,862,843 $ 5,994,057 $ 78,501 $ 84,544 $ 87,872 57,567 59,296 1 3,943 4,061 — 23,834 16,069 136,197 (78,501) (84,544) (87,872) (77) (217) (188) — — — 85,267 79,209 136,010 331,052 * 416,319 495,528 $ 416,319 $ 495,528 $ 631,538 $ 4,765,482 $ 5,367,315 $ 5,362,519 8.03 % 8.45 % 10.54 % $ 942,765 $ 958,694 $ 890,777 505.48 % 559.86 % 602.00 % (continued) 215 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Fiscal Years1 (amounts in thousands) 20172 20182 RETIREE HEALTH BENEFITS PROGRAM BARGAINING UNIT 6 PLAN Total OPEB liability Service cost........................................................................................................................... $ 609,551 $ 531,916 Interest on total OPEB liability............................................................................................. 574,853 634,360 Differences between expected and actual experiences5....................................................... — (1,186,530) Changes in assumptions........................................................................................................ (1,637,897) (164,236) Benefit payments................................................................................................................... (325,344) (327,604) Net change in total OPEB liability..................................................................................... (778,837) (512,094) Total OPEB liability – beginning.......................................................................................... 15,990,189 15,211,352 Total OPEB liability – ending (a).......................................................................................... $ 15,211,352 $ 14,699,258 Plan fiduciary net position Contributions – employer...................................................................................................... $ 325,344 $ 327,604 Contributions – prefunding................................................................................................... 146,933 65,245 Contributions – employee..................................................................................................... 23,181 65,245 Net investment income.......................................................................................................... 15,089 17,235 Benefit payments................................................................................................................... (325,344) (327,604) Administrative expense......................................................................................................... (48) (128) Other expenses...................................................................................................................... — — Net change in plan fiduciary net position........................................................................... 185,155 147,597 Plan fiduciary net position – beginning................................................................................ — 185,155 Plan fiduciary net position – ending (b)................................................................................ $ 185,155 $ 332,752 State’s net OPEB liability – ending (a) – (b)........................................................................ $ 15,026,197 $ 14,366,506 Plan fiduciary net position as a percentage of the total OPEB liability.................................... 1.22 % 2.26 % Covered payroll........................................................................................................................ $ 2,653,404 $ 2,726,616 State’s net OPEB liability as a percentage of covered payroll................................................. 566.30 % 526.90 % * Restated 216 Required Supplementary Information 20192 20202 20212 $ 503,829 $ 535,696 $ 578,629 622,325 608,903 562,522 (460,414) (354,942) (1,113,335) 912,754 675,803 1,438,841 (294,213) (357,726) (370,922) 1,284,281 1,107,734 1,095,735 14,699,258 15,983,539 17,091,273 $ 15,983,539 $ 17,091,273 $ 18,187,008 $ 294,213 $ 357,726 $ 370,922 106,592 129,540 109,211 106,592 129,540 — 33,447 24,249 247,525 (294,213) (357,726) (370,922) (94) (342) (343) — — — 246,537 282,987 356,393 332,511 * 579,048 862,035 $ 579,048 $ 862,035 $ 1,218,428 $ 15,404,491 $ 16,229,238 $ 16,968,580 3.62 % 5.04 % 6.70 % $ 2,819,233 $ 2,989,457 $ 2,709,765 546.41 % 542.88 % 626.20 % (continued) 217 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Fiscal Years1 (amounts in thousands) 20172 20182 RETIREE HEALTH BENEFITS PROGRAM BARGAINING UNIT 9 PLAN3 Total OPEB liability Service cost............................................................................................................................ $ 166,173 $ 142,954 Interest on total OPEB liability.............................................................................................. 154,495 174,062 Differences between expected and actual experiences5........................................................ — (334,650) Changes in assumptions......................................................................................................... (475,991) (200,549) Benefit payments................................................................................................................... (82,449) (85,278) Net change in total OPEB liability..................................................................................... (237,772) (303,461) Total OPEB liability – beginning........................................................................................... 4,640,159 4,402,387 Total OPEB liability – ending (a)........................................................................................... $ 4,402,387 $ 4,098,926 Plan fiduciary net position Contributions – employer...................................................................................................... $ 82,449 $ 85,278 Contributions – prefunding.................................................................................................... 35,210 5,688 Contributions – employee...................................................................................................... — 5,688 Net investment income.......................................................................................................... 3,630 3,246 Benefit payments................................................................................................................... (82,449) (85,278) Administrative expense......................................................................................................... (11) (22) Other expenses....................................................................................................................... — — Net change in plan fiduciary net position.......................................................................... 38,829 14,600 Plan fiduciary net position – beginning................................................................................. — 38,829 Plan fiduciary net position – ending (b)................................................................................ $ 38,829 $ 53,429 State’s net OPEB liability – ending (a) – (b)......................................................................... $ 4,363,558 $ 4,045,497 Plan fiduciary net position as a percentage of the total OPEB liability.................................... 0.88 % 1.30 % Covered payroll......................................................................................................................... $ 1,366,302 $ 1,376,743 State’s net OPEB liability as a percentage of covered payroll.................................................. 319.37 % 293.85 % * Restated 218 Required Supplementary Information 20192 20202 20212 $ 127,060 $ 136,522 $ 155,301 165,399 159,587 144,901 (88,806) (55,316) (308,759) 145,634 93,540 166,566 (84,522) (100,777) (109,002) 264,765 233,556 49,007 4,098,926 4,363,691 4,597,247 $ 4,363,691 $ 4,597,247 $ 4,646,254 $ 84,522 $ 100,777 $ 109,002 13,311 31,649 28,942 13,311 31,649 — 4,789 3,793 44,511 (84,522) (100,777) (109,002) (14) (55) (62) — — — 31,397 67,036 73,391 53,391 * 84,788 151,824 $ 84,788 $ 151,824 $ 225,215 $ 4,278,903 $ 4,445,423 $ 4,421,039 1.94 % 3.30 % 4.85 % $ 1,502,529 $ 1,596,949 $ 1,498,878 284.78 % 278.37 % 294.96 % (continued) 219 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Fiscal Years1 (amounts in thousands) 20172 20182 RETIREE HEALTH BENEFITS PROGRAM BARGAINING UNIT 12 PLAN3 Total OPEB liability Service cost............................................................................................................................ $ 167,689 $ 146,732 Interest on total OPEB liability............................................................................................. 154,036 172,744 Differences between expected and actual experiences5........................................................ — (362,455) Changes in assumptions........................................................................................................ (433,966) (166,573) Benefit payments................................................................................................................... (110,860) (114,235) Net change in total OPEB liability.................................................................................... (223,101) (323,787) Total OPEB liability – beginning........................................................................................... 4,540,951 4,317,850 Total OPEB liability – ending (a).......................................................................................... $ 4,317,850 $ 3,994,063 Plan fiduciary net position Contributions – employer...................................................................................................... $ 110,860 $ 114,235 Contributions – prefunding................................................................................................... 1,076 8,280 Contributions – employee..................................................................................................... 1,076 8,280 Net investment income.......................................................................................................... 872 1,051 Benefit payments................................................................................................................... (110,860) (114,235) Administrative expense......................................................................................................... (4) (9) Other expenses...................................................................................................................... — — Net change in plan fiduciary net position.......................................................................... 3,020 17,602 Plan fiduciary net position – beginning................................................................................. 7,186 10,206 Plan fiduciary net position – ending (b)................................................................................ $ 10,206 $ 27,808 State’s net OPEB liability – ending (a) – (b)......................................................................... $ 4,307,644 $ 3,966,255 Plan fiduciary net position as a percentage of the total OPEB liability.................................... 0.24 % 0.70 % Covered payroll......................................................................................................................... $ 627,283 $ 676,752 State’s net OPEB liability as a percentage of covered payroll.................................................. 686.71 % 586.07 % * Restated 220 Required Supplementary Information 20192 20202 20212 $ 129,311 $ 134,649 $ 137,010 162,948 154,691 135,412 (97,510) (149,086) (348,753) 152,849 21,353 165,715 (120,833) (127,671) (132,052) 226,765 33,936 (42,668) 3,994,063 4,220,828 4,254,764 $ 4,220,828 $ 4,254,764 $ 4,212,096 $ 120,833 $ 127,671 $ 132,052 16,268 26,329 31,233 16,268 26,329 — 3,552 2,974 36,034 (120,833) (127,671) (132,052) (9) (43) (52) — — — 36,079 55,589 67,215 27,788 * 63,867 119,456 $ 63,867 $ 119,456 $ 186,671 $ 4,156,961 $ 4,135,308 $ 4,025,425 1.51 % 2.81 % 4.43 % $ 723,964 $ 748,801 $ 673,098 574.19 % 552.26 % 598.04 % (continued) 221 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Fiscal Years1 (amounts in thousands) 20172 20182,4 RETIREE HEALTH BENEFITS PROGRAM OTHER FUNDED PLANS3 Total OPEB liability Service cost.......................................................................................................................... $ 92,991 $ 501,028 Interest on total OPEB liability............................................................................................ 74,923 523,258 Differences between expected and actual experiences5...................................................... — (1,033,520) Changes in assumptions....................................................................................................... (197,059) (304,299) Benefit payments................................................................................................................. (46,820) (288,774) Net change in total OPEB liability................................................................................... (75,965) (602,307) Total OPEB liability – beginning......................................................................................... 2,116,405 12,699,917 Total OPEB liability – ending (a)......................................................................................... $ 2,040,440 $ 12,097,610 Plan fiduciary net position Contributions – employer.................................................................................................... $ 46,820 $ 288,774 Contributions – prefunding.................................................................................................. 10,442 32,759 Contributions – employee.................................................................................................... 2,323 32,759 Net investment income........................................................................................................ 1,589 5,578 Benefit payments................................................................................................................. (46,820) (288,774) Administrative expense....................................................................................................... (7) (47) Other expenses..................................................................................................................... — — Net change in plan fiduciary net position........................................................................ 14,347 71,049 Plan fiduciary net position – beginning............................................................................... 4,836 57,956 * Plan fiduciary net position – ending (b).............................................................................. $ 19,183 $ 129,005 State’s net OPEB liability – ending (a) – (b)....................................................................... $ 2,021,257 $ 11,968,605 Plan fiduciary net position as a percentage of the total OPEB liability.................................. 0.94 % 1.07 % Covered payroll....................................................................................................................... $ 851,868 $ 3,469,855 State’s net OPEB liability as a percentage of covered payroll................................................ 237.27 % 344.93 % * Restated 222 Required Supplementary Information 20192, 4 20202 20212 $ 528,502 $ 546,766 $ 597,140 581,170 570,727 508,583 (221,816) (517,882) (1,092,126) 506,543 305,572 811,046 (364,207) (371,323) (401,508) 1,030,192 533,860 423,135 14,074,765 15,104,957 15,638,817 $ 15,104,957 $ 15,638,817 $ 16,061,952 $ 364,207 $ 371,323 $ 401,508 71,376 124,916 127,043 71,376 124,916 — 16,116 13,386 163,783 (364,207) (371,323) (401,508) (43) (194) (230) — — — 158,825 263,024 290,596 128,914 * 287,739 550,763 $ 287,739 $ 550,763 $ 841,359 $ 14,817,218 $ 15,088,054 $ 15,220,593 1.90 % 3.52 % 5.24 % $ 4,162,765 $ 4,363,200 $ 3,875,766 355.95 % 345.80 % 392.71 % (continued) 223 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Fiscal Years1 (amounts in thousands) 20172 20182,4 RETIREE HEALTH BENEFITS PROGRAM UNFUNDED PLAN3 Total OPEB liability Service cost............................................................................................................................. $ 2,805,040 $ 2,008,794 Interest on total OPEB liability.............................................................................................. 2,112,139 1,959,522 Differences between expected and actual experiences5......................................................... — (4,164,211) Changes in assumptions......................................................................................................... (6,610,919) (1,766,620) Benefit payments.................................................................................................................... (1,457,705) (1,352,652) Net change in total OPEB liability..................................................................................... (3,151,445) (3,315,167) Total OPEB liability – beginning........................................................................................... 64,144,931 50,334,009 Total OPEB liability – ending (a).......................................................................................... $ 60,993,486 $ 47,018,842 Plan fiduciary net position Contributions – employer....................................................................................................... $ 1,457,705 $ 1,352,652 Contributions – prefunding.................................................................................................... — — Contributions – employee...................................................................................................... — — Net investment income........................................................................................................... — — Benefit payments.................................................................................................................... (1,457,705) (1,352,652) Administrative expense.......................................................................................................... — — Other expenses....................................................................................................................... — — Net change in plan fiduciary net position........................................................................... — — Plan fiduciary net position – beginning................................................................................. — — Plan fiduciary net position – ending (b)................................................................................ $ — $ — State’s net OPEB liability – ending (a) – (b)......................................................................... $ 60,993,486 $ 47,018,842 Plan fiduciary net position as a percentage of the total OPEB liability.................................... — % — % Covered payroll......................................................................................................................... $ 12,525,617 $ 10,825,049 State’s net OPEB liability as a percentage of covered payroll.................................................. 486.95 % 434.35 % 224 Required Supplementary Information 20192,4,6 20202 20212 $ 651,082 $ 695,884 $ 826,026 576,896 547,791 447,744 (41,161) (665,066) (1,270,439) 863,523 583,238 476,706 (546,742) (512,702) (522,538) 1,503,598 649,145 (42,501) 15,556,199 17,059,797 17,708,942 $ 17,059,797 $ 17,708,942 $ 17,666,441 $ 546,742 $ 512,702 $ 522,538 — — — — — — — — — (546,742) (512,702) (522,538) — — — — — — — — — — — — $ — $ — $ — $ 17,059,797 $ 17,708,942 $ 17,666,441 — % — % — % $ 3,366,371 $ 3,536,386 $ 3,483,142 506.77 % 500.76 % 507.20 % (concluded) 225 State of California Annual Comprehensive Financial Report Schedule of OPEB Contributions For the Past Fiscal Years1 (amounts in thousands) 2018 20193 RETIREE HEALTH BENEFITS PROGRAM SERVICE EMPLOYEES INTERNATIONAL UNION PLAN2 Actuarially determined contribution......................................................................... $ — $ — Contributions in relation to the actuarially determined contribution........................ — — Contribution deficiency (excess).............................................................................. $ — $ — Covered payroll........................................................................................................ $ — $ — Contributions as a percentage of covered payroll..................................................... — — BARGAINING UNIT 5 PLAN Actuarially determined contribution......................................................................... $ 204,361 $ 210,626 Contributions in relation to the actuarially determined contribution........................ (184,456) (137,475) Contribution deficiency............................................................................................ $ 19,905 $ 73,151 Covered payroll........................................................................................................ $ 915,549 $ 942,765 Contributions as a percentage of covered payroll..................................................... 20.15 % 14.58 % BARGAINING UNIT 6 PLAN Actuarially determined contribution......................................................................... $ 743,757 $ 671,262 Contributions in relation to the actuarially determined contribution........................ (503,636) (445,061) Contribution deficiency............................................................................................ $ 240,121 $ 226,201 Covered payroll........................................................................................................ $ 2,805,093 $ 2,819,233 Contributions as a percentage of covered payroll..................................................... 17.95 % 15.79 % BARGAINING UNIT 9 PLAN2 Actuarially determined contribution......................................................................... $ 207,027 $ 191,109 Contributions in relation to the actuarially determined contribution........................ (125,471) (102,971) Contribution deficiency............................................................................................ $ 81,556 $ 88,138 Covered payroll........................................................................................................ $ 1,444,410 $ 1,502,529 Contributions as a percentage of covered payroll..................................................... 8.69 % 6.85 % 1 This schedule will be built prospectively until it contains ten years of data. 2 This schedule includes amounts attributable to related organizations, fiduciary component units, and discretely presented component units, which are not part of the primary government. 3 The valuation groups that comprise the Unfunded and Other Funded plans shifted from the prior year. 226 Required Supplementary Information 20203 20213 20223 $ 1,543,231 $ 1,584,331 $ 1,336,683 (1,077,554) (1,204,613) (1,576,969) $ 465,677 $ 379,718 $ (240,286) $ 7,701,525 $ 7,477,126 $ 8,705,771 13.99 % 16.11 % 18.11 % $ 229,183 $ 240,749 $ 239,989 (139,230) (87,872) (212,763) $ 89,953 $ 152,877 $ 27,226 $ 958,694 $ 890,777 $ 950,596 14.52 % 9.86 % 22.38 % $ 676,241 $ 772,683 $ 681,831 (477,342) (480,133) (623,643) $ 198,899 $ 292,550 $ 58,188 $ 2,989,457 $ 2,709,765 $ 2,983,435 15.97 % 17.72 % 20.90 % $ 194,353 $ 212,002 $ 182,301 (131,031) (137,944) (182,205) $ 63,322 $ 74,058 $ 96 $ 1,596,949 $ 1,498,878 $ 1,770,060 8.21 % 9.20 % 10.29 % (continued) 227 State of California Annual Comprehensive Financial Report Schedule of OPEB Contributions (continued) For the Past Fiscal Years1 (amounts in thousands) 2018 20193 RETIREE HEALTH BENEFITS PROGRAM BARGAINING UNIT 12 PLAN2 Actuarially determined contribution......................................................................... $ 217,883 $ 197,202 Contributions in relation to the actuarially determined contribution....................... (119,368) (137,758) Contribution deficiency (excess).............................................................................. $ 98,515 $ 59,444 Covered payroll........................................................................................................ $ 663,143 $ 723,870 Contributions as a percentage of covered payroll.................................................... 18.00 % 19.03 % OTHER FUNDED PLANS2 Actuarially determined contribution......................................................................... $ 109,630 $ 608,960 Contributions in relation to the actuarially determined contribution....................... (61,064) (366,050) Contribution deficiency (excess).............................................................................. $ 48,566 $ 242,910 Covered payroll........................................................................................................ $ 900,567 $ 3,595,234 Contributions as a percentage of covered payroll.................................................... 6.78 % 10.18 % UNFUNDED PLAN2 Actuarially determined contribution......................................................................... $ 3,199,223 $ 2,552,923 Contributions in relation to the actuarially determined contribution....................... (1,547,989) (1,493,023) Contribution deficiency............................................................................................ $ 1,651,234 $ 1,059,900 Covered payroll........................................................................................................ $ 13,241,681 $ 11,391,811 Contributions as a percentage of covered payroll.................................................... 11.69 % 13.11 % 228 Required Supplementary Information 20203 20213 20223 $ 198,316 $ 203,358 $ 169,461 (153,368) (160,882) (203,007) $ 44,948 $ 42,476 $ (33,546) $ 748,801 $ 673,098 $ 805,625 20.48 % 23.90 % 25.20 % $ 707,352 $ 756,965 $ 645,590 (492,373) (522,778) (698,669) $ 214,979 $ 234,187 $ (53,079) $ 4,363,200 $ 3,875,766 $ 4,500,952 11.28 % 13.49 % 15.52 % $ 977,820 $ 944,654 $ 915,632 (512,702) (504,813) (530,610) $ 465,118 $ 439,841 $ 385,022 $ 3,536,386 $ 3,483,142 $ 3,539,212 14.50 % 14.49 % 14.99 % (concluded) 229 State of California Annual Comprehensive Financial Report Schedule of OPEB Contributions (continued) For the Past Fiscal Year (amounts in thousands) Notes to Required Supplementary Information for the most recent fiscal year presented: Retiree Health Benefits Program Covered payroll: Pensionable earnings provided by employer Valuation date: Actuarially determined contribution rates were calculated as of June 30, 2021. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal Amortization method Level percentage of payroll, closed Amortization period 30 years Asset valuation method Market value of assets; for details see the June 30, 2021 Actuarial Valuation Report Inflation 2.30% Healthcare cost trend Pre-Medicare coverage: Actual rates for 2022, increasing to 7.50% in 2023, grading rates down to 4.50% from 2029 to 2037, and 4.25% for 2038 and later years. Post-Medicare coverage: Actual rates for 2022, increasing to rates ranging from 7.50% to 8.42% in 2023, grading down to 4.50% from 2031 to 2037, and 4.25% for 2038 and later years. Dental coverage: 0.00% in 2022, 2.00% for 2023, 3.00% for 2024, 4.00% for 2025, and 4.25% for 2026 and thereafter. Salary increases Varies by entry age and service Investment rate of return 6.00%, net of OPEB plan investment expenses but without reduction for OPEB administrative expenses. Retirement age The probabilities of retirement are based on the 2021 CalPERS Experience Study for the period from 2000 to 2019. Mortality Mortality rates are based on the 2021 CalPERS Experience Study adopted by the CalPERS Board. Post-retirement mortality rates include 15 years of projected on-going mortality improvements using the Society of Actuaries 80% Scale MP 2020. (concluded) 230 Required Supplementary Information Infrastructure Assets Using the Modified Approach Pursuant to Governmental Accounting Standards Board (GASB) Statement No. 34, the State uses the modified approach to report the cost of its infrastructure assets (state bridges, roadways, and high-speed rail). Under the modified approach, the State does not report depreciation expense for infrastructure assets but capitalizes all costs that add to the capacity and efficiency of state-owned bridges, roads, and the high-speed rail system. All maintenance and preservation costs are expensed and not capitalized. A. Infrastructure Asset Reporting Categories The infrastructure assets reported in the State’s financial statements for the fiscal year ending June 30, 2022, are in the following categories and amounts: state highway infrastructure, consisting of completed highway projects totaling $82.0 billion; land purchased for highway projects totaling $15.1 billion; infrastructure construction-in-progress (uncompleted highway projects) totaling $9.3 billion; and high-speed rail system infrastructure, consisting of construction-in-progress (uncompleted rail construction projects) totaling $5.2 billion. Donation and Relinquishment: Donation and relinquishment activity affects the inventory of statewide lane miles, land, and/or bridges as adjustments to the infrastructure assets and/or land balance in the State’s financial statements. For the fiscal year ending June 30, 2022, there were no donations of infrastructure land, and relinquishments were $11 million of state highway infrastructure (completed highway projects) and $2 million of infrastructure land. B. Condition Baselines and Assessments 1. Bridges The federal Fixing America’s Surface Transportation (FAST) Act required all states to adopt national asset management performance measures to establish nationwide consistency for condition reporting of highway assets. Under the FAST Act, the national performance measure for bridges is total deck area of the structures in good, fair, or poor condition. The inspection data is based on the American Association of State Highway Transportation Officials’ Guide Manual for Bridge Element Inspection and the Caltrans Bridge Element Inspection Manual. The State’s established condition baseline for fiscal year 2021-22 is to have at least 90% of the State’s bridge deck area in fair or better condition. 231 State of California Annual Comprehensive Financial Report The following table shows the State’s established condition baseline and actual statewide bridge condition for the last three fiscal years: Fiscal Year Ended June 30 Established Condition1 Actual Condition 2020 90.0% Fair or Better 95.7% Fair or Better 2021 90.0% Fair or Better 95.7% Fair or Better 2022 90.0% Fair or Better 94.1% Fair or Better 1 The actual statewide bridge conditions should not be lower than the baseline condition established by the State. The following table provides details on the State’s actual bridge condition as of June 30, 2022: Number of Condition Bridges/Tunnels Deck Area (sq. ft.) Deck Area (%) Good 6,846 122,566,496 46.90 % Fair 5,660 123,404,232 47.21 Poor 549 15,381,678 5.89 Total 13,055 261,352,406 100.00 % 2. Roadways The State conducts a periodic pavement-condition survey, which evaluates ride quality and structural integrity and identifies the number of distressed lane miles. The State classifies a roadway’s pavement condition by the following descriptions: • Excellent/good condition – few potholes or cracks • Fair condition – moderate number of potholes or cracks • Poor condition – significant or extensive number of potholes or cracks Statewide lane miles are considered “distressed lane miles” if they are in poor condition. The actual distressed lane miles are compared to the established condition baseline to ensure that the baseline is not exceeded. 232 Required Supplementary Information The following table shows the State’s established condition baseline and actual distressed lane miles from the last three completed pavement-condition surveys: Condition Established Condition Actual Actual Distressed Assessment Baseline Distressed Distressed Lane Miles as Percent Date1 Lane Miles (maximum)2 Lane Miles of Total Lane Miles September 2020 18,000 5,890 11.9 % April 2022 18,000 6,872 13.8 July 2023 18,000 6,980 13.9 1 Condition assessment for the State’s established condition baseline and actual distressed lane miles is being reported as of the State of the Pavement report publication date. 2 The actual statewide distressed lane miles should not exceed the maximum distressed lane miles established by the State. The following table provides details on the State’s actual distressed lane miles as of the last completed pavement-condition survey: Pavement Condition Lane Miles Distressed Lane Miles Excellent/Good 33,194 — Fair 10,008 — Poor 6,980 6,980 Total 50,182 6,980 C. Budgeted and Actual Preservation Costs The estimated budgeted preservation costs represent the preservation projects approved by the California Transportation Commission and the State’s scheduled preservation work for each fiscal year. The actual preservation costs represent the cumulative cost to date for the projects approved and work scheduled in each fiscal year. 233 State of California Annual Comprehensive Financial Report 1. Bridges The following table shows the State’s budgeted and actual preservation cost information for the State’s bridges for the most recent and four previous fiscal years: Estimated Budgeted Actual Fiscal Year Preservation Costs Preservation Costs Ending June 30 (in millions)1 (in millions)1 2018 $ 267 $ 265 2019 293 290 2020 229 228 2021 247 228 2022 221 153 1Some prior years were updated based on more current information. 2. Roadways The following table shows the State’s budgeted and actual preservation cost information for the State’s roadways for the most recent and four previous fiscal years: Estimated Budgeted Actual Fiscal Year Preservation Costs Preservation Costs Ending June 30 (in millions)1 (in millions)1 2018 $ 4,184 $ 4,035 2019 5,103 4,897 2020 5,070 4,651 2021 5,379 4,129 2022 5,250 2,683 1Some prior years were updated based on more current information. 234 Required Supplementary Information This page intentionally left blank 235 State of California Annual Comprehensive Financial Report Budgetary Comparison Schedule General Fund and Major Special Revenue Funds Year Ended June 30, 2022 (amounts in thousands) General Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Corporation tax ................................................................... $ 32,863,043 $ 45,128,400 $ 44,711,973 $ (416,427) Intergovernmental ............................................................... — Cigarette and tobacco taxes ................................................ 57,916 54,103 54,103 — Insurance gross premiums tax ............................................ 3,448,339 3,494,540 3,503,238 8,698 Vehicle license fees ............................................................ 490 620 619 (1) Motor vehicle fuel tax ......................................................... — — — — Personal income tax ............................................................ 120,873,151 137,144,320 138,713,606 1,569,286 Retail sales and use taxes .................................................... 30,865,984 33,026,420 32,994,935 (31,485) Other major taxes and licenses ........................................... 423,267 431,363 431,363 — Other revenues .................................................................... 5,297,150 4,223,240 3,616,843 (606,397) Total revenues ............................................................. 193,829,340 223,503,006 224,026,680 523,674 EXPENDITURES Business, consumer services, and housing ......................... 1,113,782 1,157,679 1,140,876 (16,803) Transportation ..................................................................... 1,303,026 3,027,506 503,027 (2,524,479) Natural resources and environmental protection ................ 8,854,499 9,816,204 8,491,932 (1,324,272) Health and human services ................................................. 50,630,277 56,204,069 49,981,465 (6,222,604) Corrections and rehabilitation ............................................ 13,832,643 14,262,404 13,813,290 (449,114) Education............................................................................. 68,498,069 107,427,799 101,866,384 (5,561,415) General government: Tax relief .......................................................................... 393,372 415,001 393,372 (21,629) Debt service ..................................................................... 6,187,876 4,718,388 4,688,204 (30,184) Other general government ............................................... 17,834,124 19,965,670 17,724,333 (2,241,337) Total expenditures ...................................................... 168,647,668 216,994,720 198,602,883 (18,391,837) OTHER FINANCING SOURCES (USES) Transfers from other funds ................................................. — — 11,995,627 — Transfers to other funds ...................................................... — — (13,486,232) — Other additions (deductions) .............................................. — — 13,308,889 — Total other financing sources (uses) .......................... — — 11,818,284 — Excess (deficiency) of revenues and other sources over (under) expenditures and other uses ................ — — 37,242,081 — Fund balances – beginning .................................................. — — 31,939,690 — Fund balances – ending........................................................ $ — $ — $ 69,181,771 $ — 236 Required Supplementary Information Federal Transportation Budgeted Amounts Actual Variance with Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Original Final Amounts Final Budget $ — $ — $ — $ — $ — $ — $ — $ — 151,886,738 151,886,738 151,886,738 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 8,641,873 8,519,577 9,290,301 770,724 — — — — — — — — — — — — — — — — — — — — 8,035,546 8,171,484 7,320,025 (851,459) 866 866 866 — 1,133,943 1,222,442 390,301 (832,141) 151,887,604 151,887,604 151,887,604 — 17,811,362 17,913,503 17,000,627 (912,876) 3,132,518 3,132,518 3,132,518 — 125,857 127,649 116,904 (10,745) 4,302,329 4,302,329 4,302,329 — 10,085,091 14,982,070 13,309,580 (1,672,490) 457,642 457,642 457,642 — 187,580 190,004 170,558 (19,446) 99,290,061 99,290,061 99,290,061 — 3,467 3,540 2,434 (1,106) 98,527 98,527 98,527 — — — — — 14,549,150 14,549,150 14,549,150 — 7,945 9,998 9,497 (501) — — — — — — — — — — — — 3,173 3,173 2,213 (960) 1,351,724 1,351,724 1,351,724 — (67,765) 483,779 472,221 (11,558) 123,181,951 123,181,951 123,181,951 — 10,345,348 15,800,213 14,083,407 (1,716,806) — — 1,701,156 — — — 21,231,181 — — — (30,406,787) — — — (23,490,254) — — — — — — — (473,280) — — — (28,705,631) — — — (2,732,353) — — — 22 — — — 184,867 — — — 637 — — — 9,133,887 — $ — $ — $ 659 $ — $ — $ — $ 9,318,754 $ — (continued) 237 State of California Annual Comprehensive Financial Report Budgetary Comparison Schedule (continued) General Fund and Major Special Revenue Funds Year Ended June 30, 2022 (amounts in thousands) Environmental and Natural Resources Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Corporation tax ................................................................ $ — $ — $ — $ — Intergovernmental ............................................................ — — — — Cigarette and tobacco taxes.............................................. 93 93 93 — Insurance gross premiums tax .......................................... — — — — Vehicle license fees........................................................... — — — — Motor vehicle fuel tax....................................................... — — — — Personal income tax ......................................................... — — — — Retail sales and use taxes ................................................. — — — — Other major taxes and licenses ........................................ 177,841 177,841 177,841 — Other revenues ................................................................. 8,851,266 8,851,266 8,851,266 — Total revenues .......................................................... 9,029,200 9,029,200 9,029,200 — EXPENDITURES Business, consumer services, and housing ...................... 254,501 224,309 190,710 (33,599) Transportation................................................................... 1,228,805 1,229,346 1,228,873 (473) Natural resources and environmental protection.............. 5,826,373 7,488,017 5,723,006 (1,765,011) Health and human services .............................................. 70,083 88,718 73,250 (15,468) Corrections and rehabilitation .......................................... — — — — Education ......................................................................... 2,870 2,870 366 (2,504) General government: Tax relief ....................................................................... — — — — Debt service .................................................................. 695 695 695 — Other general government.............................................. 229,052 237,886 227,913 (9,973) Total expenditures ................................................... 7,612,379 9,271,841 7,444,813 (1,827,028) OTHER FINANCING SOURCES (USES) Transfers from other funds................................................ — — 897,869 — Transfers to other funds ................................................... — — (798,267) — Other additions (deductions) ............................................ — — 1,243,224 — Total other financing sources (uses)........................ — — 1,342,826 — Excess (deficiency) of revenues and other sources over (under) expenditures and other uses ............. — — 2,927,213 — Fund balances – beginning ................................................ — — 14,050,286 — Fund balances – ending...................................................... $ — $ — $ 16,977,499 $ — 238 Required Supplementary Information Health Care Related Programs Budgeted Amounts Actual Variance with Original Final Amounts Final Budget $ — $ — $ — $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 2,517,244 2,517,244 2,517,244 — 7,237,356 7,237,356 7,237,356 — 9,754,600 9,754,600 9,754,600 — — — — — — — — — 2,760 3,042 3,010 (32) 9,514,065 9,615,311 9,605,077 (10,234) — — — — 139,337 139,337 139,337 — — — — — 7,269 7,433 7,433 — (9,281) 500 500 — 9,654,150 9,765,623 9,755,357 (10,266) — — 114,910 — — — (6,667) — — — (171,514) — — — (63,271) — — — (64,028) — — — 3,322,241 — $ — $ — $ 3,258,213 $ — (concluded) 239 State of California Annual Comprehensive Financial Report Reconciliation of Budgetary Basis Fund Balances of the General Fund and Major Special Revenue Funds to GAAP Basis Fund Balances June 30, 2022 (amounts in thousands) Major Special Revenue Funds Environmental Health Care and Natural Related General Federal Transportation Resources Programs Budgetary fund balance reclassified into GAAP statement fund structure... $ 69,181,771 $ 659 $ 9,318,754 $ 16,977,499 $ 3,258,213 Basis difference: Interfund receivables............................... 2,943,415 — 85,258 786,823 — Loans receivable...................................... 23,216 268,575 — 567,375 23,000 Interfund payables................................... (3,435,425) — (594,815) (456,475) (2,193) Escheat property...................................... (1,315,586) — — — — Tax revenues............................................ (12,958,004) — — — — Fund classification changes..................... 32,203,011 8,533,399 — — — Other........................................................ (10,797,660) (48,174,275) 1,951,336 (229,108) — Timing difference: Liabilities budgeted in subsequent years.................................... (1,797,580) (15,325,758) (592,932) (3,117) (1,508,882) GAAP fund balance – ending................. $ 74,047,158 $ (54,697,400) $ 10,167,601 $ 17,642,997 $ 1,770,138 Notes to the Required Supplementary Information Budgetary Comparison Schedule The State annually reports its financial condition based on a Generally Accepted Accounting Principles (GAAP) basis and on the State’s budgetary provisions (budgetary basis). The Budgetary Comparison Schedule for the General Fund and Major Special Revenue Funds reports the original budget, the final budget, the actual expenditures, and the variance between the final budget and the actual expenditures, using the budgetary basis of accounting. On the budgetary basis, individual appropriations are charged as expenditures when commitments for goods and services are incurred. However, for financial reporting purposes, the State reports expenditures based on the year in which goods and services are received. The Budgetary Comparison Schedule includes all of the current year expenditures for the General Fund and major special revenue funds as well as related appropriations that typically are legislatively authorized annually, continually, or by project. While the encumbrances relate to all programs’ expenditures on a budgetary basis, adjustments for encumbrances are made under “other general government,” except for Environmental and Natural Resources where adjustments for encumbrances are made under each program’s expenditures. The Budgetary Comparison Schedule is not presented in this document at the legal level of budgetary control because such a presentation would be extremely lengthy and cumbersome. The State of California prepares a separate report, the Annual Comprehensive Financial Report Supplement, which includes statements that demonstrate compliance with the legal level of budgetary control in accordance 240 Required Supplementary Information with Government Accounting Standards Board’s (GASB) Codification of Governmental Accounting and Financial Reporting Standards, Section 2400.121. The supplement includes a comparison of the annual appropriated budget with expenditures at the legal level of control. A copy of the Annual Comprehensive Financial Report Supplement is available upon email request to the State Controller’s Office, State Accounting and Reporting Division at StateGovReports@sco.ca.gov. Reconciliation of Budgetary with GAAP Basis The reconciliation of budgetary basis fund balances of the General Fund and the major special revenue funds to GAAP basis fund balances is presented on the previous page and the reconciling items are explained in the following paragraphs. Basis Difference Interfund Receivables and Loans Receivable: Loans made to other funds or to other governments are normally recorded as either expenditures or transfers on a budgetary basis. However, in accordance with GAAP, these loans are recorded as assets. The adjustments related to interfund receivables caused increases of $2.9 billion in the General Fund, $85 million in the Transportation Fund, and $787 million in the Environmental and Natural Resources Fund. The adjustments related to loans receivable caused increases of $23 million in the General Fund, $269 million in the Federal Fund, $567 million in the Environmental and Natural Resources Fund, and $23 million in the Health Care Related Programs Fund. Interfund Payables: Loans received from other funds are normally recorded as transfers on a budgetary basis. However, in accordance with GAAP, these loans are recorded as liabilities. The adjustments related to interfund payables caused decreases of $3.4 billion in the General Fund, $595 million in the Transportation Fund, $456 million in the Environmental and Natural Resources Fund, and $2 million in the Health Care Related Programs Fund. Escheat Property: A liability for the estimated amount of escheat property expected to ultimately be reclaimed and paid is not reported on a budgetary basis. The liability is required to be reported on a GAAP basis. This adjustment caused a $1.3 billion decrease in the General Fund. Tax Revenues: Estimated tax payments are accrued on a budgetary basis pursuant to Chapter 751, Statutes of 2008; however, in accordance with GAAP, tax payments are accrued based on the portion of estimated net final payments related to the fiscal year. This adjustment caused a decrease of $13.0 billion in the General Fund. Fund Classification Changes: The fund balance amounts for governmental funds have been reclassified in accordance with governmental accounting standards. These reclassifications caused increases of $32.2 billion in the General Fund and $8.5 billion in the Federal Fund. These increases represent the fund balances of funds that are not considered part of the General Fund or the Federal Fund for any budgetary purpose or for the Budgetary/Legal Basis Annual Report. Other: Certain other adjustments and reclassifications are necessary to present the financial statements in accordance with GAAP. The other adjustments caused a decrease of $10.8 billion in the General Fund, and $48.2 billion in the Federal Fund, an increase of $2.0 billion in the Transportation Fund, and a decrease of $229 million in the Environmental and Natural Resources Fund. 241 State of California Annual Comprehensive Financial Report Timing Difference Liabilities Budgeted in Subsequent Years: On a budgetary basis, the primary government does not accrue liabilities for which there is no existing appropriation or no currently available appropriation. The adjustments made to account for these liabilities in accordance with GAAP caused decreases of $1.8 billion in the General Fund, $15.3 billion in the Federal Fund, $593 million in the Transportation Fund, $3 million in the Environmental and Natural Resources Fund, and $1.5 billion in the Health Care Related Programs Fund. The large decrease in the General Fund primarily consists of $1.1 billion for medical assistance and $407 million for workers’ compensation claims. The large decrease in the Federal Fund consists of $9.0 billion for coronavirus relief and $6.3 billion for unemployment programs. The decrease in the Health Care Related Programs Fund primarily consists of medical assistance. 242 Combining Financial Statements and Schedules – Nonmajor and Other Funds This page intentionally left blank Nonmajor Governmental Funds Nonmajor Governmental Funds Nonmajor governmental funds account for the State’s activities that do not meet the criteria of a major governmental fund. Following are brief descriptions of nonmajor governmental funds. Special revenue funds account for the proceeds of specific revenue sources, other than debt service or capital projects, that are restricted, committed, or assigned to expenditures for specific purposes. The Business and Professions Regulatory and Licensing Fund accounts for fees and other revenues charged for regulating and licensing specific industries, professions, and vocations. The Financing for Local Governments and the Public Fund accounts for taxes, fees, bond proceeds, and other revenues used to finance the construction and maintenance of parks, jails, and other public and local government programs. The Cigarette, Tobacco, and Cannabis Tax Fund accounts for a surtax on cigarette and tobacco products that is used for various health programs; and cannabis excise and cultivation taxes that are used for various health, youth education, and research programs. The Local Revenue and Public Safety Fund accounts for vehicle license fees and a 1.5625% state sales tax dedicated to local governments for realigning costs from the State to local governments, and a 0.5% state sales tax dedicated to local governments to fund public safety programs. The Trial Courts Fund accounts for the various fees collected by the courts, maintenance- of-effort payments from the counties, transfers in from the General Fund, and trial court operating costs. The Golden State Tobacco Securitization Corporation Fund is a blended component unit that accounts for the receipt of Tobacco Revenue Settlements pledged for the payment of debt service. Other special revenue programs funds account for all other proceeds of revenue sources, other than debt service or capital projects, that are restricted or committed to expenditures for specific purposes. Debt service funds account for and report financial resources that are restricted, committed, or assigned for the payment of principal and interest on general long-term obligations. The No Place Like Home Fund accounts for bond proceeds and other revenues used to implement and administer the No Place Like Home Program to reduce homelessness and provide affordable housing for individuals with mental illness. The Transportation Debt Service Fund accounts for Transportation Fund transfers used for the payment of principal and interest related to various transportation-related general obligation bonds. (continued) 245 State of California Annual Comprehensive Financial Report (continued) Capital projects funds account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. The Higher Education Construction Fund accounts for bond proceeds used to construct state colleges and universities. The Hospital Construction Fund accounts for bond proceeds used to construct hospitals. The Local Government Construction Fund accounts for bond proceeds used to construct schools, libraries, and other major capital facilities for local governments. Building authorities are blended component units created by joint-powers agreements between local governments and the State or other local governments for the purpose of financing the construction of state buildings. The funds account for bond proceeds used to finance and construct state buildings and parking facilities. Other capital projects funds account for transactions related to resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. 246 Nonmajor Governmental Funds This page intentionally left blank 247 State of California Annual Comprehensive Financial Report Combining Balance Sheet Nonmajor Governmental Funds June 30, 2022 (amounts in thousands) Special Revenue Business and Financing Professions for Local Cigarette, Regulatory Governments Tobacco, and and Licensing and the Public Cannabis Tax ASSETS Cash and pooled investments................................................................. $ 1,904,508 $ 3,082,099 $ 2,537,879 Investments............................................................................................. — 1,129,983 — Receivables (net).................................................................................... 185,349 177,391 665,472 Due from other funds.............................................................................. 48,931 577,315 1,589 Due from other governments.................................................................. 9,329 3,545 175,136 Interfund receivables.............................................................................. 154,719 88,806 29,669 Loans receivable..................................................................................... 101,700 2,693,684 8,339 Other assets............................................................................................. — — — Total assets......................................................................................... $ 2,404,536 $ 7,752,823 $ 3,418,084 LIABILITIES Accounts payable.................................................................................... $ 180,261 $ 236,224 $ 62,544 Due to other funds.................................................................................. 22,975 21,581 27,817 Due to component units.......................................................................... — — 26,240 Due to other governments....................................................................... 6,964 285,516 148,216 Interfund payables.................................................................................. 17,129 — — Revenues received in advance................................................................ 58,535 907 — Deposits.................................................................................................. — — — Other liabilities....................................................................................... 32,770 155 6 Total liabilities................................................................................... 318,634 544,383 264,823 DEFERRED INFLOWS OF RESOURCES......................................... — — 214,960 Total liabilities and deferred inflows of resources..................... 318,634 544,383 479,783 FUND BALANCES Nonspendable......................................................................................... — — — Restricted................................................................................................ 1,453,624 6,823,406 2,938,301 Committed.............................................................................................. 632,278 385,034 — Assigned................................................................................................. — — — Total fund balances........................................................................... 2,085,902 7,208,440 2,938,301 Total liabilities, deferred inflows of resources, and fund balances........................................................................ $ 2,404,536 $ 7,752,823 $ 3,418,084 248 Nonmajor Governmental Funds Special Revenue Golden State Other Total Local Tobacco Special Nonmajor Revenue and Trial Securitization Revenue Special Public Safety Courts Corporation Programs Revenue $ 3,793,618 $ 1,366,888 $ 263,893 $ 4,132,804 $ 17,081,689 — 402,846 49,799 — 1,582,628 3,182 229,924 220,540 280,393 1,762,251 213,195 16,552 — 543,052 1,400,634 — 45,374 — 56,749 290,133 44,992 53,432 — 530,787 902,405 11,791 14,375 — 123,787 2,953,676 — 42,027 — — 42,027 $ 4,066,778 $ 2,171,418 $ 534,232 $ 5,667,572 $ 26,015,443 $ 5,445 $ 263,746 $ 53 $ 480,446 $ 1,228,719 79,435 42,253 — 99,623 293,684 — — — 7,480 33,720 3,884,320 101,377 — 479,711 4,906,104 — — — 25,071 42,200 — 198,073 — 70,492 328,007 — 385,800 — 90,371 476,171 — 100,135 — 54,544 187,610 3,969,200 1,091,384 53 1,307,738 7,496,215 — 3,021 — 9,617 227,598 3,969,200 1,094,405 53 1,317,355 7,723,813 — 39,130 — — 39,130 8,541 845,684 534,179 3,914,520 16,518,255 89,037 128,742 — 435,697 1,670,788 — 63,457 — — 63,457 97,578 1,077,013 534,179 4,350,217 18,291,630 $ 4,066,778 $ 2,171,418 $ 534,232 $ 5,667,572 $ 26,015,443 (continued) 249 State of California Annual Comprehensive Financial Report Combining Balance Sheet (continued) Nonmajor Governmental Funds June 30, 2022 (amounts in thousands) Debt Service Total No Place Transportation Nonmajor Like Home Debt Debt Debt Service Service Service ASSETS Cash and pooled investments................................................................ $ 83,634 $ — $ 83,634 Investments............................................................................................ — — — Receivables (net)................................................................................... — — — Due from other funds............................................................................ 252 209,237 209,489 Due from other governments................................................................. — — — Interfund receivables............................................................................. — — — Loans receivable.................................................................................... — — — Other assets........................................................................................... — — — Total assets....................................................................................... $ 83,886 $ 209,237 $ 293,123 LIABILITIES Accounts payable.................................................................................. $ 214 $ — $ 214 Due to other funds................................................................................. 52 209,237 209,289 Due to component units......................................................................... — — — Due to other governments..................................................................... — — — Interfund payables................................................................................. — — — Revenues received in advance............................................................... — — — Deposits................................................................................................. — — — Other liabilities...................................................................................... — — — Total liabilities.................................................................................. 266 209,237 209,503 DEFERRED INFLOWS OF RESOURCES....................................... — — — Total liabilities and deferred inflows of resources..................... 266 209,237 209,503 FUND BALANCES Nonspendable........................................................................................ — — — Restricted............................................................................................... 83,620 — 83,620 Committed............................................................................................. — — — Assigned................................................................................................ — — — Total fund balances......................................................................... 83,620 — 83,620 Total liabilities, deferred inflows of resources, and fund balances....................................................................... $ 83,886 $ 209,237 $ 293,123 250 Nonmajor Governmental Funds Capital Projects Total Higher Local Other Nonmajor Total Education Hospital Government Building Capital Capital Nonmajor Construction Construction Construction Authorities Projects Projects Governmental $ 174,540 $ 10,447 $ 719,523 $ 5,946 $ 226,334 $ 1,136,790 $ 18,302,113 — — — — — — 1,582,628 — — — — 29 29 1,762,280 327 60 1,483 3,016 6,856 11,742 1,621,865 — — 9,151 — — 9,151 299,284 — — — — 5,438 5,438 907,843 — — — — 185,744 185,744 3,139,420 — — — — — — 42,027 $ 174,867 $ 10,507 $ 730,157 $ 8,962 $ 424,401 $ 1,348,894 $ 27,657,460 $ — $ 149 $ — $ — $ 2,447 $ 2,596 $ 1,231,529 — — 6,183 — 1,241 7,424 510,397 — — — — — — 33,720 — — 69,040 — 54 69,094 4,975,198 — — — — — — 42,200 — — — — — — 328,007 — — — — — — 476,171 — — — 18 — 18 187,628 — 149 75,223 18 3,742 79,132 7,784,850 — — — — — — 227,598 — 149 75,223 18 3,742 79,132 8,012,448 — — — — — — 39,130 174,867 10,358 654,934 8,944 337,432 1,186,535 17,788,410 — — — — 83,227 83,227 1,754,015 — — — — — — 63,457 174,867 10,358 654,934 8,944 420,659 1,269,762 19,645,012 $ 174,867 $ 10,507 $ 730,157 $ 8,962 $ 424,401 $ 1,348,894 $ 27,657,460 (concluded) 251 State of California Annual Comprehensive Financial Report Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended June 30, 2022 (amounts in thousands) Special Revenue Business and Financing Professions for Local Cigarette, Regulatory Governments Tobacco, and and Licensing and the Public Cannabis Tax REVENUES Personal income taxes.................................................................................. $ — $ 2,579,075 $ — Sales and use taxes....................................................................................... — — — Motor vehicle excise taxes........................................................................... 75,452 61,042 — Other taxes................................................................................................... 2,720 694,425 2,803,927 Intergovernmental........................................................................................ — — — Licenses and permits.................................................................................... 752,049 16,236 196 Charges for services..................................................................................... 52,742 3,113 50 Fees.............................................................................................................. 1,808,056 474,286 102 Penalties....................................................................................................... 16,885 139 — Investment and interest................................................................................ 25,157 7,781 2,129 Escheat......................................................................................................... — — — Other............................................................................................................ 39,670 51,048 7,612 Total revenues....................................................................................... 2,772,731 3,887,145 2,814,016 EXPENDITURES Current: General government.................................................................................. 924,723 823,137 100,985 Education.................................................................................................. 18,687 4,287 145,606 Health and human services....................................................................... 599,175 3,157,668 1,761,127 Natural resources and environmental protection...................................... 96,082 93,579 34,991 Business, consumer services, and housing............................................... 804,689 160,643 26,639 Transportation........................................................................................... 9,100 — 8,229 Corrections and rehabilitation................................................................... — 123,754 3,571 Capital outlay............................................................................................... 11,747 2,535 — Debt service: Bond, commercial paper, and lease principal retirement.......................... 32,631 21,700 18 Interest and fiscal charges......................................................................... 1,686 4,406 34 Total expenditures................................................................................ 2,498,520 4,391,709 2,081,200 Excess (deficiency) of revenues over (under) expenditures................ 274,211 (504,564) 732,816 OTHER FINANCING SOURCES (USES) General obligation bonds and commercial paper issued.............................. — 180,245 — Revenue bonds issued.................................................................................. — 1,039,000 — Refunding debt issued.................................................................................. — — — Payment to refund long-term debt............................................................... — — — Premium on bonds issued............................................................................ — 103 — Proceeds from leases.................................................................................... 11,747 2,535 — Transfers in.................................................................................................. 43,613 945,043 3,000 Transfers out................................................................................................ (8,458) (148,986) (38,015) Total other financing sources (uses) ................................................... 46,902 2,017,940 (35,015) Net change in fund balances................................................................ 321,113 1,513,376 697,801 Fund balances – beginning........................................................................... 1,764,789 5,695,064 2,240,500 Fund balances – ending................................................................................ $ 2,085,902 $ 7,208,440 $ 2,938,301 252 Nonmajor Governmental Funds Special Revenue Golden State Other Total Local Tobacco Special Nonmajor Revenue and Trial Securitization Revenue Special Public Safety Courts Corporation Programs Revenue $ — $ — $ — $ — $ 2,579,075 18,534,894 — — — 18,534,894 — — — — 136,494 — — — — 3,501,072 3,547 826,826 — — 830,373 3,173,461 — — 144,880 4,086,822 — 57,350 — 325,721 438,976 — 520,057 — 1,404,742 4,207,243 231 280,406 — 268,120 565,781 3,236 6,235 — 15,862 60,400 — 1,555 — — 1,555 — 162,234 482,247 829,517 1,572,328 21,715,369 1,854,663 482,247 2,988,842 36,515,013 6,103,962 3,716,475 371 1,518,613 13,188,266 — — — 7,662 176,242 13,383,914 — — 1,015,564 19,917,448 — — — 75,190 299,842 488 105 — 27,053 1,019,617 — — — 1,593 18,922 2,209,601 — — 58 2,336,984 — — — 1,563 15,845 — 15,662 2,981,103 9,875 3,060,989 1 847 799,366 808 807,148 21,697,966 3,733,089 3,780,840 2,657,979 40,841,303 17,403 (1,878,426) (3,298,593) 330,863 (4,326,290) — — — — 180,245 — — — — 1,039,000 — — 6,024,571 — 6,024,571 — — (2,935,087) — (2,935,087) — — — — 103 — — — 1,563 15,845 29,999 2,135,425 — 108,699 3,265,779 (44,985) (2,284) — (24,341) (267,069) (14,986) 2,133,141 3,089,484 85,921 7,323,387 2,417 254,715 (209,109) 416,784 2,997,097 95,161 822,298 743,288 3,933,433 15,294,533 $ 97,578 $ 1,077,013 $ 534,179 $ 4,350,217 $ 18,291,630 (continued) 253 State of California Annual Comprehensive Financial Report Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (continued) Nonmajor Governmental Funds Year Ended June 30, 2022 (amounts in thousands) Debt Service Total No Place Transportation Nonmajor Like Home Debt Debt Debt Service Service Service REVENUES Personal income taxes ........................................................................... $ — $ — $ — Sales and use taxes ................................................................................ — — — Motor vehicle excise taxes.................................................................... — — — Other taxes............................................................................................. — — — Intergovernmental................................................................................. — — — Licenses and permits............................................................................. — — — Charges for services.............................................................................. — — — Fees........................................................................................................ — — — Penalties................................................................................................ — — — Investment and interest.......................................................................... 459 — 459 Escheat.................................................................................................. — — — Other...................................................................................................... — — — Total revenues................................................................................ 459 — 459 EXPENDITURES Current: General government ........................................................................... 474 — 474 Education............................................................................................ — — — Health and human services................................................................. — — — Natural resources and environmental protection................................ — — — Business, consumer services, and housing......................................... — — — Transportation .................................................................................... — — — Corrections and rehabilitation ............................................................ — — — Capital outlay ........................................................................................ — — — Debt service: Bond, commercial paper, and lease principal retirement................... 97,010 882,523 979,533 Interest and fiscal charges .................................................................. 23,156 704,056 727,212 Total expenditures ......................................................................... 120,640 1,586,579 1,707,219 Excess (deficiency) of revenues over (under) expenditures......... (120,181) (1,586,579) (1,706,760) OTHER FINANCING SOURCES (USES) General obligation bonds and commercial paper issued....................... — — — Revenue bonds issued ........................................................................... 11,000 — 11,000 Refunding debt issued ........................................................................... — — — Payment to refund long-term debt......................................................... — — — Premium on bonds issued...................................................................... — — — Proceeds from leases ............................................................................. — — Transfers in............................................................................................ 124,987 1,586,579 1,711,566 Transfers out.......................................................................................... — — — Total other financing sources (uses)............................................. 135,987 1,586,579 1,722,566 Net change in fund balances......................................................... 15,806 — 15,806 Fund balances – beginning.................................................................... 67,814 — 67,814 Fund balances – ending......................................................................... $ 83,620 $ — $ 83,620 254 Nonmajor Governmental Funds Capital Projects Total Higher Local Other Nonmajor Total Education Hospital Government Building Capital Capital Nonmajor Construction Construction Construction Authorities Projects Projects Governmental $ — $ — $ — $ — $ — $ — $ 2,579,075 — — — — — — 18,534,894 — — — — — — 136,494 — — — — — — 3,501,072 — — — — — — 830,373 — — — — 49 49 4,086,871 — — — — — — 438,976 — — — — — — 4,207,243 — — — — — — 565,781 816 10 7,075 43 128 8,072 68,931 — — — — — — 1,555 — — — — 7,145 7,145 1,579,473 816 10 7,075 43 7,322 15,266 36,530,738 — 149,536 — — — 149,536 13,338,276 — — 1,468,587 — — 1,468,587 1,644,829 — — — — — — 19,917,448 — — — — 1,378 1,378 301,220 — — — — 1 1 1,019,618 — — — — — — 18,922 — — — — — — 2,336,984 248,424 715 10,116 — 52,484 311,739 327,584 603,130 95,945 3,186,735 29,485 30,695 3,945,990 7,986,512 9,117 59 50,344 1,260 30 60,810 1,595,170 860,671 246,255 4,715,782 30,745 84,588 5,938,041 48,486,563 (859,855) (246,245) (4,708,707) (30,702) (77,266) (5,922,775) (11,955,825) 124,385 132,085 1,948,590 — 61,910 2,266,970 2,447,215 — — — — — — 1,050,000 466,185 — 2,108,255 — — 2,574,440 8,599,011 — — — — — — (2,935,087) 121,677 16,669 617,524 — 134 756,004 756,107 — — — — — — 15,845 — — 250,000 11,478 52,705 314,183 5,291,528 — — (1,154) — (1,227) (2,381) (269,450) 712,247 148,754 4,923,215 11,478 113,522 5,909,216 14,955,169 (147,608) (97,491) 214,508 (19,224) 36,256 (13,559) 2,999,344 322,475 107,849 440,426 28,168 384,403 1,283,321 16,645,668 $ 174,867 $ 10,358 $ 654,934 $ 8,944 $ 420,659 $ 1,269,762 $ 19,645,012 (concluded) 255 State of California Annual Comprehensive Financial Report Budgetary Comparison Schedule Nonmajor Governmental Funds1 Year Ended June 30, 2022 (amounts in thousands) Budgeted Actual Variance with Amounts Amounts Final Budget REVENUES Cigarette and tobacco taxes.................................................................... $ 332,161 $ 332,161 $ — Vehicle license fees ............................................................................... 2,412,638 2,412,638 — Personal income tax .............................................................................. 2,579,075 2,579,075 — Retail sales and use taxes ...................................................................... 18,534,974 18,534,974 — Other major taxes and licenses .............................................................. 1,889 1,889 — Other revenues ....................................................................................... 9,324,525 9,324,525 — Total revenues .................................................................................. 33,185,262 33,185,262 — EXPENDITURES Business, consumer services, and housing ............................................ 2,212,005 2,092,618 (119,387) Transportation ....................................................................................... 1,619,277 1,618,708 (569) Natural resources and environmental protection ................................... 390,807 336,510 (54,297) Health and human services .................................................................... 24,244,895 23,697,079 (547,816) Corrections and rehabilitation ............................................................... 19,498 19,481 (17) Education ............................................................................................... 2,075,492 1,761,930 (313,562) General government: Tax relief ............................................................................................ 4,466 4,466 — Other general government ................................................................. 9,660,023 9,027,480 (632,543) Total expenditures ........................................................................... 40,226,463 38,558,272 (1,668,191) OTHER FINANCING SOURCES (USES) Transfers from other funds .................................................................... — 44,125,847 — Transfers to other funds ......................................................................... — (38,405,256) — Other additions....................................................................................... — 2,844,728 — Total other financing sources (uses) ............................................... — 8,565,319 — Excess of revenues and other sources over expenditures and other uses........................................................... — 3,192,309 — Fund balances – beginning, restated..................................................... — 10,067,034 — Fund balances – ending .......................................................................... $ — $ 13,259,343 $ — 1On a budgetary basis, the State’s funds are classified as either governmental cost funds or nongovernmental cost funds. The governmental cost funds include the General Fund, most of the funds that comprise the Transportation Fund and the Environmental and Natural Resources Fund, Health Care Related Programs Fund, and many other funds that make up the nonmajor governmental funds reported in these financial statements. Governmental cost funds derive their revenue from taxes, licenses, and fees that support the general operations of the State. The appropriations of the budgetary basis governmental cost funds form the annual appropriated budget of the State. Nongovernmental cost funds consist of funds that derive their receipts from sources other than general and special taxes, licenses, fees, or state revenues and mainly represent the proprietary and fiduciary funds reported in these financial statements. Expenditures of these funds do not represent a cost of government and most of the nongovernmental cost funds are not included in the annual appropriated budget. Therefore, the expenditures of these funds are not included in this schedule. The Federal Fund is one nongovernmental cost fund that is included in the annual appropriated budget. The Budgetary Comparison Schedule for the General Fund, Federal Fund, Transportation Fund, Environmental and Natural Resources Fund, and Health Care Related Programs Fund is included in the Required Supplementary Information section; the remaining governmental cost funds are reflected in this schedule. Additional information on the budgetary basis of accounting can be found in the Management’s Discussion and Analysis, Note 2 – Budgetary and Legal Compliance, notes to the Required Supplementary Information, and in the separately issued Annual Comprehensive Financial Report Supplement. 256 Internal Service Funds Internal service funds account for state activities that provide goods and services to other state departments or agencies on a cost reimbursement basis. Following are brief descriptions of the internal service funds. The Public Buildings Construction Fund accounts for rental charges from the lease of public assets and the related lease-purchase revenue bonds. The Architecture Revolving Fund accounts for charges for the costs of architectural services, construction, and improvements. The Service Revolving Fund accounts for charges for printing and procurement services rendered by the Department of General Services for state departments and other public entities. The Prison Industries Fund accounts for charges for goods produced by inmates in state prisons that are sold to state departments and other governmental entities. The Financial Information Systems Fund accounts for charges for the development and subsequent use of the State’s new financial information system. The Technology Services Revolving Fund accounts for charges for technology services performed for various state, federal, and local government entities by the Department of Technology. The Water Resources Revolving Fund accounts for charges for administrative services related to water delivery provided by the Department of Water Resources to federal, state, and local government agencies. Other internal service program funds account for all other goods and services provided to other agencies, departments, or governments on a cost-reimbursement basis. 257 State of California Annual Comprehensive Financial Report Combining Statement of Net Position Internal Service Funds June 30, 2022 (amounts in thousands) Public Buildings Architecture Construction Revolving ASSETS Current assets: Cash and pooled investments............................................................................................... $ — $ 1,333,796 Restricted assets: Cash and pooled investments............................................................................................ 570,780 — Contracts and installments receivable.................................................................................. 533,138 — Receivables (net).................................................................................................................. — 3,659 Due from other funds............................................................................................................ 205,180 85,555 Due from other governments................................................................................................ — — Prepaid items........................................................................................................................ — 15,007 Inventories............................................................................................................................ — — Total current assets............................................................................................................ 1,309,098 1,438,017 Noncurrent assets: Restricted assets: Cash and pooled investments............................................................................................ 117,598 — Contracts and installments receivable.................................................................................. 7,861,763 — Receivables (net).................................................................................................................. — — Interfund receivables............................................................................................................ — — Loans receivable................................................................................................................... — — Long-term prepaid charges................................................................................................... 181 — Capital assets: Land................................................................................................................................... — — Buildings and other depreciable property.......................................................................... — 211 Intangible assets – amortizable.......................................................................................... — — Less: accumulated depreciation/amortization................................................................... — (211) Construction/development in progress.............................................................................. 2,611,825 — Total noncurrent assets...................................................................................................... 10,591,367 — Total assets.................................................................................................................... 11,900,465 1,438,017 DEFERRED OUTFLOWS OF RESOURCES.................................................................... 117,199 — Total assets and deferred outflows of resources...................................................... $ 12,017,664 $ 1,438,017 258 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ 214,043 $ 383,528 $ 9,400 $ 52,862 $ 35,345 $ 370,704 $ 2,399,678 — — — — — — 570,780 — — — — — — 533,138 2,960 6,507 — 3,804 788 11,762 29,480 244,238 1,812 — 68,472 194,091 92,993 892,341 1,590 244 — 14,431 1,000 26,435 43,700 153,896 3,225 2,000 1,206 12,427 2,934 190,695 6,002 57,780 — — 866 17,218 81,866 622,729 453,096 11,400 140,775 244,517 522,046 4,741,678 — — — — — — 117,598 — — — — — — 7,861,763 — — — — — 5,136 5,136 — — — — — 37,844 37,844 — — — 577 — 7,541 8,118 — — — — — — 181 — — — — — 2,080 2,080 170,067 217,116 2,977 160,220 38,787 82,968 672,346 240,025 5,819 2,764 25,750 12,153 66,326 352,837 (153,283) (159,597) (4,892) (133,598) (40,842) (87,622) (580,045) — 12,649 346,517 — — 645 2,971,636 256,809 75,987 347,366 52,949 10,098 114,918 11,449,494 879,538 529,083 358,766 193,724 254,615 636,964 16,191,172 158,716 48,737 — 69,900 — 161,669 556,221 $ 1,038,254 $ 577,820 $ 358,766 $ 263,624 $ 254,615 $ 798,633 $ 16,747,393 (continued) 259 State of California Annual Comprehensive Financial Report Combining Statement of Net Position (continued) Internal Service Funds June 30, 2022 (amounts in thousands) Public Buildings Architecture Construction Revolving LIABILITIES Current liabilities: Accounts payable.................................................................................................................. $ 24,514 $ 14,451 Due to other funds................................................................................................................. 61,469 103,378 Due to other governments..................................................................................................... 33,743 1,015 Revenues received in advance.............................................................................................. 1,475 1,314,437 Deposits................................................................................................................................. — — Contracts and notes payable.................................................................................................. — — Interest payable..................................................................................................................... 98,520 — Current portion of long-term obligations.............................................................................. 584,768 — Other current liabilities......................................................................................................... 6,241 13 Total current liabilities....................................................................................................... 810,730 1,433,294 Noncurrent liabilities: Interfund payables................................................................................................................. 2,519,404 3,189 Compensated absences payable............................................................................................ — 130 Workers’ compensation benefits payable............................................................................. — 205 Lease liability........................................................................................................................ — — Revenue bonds payable......................................................................................................... 8,574,870 — Net other postemployment benefits liability......................................................................... — — Net pension liability.............................................................................................................. — — Other noncurrent liabilities................................................................................................... — — Total noncurrent liabilities................................................................................................. 11,094,274 3,524 Total liabilities............................................................................................................... 11,905,004 1,436,818 DEFERRED INFLOWS OF RESOURCES........................................................................ 13,604 — Total liabilities and deferred inflows of resources.................................................. 11,918,608 1,436,818 NET POSITION Net investment in capital assets............................................................................................ — — Restricted – expendable: Construction.................................................................................................................... 99,056 — Total expendable.......................................................................................................... 99,056 — Unrestricted........................................................................................................................... — 1,199 Total net position (deficit)............................................................................................ 99,056 1,199 Total liabilities, deferred inflows of resources, and net position........................... $ 12,017,664 $ 1,438,017 260 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ 86,244 $ 16,021 $ 270 $ 26,657 $ 17,281 $ 276,581 $ 462,019 43,139 2,287 18 999 1,337 94,014 306,641 23,254 — — — 8,968 2,734 69,714 15,000 3,178 — — 176 29,758 1,364,024 2,365 — — — — — 2,365 2,840 — — 11,302 20,326 — 34,468 — — — — — — 98,520 19,191 3,943 — 4,066 — 19,297 631,265 10,103 4,949 — — 36 — 21,342 202,136 30,378 288 43,024 48,124 422,384 2,990,358 29,442 2,234 37,650 7,216 225,907 847 2,825,889 97,712 15,456 — 46,444 — 41,046 200,788 29,492 20,794 — 772 — 1,039 52,302 182,298 — — 9,286 — 46,781 238,365 — — — — — — 8,574,870 685,952 283,968 — 309,764 — 589,418 1,869,102 318,149 27,216 — 136,985 — 365,355 847,705 — — — 9,322 12,843 — 22,165 1,343,045 349,668 37,650 519,789 238,750 1,044,486 14,631,186 1,545,181 380,046 37,938 562,813 286,874 1,466,870 17,621,544 249,524 87,679 — 112,487 — 262,109 725,403 1,794,705 467,725 37,938 675,300 286,874 1,728,979 18,346,947 252,780 75,987 347,365 19,851 — 9,168 705,151 — — — — — — 99,056 — — — — — — 99,056 (1,009,231) 34,108 (26,537) (431,527) (32,259) (939,514) (2,403,761) (756,451) 110,095 320,828 (411,676) (32,259) (930,346) (1,599,554) $ 1,038,254 $ 577,820 $ 358,766 $ 263,624 $ 254,615 $ 798,633 $ 16,747,393 (concluded) 261 State of California Annual Comprehensive Financial Report Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds Year Ended June 30, 2022 (amounts in thousands) Public Buildings Architecture Construction Revolving OPERATING REVENUES Services and sales.................................................................................................................... $ — $ 1,146,858 Investment and interest ........................................................................................................... 4,893 — Rent.......................................................................................................................................... 349,581 — Total operating revenues.................................................................................................... 354,474 1,146,858 OPERATING EXPENSES Personal services ..................................................................................................................... — — Supplies .................................................................................................................................. — — Services and charges ............................................................................................................... 7,396 1,033,716 Depreciation............................................................................................................................. — — Interest expense....................................................................................................................... 411,384 — Amortization of long-term prepaid charges ............................................................................ 42 — Total operating expenses ................................................................................................... 418,822 1,033,716 Operating income (loss) .................................................................................................... (64,348) 113,142 NONOPERATING REVENUES (EXPENSES) Investment and interest income .............................................................................................. — — Interest expense and fiscal charges ......................................................................................... — — Other........................................................................................................................................ (660) — Total nonoperating revenues (expenses)........................................................................... (660) — Income (loss) before transfers ........................................................................................... (65,008) 113,142 Gain on early extinguishment of debt ..................................................................................... 11,576 — Transfers in ............................................................................................................................. — — Transfers out ........................................................................................................................... — (2,559) Change in net position........................................................................................................ (53,432) 110,583 Total net position (deficit) – beginning.................................................................................... 152,488 (109,384) Total net position (deficit) – ending ........................................................................................ $ 99,056 $ 1,199 * Restated 262 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ 900,225 $ 359,477 $ 18 $ 470,026 $ 664,286 $ 1,246,732 $ 4,787,622 — — — — — 72 4,965 — — — — — 216 349,797 900,225 359,477 18 470,026 664,286 1,247,020 5,142,384 261,457 104,167 — 110,339 — 415,199 891,162 — 3,129 — — 20,201 — 23,330 304,960 191,767 — 297,552 655,842 897,029 3,388,262 44,303 10,052 168 21,094 4,120 15,062 94,799 — — — 258 — — 411,642 — — — — — — 42 610,720 309,115 168 429,243 680,163 1,327,290 4,809,237 289,505 50,362 (150) 40,783 (15,877) (80,270) 333,147 — 50 — 215 — 461 726 (3,184) (61) — (149) — (648) (4,042) — (73) — (857) — 1,586 (4) (3,184) (84) — (791) — 1,399 (3,320) 286,321 50,278 (150) 39,992 (15,877) (78,871) 329,827 — — — — — — 11,576 2,559 — — 1,152 — — 3,711 (10,986) — — — — (29,939) (43,484) 277,894 50,278 (150) 41,144 (15,877) (108,810) 301,630 (1,034,345) 59,817 320,978 (452,820) (16,382) (821,536) * (1,901,184) $ (756,451) $ 110,095 $ 320,828 $ (411,676) $ (32,259) $ (930,346) $ (1,599,554) 263 State of California Annual Comprehensive Financial Report Combining Statement of Cash Flows Internal Service Funds Year Ended June 30, 2022 (amounts in thousands) Public Buildings Architecture Construction Revolving CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers ....................................................................................................... $ 12,212 $ — Receipts from interfund services provided ........................................................................... 912,843 1,626,966 Payments to suppliers ........................................................................................................... (3,498) (1,019,608) Payments to employees ......................................................................................................... — (108,724) Payments for interfund services used.................................................................................... — — Claims paid to other than employees .................................................................................... — — Other receipts (payments)...................................................................................................... (456,973) 972 Net cash provided by (used in) operating activities....................................................... 464,584 499,606 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Changes in interfund receivables........................................................................................... — — Changes in interfund payables and loans payable ................................................................ (34,459) (387) Interest paid ........................................................................................................................... — — Transfers in ........................................................................................................................... — — Transfers out.......................................................................................................................... — (2,559) Other receipts......................................................................................................................... — — Net cash provided by (used in) noncapital financing activities..................................... (34,459) (2,946) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets .................................................................................................. (1,211,951) — Proceeds from sale of capital assets ...................................................................................... — — Proceeds from long-term capital financing............................................................................ — — Proceeds from revenue bonds................................................................................................ 2,434,342 — Retirement of revenue bonds................................................................................................. (1,922,085) — Interest paid............................................................................................................................ — — Net cash used in capital and related financing activities............................................... (699,694) — CASH FLOWS FROM INVESTING ACTIVITIES Change in loans receivable.................................................................................................... — — Earnings on investments........................................................................................................ — — Net cash provided by investing activities........................................................................ — — Net increase (decrease) in cash and pooled investments.................................................. (269,569) 496,660 Cash and pooled investments – beginning ........................................................................... 957,947 837,136 Cash and pooled investments – ending................................................................................. $ 688,378 $ 1,333,796 264 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ — $ — $ — $ — $ — $ — $ 12,212 742,351 365,971 2,454 438,828 608,228 1,320,776 6,018,417 (319,246) (191,587) — (308,947) (29,888) (885,572) (2,758,346) (380,227) (111,399) — (139,395) — (310,135) (1,049,880) — (19,114) — — — (20,829) (39,943) — — — — (655,842) — (655,842) 29,772 45 — (18,095) 14,525 2,530 (427,224) 72,650 43,916 2,454 (27,609) (62,977) 106,770 1,099,394 — — — 3,149 — 9,850 12,999 (20,029) (1,149) — (154) 63,296 847 7,965 — (61) — — — — (61) 2,559 — — 1,152 — — 3,711 (10,986) — — — — (29,939) (43,484) — — — 2,781 — 1,586 4,367 (28,456) (1,210) — 6,928 63,296 (17,656) (14,503) (235,307) (9,886) (874) (38,666) (3,908) (70,246) (1,570,838) 1,536 252 — 6,280 7 305 8,380 201,489 — — 13,352 — 55,963 270,804 — — — — — — 2,434,342 — — — — — — (1,922,085) (3,184) — — (149) — (646) (3,979) (35,466) (9,634) (874) (19,183) (3,901) (14,624) (783,376) — — — — — (2) (2) — 55 — 215 — 461 731 — 55 — 215 — 459 729 8,728 33,127 1,580 (39,649) (3,582) 74,949 302,244 205,315 350,401 7,820 92,511 38,927 295,755 2,785,812 $ 214,043 $ 383,528 $ 9,400 $ 52,862 $ 35,345 $ 370,704 $ 3,088,056 (continued) 265 State of California Annual Comprehensive Financial Report Combining Statement of Cash Flows (continued) Internal Service Funds Year Ended June 30, 2022 (amounts in thousands) Public Buildings Architecture Construction Revolving RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss)........................................................................................................... $ (64,348) $ 113,142 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation.......................................................................................................................... — — Amortization of premiums and discounts............................................................................. (107,355) — Amortization of long-term prepaid charges.......................................................................... 42 — Other...................................................................................................................................... 11,446 — Change in account balances: Receivables......................................................................................................................... — (2,716) Due from other funds.......................................................................................................... (4,355) 31,977 Due from other governments.............................................................................................. — — Prepaid items...................................................................................................................... — 37 Inventories.......................................................................................................................... — — Contracts and installments receivable................................................................................ 578,355 — Leases receivable................................................................................................................ — — Deferred outflow of resources............................................................................................ — 13,008 Accounts payable................................................................................................................ (824) 14,071 Due to other funds.............................................................................................................. 51,168 43,732 Due to component units...................................................................................................... — 1,015 Due to other governments................................................................................................... — (43) Deposits.............................................................................................................................. — — Contracts and notes payable............................................................................................... — — Interest payable................................................................................................................... 6,593 — Revenues received in advance............................................................................................ (4,500) 407,115 Other current liabilities....................................................................................................... (1,638) — Benefits payable................................................................................................................. — — Compensated absences payable.......................................................................................... — (417) Other noncurrent liabilities................................................................................................. — (113,073) Deferred inflow of resources.............................................................................................. — (8,242) Total adjustments............................................................................................................. 528,932 386,464 Net cash provided by (used in) operating activities............................................................ $ 464,584 $ 499,606 Noncash investing, capital, and financing activities Miscellaneous noncash activities transactions ..................................................................... $ 3,753 $ — 266 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ 289,505 $ 50,362 $ (150) $ 40,783 $ (15,877) $ (80,270) $ 333,147 44,303 10,052 168 21,094 4,120 15,062 94,799 — — — — — — (107,355) — — — — — — 42 — 45 — — — — 11,491 (471) (1,220) — (462) (435) 43,407 38,103 (148,096) 3,944 — (25,577) (57,961) (41,319) (241,387) (675) (90) — (11,070) (985) 1,392 (11,428) (34,120) (2,182) 2,483 (524) (4,830) (819) (39,955) (4,467) (6,012) — — 84 1,827 (8,568) — — — — — — 578,355 — — — — — (5,287) (5,287) (24,404) 23,829 — (7,425) — (20,013) (15,005) 24,301 (3,490) 116 (10,613) (4,941) 10,449 29,069 (5,236) (4,534) (163) (5,159) 2,426 94,475 176,709 — — — — — — 1,015 21,120 — — — 8,928 1,138 31,143 26 — — — — — 26 (308) — — (571) 7,904 — 7,025 — — — — — — 6,593 (4,071) 373 — — (88) (38,349) 360,480 9,609 1,533 — — 17 — 9,521 — — — — — 1 1 (27,325) (821) — (9,865) — 17,389 (21,039) (207,642) (68,717) — (82,660) (1,339) (83,534) (556,965) 140,601 40,844 — 64,440 — 191,221 428,864 (216,855) (6,446) 2,604 (68,392) (47,100) 187,040 766,247 $ 72,650 $ 43,916 $ 2,454 $ (27,609) $ (62,977) $ 106,770 $ 1,099,394 (concluded) $ — $ 31 $ — $ — $ — $ — $ 3,784 267 State of California Annual Comprehensive Financial Report This page intentionally left blank 268 Nonmajor Enterprise Funds Enterprise funds account for operations that are financed and operated in a manner similar to private business enterprises, in which the costs of providing goods or services to the general public on a continuing basis are intended to be financed or recovered primarily through user charges. Following are brief descriptions of nonmajor enterprise funds. The State Water Pollution Control Revolving Fund accounts for loans to finance the construction of publicly owned water pollution control facilities. The Safe Drinking Water State Revolving Fund accounts for loans to finance the construction of publicly owned water systems for drinking water infrastructure projects. The Housing Loan Fund accounts for financing and contracts for the sale of properties to eligible California veterans. Other enterprise program funds account for all other goods or services provided to the general public on a continuing basis when all or most of the cost involved is to be financed by user charges, or when periodic measurement of the results of operations is appropriate for management control, accountability, capital maintenance, public policy, or other purposes. 269 State of California Annual Comprehensive Financial Report Combining Statement of Net Position Nonmajor Enterprise Funds June 30, 2022 (amounts in thousands) State Water Safe Drinking Pollution Control Water State Revolving Revolving ASSETS Current assets: Cash and pooled investments........................................................................................ $ 388,257 $ 125,243 Restricted assets: Cash and pooled investments..................................................................................... 373,249 27,709 Due from other governments...................................................................................... 182,189 19,047 Receivables (net)........................................................................................................... — 5,384 Due from other funds.................................................................................................... 1,306 21,770 Due from other governments......................................................................................... 43,524 48,063 Prepaid items................................................................................................................. — — Inventories..................................................................................................................... — — Total current assets..................................................................................................... 988,525 247,216 Noncurrent assets: Restricted assets: Loans receivable......................................................................................................... 3,670,907 749,798 Investments.................................................................................................................... — — Interfund receivables..................................................................................................... 3,185 — Loans receivable............................................................................................................ 1,079,232 1,215,143 Capital assets: Land............................................................................................................................ — — Buildings and other depreciable property................................................................... — — Intangible assets – amortizable................................................................................... — — Less: accumulated depreciation/amortization............................................................ — — Construction/development in progress....................................................................... — — Other noncurrent assets................................................................................................. — — Total noncurrent assets............................................................................................... 4,753,324 1,964,941 Total assets.............................................................................................................. 5,741,849 2,212,157 DEFERRED OUTFLOWS OF RESOURCES........................................................... — — Total assets and deferred outflows of resources............................................... $ 5,741,849 $ 2,212,157 270 Nonmajor Enterprise Funds Other Housing Enterprise Loan Programs Total $ 189,406 $ 270,427 $ 973,333 — — 400,958 — — 201,236 31,247 626 37,257 — 2,382 25,458 — 286 91,873 — 21 21 — 5,698 5,698 220,653 279,440 1,735,834 — — 4,420,705 19,562 — 19,562 — 4,353 7,538 803,442 65,336 3,163,153 444 829 1,273 16,501 10,085 26,586 — 3,740 3,740 (16,260) (9,164) (25,424) — 106 106 9,964 — 9,964 833,653 75,285 7,627,203 1,054,306 354,725 9,363,037 2,982 8,874 11,856 $ 1,057,288 $ 363,599 $ 9,374,893 (continued) 271 State of California Annual Comprehensive Financial Report Combining Statement of Net Position (continued) Nonmajor Enterprise Funds June 30, 2022 (amounts in thousands) State Water Safe Drinking Pollution Control Water State Revolving Revolving LIABILITIES Current liabilities: Accounts payable.......................................................................................................... $ — $ — Due to other funds......................................................................................................... — 22,354 Due to other governments............................................................................................. — — Revenues received in advance....................................................................................... 5 — Interest payable............................................................................................................. 12,364 872 Current portion of long-term obligations...................................................................... 110,973 7,818 Total current liabilities................................................................................................ 123,342 31,044 Noncurrent liabilities: Interfund payables......................................................................................................... — — Compensated absences payable.................................................................................... — — Workers’ compensation benefits payable..................................................................... — — Lease liability................................................................................................................ — — General obligation bonds payable................................................................................. — — Revenue bonds payable................................................................................................. 1,007,169 72,289 Net other postemployment benefits liability................................................................. — — Net pension liability...................................................................................................... — — Other noncurrent liabilities............................................................................................ — — Total noncurrent liabilities.......................................................................................... 1,007,169 72,289 Total liabilities........................................................................................................ 1,130,511 103,333 DEFERRED INFLOWS OF RESOURCES............................................................... — — Total liabilities and deferred inflows of resources........................................................................................................ 1,130,511 103,333 NET POSITION Net investment in capital assets.................................................................................... — — Restricted – expendable: Debt service................................................................................................................ 373,249 — Security for revenue bonds......................................................................................... 3,853,096 — Other purposes............................................................................................................ — 2,108,824 Total expendable...................................................................................................... 4,226,345 2,108,824 Unrestricted................................................................................................................... 384,993 — Total net position.................................................................................................... 4,611,338 2,108,824 Total liabilities, deferred inflows of resources, and net position.................... $ 5,741,849 $ 2,212,157 272 Nonmajor Enterprise Funds Other Housing Enterprise Loan Programs Total $ 1,426 $ 9,103 $ 10,529 734 1,400 24,488 15 300 315 — 49 54 14,141 — 27,377 21,495 8,860 149,146 37,811 19,712 211,909 773 21,720 22,493 — 13,315 13,315 — 4,744 4,744 — 96 96 533,032 — 533,032 342,834 — 1,422,292 9,718 30,786 40,504 8,401 12,446 20,847 3,129 13,841 16,970 897,887 96,948 2,074,293 935,698 116,660 2,286,202 15,548 15,411 30,959 951,246 132,071 2,317,161 685 3,594 4,279 — — 373,249 — — 3,853,096 105,357 163,974 2,378,155 105,357 163,974 6,604,500 — 63,960 448,953 106,042 231,528 7,057,732 $ 1,057,288 $ 363,599 $ 9,374,893 (concluded) 273 State of California Annual Comprehensive Financial Report Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Nonmajor Enterprise Funds Year Ended June 30, 2022 (amounts in thousands) State Water Safe Drinking Pollution Control Water State Revolving Revolving OPERATING REVENUES Services and sales.............................................................................................................. $ 7,997 $ — Investment and interest...................................................................................................... 59,307 26,836 Other ................................................................................................................................. — — Total operating revenues.............................................................................................. 67,304 26,836 OPERATING EXPENSES Personal services............................................................................................................... — 15,674 Supplies............................................................................................................................. — — Services and charges......................................................................................................... 4,168 — Depreciation...................................................................................................................... — — Interest expense................................................................................................................. — — Other.................................................................................................................................. 510 7,305 Total operating expenses.............................................................................................. 4,678 22,979 Operating income (loss)............................................................................................... 62,626 3,857 NONOPERATING REVENUES (EXPENSES) Donations and grants......................................................................................................... 136,956 66,607 Investment and interest income......................................................................................... 2,391 541 Interest expense and fiscal charges................................................................................... (30,656) (1,629) Other.................................................................................................................................. — — Total nonoperating revenues (expenses)..................................................................... 108,691 65,519 Income (loss) before capital contributions and transfers............................................................................................................... 171,317 69,376 Transfers in........................................................................................................................ — — Transfers out...................................................................................................................... — — Change in net position 171,317 69,376 Total net position – beginning........................................................................................... 4,440,021 2,039,448 Total net position – ending................................................................................................ $ 4,611,338 $ 2,108,824 274 Nonmajor Enterprise Funds Other Housing Enterprise Loan Programs Total $ 1,803 $ 122,184 $ 131,984 41,298 300 127,741 2,719 542 3,261 45,820 123,026 262,986 4,700 21,896 42,270 — 65,463 65,463 13,956 75,744 93,868 — 2,534 2,534 26,708 — 26,708 — — 7,815 45,364 165,637 238,658 456 (42,611) 24,328 — — 203,563 — 7,709 10,641 — (18) (32,303) 48 102 150 48 7,793 182,051 504 (34,818) 206,379 — 52,082 52,082 — (55) (55) 504 17,209 258,406 105,538 214,319 6,799,326 $ 106,042 $ 231,528 $ 7,057,732 275 State of California Annual Comprehensive Financial Report Combining Statement of Cash Flows Nonmajor Enterprise Funds Year Ended June 30, 2022 (amounts in thousands) State Water Safe Drinking Pollution Control Water State Revolving Revolving CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers/employers............................................................................ $ 58,190 $ 27,467 Receipts from interfund services provided................................................................... — — Payments to suppliers................................................................................................... (4,678) (19,878) Payments to employees................................................................................................ — — Payments for interfund services used........................................................................... (42) — Other payments............................................................................................................ (159,933) (109,617) Net cash provided by (used in) operating activities.............................................. (106,463) (102,028) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Changes in interfund receivables and loans receivable................................................ 1,275 — Changes in interfund payables and loans payable........................................................ — — Retirement of general obligation bonds....................................................................... — — Proceeds from revenue bonds...................................................................................... — — Retirement of revenue bonds........................................................................................ (87,375) (5,690) Interest paid.................................................................................................................. (51,717) (3,640) Transfers in................................................................................................................... — — Transfers out................................................................................................................. — — Grants received............................................................................................................. 136,943 64,117 Other receipts............................................................................................................... — — Net cash provided by (used in) noncapital financing activities........................... (874) 54,787 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets......................................................................................... — — Proceeds from sale of capital assets............................................................................. — — Proceeds from long-term capital financing.................................................................. — — Interest paid.................................................................................................................. — — Net cash used in capital and related financing activities..................................... — — CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments............................................................................................... — — Proceeds from maturity and sale of investments.......................................................... — — Earnings on investments............................................................................................... 1,748 422 Net cash provided by investing activities............................................................... 1,748 422 Net increase (decrease) in cash and pooled investments........................................ (105,589) (46,819) Cash and pooled investments – beginning.................................................................. 867,095 199,771 Cash and pooled investments – ending........................................................................ $ 761,506 $ 152,952 276 Nonmajor Enterprise Funds Other Housing Enterprise Loan Programs Total $ 271,034 $ 123,472 $ 480,163 — 3,995 3,995 (11,559) (130,867) (166,982) (4,700) (28,018) (32,718) (765) (2,183) (2,990) (201,365) (12,463) (483,378) 52,645 (46,064) (201,910) — 14,335 15,610 762 — 762 (59,270) — (59,270) 108,565 — 108,565 (142,575) — (235,640) — (14) (55,371) — 52,082 52,082 — (55) (55) — — 201,060 — 102 102 (92,518) 66,450 27,845 (241) (2,179) (2,420) — 7 7 — 1,014 1,014 — (4) (4) (241) (1,162) (1,403) (2,675) — (2,675) 3,221 — 3,221 — 7,709 9,879 546 7,709 10,425 (39,568) 26,933 (165,043) 228,974 243,494 1,539,334 $ 189,406 $ 270,427 $ 1,374,291 (continued) 277 State of California Annual Comprehensive Financial Report Combining Statement of Cash Flows (continued) Nonmajor Enterprise Funds Year Ended June 30, 2022 (amounts in thousands) State Water Safe Drinking Pollution Control Water State Revolving Revolving RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss).................................................................................................. $ 62,626 $ 3,857 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation................................................................................................................. — — Provisions and allowances........................................................................................... — — Amortization of premiums and discounts.................................................................... — — Other............................................................................................................................. (14,075) — Change in account balances: Receivables................................................................................................................ — — Due from other funds................................................................................................. (42) — Due from other governments..................................................................................... 6,429 631 Inventories................................................................................................................. — — Other current assets................................................................................................... — — Loans receivable........................................................................................................ (161,401) (109,617) Deferred outflow of resources................................................................................... — — Accounts payable....................................................................................................... — — Due to other funds..................................................................................................... — 3,101 Due to other governments.......................................................................................... — — Interest payable.......................................................................................................... — — Revenues received in advance................................................................................... — — Other current liabilities.............................................................................................. — — Benefits payable........................................................................................................ — — Compensated absences payable................................................................................. — — Other noncurrent liabilities........................................................................................ — — Deferred inflows of resources.................................................................................... — — Total adjustments.................................................................................................... (169,089) (105,885) Net cash provided by (used in) operating activities................................................... $ (106,463) $ (102,028) Noncash investing, capital, and financing activities Miscellaneous noncash activities transactions............................................................. $ — $ — 278 Nonmajor Enterprise Funds Other Housing Enterprise Loan Programs Total $ 456 $ (42,611) $ 24,328 — 2,534 2,534 (6) — (6) (1,326) — (1,326) 29 — (14,046) 1,687 454 2,141 — (1,009) (1,051) — 28 7,088 — (965) (965) (5,699) — (5,699) 60,845 499 (209,674) (330) 742 412 656 231 887 1,197 845 5,143 — 60 60 (388) — (388) — (8) (8) (19) (3,869) (3,888) — (613) (613) — (4,547) (4,547) (5,007) (8,518) (13,525) 550 10,683 11,233 52,189 (3,453) (226,238) $ 52,645 $ (46,064) $ (201,910) (concluded) $ 169 $ — $ 169 279 State of California Annual Comprehensive Financial Report This page intentionally left blank 280 Fiduciary Funds and Similar Component Units – Pension and Other Employee Benefit Trust Funds Pension and other employee benefit trust funds account for transactions, assets, liabilities, and net position available for pension and other employee benefits of the two public employees’ retirement systems that are fiduciary component units, and for other primary government employee benefit programs. Following are brief descriptions of pension and other employee benefit trust funds. Defined Benefit Pension Plans are pension plans that provide defined benefit pensions to employees after separation from service: The Public Employees’ Retirement Fund is administered by the California Public Employees’ Retirement System (CalPERS) and accounts for the employee and employer contributions of the agent and cost-sharing multiple-employer retirement plans that provide pension benefits to employees of the State of California, non-teaching school employees, and employees of California public agencies. The State Teachers’ Retirement Fund is administered by the California State Teachers’ Retirement System (CalSTRS) and accounts for the employee, employer, and primary government contributions of the cost-sharing multiple-employer retirement plan that provides pension benefits to teachers and certain other employees of the California public school system. The Judges’ Retirement Fund is administered by CalPERS and accounts for the employee and employer contributions of the single-employer retirement plan that provides pension benefits to judges of the California Supreme Court, courts of appeal, and superior courts who were appointed or elected prior to November 9, 1994. The Judges’ Retirement Fund II is administered by CalPERS and accounts for the employee and employer contributions of the single-employer retirement plan that provides pension benefits to judges of the California Supreme Court, courts of appeal, and superior courts who were appointed or elected on or subsequent to November 9, 1994. The Legislators’ Retirement Fund is administered by CalPERS and accounts for the employee and employer contributions of the single-employer retirement plan that provides pension benefits to members of the Legislature serving prior to November 7, 1990, constitutional officers, and legislative statutory officers who elect to participate in the plan. (continued) 281 State of California Annual Comprehensive Financial Report (continued) The Defined Benefit Other Postemployment Benefits (OPEB) Plan provides defined benefit OPEB, other than pensions, to employees after separation from service: The Annuitants’ Health Care Coverage Fund is administered by CalPERS as the California Employers’ Retiree Benefit Trust Fund (CERBTF), an agent multiple-employer plan for employers to prefund health, dental, and other nonpension postemployment benefits for state and local government annuitants, and to pay related administrative costs. The Deferred Compensation Fund accounts for monies withheld from the salaries of participants per Internal Revenue Code sections 401(k), 457, and 403(b). The monies are invested until the employee retires or resigns, at which time all money withdrawn, including investment income, is subject to income taxes. Other pension and other employee benefit trust funds account for funds contributed to smaller retirement plans and programs that are not defined benefit pension plans including the Teachers’ Health Benefits Fund, Supplemental Contributions Program Fund, Boxers’ Pension Fund, and Flexelect Benefit Fund. 282 This page intentionally left blank 283 State of California Annual Comprehensive Financial Report Combining Statement of Fiduciary Net Position Fiduciary Funds and Similar Component Units – Pension and Other Employee Benefit Trust Funds June 30, 2022 (amounts in thousands) Defined Benefit Public State Employees’ Teachers’ Judges’ Retirement Retirement Retirement ASSETS Cash and pooled investments............................................................................ $ 3,291,998 $ 301,636 $ 6,696 Investments, at fair value: Short-term....................................................................................................... 13,781,589 13,966,803 48,840 Equity securities............................................................................................. 190,419,760 112,226,576 — Debt securities................................................................................................ 110,346,016 44,383,696 — Real estate....................................................................................................... 70,674,894 51,389,094 — Securities lending collateral............................................................................ 14,303,670 25,301,600 — Other............................................................................................................... 56,237,017 81,678,588 — Total investments......................................................................................... 455,762,946 328,946,357 48,840 Receivables (net)............................................................................................... 11,687,665 12,454,553 1,812 Due from other funds........................................................................................ 809,384 — 25 Loans receivable............................................................................................... — 5,497,519 — Other assets....................................................................................................... 238,588 615,194 — Total assets.................................................................................................... 471,790,581 347,815,259 57,373 DEFERRED OUTFLOWS OF RESOURCES............................................... 117,588 87,781 493 Total assets and deferred outflows of resources...................................... 471,908,169 347,903,040 57,866 LIABILITIES Accounts payable.............................................................................................. 9,534 13,375,382 259 Due to other governments................................................................................. — 6 — Benefits payable................................................................................................ 2,483,961 1,802,164 — Securities lending obligations........................................................................... 14,296,470 25,288,492 — Loans payable................................................................................................... — 5,510,763 — Other liabilities.................................................................................................. 15,544,679 1,500,602 7,716 Total liabilities............................................................................................... 32,334,644 47,477,409 7,975 DEFERRED INFLOWS OF RESOURCES................................................... 214,499 369,346 1,005 Total liabilities and deferred inflows of resources.................................. 32,549,143 47,846,755 8,980 NET POSITION Restricted: Pension and other postemployment benefits..................................................... 439,359,026 300,056,285 48,886 Deferred compensation participants................................................................. — — — Individuals, organizations, or other governments............................................. — — — Total net position.......................................................................................... $ 439,359,026 $ 300,056,285 $ 48,886 284 Pension and Other Employee Benefit Trust Funds Defined Benefit Other Pension Plans OPEB Plan Pension and Other Judges’ Legislators’ Annuitants’ Health Deferred Employee Retirement II Retirement Care Coverage Compensation Benefit Trust Total $ 3,962 $ 1,922 $ 21,332 $ 13,832 $ 17,352 $ 3,658,730 54 3 28,000 2,854,989 11,711 30,691,989 1,299,385 34,418 9,843,780 12,176,250 56,856 326,057,025 827,221 68,254 5,421,484 2,456,165 43,187 163,546,023 — — — — — 122,063,988 — — — — — 39,605,270 — — — 4,086,022 — 142,001,627 2,126,660 102,675 15,293,264 21,573,426 111,754 823,965,922 9,972 54 117,364 43,216 655 24,315,291 13 — 39 1,234 110 810,805 — — — 6,193 — 5,503,712 — — — — — 853,782 2,140,607 104,651 15,431,999 21,637,901 129,871 859,108,242 623 175 1,028 913 205 208,806 2,141,230 104,826 15,433,027 21,638,814 130,076 859,317,048 306 74 1,054 2,513 6,179 13,395,301 — — — — — 6 — 575 89,752 413 656 4,377,521 — — — — — 39,584,962 — — — — 3 5,510,766 5,362 1,292 7,038 12,300 2,770 17,081,759 5,668 1,941 97,844 15,226 9,608 79,950,315 1,174 261 2,889 3,121 1,173 593,468 6,842 2,202 100,733 18,347 10,781 80,543,783 2,134,388 102,624 15,332,294 — 111,328 757,144,831 — — — 21,620,467 — 21,620,467 — — — — 7,967 7,967 $ 2,134,388 $ 102,624 $ 15,332,294 21,620,467 $ 119,295 $ 778,773,265 285 State of California Annual Comprehensive Financial Report Combining Statement of Changes in Fiduciary Net Position Fiduciary Funds and Similar Component Units – Pension and Other Employee Benefit Trust Funds Year Ended June 30, 2022 (amounts in thousands) Defined Benefit Public State Employees’ Teachers’ Judges’ Retirement Retirement Retirement ADDITIONS Contributions: Employer..................................................................................................... $ 22,702,547 $ 6,521,356 $ 194,960 Plan member................................................................................................ 5,159,664 4,067,526 1,956 Non-employer.............................................................................................. — 4,279,964 — Total contributions................................................................................... 27,862,211 14,868,846 196,916 Investment income: Net appreciation (depreciation) in fair value of investments...................... (42,878,664) (13,431,817) — Interest, dividends, and other investment income....................................... 8,168,878 6,535,345 202 Less: investment expense............................................................................ (1,379,556) (493,818) (8) Net investment income (loss)................................................................... (36,089,342) (7,390,290) 194 Other............................................................................................................... 8,781 130,195 2,305 Total additions (8,218,350) 7,608,751 199,415 DEDUCTIONS Distributions to beneficiaries......................................................................... 29,118,354 17,414,245 210,492 Refunds of contributions................................................................................ 329,555 112,424 — Administrative expense.................................................................................. 297,464 196,186 1,677 Interest expense.............................................................................................. — 123,064 — Payments to and for depositors...................................................................... — — — Total deductions........................................................................................ 29,745,373 17,845,919 212,169 Change in net position.............................................................................. (37,963,723) (10,237,168) (12,754) Net position – beginning.................................................................................. 477,322,749 310,293,453 61,640 Net position – ending....................................................................................... $ 439,359,026 $ 300,056,285 $ 48,886 * Restated 286 Pension and Other Employee Benefit Trust Funds Defined Benefit Other Pension Plans OPEB Plan Pension and Other Judges’ Legislators’ Annuitants’ Health Deferred Employee Retirement II Retirement Care Coverage Compensation Benefit Trust Total $ 92,773 $ 85 $ 5,503,086 $ 2,124 $ 26,352 $ 35,043,283 36,529 23 — 1,070,889 39,097 10,375,684 — — — — — 4,279,964 129,302 108 5,503,086 1,073,013 65,449 49,698,931 (323,611) (12,412) (2,339,519) (3,036,031) (14,371) (62,036,425) 241 13 197 45,517 27 14,750,420 (995) (51) (6,736) (778) (46) (1,881,988) (324,365) (12,450) (2,346,058) (2,991,292) (14,390) (49,167,993) 3 1 14,097 25,376 88 180,846 (195,060) (12,341) 3,171,125 (1,892,903) 51,147 711,784 66,382 6,647 3,337,707 84,954 64,338 50,303,119 357 — — 5,927 — 448,263 1,842 436 4,241 27,275 919 530,040 — — — 2 1 123,067 — — 135,440 605,035 5,186 745,661 68,581 7,083 3,477,388 723,193 70,444 52,150,150 (263,641) (19,424) (306,263) (2,616,096) (19,297) (51,438,366) 2,398,029 122,048 15,638,557 24,236,563 138,592 * 830,211,631 $ 2,134,388 $ 102,624 $ 15,332,294 $ 21,620,467 $ 119,295 $ 778,773,265 287 State of California Annual Comprehensive Financial Report This page intentionally left blank 288 Private Purpose Trust Funds Private purpose trust funds account for all trust arrangements, other than those properly reported in pension and other employee benefit trust funds or investment trust funds, under which both principal and income benefit individuals, private organizations, or other governments. Following are brief descriptions of private purpose trust funds. The Scholarshare Program Trust Fund accounts for money received from participants to fund their beneficiaries’ higher-education expenses at certain postsecondary educational institutions. The Unclaimed Property Fund accounts for unclaimed money and properties held in trust by the State. Other private purpose trust funds account for other assets held in a trustee capacity when both principal and income benefit individuals, private organizations, or other governments. 289 State of California Annual Comprehensive Financial Report Combining Statement of Fiduciary Net Position Private Purpose Trust Funds June 30, 2022 (amounts in thousands) Scholarshare Other Private Program Unclaimed Purpose Trust Property Trust Total ASSETS Cash and pooled investments ...................................... $ 4,656 $ 57,523 $ 35,897 $ 98,076 Investments, at fair value: Short-term................................................................. 426,667 — — 426,667 Equity securities....................................................... 6,169,262 — 26,553 6,195,815 Debt securities.......................................................... 3,001,460 — 19,139 3,020,599 Real estate ............................................................... 323,663 — — 323,663 Other......................................................................... 2,339,654 — 254,987 2,594,641 Total investments ................................................. 12,260,706 — 300,679 12,561,385 Receivables (net).......................................................... 1,730 6,263 88 8,081 Due from other funds .................................................. — — 55 55 Other assets.................................................................. — 249,459 17 249,476 Total assets.............................................................. 12,267,092 313,245 336,736 12,917,073 LIABILITIES Accounts payable......................................................... 6,906 205 14,639 21,750 Due to other governments............................................ — — 6,160 6,160 Revenues received in advance..................................... — — 19,876 19,876 Deposits........................................................................ — 249,459 — 249,459 Total liabilities........................................................ 6,906 249,664 40,675 297,245 NET POSITION Restricted for individuals, organizations, or other governments.................................................. $ 12,260,186 $ 63,581 $ 296,061 $ 12,619,828 290 Private Purpose Trust Funds Combining Statement of Changes in Fiduciary Net Position Private Purpose Trust Funds Year Ended June 30, 2022 (amounts in thousands) Scholarshare Other Private Program Unclaimed Purpose Trust Property Trust Total ADDITIONS Investment income: Net appreciation (depreciation) in fair value of investments........................................................ $ (1,665,674) $ — $ (46,637) $ (1,712,311) Interest, dividends, and other investment income.... 369,343 — 4,238 373,581 Less: investment expense......................................... (3,172) — (1,280) (4,452) Net investment income (loss)................................ (1,299,503) — (43,679) (1,343,182) Receipts from depositors............................................. 2,881,761 761,032 260,494 3,903,287 Total additions..................................................... 1,582,258 761,032 216,815 2,560,105 DEDUCTIONS Administrative expenses............................................. — 1,724 196 1,920 Payments to and for depositors................................... 1,850,494 787,074 53,247 2,690,815 Total deductions.................................................. 1,850,494 788,798 53,443 2,692,735 Change in net position........................................ (268,236) (27,766) 163,372 (132,630) Net position – beginning............................................... 12,528,422 91,347 132,689 12,752,458 Net position – ending.................................................... $ 12,260,186 $ 63,581 $ 296,061 $ 12,619,828 291 State of California Annual Comprehensive Financial Report This page intentionally left blank 292 Investment Trust Funds Investment trust funds account for the external portion of investment pools held in a trust. Following are brief descriptions of investment trust funds. The Local Agency Investment Fund accounts for the deposits, withdrawals, and earnings of local governments and public agencies. The California Employers’ Pension Prefunding Trust Fund is administered by the California Public Employees’ Retirement System (CalPERS) to invest prefunding deposits made by local governments and public agency employers for the purpose of funding future defined benefit pension plan contributions. 293 State of California Annual Comprehensive Financial Report Combining Statement of Fiduciary Net Position Investment Trust Funds June 30, 2022 (amounts in thousands) California Employers’ Pension Local Agency Prefunding Investment Trust Total ASSETS Cash and pooled investments............................................................... $ 35,829,502 $ 52 $ 35,829,554 Investments, at fair value: Short-term.......................................................................................... — 9,153 9,153 Equity securities................................................................................ — 27,711 27,711 Debt securities................................................................................... — 47,122 47,122 Total investments............................................................................ — 83,986 83,986 Receivables (net).................................................................................. — 1,117 1,117 Total assets....................................................................................... 35,829,502 85,155 35,914,657 DEFERRED OUTFLOWS OF RESOURCES.................................. — 19 19 Total assets and deferred outflows of resources.................................................................................. 35,829,502 85,174 35,914,676 LIABILITIES Accounts payable................................................................................. 25 5 30 Due to other governments.................................................................... 67,382 — 67,382 Other liabilities..................................................................................... — 15 15 Total liabilities................................................................................. 67,407 20 67,427 DEFERRED INFLOWS OF RESOURCES...................................... — 85 85 Total liabilities and deferred inflows of resources.................................................................................. 67,407 105 67,512 NET POSITION Restricted: Pension and other postemployment benefits........................................ — 85,069 85,069 Pool participants................................................................................... 35,762,095 — 35,762,095 Total net position............................................................................. $ 35,762,095 $ 85,069 $ 35,847,164 294 Investment Trust Funds Combining Statement of Changes in Fiduciary Net Position Investment Trust Funds Year Ended June 30, 2022 (amounts in thousands) California Employers’ Pension Local Agency Prefunding Investment Trust Total ADDITIONS Contributions: Employer............................................................................................ $ — $ 36,474 $ 36,474 Total contributions........................................................................... — 36,474 36,474 Investment income: Net appreciation (depreciation) in fair value of investments............. — (9,532) (9,532) Interest, dividends, and other investment income.............................. 140,417 9 140,426 Less: investment expense................................................................... — (21) (21) Net investment income.................................................................... 140,417 (9,544) 130,873 Receipts from depositors....................................................................... 25,058,778 — 25,058,778 Other...................................................................................................... — 154 154 Total additions.................................................................................. 25,199,195 27,084 25,226,279 DEDUCTIONS Distributions paid and payable to participants...................................... 138,418 — 138,418 Administrative expense......................................................................... 1,999 43 2,042 Payments to and for depositors............................................................. 26,363,290 — 26,363,290 Total deductions................................................................................ 26,503,707 43 26,503,750 Change in net position..................................................................... (1,304,512) 27,041 (1,277,471) Net position – beginning........................................................................ 37,066,607 58,028 37,124,635 Net position – ending............................................................................. $ 35,762,095 $ 85,069 $ 35,847,164 295 State of California Annual Comprehensive Financial Report This page intentionally left blank 296 Nonmajor Component Units Nonmajor component units are legally separate entities that are discretely presented in the State’s financial statements in accordance with Generally Accepted Accounting Principles (GAAP). The inclusion of component units in the State’s financial statements reflects the State’s financial accountability for or relationships with these organizations such that exclusion would cause the State’s financial statements to be misleading. Following are brief descriptions of the nonmajor consolidated component unit segments. Financing authorities provide financing for transportation, business development and public improvements, and coastal and inland urban waterfront restoration projects. These agencies include the California Alternative Energy and Advanced Transportation Financing Authority, the California Infrastructure and Economic Development Bank, and the California Urban Waterfront Area Restoration Financing Authority. California State University Auxiliary Organizations provide services primarily to university students through foundations, associated student organizations, student unions, food service entities, book stores, and similar organizations. District agricultural associations were created to exhibit all of the industries, industrial enterprises, resources, and products of the State. The financial information presented is as of and for the year ended December 31, 2021. Other component units provide legal education programs, financial assistance to businesses, and health benefits for state employees and annuitants. These entities include the University of California Hastings College of the Law; the State Assistance Fund for Enterprise, Business and Industrial Development Corporation; and the Public Employees’ Contingency Reserve. 297 State of California Annual Comprehensive Financial Report Combining Statement of Net Position Nonmajor Component Units June 30, 2022 (amounts in thousands) California State University Financing Auxiliary Authorities Organizations ASSETS Current assets: Cash and pooled investments................................................................................................ $ 10,049 $ 647,534 Investments............................................................................................................................ — 639,346 Restricted assets: Cash and pooled investments.............................................................................................. 154,596 — Investments.......................................................................................................................... 43,555 — Receivables (net)................................................................................................................... 28,441 492,049 Due from primary government.............................................................................................. 84 — Due from other governments................................................................................................. 2,000 — Prepaid items......................................................................................................................... — — Other current assets............................................................................................................... — 30,657 Total current assets.............................................................................................................. 238,725 1,809,586 Noncurrent assets: Restricted assets: Cash and pooled investments.............................................................................................. — 55,194 Investments.......................................................................................................................... 328,222 — Investments............................................................................................................................ — 2,745,961 Receivables (net)................................................................................................................... — 697,402 Loans receivable.................................................................................................................... 442,455 — Long-term prepaid charges.................................................................................................... — — Capital assets: Land..................................................................................................................................... — 147,088 Collections – nondepreciable.............................................................................................. — 11,689 Buildings and other depreciable property........................................................................... 9 1,206,306 Intangible assets – amortizable........................................................................................... — 199,684 Less: accumulated depreciation/amortization..................................................................... (9) (657,238) Construction/development in progress................................................................................ — 81,284 Intangible assets – nonamortizable..................................................................................... — 5,098 Other noncurrent assets......................................................................................................... — 69,819 Total noncurrent assets........................................................................................................ 770,677 4,562,287 Total assets....................................................................................................................... 1,009,402 6,371,873 DEFERRED OUTFLOWS OF RESOURCES.................................................................... 17,104 46,499 Total assets and deferred outflows of resources........................................................ $ 1,026,506 $ 6,418,372 298 Nonmajor Component Units District Other Agricultural Component Associations Units Total $ 188,248 $ 761,947 $ 1,607,778 — — 639,346 20,694 1,653 176,943 4,720 — 48,275 16,084 38,122 574,696 — — 84 — — 2,000 1,320 1,814 3,134 3,814 — 34,471 234,880 803,536 3,086,727 — — 55,194 3,300 — 331,522 — 341,392 3,087,353 — 3,212 700,614 — — 442,455 — 111 111 22,246 5,089 174,423 — 421 12,110 808,413 191,675 2,206,403 — 1,483 201,167 (561,892) (53,603) (1,272,742) 45,999 122,337 249,620 — 116 5,214 — 9,575 79,394 318,066 621,808 6,272,838 552,946 1,425,344 9,359,565 24,926 29,114 117,643 $ 577,872 $ 1,454,458 $ 9,477,208 (continued) 299 State of California Annual Comprehensive Financial Report Combining Statement of Net Position (continued) Nonmajor Component Units June 30, 2022 (amounts in thousands) California State University Financing Auxiliary Authorities Organizations LIABILITIES Current liabilities: Accounts payable................................................................................................................... $ 2,742 $ 130,167 Revenues received in advance............................................................................................... 1,024 137,358 Deposits.................................................................................................................................. — — Contracts and notes payable................................................................................................... — 12,580 Interest payable...................................................................................................................... 1,284 — Current portion of long-term obligations............................................................................... 18,391 103,995 Other current liabilities.......................................................................................................... 22,880 119,921 Total current liabilities......................................................................................................... 46,321 504,021 Noncurrent liabilities: Compensated absences payable............................................................................................. 527 6,542 Workers’ compensation benefits payable.............................................................................. — 8,064 Loans payable........................................................................................................................ 383 — Commercial paper and other borrowings............................................................................... — 75,490 Capital lease obligations........................................................................................................ — 218,959 Revenue bonds payable.......................................................................................................... 286,730 50,846 Net other postemployment benefits liability.......................................................................... 7,016 87,666 Net pension liability............................................................................................................... 6,342 49,182 Revenues received in advance............................................................................................... — — Other noncurrent liabilities.................................................................................................... 44,792 622,683 Total noncurrent liabilities................................................................................................... 345,790 1,119,432 Total liabilities................................................................................................................. 392,111 1,623,453 DEFERRED INFLOWS OF RESOURCES......................................................................... 4,311 468,733 Total liabilities and deferred inflows of resources..................................................... 396,422 2,092,186 NET POSITION Net investment in capital assets............................................................................................. — 402,479 Restricted: Nonexpendable – endowments............................................................................................ — 1,731,240 Expendable: Endowments and gifts....................................................................................................... — — Education........................................................................................................................... — 1,303,722 Statute................................................................................................................................ 627,928 — Other purposes................................................................................................................... 2,051 — Total expendable............................................................................................................. 629,979 1,303,722 Unrestricted............................................................................................................................ 105 888,745 Total net position............................................................................................................... 630,084 4,326,186 Total liabilities, deferred inflows of resources, and net position.............................. $ 1,026,506 $ 6,418,372 300 Nonmajor Component Units District Other Agricultural Component Associations Units Total $ 15,415 $ 796,067 $ 944,391 24,923 1,984 165,289 926 257 1,183 — — 12,580 470 — 1,754 2,554 4,349 129,289 3,837 13,041 159,679 48,125 815,698 1,414,165 7,084 — 14,153 — — 8,064 11,376 — 11,759 — — 75,490 — — 218,959 37,436 431,535 806,547 44,346 71,062 210,090 108,140 56,875 220,539 17,829 — 17,829 32,355 14,045 713,875 258,566 573,517 2,297,305 306,691 1,389,215 3,711,470 15,548 49,481 538,073 322,239 1,438,696 4,249,543 242,391 76,620 721,490 — 25,727 1,756,967 — 17,637 17,637 — (14,057) 1,289,665 — — 627,928 18,701 — 20,752 18,701 3,580 1,955,982 (5,459) (90,165) 793,226 255,633 15,762 5,227,665 $ 577,872 $ 1,454,458 $ 9,477,208 (concluded) 301 State of California Annual Comprehensive Financial Report Combining Statement of Activities Nonmajor Component Units Year Ended June 30, 2022 (amounts in thousands) California State University Financing Auxiliary Authorities Organizations OPERATING EXPENSES Personal services....................................................................................................................... $ 1,609 $ 379,270 Scholarships and fellowships.................................................................................................... — 94,888 Supplies..................................................................................................................................... — — Services and charges................................................................................................................. 3,386 1,216,876 Depreciation.............................................................................................................................. — 74,488 Interest expense and fiscal charges........................................................................................... 6,801 21,736 Other.......................................................................................................................................... — 86,993 Total operating expenses...................................................................................................... 11,796 1,874,251 PROGRAM REVENUES Charges for services.................................................................................................................. 2,589 391,027 Operating grants and contributions........................................................................................... 119,861 709,350 Capital grants and contributions................................................................................................ — 42,238 Total program revenues....................................................................................................... 122,450 1,142,615 Net revenues (expenses)....................................................................................................... 110,654 (731,636) GENERAL REVENUES Investment and interest income (loss)....................................................................................... (3,125) (341,981) Other.......................................................................................................................................... 3,860 932,489 Total general revenues.......................................................................................................... 735 590,508 Change in net position.......................................................................................................... 111,389 (141,128) Net position – beginning............................................................................................................. 518,695 4,467,314 * Net position – ending.................................................................................................................. $ 630,084 $ 4,326,186 * Restated 302 Nonmajor Component Units District Other Agricultural Component Associations Units Total $ 85,075 $ 45,119 $ 511,073 — 11,936 106,824 — 17,909 17,909 69,740 28,081 1,318,083 20,342 4,356 99,186 1,903 20,262 50,702 86 8,407 95,486 177,146 136,070 2,199,263 241,032 65,284 699,932 — 36,739 865,950 — 584 42,822 241,032 102,607 1,608,704 63,886 (33,463) (590,559) 245 (5,560) (350,421) 11,580 23,539 971,468 11,825 17,979 621,047 75,711 (15,484) 30,488 179,922 31,246 5,197,177 $ 255,633 $ 15,762 $ 5,227,665 303 State of California Annual Comprehensive Financial Report This page intentionally left blank 304 Statistical Section 305 State of California Annual Comprehensive Financial Report This page intentionally left blank 306 Financial Trends Financial trend schedules contain trend information to help the reader understand how the State’s financial performance and well-being have changed over time. This section includes the following financial trend schedules. Schedule of Net Position by Component Schedule of Changes in Net Position Schedule of Fund Balances – Governmental Funds Schedule of Changes in Fund Balances – Governmental Funds Source: The information in the following schedules is derived from the State’s Annual Comprehensive Financial Reports. 307 State of California Annual Comprehensive Financial Report Schedule of Net Position by Component For the Past Ten Fiscal Years (accrual basis of accounting, amounts in thousands) 2013 2014 2 2015 3 2016 Governmental activities Net investment in capital assets.................................... $ 84,931,030 $ 94,001,659 $ 100,694,652 $ 104,596,917 Restricted – Expendable............................................... 24,315,913 24,950,740 26,632,502 29,060,971 Unrestricted 1................................................................ (117,383,903) (116,948,128) (169,744,967) (168,542,861) Total governmental activities net position (deficit)..... $ (8,136,960) $ 2,004,271 $ (42,417,813) $ (34,884,973) Business-type activities Net investment in capital assets.................................... $ 1,718,648 $ 2,065,550 $ 2,278,252 $ 2,520,621 Restricted – Nonexpendable......................................... 20,627 16,219 13,448 8,653 Restricted – Expendable............................................... 5,151,915 4,897,314 4,523,496 5,750,634 Unrestricted................................................................... (2,824,738) (1,661,692) (5,360,817) (3,707,406) Total business-type activities net position (deficit)...... $ 4,066,452 $ 5,317,391 $ 1,454,379 $ 4,572,502 Primary government Net investment in capital assets.................................... $ 86,649,678 $ 96,067,209 $ 102,972,904 $ 107,117,538 Restricted – Nonexpendable......................................... 20,627 16,219 13,448 8,653 Restricted – Expendable............................................... 29,467,828 29,848,054 31,155,998 34,811,605 Unrestricted................................................................... (120,208,641) (118,609,820) (175,105,784) (172,250,267) Total primary government net position (deficit)......... $ (4,070,508) $ 7,321,662 $ (40,963,434) $ (30,312,471) 1 Governmental activities’ unrestricted net position reflects a negative balance because of outstanding bonded debt issued to build capital assets for school districts and other local governmental entities and unfunded employee-related obligations—net pension liability, net other postemployment benefits (OPEB) liability and compensated absences. 2 In fiscal year 2014, the net position of governmental activities and business-type activities changed primarily as a result of the reclassification of the $380 million beginning net position of the Public Buildings Construction Fund from an enterprise fund to an internal service fund. 3 In fiscal year 2015, the net position of governmental activities and business-type activities significantly decreased as a result of implementing GASB Statements No. 68 and No. 71 requiring the recognition of net pension liability and related pension expense and deferred outflows and inflows of resources. 4 In fiscal year 2018, the net position of governmental activities and business-type activities significantly decreased as a result of implementing GASB Statement No. 75 requiring the recognition of net OPEB liability and related OPEB expense and deferred outflows and inflows of resources. 308 Statistical Section 2017 2018 4 2019 2020 2021 2022 $ 107,042,274 $ 109,614,321 $ 112,279,950 $ 116,773,259 $ 120,745,220 $ 125,862,983 33,832,232 35,053,202 41,371,805 46,670,678 46,362,528 60,482,461 (169,499,683) (213,316,033) (208,377,265) (207,968,523) (174,427,918) (221,863,616) $ (28,625,177) $ (68,648,510) $ (54,725,510) $ (44,524,586) $ (7,320,170) $ (35,518,172) $ 2,295,270 $ 2,469,723 $ 2,534,257 $ 2,907,066 $ 2,677,917 $ 3,340,905 1,746 1,708 1,693 1,677 1,663 1,641 6,307,218 12,083,737 12,945,567 7,722,116 7,651,874 10,639,641 (1,321,132) (16,464,573) (16,718,860) (20,948,611) (52,668,204) (33,212,073) $ 7,283,102 $ (1,909,405) $ (1,237,343) $ (10,317,752) $ (42,336,750) $ (19,229,886) $ 109,337,544 $ 112,084,044 $ 114,814,207 $ 119,680,325 $ 123,423,137 $ 129,203,888 1,746 1,708 1,693 1,677 1,663 1,641 40,139,450 47,136,939 54,317,372 54,392,794 54,014,402 71,122,102 (170,820,815) (229,780,606) (225,096,125) (228,917,134) (227,096,122) (255,075,689) $ (21,342,075) $ (70,557,915) $ (55,962,853) $ (54,842,338) $ (49,656,920) $ (54,748,058) 309 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Position For the Past Ten Fiscal Years (accrual basis of accounting, amounts in thousands) 2013 2014 4 2015 2016 Governmental activities Expenses General government .................................................. $ 15,390,100 $ 14,292,179 $ 15,804,281 $ 16,686,037 Education................................................................... 50,586,387 54,719,677 59,521,018 65,467,497 Health and human services........................................ 94,069,749 105,037,102 122,063,805 127,543,288 Natural resources and environmental protection....... 5,670,922 5,854,685 6,419,591 6,988,442 Business, consumer services, and housing................ 1,475,486 589,715 903,782 814,676 Transportation............................................................ 12,836,192 13,427,229 12,897,591 12,120,820 Corrections and rehabilitation................................... 10,081,736 11,234,705 11,483,573 11,875,294 Interest on long-term debt.......................................... 4,349,632 4,699,265 4,880,625 4,231,581 Total expenses....................................................... 194,460,204 209,854,557 233,974,266 245,727,635 Program revenues Charges for services: General government .............................................. 6,196,586 5,994,608 6,502,363 6,525,736 Education................................................................ 64,480 67,165 53,498 66,298 Health and human services..................................... 8,761,781 7,961,897 8,259,696 10,630,859 Natural resources and environmental protection.... 3,269,315 3,403,524 4,546,413 4,823,861 Business, consumer services, and housing............. 682,503 586,055 626,960 823,189 Transportation......................................................... 4,082,616 4,247,258 4,382,901 4,532,300 Corrections and rehabilitation................................ 45,153 13,645 18,557 19,411 Operating grants/contributions.................................. 60,943,536 69,861,130 84,896,237 86,628,827 Capital grants/contributions....................................... 1,669,021 1,515,890 1,319,430 1,480,351 Total program revenues....................................... 85,714,991 93,651,172 110,606,055 115,530,832 Total governmental activities net program expenses (108,745,213) (116,203,385) (123,368,211) (130,196,803) General revenues and other changes in net position General revenues: Personal income taxes .............................................. 67,502,738 68,793,292 78,098,865 80,303,076 Sales and use taxes.................................................... 33,839,065 36,477,724 38,224,080 39,121,061 Corporation taxes....................................................... 7,289,910 9,102,128 10,720,647 9,213,173 Motor vehicle excise taxes 1 ..................................... 5,219,605 5,777,167 5,393,994 5,028,589 Insurance taxes ......................................................... 2,295,579 3,359,043 3,926,319 4,203,885 Managed care organization enrollment tax 2............. — — — — Other taxes 1............................................................... 2,498,248 2,302,231 2,235,498 2,158,874 Investment and interest ............................................. 57,285 80,969 58,016 131,615 Escheat ...................................................................... 551,580 487,937 400,807 304,960 Gain (loss) on early extinguishment of debt 3.............. — (54,537) — 40,516 Transfers....................................................................... (1,997,759) (2,296,010) (2,554,970) (2,800,101) Total general revenues and other changes in net position ..................... 117,256,251 124,029,944 136,503,256 137,705,648 Total governmental activities change in net position $ 8,511,038 $ 7,826,559 $ 13,135,045 $ 7,508,845 1 Motor vehicle excise taxes, reported separately in fiscal year 2012 due to material increases, were included with “other taxes” in prior years. 2 In fiscal year 2017, the State restructured its managed care organization enrollment tax to conform to federal Medicaid requirements. This tax revenue was included with “insurance taxes” in prior years. 3 In fiscal year 2014, a component unit assumed debt on behalf of the primary government. In fiscal year 2016, the California State University, an enterprise fund, assumed debt on behalf of the Public Buildings Construction Fund, an internal service fund. In fiscal year 2017, the Golden State Tobacco Securitization Corporation, a nonmajor special revenue fund, recognized a gain from using existing resources to defease a portion of its capital appreciation bonds. In fiscal year 2022, the Public Building Construction Fund, an internal service fund, recognized a gain on extinguishment of debt. 4 In fiscal year 2014, the Public Buildings Construction Fund was reclassified from an enterprise fund to an internal service fund. 5 In fiscal year 2018, the Safe Drinking Water State Revolving Fund was reclassified from a governmental fund to an enterprise fund. 310 Statistical Section 2017 2018 5 2019 2020 2021 2022 $ 17,400,482 $ 18,378,216 $ 17,900,629 $ 23,489,012 $ 30,604,918 $ 38,760,471 67,377,805 70,280,444 75,643,779 75,803,990 101,569,505 108,450,558 135,090,171 137,828,737 144,936,676 192,576,208 311,925,505 216,232,017 7,342,079 8,304,162 9,774,290 10,110,777 9,923,185 12,502,619 1,163,511 1,258,104 2,133,480 2,603,823 2,946,561 7,364,028 12,947,296 14,259,461 17,022,071 18,424,746 18,119,697 15,792,836 13,086,499 14,921,295 15,153,502 16,861,994 14,185,645 16,526,318 4,191,283 4,154,485 3,995,597 3,841,351 3,505,827 3,508,229 258,599,126 269,384,904 286,560,024 343,711,901 492,780,843 419,137,076 5,825,533 5,726,900 5,755,165 5,847,276 6,583,975 6,167,925 74,548 37,147 78,445 49,780 69,727 65,810 11,638,503 12,968,379 13,874,296 13,836,881 12,664,071 11,402,121 3,998,751 6,319,879 6,644,917 5,551,029 6,592,526 8,422,029 844,445 957,885 1,206,126 1,378,181 1,697,687 1,671,025 4,611,244 6,053,140 7,093,122 7,244,317 7,731,094 8,479,493 17,988 39,887 10,993 14,753 15,776 13,563 89,497,290 87,812,627 94,501,862 143,670,642 268,258,265 170,662,661 3,027,780 1,882,595 1,561,483 2,107,963 1,847,263 1,895,160 119,536,082 121,798,439 130,726,409 179,700,822 305,460,384 208,779,787 (139,063,044) (147,586,465) (155,833,615) (164,011,079) (187,320,459) (210,357,289) 85,712,013 94,460,551 100,657,551 108,308,455 132,042,516 126,058,884 38,726,332 39,784,494 41,006,121 40,703,239 45,905,984 52,328,196 11,128,198 12,608,756 14,625,724 13,180,402 32,108,028 35,850,573 4,878,953 6,680,858 7,632,365 7,876,545 7,942,519 8,453,232 2,719,489 2,754,056 2,734,068 3,161,634 3,156,992 3,516,612 2,282,313 2,397,531 2,562,919 1,031,357 2,318,011 2,584,077 2,574,456 3,573,848 3,790,987 3,789,610 3,827,360 4,402,939 149,135 297,782 706,637 690,169 140,329 788,612 325,755 378,180 447,401 614,394 640,226 660,143 30,986 — — — — 11,576 (3,083,437) (4,339,995) (3,930,906) (5,963,068) (3,851,666) (5,465,790) 145,444,193 158,596,061 170,232,867 173,392,737 224,230,299 229,189,054 $ 6,381,149 $ 11,009,596 $ 14,399,252 $ 9,381,658 $ 36,909,840 $ 18,831,765 (continued) 311 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Position (continued) For the Past Ten Fiscal Years (accrual basis of accounting, amounts in thousands) 2013 2014 2015 2016 Business-type activities Expenses Electric Power................................................................ $ 488,000 $ 835,000 $ 799,000 $ 728,000 Water Resources ............................................................ 1,127,195 983,048 1,019,378 1,086,650 Public Buildings Construction 4..................................... 410,404 — — — State Lottery................................................................... 4,499,451 5,078,935 5,560,299 6,315,957 Unemployment Programs .............................................. 17,599,219 13,673,403 11,390,227 11,458,966 California State University 3........................................... 6,196,541 6,544,936 6,847,789 7,199,277 High Technology Education........................................... 6,568 847 — — State University Dormitory Building Maintenance and Equipment.................................................................... — — — — State Water Pollution Control Revolving....................... 3,698 5,072 9,082 11,814 Safe Drinking Water State Revolving 5.......................... — — — — Housing Loan ................................................................ 70,356 57,206 58,280 55,627 Other enterprise programs.............................................. 58,578 79,641 77,475 84,188 Total expenses............................................................ 30,460,010 27,258,088 25,761,530 26,940,479 Program revenues Charges for services: Electric Power............................................................. 488,000 835,000 799,000 728,000 Water Resources.......................................................... 1,127,195 983,048 1,019,378 1,086,650 Public Buildings Construction 4.................................. 616,041 — — — State Lottery ............................................................... 4,445,921 5,077,976 5,553,418 6,367,902 Unemployment Programs ........................................... 18,597,962 15,167,258 13,402,902 13,866,028 California State University 3....................................... 2,891,432 3,014,030 3,113,988 3,172,154 High Technology Education........................................ 5,585 424 — — State University Dormitory Building Maintenance and Equipment........................................................... — — — — State Water Pollution Control Revolving ................... 60,173 62,985 65,959 70,245 Safe Drinking Water State Revolving 5....................... — — — — Housing Loan ............................................................. 66,050 65,247 57,742 53,617 Other enterprise programs........................................... 80,540 77,671 78,625 82,029 Operating grants/contributions ...................................... 1,323,345 1,491,559 1,666,292 1,764,962 Capital grants/contributions........................................... 142,304 80,903 107,746 66,914 Total program revenues............................................ 29,844,548 26,856,101 25,865,050 27,258,501 Total business-type activities net program revenues (expenses) ....................... (615,462) (401,987) 103,520 318,022 Other changes in net position Gain (loss) on early extinguishment of debt 2................ — (26,913) — Transfers......................................................................... 1,997,759 2,296,010 2,554,970 2,800,101 Total business-type activities change in net position...... 1,382,297 1,867,110 2,658,490 3,118,123 Total primary government change in net position ........ $ 9,893,335 $ 9,693,669 $ 15,793,535 $ 10,626,968 312 Statistical Section 2017 2018 5 2019 2020 2021 2022 $ 945,000 $ 952,000 $ 913,000 $ 905,115 $ 290,411 $ 36,239 1,223,340 1,221,866 1,199,823 1,184,458 1,157,325 1,233,036 — — — — — — 6,271,875 7,006,591 7,435,755 6,665,062 8,452,743 8,885,370 11,907,623 12,133,531 13,229,332 23,622,023 55,737,215 14,965,703 8,001,396 9,806,114 9,779,084 10,592,814 10,391,177 10,778,052 — — — — — — — — — — — — 17,112 32,335 49,860 45,288 41,466 35,334 — 21,994 19,371 25,007 23,570 24,608 62,885 57,088 54,402 53,656 54,540 45,316 75,397 96,078 109,113 148,450 88,903 165,655 28,504,628 31,327,597 32,789,740 43,241,873 76,237,350 36,169,313 945,000 952,000 913,000 903,000 406,588 124,467 1,223,340 1,221,866 1,172,134 1,155,001 1,125,002 1,295,670 — — — — — — 6,213,074 6,975,168 7,473,452 6,735,321 8,395,767 8,785,557 14,437,094 15,594,045 14,039,030 12,564,665 23,903,289 16,288,566 3,224,919 3,387,420 3,529,083 3,323,307 3,236,482 3,199,357 — — — — — — — — — — — — 75,912 86,789 95,703 87,110 73,790 69,695 — 22,675 25,762 29,717 26,457 27,377 52,842 52,735 60,002 61,990 51,953 45,820 93,177 86,911 106,687 105,874 107,929 130,837 1,805,406 2,132,665 2,125,362 2,593,383 3,103,175 4,010,488 61,027 — — — — 28,131,791 30,512,274 29,540,215 27,559,368 40,430,432 33,977,834 (372,837) (815,323) (3,249,525) (15,682,505) (35,806,918) (2,191,479) — — — — — — 3,083,437 4,339,995 3,930,906 5,963,068 3,851,666 5,465,790 2,710,600 3,524,672 681,381 (9,719,437) (31,955,252) 3,274,311 $ 9,091,749 $ 14,534,268 $ 15,080,633 $ (337,779) $ 4,954,588 $ 22,106,076 (concluded) 313 State of California Annual Comprehensive Financial Report Schedule of Fund Balances – Governmental Funds For the Past Ten Fiscal Years (modified accrual basis of accounting, amounts in thousands) 2013 2014 2015 2016 General Fund Reserved ....................................................................... $ — $ — $ — $ — Unreserved .................................................................... — — — — Nonspendable ............................................................... 140,107 128,609 53,431 75,939 Restricted....................................................................... 178,643 394,246 2,266,635 4,044,911 Committed..................................................................... 22,879 125,120 102,793 68,102 Assigned........................................................................ — — — — Unassigned..................................................................... (14,596,085) (8,092,571) (4,651,491) (3,827,224) Total General Fund......................................................... $ (14,254,456) $ (7,444,596) $ (2,228,632) $ 361,728 All other governmental funds Reserved........................................................................ $ — $ — $ — $ — Unreserved, reported in: Special revenue funds................................................ — — — — Capital projects funds................................................ — — — — Nonspendable................................................................ 15,022 27,260 5,620 11,188 Restricted....................................................................... 24,137,270 24,269,093 24,224,167 24,885,166 Committed .................................................................... 2,318,035 2,914,747 4,090,563 5,652,478 Assigned........................................................................ 209,171 18,857 16,767 14,622 Unassigned..................................................................... (176,066) (20,145) (6,456) (1,037) Total all other governmental funds............................... $ 26,503,432 $ 27,209,812 $ 28,330,661 $ 30,562,417 314 Statistical Section 2017 2018 2019 2020 2021 2022 $ — $ — $ — $ — $ — $ — — — — — — — 103,903 559,644 1,180,575 2,129,227 2,878,611 2,958,319 7,429,825 9,807,729 14,834,597 16,709,782 12,928,039 23,251,079 180,755 171,020 1,787,142 2,965,662 668,351 4,024,689 — — — 3,080,372 4,938,117 7,290,655 (1,904,097) 1,648,511 765,568 3,616,557 52,731,990 36,522,416 $ 5,810,386 $ 12,186,904 $ 18,567,882 $ 28,501,600 $ 74,145,108 $ 74,047,158 $ — $ — $ — $ — $ — $ — — — — — — — — — — — — — 20,172 69,868 12,760 13,702 10,238 39,130 26,233,389 25,051,548 26,329,109 29,796,900 33,282,001 37,132,326 5,847,879 7,897,362 9,994,978 10,066,141 10,160,675 12,949,069 12,033 26,346 19,247 49,868 45,543 63,457 (15,152) — — (2,474,960) (8,822,239) (55,655,634) $ 32,098,321 $ 33,045,124 $ 36,356,094 $ 37,451,651 $ 34,676,218 $ (5,471,652) 315 State of California Annual Comprehensive Financial Report Schedule of Changes in Fund Balances - Governmental Funds For the Past Ten Fiscal Years (modified accrual basis of accounting, amounts in thousands) 2013 2014 2015 2016 Revenues Personal income taxes ........................................................... $ 67,424,576 $ 68,771,667 $ 78,245,616 $ 79,934,285 Sales and use taxes ................................................................ 33,869,961 36,409,311 38,389,972 39,136,040 Corporation taxes ................................................................... 7,261,910 9,242,454 10,780,647 9,214,173 Motor vehicle excise taxes 1................................................... 5,219,605 5,777,167 5,393,994 5,028,589 Insurance taxes....................................................................... 2,295,579 3,359,043 3,926,319 4,203,885 Managed care organization enrollment tax 2.......................... — — — — Other taxes 1............................................................................ 2,425,184 2,297,025 2,312,875 2,185,690 Intergovernmental................................................................... 64,418,808 73,000,600 87,740,667 91,069,753 Licenses and permits.............................................................. 6,659,078 6,957,117 7,270,994 7,612,551 Charges for services................................................................ 741,201 769,302 849,895 870,142 Fees and penalties .................................................................. 10,673,104 9,757,476 10,510,727 11,882,699 Investment and interest........................................................... 135,928 137,754 119,690 232,285 Escheat.................................................................................... 551,580 488,945 406,899 305,394 Other....................................................................................... 3,227,347 2,903,335 3,975,144 4,049,789 Total revenues.................................................................... 204,903,861 219,871,196 249,923,439 255,725,275 Expenditures General government .............................................................. 15,748,069 14,778,214 16,202,395 16,715,892 Education................................................................................ 49,692,763 53,309,436 62,952,621 65,213,542 Health and human services..................................................... 94,621,630 104,781,494 122,259,036 127,201,314 Natural resources and environmental protection.................... 5,318,332 5,508,860 6,006,446 6,278,363 Business, consumer services, and housing............................. 1,259,392 621,037 670,774 1,130,213 Transportation ........................................................................ 15,008,671 15,721,532 15,137,217 14,814,829 Corrections and rehabilitation................................................ 9,681,086 10,395,234 11,182,926 11,450,980 Capital outlay.......................................................................... 1,222,342 1,909,010 1,019,335 1,492,442 Debt service: Bond and commercial paper retirement............................... 5,189,150 7,002,941 8,482,380 6,929,866 Interest and fiscal charges ................................................... 4,363,260 4,321,040 4,473,799 4,057,907 Total expenditures............................................................. 202,104,695 218,348,798 248,386,929 255,285,348 Excess (deficiency) of revenues over (under) expenditures... 2,799,166 1,522,398 1,536,510 439,927 Other financing sources (uses) General obligation bonds and commercial paper issued........ 4,038,095 5,082,305 4,343,165 4,074,980 Revenue bonds issued............................................................. — — — — Refunding/remarketing debt issued........................................ 4,634,365 2,077,330 5,086,100 5,220,320 Payment to refund/remarket long-term debt........................... (3,174,613) (328,024) (3,865,093) (4,378,328) Premium on bonds issued....................................................... 964,211 505,026 1,116,811 1,037,920 Capital leases ......................................................................... 710,440 1,486,204 625,282 1,148,774 Transfers in............................................................................. 2,957,762 4,041,250 5,344,134 4,385,123 Transfers out........................................................................... (4,898,754) (6,304,047) (7,934,754) (7,130,142) Total other financing sources............................................ 5,231,506 6,560,044 4,715,645 4,358,647 Total change in fund balance.................................................. $ 8,030,672 $ 8,082,442 $ 6,252,155 $ 4,798,574 Debt service as a percentage of noncapital expenditures ......... 4.9 % 5.3 % 5.3 % 4.4 % 1 Motor vehicle excise taxes, reported separately in fiscal year 2012 due to material increases, were included with “other taxes” in prior years. 2 In fiscal year 2017, the State restructured its managed care organization enrollment tax to conform to federal Medicaid requirements. This tax revenue was included with “insurance taxes” in prior years. 316 Statistical Section 2017 2018 2019 2020 2021 2022 $ 85,737,905 $ 94,484,443 $ 96,801,076 $ 111,831,167 $ 132,095,124 $ 125,914,865 38,741,715 39,777,069 41,085,626 40,709,462 45,906,755 52,317,376 11,125,198 12,597,928 14,038,348 13,722,735 32,122,361 35,824,715 4,878,953 6,680,858 7,632,365 7,876,545 7,942,519 8,453,232 2,719,489 2,754,056 2,734,068 3,161,634 3,156,993 3,516,612 2,282,313 2,397,531 2,562,919 1,031,357 2,318,011 2,584,077 2,565,928 3,548,182 3,688,531 3,862,045 4,007,125 4,421,355 95,709,784 92,904,469 99,867,750 148,951,650 272,691,880 175,107,421 8,113,542 8,761,620 9,186,945 9,256,454 9,999,107 10,126,549 860,241 975,314 956,032 972,805 1,025,167 1,028,747 11,571,934 13,548,471 14,187,698 14,322,983 15,062,529 15,461,639 318,502 607,418 1,321,143 1,328,956 626,478 643,594 327,614 382,793 448,756 615,720 644,248 661,698 2,934,157 5,318,739 5,594,587 4,595,386 6,802,576 7,862,830 267,887,275 284,738,891 300,105,844 362,238,899 534,400,873 443,924,710 17,250,720 18,978,389 19,263,146 27,393,107 29,908,484 44,249,597 67,224,796 69,902,627 75,071,188 76,347,719 99,964,095 111,764,166 134,372,094 138,018,275 144,543,589 191,819,998 311,093,756 216,174,091 6,712,838 7,987,878 9,069,777 9,244,813 8,862,649 12,175,743 1,103,694 1,189,365 2,013,409 2,457,248 2,824,462 7,637,467 15,007,639 17,169,040 17,893,338 20,025,848 19,623,756 19,491,005 12,276,391 14,665,524 14,055,766 14,680,705 12,598,851 15,689,740 1,238,700 612,769 287,487 401,066 886,020 682,904 9,364,550 8,598,856 10,444,825 10,276,581 9,594,575 13,402,490 3,986,270 3,961,704 3,971,353 3,856,390 3,650,153 4,126,022 268,537,692 281,084,427 296,613,878 356,503,475 499,006,801 445,393,225 (650,417) 3,654,464 3,491,966 5,735,424 35,394,072 (1,468,515) 4,325,075 5,283,365 3,626,765 5,085,590 5,051,305 4,552,690 — — — 500,000 450,000 1,050,000 7,074,225 6,681,855 5,683,865 4,384,895 3,657,445 10,011,411 (3,038,281) (3,726,204) (411,340) — (428,395) (2,935,087) 1,309,254 1,036,320 1,003,337 1,217,615 1,218,766 1,229,185 988,680 405,930 50,506 24,082 439,180 143,759 4,586,199 4,266,596 4,414,250 5,776,094 6,408,853 7,121,202 (7,551,627) (8,555,594) (8,298,095) (11,731,486) (10,249,393) (12,547,219) 7,693,525 5,392,268 6,069,288 5,256,790 6,547,761 8,625,941 $ 7,043,108 $ 9,046,732 $ 9,561,254 $ 10,992,214 $ 41,941,833 $ 7,157,426 5.1 % 4.6 % 5.0 % 4.0 % 2.7 % 4.0 % 317 State of California Annual Comprehensive Financial Report This page intentionally left blank 318 Revenue Capacity Revenue capacity schedules contain information to help the reader assess the State’s capacity to raise revenue and the sources of that revenue. This section includes the following revenue capacity schedules. Schedule of Revenue Base Schedule of Revenue Payers by Income Level/Industry Schedule of Personal Income Tax Rates 319 State of California Annual Comprehensive Financial Report Schedule of Revenue Base For the Past Ten Calendar Years (amounts in thousands) 2012 2013 2014 2015 Personal Income by Industry (items restated as footnoted) 1 Farm earnings...................................................... $ 17,370,268 $ 20,545,796 $ 22,609,066 $ 21,222,250 Forestry, fishing, and other natural resources..... 7,454,062 7,873,988 8,303,175 9,216,947 Mining................................................................. 6,036,435 6,503,958 6,712,256 4,963,527 Construction and utilities.................................... 66,932,640 74,439,881 79,692,915 88,130,646 Manufacturing..................................................... 124,445,460 126,037,578 133,035,011 139,414,534 Wholesale trade................................................... 58,930,627 61,468,734 65,805,068 70,215,535 Retail trade.......................................................... 76,425,385 78,268,977 81,107,100 84,898,965 Transportation and warehousing......................... 37,625,628 39,503,640 42,142,663 45,945,185 Information, finance, and insurance.................... 143,606,186 156,649,296 159,848,610 174,617,028 Real estate and rental and leasing....................... 54,307,662 52,035,567 49,055,596 51,762,077 Services............................................................... 476,932,767 482,396,884 516,952,464 552,135,538 Federal, civilian................................................... 26,157,969 25,771,225 26,450,856 27,477,720 Military............................................................... 15,933,613 15,354,084 15,071,769 14,952,018 State and local government................................. 179,879,539 190,360,140 200,331,079 212,528,644 Other 2................................................................. 496,789,437 474,413,668 517,464,525 566,525,160 Total personal income.......................................... $ 1,788,827,678 $ 1,811,623,416 $ 1,924,582,153 $ 2,064,005,774 Average effective rate 3.......................................... 5.0 % 6.1 % 5.6 % 6.1 % Source: Bureau of Economic Analysis, U.S. Department of Commerce 1 Prior years were updated based on more current information. 2 Other personal income includes dividends, interest, rental income, residence adjustment, government transfers for individuals, and deductions for social insurance. 3 The total direct rate for personal income is not available. The average effective rate equals personal income tax revenue divided by adjusted gross income. 320 Statistical Section 2016 2017 2018 2019 2020 2021 $ 18,646,282 $ 20,041,415 $ 15,669,285 $ 15,978,888 $ 17,315,815 $ 15,575,403 9,898,303 10,176,211 10,765,747 11,261,626 12,690,920 12,409,090 3,753,851 3,216,216 3,717,373 3,427,775 2,839,729 2,644,161 93,511,037 102,974,465 112,396,379 120,240,852 117,965,220 122,073,288 145,528,697 153,661,389 159,126,826 161,854,115 172,313,755 187,218,373 70,149,369 73,535,459 71,639,917 72,727,682 73,620,933 76,454,399 84,819,197 87,143,887 90,173,648 92,171,144 93,632,170 103,125,834 49,332,199 53,670,285 60,511,132 69,759,793 68,916,210 82,190,820 190,140,120 206,955,669 218,388,275 229,828,550 252,396,092 293,219,543 54,244,467 55,830,864 60,774,043 69,549,333 72,006,102 77,184,395 574,579,377 604,183,727 640,289,889 680,264,303 678,958,934 760,246,498 28,337,175 29,073,247 30,340,685 31,010,832 32,936,947 33,470,612 16,333,621 16,101,002 15,238,777 15,611,106 16,600,127 17,841,972 223,593,750 230,997,705 237,580,482 245,796,913 255,052,712 263,859,389 593,930,254 612,061,700 643,820,394 677,994,115 858,162,187 919,383,466 $ 2,156,797,699 $ 2,259,623,241 $ 2,370,432,852 $ 2,497,477,027 $ 2,725,407,853 $ 2,966,897,243 6.0 % 5.9 % 6.1 % 6.0 % 6.5 % 6.5 % (continued) 321 State of California Annual Comprehensive Financial Report Schedule of Revenue Base (continued) For the Past Ten Calendar Years (amounts in thousands) 2012 2013 2014 2015 Taxable Sales by Industry Retail and Food Services: Motor vehicle and parts dealers................................. $ 61,547,848 $ 67,986,436 $ 73,232,242 $ 80,346,595 Furniture and home furnishings stores...................... 9,937,187 10,645,523 11,408,837 12,169,888 Electronics and appliance stores................................ 14,744,723 14,765,485 15,148,893 16,349,542 Building materials, garden equipment, and supplies. 27,438,083 29,680,053 31,299,110 33,601,538 Food and beverage..................................................... 24,511,714 25,289,203 26,298,414 27,134,034 Health and personal care stores................................. 10,787,801 11,294,049 11,640,870 12,364,559 Gasoline stations........................................................ 58,006,168 56,860,585 55,733,384 48,203,175 Clothing and clothing accessories stores................... 32,357,516 34,918,036 36,822,241 38,438,074 Sporting goods, hobby, book, and music stores........ 10,751,814 11,113,831 11,056,024 11,341,328 General merchandise stores....................................... 49,996,451 51,431,094 52,013,855 53,119,200 Miscellaneous store retailers..................................... 17,880,765 18,382,224 19,024,905 19,852,685 Nonstore retailers....................................................... 4,375,432 7,296,839 8,292,788 9,531,606 Food services and drinking places............................. 59,037,320 62,776,360 67,864,614 73,889,708 All other outlets............................................................ 177,014,427 184,399,899 195,985,698 202,290,022 Total taxable sales......................................................... $ 558,387,249 $ 586,839,617 $ 615,821,875 $ 638,631,954 Direct sales tax rate 1....................................................... 6.25 % 6.50 %2 6.50 % 6.50 % Source: California Department of Tax and Fee Administration (CDTFA) 1 The direct sales tax rate used is the state tax rate that provides revenue to the State’s General Fund. It does not include the local tax rate that is allocated to cities and counties. 2 Rate change was effective on January 1, 2013. 3 Rate change was effective on January 1, 2017. 322 Statistical Section 2016 2017 2018 2019 2020 2021 $ 84,225,652 $ 86,983,280 $ 89,696,669 $ 88,526,876 $ 87,847,344 $ 106,686,238 12,790,041 13,035,340 13,578,685 13,427,029 13,626,241 16,375,319 17,120,030 17,170,671 17,520,474 16,999,111 16,926,013 19,232,973 35,238,333 37,504,347 39,469,798 40,313,948 45,966,216 50,775,894 27,678,056 28,799,044 29,697,424 30,216,432 32,042,780 33,308,785 13,163,569 13,669,415 14,384,602 15,160,891 15,622,747 17,397,455 43,273,182 47,434,923 54,302,232 54,141,178 38,345,721 56,231,375 39,698,156 40,206,581 42,233,560 43,130,842 32,500,749 47,599,716 11,441,556 10,900,749 10,467,200 10,407,608 10,110,131 11,776,823 53,032,357 54,684,182 56,416,293 58,066,003 57,003,022 66,201,633 19,617,820 19,719,301 20,503,078 20,952,870 20,863,193 24,996,467 11,717,407 13,599,808 15,663,789 20,276,518 53,383,005 60,520,452 78,494,623 82,355,474 85,226,197 89,403,960 63,665,386 87,700,329 206,365,477 211,760,378 217,675,199 231,733,635 218,853,973 263,908,719 $ 653,856,259 $ 677,823,493 $ 706,835,200 $ 732,756,901 $ 706,756,521 $ 862,712,178 6.50 % 6.00 % 3 6.00 % 6.00 % 6.00 % 6.00 % (concluded) 323 State of California Annual Comprehensive Financial Report Schedule of Revenue Payers by Income Level/Industry For Calendar Years 2013 and 2021 Personal Income Tax Filers and Liability by Income Level 1 2013 Number Percent Tax Percent of Filers of Total Liability 2 of Total Under $ 50,000 ....................................... 9,549,671 61.6 % $ 1,396,252 2.5 % 50,000 to 99,999 ....................................... 3,265,205 21.1 5,639,339 10.2 100,000 to 149,999 ....................................... 1,296,856 8.4 6,207,337 11.2 150,000 to 199,999 ....................................... 575,201 3.7 5,008,725 9.0 200,000 to 299,999 ....................................... 432,933 2.8 6,240,174 11.2 300,000 to 399,999 ....................................... 151,111 1.0 3,541,194 6.4 400,000 to 499,999 ....................................... 70,980 0.4 2,340,079 4.2 500,000 to 599,999 ....................................... 38,634 0.2 1,635,841 2.9 600,000 to 699,999 ....................................... 24,779 0.2 1,302,480 2.3 700,000 to 799,999 ....................................... 16,995 0.1 1,070,707 1.9 800,000 to 899,999 ....................................... 11,615 0.1 856,683 1.6 900,000 to 999,999 ....................................... 8,610 0.1 720,373 1.3 1,000,000 to 1,999,999 ....................................... 33,152 0.2 4,409,909 7.9 2,000,000 to 2,999,999 ....................................... 8,288 0.1 2,151,781 3.9 3,000,000 to 3,999,999 ....................................... 3,640 — 1,395,555 2.5 4,000,000 to 4,999,999 ....................................... 1,968 — 1,001,131 1.8 $ 5,000,000 and over.................................................... 5,745 — 10,704,400 19.2 Total................................................................................ 15,495,383 100.0 % $ 55,621,960 100.0 % 2021 Number Percent Tax Percent of Filers of Total Liability 2 of Total Under $ 50,000 ....................................... 9,569,754 53.2 % $ 1,533,745 1.2 % 50,000 to 99,999 ....................................... 4,011,233 22.3 6,612,276 5.3 100,000 to 149,999 ....................................... 1,737,997 9.7 8,044,591 6.4 150,000 to 199,999 ....................................... 901,853 5.0 7,593,390 6.0 200,000 to 299,999 ....................................... 793,450 4.4 11,225,388 8.9 300,000 to 399,999 ....................................... 331,440 1.8 7,579,555 6.0 400,000 to 499,999 ....................................... 178,318 1.0 5,645,447 4.5 500,000 to 599,999 ....................................... 109,408 0.6 4,451,632 3.5 600,000 to 699,999 ....................................... 71,676 0.4 3,539,243 2.8 700,000 to 799,999 ....................................... 51,011 0.3 2,988,245 2.4 800,000 to 899,999 ....................................... 36,855 0.2 2,516,548 2.0 900,000 to 999,999 ....................................... 27,406 0.2 2,147,554 1.7 1,000,000 to 1,999,999 ....................................... 98,315 0.6 11,799,095 9.4 2,000,000 to 2,999,999 ....................................... 23,777 0.1 5,539,434 4.4 3,000,000 to 3,999,999 ....................................... 10,743 0.1 3,644,107 2.9 4,000,000 to 4,999,999 ....................................... 6,148 — 2,717,326 2.2 $ 5,000,000 and over.................................................... 19,461 0.1 38,273,200 30.4 Total ............................................................................... 17,978,845 100.0 % $ 125,850,776 100.0 % Source: California Franchise Tax Board 1 For California resident tax returns. Calendar year 2021 is the most applicable year for which data is available. 2 Amounts are in thousands. 324 Statistical Section For Calendar Years 2012 and 2021 Sales Tax Permits and Tax Liability by Industry 2012 Number Percent Tax Percent of Permits of Total Liability 1 of Total Retail and Food Services: Motor vehicle and parts dealers...................................... 33,767 3.4 % $ 3,846,740 11.0 % Furniture and home furnishings stores............................ 18,587 1.9 621,074 1.8 Electronics and appliance stores..................................... 23,301 2.4 921,545 2.6 Building materials, garden equipment, and supplies...... 17,236 1.8 1,714,880 4.9 Food and beverage.......................................................... 31,900 3.3 1,531,982 4.4 Health and personal care stores....................................... 24,427 2.5 674,238 1.9 Gasoline stations............................................................. 9,990 1.0 3,625,385 10.4 Clothing and clothing accessories stores........................ 70,775 7.2 2,022,345 5.8 Sporting goods, hobby, book, and music stores.............. 29,246 3.0 671,988 1.9 General merchandise stores............................................ 17,163 1.8 3,124,778 9.0 Miscellaneous store retailers........................................... 117,979 12.1 1,117,548 3.2 Nonstore retailers............................................................ 167,568 17.1 273,464 0.8 Food services and drinking places.................................. 94,453 9.6 3,689,833 10.6 All other outlets.................................................................. 321,897 32.9 11,063,402 31.7 Total.................................................................................. 978,289 100.0 % $ 34,899,202 100.0 % 2021 Number Percent Tax Percent of Permits of Total Liability 1 of Total Retail and Food Services: Motor vehicle and parts dealers...................................... 35,023 2.7 % $ 6,401,174 12.4 % Furniture and home furnishings stores............................ 18,817 1.4 982,519 1.9 Electronics and appliance stores..................................... 22,751 1.7 1,153,978 2.2 Building materials, garden equipment, and supplies...... 16,887 1.3 3,046,554 5.9 Food and beverage.......................................................... 37,857 2.9 1,998,527 3.8 Health and personal care stores....................................... 50,315 3.8 1,043,847 2.0 Gasoline stations............................................................. 10,419 0.8 3,373,883 6.5 Clothing and clothing accessories stores........................ 124,244 9.5 2,855,983 5.5 Sporting goods, hobby, book, and music stores.............. 32,280 2.5 706,609 1.4 General merchandise stores............................................ 27,040 2.1 3,972,098 7.7 Miscellaneous store retailers........................................... 160,337 12.2 1,499,788 2.9 Nonstore retailers............................................................ 93,745 7.1 3,631,227 7.0 Food services and drinking places.................................. 118,341 9.0 5,262,020 10.2 All other outlets.................................................................. 565,049 43.0 15,834,523 30.6 Total.................................................................................. 1,313,105 100.0 % $ 51,762,730 100.0 % Source: California Department of Tax and Fee Administration (CDTFA) 1 Calculated by multiplying the taxable sales by industry shown on pages 322 and 323 by the direct sales tax rate. Amounts are in thousands. 325 State of California Annual Comprehensive Financial Report Schedule of Personal Income Tax Rates For Calendar Years 2012-2021 Married Filing Jointly and Surviving Spouse 2012 2013 2014 2015 Tax Rate 1 Income Level Income Level Income Level Income Level 1.0 Up to $14,910 Up to $15,164 Up to $15,498 Up to $15,700 2.0 14,911 – 35,352 15,165 – 35,952 15,499 – 36,742 15,701 – 37,220 4.0 35,353 – 55,794 35,953 – 56,742 36,743 – 57,990 37,221 – 58,744 6.0 55,795 – 77,452 56,743 – 78,768 57,991 – 80,500 58,745 – 81,546 8.0 77,453 – 97,884 78,769 – 99,548 80,501 – 101,738 81,547 – 103,060 9.3 97,885 – 500,000 99,549 – 508,500 101,739 – 519,688 103,061 – 526,444 10.3 500,001 – 600,000 508,501 – 610,200 519,689 – 623,624 526,445 – 631,732 11.3 600,001 – 1,000,000 610,201 – 1,000,000 623,625 – 1,000,000 631,733 – 1,000,000 12.3 –– 1,000,001 – 1,017,000 1,000,001 – 1,039,374 1,000,001 – 1,052,886 13.3 $1,000,001 and over $1,017,001 and over $1,039,375 and over $1,052,887 and over Single and Married Filing Separately 2012 2013 2014 2015 Tax Rate 1 Income Level Income Level Income Level Income Level 1.0 Up to $7,455 Up to $7,582 Up to $7,749 Up to $7,850 2.0 7,456 – 17,676 7,583 – 17,976 7,750 – 18,371 7,851 – 18,610 4.0 17,677 – 27,897 17,977 – 28,371 18,372 – 28,995 18,611 – 29,372 6.0 27,898 – 38,726 28,372 – 39,384 28,996 – 40,250 29,373 – 40,773 8.0 38,727 – 48,942 39,385 – 49,774 40,251 – 50,869 40,774 – 51,530 9.3 48,943 – 250,000 49,775 – 254,250 50,870 – 259,844 51,531 – 263,222 10.3 250,001 – 300,000 254,251 – 305,100 259,845 – 311,812 263,223 – 315,866 11.3 300,001 – 500,000 305,101 – 508,500 311,813 – 519,687 315,867 – 526,443 12.3 500,001 – 1,000,000 508,501 – 1,000,000 519,688 – 1,000,000 526,444 – 1,000,000 13.3 $1,000,001 and over $1,000,001 and over $1,000,001 and over $1,000,001 and over Head of Household 2012 2013 2014 2015 Tax Rate 1 Income Level Income Level Income Level Income Level 1.0 Up to $14,920 Up to $15,174 Up to $15,508 Up to $15,710 2.0 14,921 – 35,351 15,175 – 35,952 15,509 – 36,743 15,711 – 37,221 4.0 35,352 – 45,571 35,953 – 46,346 36,744 – 47,366 37,222 – 47,982 6.0 45,572 – 56,400 46,347 – 57,359 47,367 – 58,621 47,983 – 59,383 8.0 56,401 – 66,618 57,360 – 67,751 58,622 – 69,242 59,384 – 70,142 9.3 66,619 – 340,000 67,752 – 345,780 69,243 – 353,387 70,143 – 357,981 10.3 340,001 – 408,000 345,781 – 414,936 353,388 – 424,065 357,982 – 429,578 11.3 408,001 – 680,000 414,937 – 691,560 424,066 – 706,774 429,579 – 715,962 12.3 680,001 – 1,000,000 691,561 – 1,000,000 706,775 – 1,000,000 715,963 – 1,000,000 13.3 $1,000,001 and over $1,000,001 and over $1,000,001 and over $1,000,001 and over Source: California Franchise Tax Board (FTB) 1 FTB tax brackets are indexed to the California Consumer Price Index and are adjusted accordingly on a yearly basis. Average Effective Rate (amounts in thousands) 2012 2013 2014 2015 Personal income tax revenue 1 ................................ $ 54,442,733 $ 66,220,132 $ 67,584,256 $ 76,879,115 Adjusted gross income 2.......................................... $ 1,087,823,400 $ 1,091,080,300 $ 1,216,002,700 $ 1,265,341,200 Average effective rate 3........................................... 5.0 % 6.1 % 5.6 % 6.1 % 1 Personal income tax revenue is reported on a fiscal year basis. 2 Source: California Franchise Tax Board. Fiscal year 2021 information reflects returns processed as of December 2022 3 The average effective rate equals personal income tax revenue divided by adjusted gross income. 326 Statistical Section Married Filing Jointly and Surviving Spouse 2016 2017 2018 2019 2020 2021 Income Level Income Level Income Level Income Level Income Level Income Level Up to $16,030 Up to $16,446 Up to $17,088 Up to $17,618 Up to $17,864 Up to $18,650 16,031 – 38,002 16,447 – 38,990 17,089 – 40,510 17,619 – 41,766 17,865 – 42,350 18,651 – 44,214 38,003 – 59,978 38,991 – 61,538 40,511 – 63,938 41,767 – 65,920 42,351 – 66,842 44,215 – 69,784 59,979 – 83,258 61,539 – 85,422 63,939 – 88,754 65,921 – 91,506 66,843 – 92,788 69,785 – 96,870 83,259 – 105,224 85,423 – 107,960 88,755 – 112,170 91,507 – 115,648 92,789 – 117,268 96,871 – 122,428 105,225 – 537,500 107,961 – 551,476 112,171 – 572,984 115,649 – 590,746 117,269 – 599,016 122,429 – 625,372 537,501 – 644,998 551,477 – 661,768 572,985 – 687,576 590,747 – 708,890 599,017 – 718,814 625,373 – 750,442 644,999 – 1,000,000 661,769 – 1,000,000 687,577 – 1,000,000 708,891 – 1,000,000 718,815 – 1,000,000 750,443 – 1,000,000 1,000,001 – 1,074,996 1,000,001 – 1,102,946 1,000,001 – 1,145,960 1,000,001 – 1,181,484 1,000,001 – 1,198,024 1,000,001 - 1,250,738 $1,074,997 and over $1,102,947 and over $1,145,961 and over $1,181,485 and over 1,198,025 and over 1,250,739 and over Single and Married Filing Separately 2016 2017 2018 2019 2020 2021 Income Level Income Level Income Level Income Level Income Level Income Level Up to $8,015 Up to $8,223 Up to $8,544 Up to $8,809 Up to $8,932 Up to $9,325 8,016 – 19,001 8,224 – 19,495 8,545 – 20,255 8,810– 20,883 8,933 – 21,175 9,326 - 22,107 19,002 – 29,989 19,496 – 30,769 20,256 – 31,969 20,884 – 32,960 21,176 – 33,421 22,108 - 34,892 29.990 – 41,629 30,770 – 42,711 31,970 – 44,377 32,961 – 45,753 33,422 – 46,394 34,893 - 48,435 41,630 – 52,612 42,712 – 53,980 44,378 – 56,085 45,754 – 57,824 46,395 – 58,634 48,436 - 61,214 52,613 – 268,750 53,981 – 275,738 56,086 – 286,492 57,825 – 295,373 58,635 – 295,508 61,215- 312,686 268,751 – 322,499 275,739 – 330,884 286,493 – 343,788 295,374 – 354,445 295,509 – 359,407 312,687 - 375,221 322,500 – 537,498 330,885 – 551,473 343,789 – 572,980 354,446 – 590,742 359,408 – 599,012 375,222 - 625,369 537,499 – 1,000,000 551,474 – 1,000,000 572,981 – 1,000,000 590,743 – 1,000,000 599,013 – 1,000,000 625,370 - 1,000,000 $1,000,001 and over $1,000,001 and over $1,000,001 and over $1,000,001 and over $1,000,001 and over $1,000,001 and over Head of Household 2016 2017 2018 2019 2020 2021 Income Level Income Level Income Level Income Level Income Level Income Level Up to $16,040 Up to $16,457 Up to $16,457 Up to $17,629 Up to $17,876 Up to $18,663 16,041 – 38,003 16,458 – 38,991 16,458 – 38,991 17,630 – 41,768 17,877 – 42,353 18,664 – 44,217 38,004 – 48,990 38,992 – 50,264 38,992 – 50,264 41,769 – 53,843 42,354 – 54,597 44,218 – 56,999 48,991 – 60,630 50,265 – 62,206 50,265 – 62,206 53,844 – 66,636 54,598 – 67,569 57,000 – 70,542 60,631 – 71,615 62,207 – 73,477 62,207 – 73,477 66,637 – 78,710 67,570 – 79,812 70,543 – 83,324 71,616 – 365,499 73,478 – 375,002 73,478 – 375,002 78,711 – 401,705 79,813 – 407,329 83,325 – 425,251 365,500 – 438,599 375,003 – 450,003 375,003 – 450,003 401,706 – 482,047 407,330 – 488,796 425,252 – 510,303 438,600 – 730,997 450,004 – 750,003 450,004 – 750,003 482,048 – 803,410 488,797 – 814,658 510,304 – 850,503 730,998 – 1,000,000 750,004 – 1,000,000 750,004 – 1,000,000 803,411 – 1,000,000 814,659 – 1,000,000 850,504 – 1,000,000 $1,000,001 and over $1,000,001 and over $1,000,001 and over $1,000,001 and over $1,000,001 and over $1,000,001 and over 2016 2017 2018 2019 2020 2021 $ 78,510,777 $ 84,253,851 $ 92,808,996 $ 95,026,913 $ 110,352,220 $ 129,514,535 $ 1,318,362,700 $ 1,430,332,000 $ 1,531,670,000 $ 1,596,322,000 $ 1,693,751,000 $ 1,991,347,000 6.0 % 5.9 % 6.1 % 6.0 % 6.5 % 6.5 % 327 State of California Annual Comprehensive Financial Report This page intentionally left blank 328 Debt Capacity Debt capacity schedules contain information to help the reader understand the State’s outstanding debt, the capacity to repay that debt, and the ability to issue additional debt in the future. This section includes the following debt capacity schedules. Schedule of Ratios of Outstanding Debt by Type Schedule of Ratios of General Bonded Debt Outstanding Schedule of General Obligation Bonds Outstanding Schedule of Pledged Revenue Coverage Sources: Unless otherwise noted, the information in the following schedules is derived from the State’s Annual Comprehensive Financial Reports. 329 State of California Annual Comprehensive Financial Report Schedule of Ratios of Outstanding Debt by Type For the Past Ten Fiscal Years (amounts in thousands, except per capita) 2013 2014 2015 2016 Governmental activities General obligation bonds 1............................................. $ 82,346,211 $ 83,276,347 $ 80,509,802 $ 79,043,295 Revenue bonds 2............................................................. 7,735,053 18,917,443 18,409,971 17,210,499 Certificates of participation and commercial paper 3..... 538,593 598,094 493,770 771,215 Capital lease obligations 4, 7............................................ 5,319,487 260,088 274,760 370,182 Lease Liability ............................................................... — — — — Total governmental activities......................................... 95,939,344 103,051,972 99,688,303 97,395,191 Business-type activities General obligation bonds 1............................................. 887,053 674,394 650,133 794,369 Revenue bonds 2............................................................. 25,558,129 12,991,827 12,670,619 13,928,374 Commercial paper........................................................... 77,560 204,647 237,186 47,416 Capital lease obligations7................................................ 909,871 1,250,274 1,210,409 389,385 Lease Liability ............................................................... — — — — Total business-type activities.......................................... 27,432,613 15,121,142 14,768,347 15,159,544 Total primary government............................................. $ 123,371,957 $ 118,173,114 $ 114,456,650 $ 112,554,735 Debt as a percentage of personal income 5........................ 6.7 % 6.3 % 5.7 % 5.2 % Amount of debt per capita 6............................................... $ 3,251 $ 3,089 $ 2,965 $ 2,892 Note: Details regarding the State’s outstanding debt can be found in Notes 9, 12, 13, 15, and 16 of the financial statements. 1 Beginning in fiscal year 2013, refunding gains/losses are no longer included in bonds payable, but are shown as deferred inflows and deferred outflows of resources. 2 Prior to fiscal year 2014, the Public Buildings Construction Fund was included in business-type activities. 3 All certificates of participation were retired in fiscal year 2016. 4 Prior to fiscal year 2014, governmental activities reported a capital lease obligation to the Public Buildings Construction Fund. In fiscal year 2014, the fund was reclassified from an enterprise fund to an internal service fund and the governmental activities’ obligation and the fund’s net investment in direct financing leases were netted against each other within governmental activities. 5 Ratio calculated using personal income data shown on pages 340 and 341 for the prior calendar year. 6 Amount calculated using population data shown on pages 340 and 341 for the prior calendar year. 7 Due to implementation of GASB 87, capital lease obligations are no longer reported. 330 Statistical Section 2017 2018 2019 2020 2021 2022 $ 79,503,871 $ 79,663,028 $ 78,772,850 $ 78,883,746 $ 78,481,408 $ 77,346,130 16,879,900 16,364,255 15,711,660 15,905,264 15,998,239 17,157,391 1,158,080 859,695 1,032,760 1,108,720 1,176,235 1,448,725 416,468 481,261 434,876 393,089 359,812 — — — — — — 2,514,714 97,958,319 97,368,239 95,952,146 96,290,819 96,015,694 98,466,960 703,754 694,100 850,762 788,052 598,384 536,352 14,955,858 14,319,372 14,521,460 14,277,362 14,806,645 14,421,501 147,765 749,877 799,643 1,049,226 401,219 323,313 353,453 309,928 315,322 357,072 336,081 — — — — — — 332,614 16,160,830 16,073,277 16,487,187 16,471,712 16,142,329 15,613,780 $ 114,119,149 $ 113,441,516 $ 112,439,333 $ 112,762,531 $ 112,158,023 $ 114,080,740 5.0 % 4.8 % 4.5 % 4.3 % 4.1 % 3.8 % $ 2,914 $ 2,882 $ 2,849 $ 2,859 $ 2,839 $ 2,914 331 State of California Annual Comprehensive Financial Report Schedule of Ratios of General Bonded Debt Outstanding For the Past Ten Fiscal Years (amounts in thousands, except per capita) 2013 2014 2015 2016 Net general bonded debt General obligation bonds 1.............................................. $ 78,001,049 $ 79,368,794 $ 80,215,650 $ 79,837,664 Economic Recovery bonds............................................. 5,232,215 4,581,745 944,285 — Less: restricted debt service fund................................. 278,425 318,171 818,321 — Net Economic Recovery bonds 2 .................................... 4,953,790 4,263,574 125,964 — Net general bonded debt.................................................. $ 82,954,839 $ 83,632,368 $ 80,341,614 $ 79,837,664 Net general bonded debt as a percentage of personal income 3............................................................. 4.5 % 4.4 % 4.0 % 3.7 % Amount of net general bonded debt per capita 4................ $ 2,186 $ 2,186 $ 2,082 $ 2,051 Note: Details regarding the State’s general bonded debt outstanding can be found in Note 15 of the financial statements. 1 Beginning in fiscal year 2013, refunding gains/losses are no longer included in bonds payable, but are shown as deferred inflows and deferred outflows of resources. 2 In fiscal year 2016, the outstanding balance of the Economic Recovery bonds was defeased and the balance in the restricted debt service fund was transferred out. 3 Ratio calculated using personal income data shown on pages 340 and 341 for the prior calendar year. 4 Amount calculated using population data shown on pages 340 and 341 for the prior calendar year. 332 Statistical Section 2017 2018 2019 2020 2021 2022 $ 79,503,871 $ 80,357,128 $ 79,623,612 $ 79,671,798 $ 79,079,792 $ 77,882,481 — — — — — — — — — — — — — — — — — — $ 79,503,871 $ 80,357,128 $ 79,623,612 $ 79,671,798 $ 79,079,792 $ 77,882,481 3.5 % 3.4 % 3.2 % 3.0 % 2.9 % 2.6 % $ 2,030 $ 2,042 $ 2,018 $ 2,020 $ 2,002 $ 1,990 333 State of California Annual Comprehensive Financial Report Schedule of General Obligation Bonds Outstanding June 30, 2022 (amounts in thousands) Governmental activity California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection........................................ $ 1,640,440 California Drought, Water, Parks, Climate, Coastal Protection, and Out Door Access For All............................ 465,535 California Library Construction and Renovation................................................................................................... 197,830 California Park and Recreational Facilities............................................................................................................ 3,485 California Parklands................................................................................................................................................ 480 California Safe Drinking Water.............................................................................................................................. 22,035 California Stem Cell Research and Cures............................................................................................................... 1,140,790 California Wildlife, Coastal, and Park Land Conservation.................................................................................... 36,720 Children’s Hospital................................................................................................................................................. 1,358,785 Class-Size Reduction Public Education Facilities.................................................................................................. 3,603,210 Clean Air and Transportation Improvement........................................................................................................... 301,280 Clean Water............................................................................................................................................................ 1,565 Clean Water and Water Conservation..................................................................................................................... 1,545 Clean Water and Water Reclamation...................................................................................................................... 5,315 Community Parklands............................................................................................................................................. 415 County Correctional Facility Capital Expenditure................................................................................................. 2,075 County Correctional Facility Capital Expenditure and Youth Facility.................................................................. 15,215 Disaster Preparedness and Flood Prevention.......................................................................................................... 2,709,390 Earthquake Safety and Public Buildings Rehabilitation......................................................................................... 10,510 Fish and Wildlife Habitat Enhancement................................................................................................................. 2,650 Higher Education Facilities..................................................................................................................................... 108,280 Highway Safety, Traffic Reduction, Air Quality, and Port Security...................................................................... 14,178,860 Housing and Emergency Shelter............................................................................................................................. 933,185 Housing and Homeless........................................................................................................................................... 190 Kindergarten-University Public Education Facilities............................................................................................. 28,314,200 New Prison Construction........................................................................................................................................ 3,675 Passenger Rail and Clean Air................................................................................................................................. 935 Public Education Facilities..................................................................................................................................... 691,930 Safe, Clean, Reliable Water Supply........................................................................................................................ 336,715 Safe Drinking Water, Clean Water, Watershed Protection, and Flood Protection................................................. 1,016,745 Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection........................... 3,201,415 Safe Neighborhood Parks, Clean Water, Clean Air, and Coastal Protection......................................................... 962,685 Safe, Reliable High-Speed Passenger Train........................................................................................................... 2,679,535 School Building and Earthquake............................................................................................................................ 5,320 School Facilities...................................................................................................................................................... 200,215 Seismic Retrofit...................................................................................................................................................... 685,785 State, Urban, and Coastal Park............................................................................................................................... 1,275 Veterans and Affordable Housing ......................................................................................................................... 169,150 Veterans Homes...................................................................................................................................................... 30,055 Veterans Housing and Homeless Prevention.......................................................................................................... 148,270 Voting Modernization ............................................................................................................................................ 41,365 Water Conservation................................................................................................................................................ 7,610 Water Conservation and Water Quality.................................................................................................................. 9,360 Water Quality, Supply, and Infrastructure Improvement....................................................................................... 1,773,040 Water Security, Clean Drinking Water, Coastal and Beach Protection.................................................................. 2,196,740 Total governmental activity............................................................................................................................... 69,215,805 Business-type activity California Water Resources Development.............................................................................................................. 205 Veterans’ Farm and Home Building....................................................................................................................... 525,490 Total business-type activity................................................................................................................................ 525,695 Total outstanding general obligation bonds................................................................................................. 69,741,500 Unamortized bond premiums/discounts..................................................................................................................... 8,140,981 Total general obligation bonds payable.............................................................................................................. $ 77,882,481 Source: California State Treasurer’s Office 334 Statistical Section This page intentionally left blank 335 State of California Annual Comprehensive Financial Report Schedule of Pledged Revenue Coverage For the Past Ten Fiscal Years (amounts in thousands) Net Revenue Debt Service Requirements 3 Gross Operating Available for June 30 Revenue 1 Expenses 2 Debt Service Principal Interest Total Coverage Housing Loans 2013 $ 66,050 $ 18,369 $ 47,681 $ 51,554 $ 16,271 $ 67,825 0.70 2014 65,247 19,452 45,795 47,620 14,926 62,546 0.73 2015 57,742 24,413 33,329 12,960 14,095 27,055 1.23 2016 53,428 21,916 31,512 381,175 21,525 402,700 0.08 2016 52,117 30,926 21,191 131,010 11,368 142,378 0.15 2017 52,480 25,943 26,537 14,000 10,380 24,380 1.09 2018 59,743 20,248 39,495 6,435 11,401 17,836 2.21 2019 61,588 15,463 46,125 17,980 11,392 29,372 1.57 2021 51,953 20,035 31,918 79,140 11,296 90,436 0.35 2022 45,820 18,656 27,164 142,575 9,132 151,707 0.18 Water Resources 2013 $ 1,127,195 $ 822,637 $ 304,558 $ 174,660 $ 145,660 $ 320,320 0.95 2014 973,508 798,653 174,855 150,911 107,727 258,638 0.68 2015 1,019,378 607,407 411,971 203,481 200,563 404,044 1.02 2016 1,086,650 796,591 290,059 171,455 84,099 255,554 1.14 2017 1,223,340 941,984 281,356 134,185 34,408 168,593 1.67 2018 1,221,866 820,163 401,703 138,570 75,670 214,240 1.88 2019 1,172,134 784,173 387,961 129,400 86,809 216,209 1.79 2020 1,155,001 720,577 434,424 147,035 139,197 286,232 1.52 2021 1,125,002 856,011 268,991 172,815 87,404 260,219 1.03 2022 1,295,670 660,537 635,133 160,300 88,108 248,408 2.56 Water Pollution 2013 $ 51,642 $ 1,055 $ 50,587 $ 45,755 $ 533 $ 46,288 1.09 Control 2014 54,968 1,739 53,229 13,000 355 13,355 3.99 2015 56,350 1,092 55,258 13,000 293 13,293 4.16 2016 59,034 321 58,713 13,000 2,199 15,199 3.86 2017 65,635 350 65,285 12,940 12,458 25,398 2.57 2018 77,135 183 76,952 27,350 28,748 56,098 1.37 2019 86,828 435 86,393 58,845 37,384 96,229 0.90 2020 80,627 353 80,274 77,170 35,174 112,344 0.71 2021 66,662 355 66,307 82,615 33,155 115,770 0.57 2022 61,698 510 61,188 87,375 30,656 118,031 0.52 Source: California State Controller’s Office 1 Total gross revenue includes non-operating interest revenue. Building authorities’ revenue includes operating transfers in. The nature of the revenue pledged for each type of debt is as follows: investment and interest earnings for Housing Loans bonds and Water Pollution Control bonds; charges for services and sales for Water Resources bonds; power sales revenue for Electric Power bonds; rental revenue for Public Buildings Construction bonds, High Technology Education bonds, CSU Channel Island Financing Authority bonds, and building authorities bonds; residence fees for California State University bonds; tobacco settlements and investment earnings for the Golden State Tobacco Securitization Corporation bonds; and federal transportation funds for Grant Anticipation Revenue Vehicles. 2 Total operating expenses are exclusive of depreciation, interest expense, and amortization (recovery) of long-term prepaid charges and refunding gains/ losses. 3 Debt service requirements include principal and interest of revenue bonds. 4 All revenue bonds have been redeemed. 5 Federal transportation funds are the only source of state revenue to pay these bonds, and the state obligation to pay debt service on these bonds is limited to and dependent on receipt of the federal funds. 336 Statistical Section For the Past Ten Fiscal Years (amounts in thousands) Net Revenue Debt Service Requirements 3 Gross Operating Available for June 30 Revenue 1 Expenses 2 Debt Service Principal Interest Total Coverage Electric Power 2013 $ 488,000 $ (408,000) $ 896,000 $ 574,000 $ 341,000 $ 915,000 0.98 2014 835,000 (46,000) 881,000 611,000 312,000 923,000 0.95 2015 799,000 (132,000) 931,000 618,000 268,000 886,000 1.05 2016 728,000 (182,000) 910,000 669,000 253,000 922,000 0.99 2017 945,000 (29,000) 974,000 690,000 215,000 905,000 1.08 2018 952,000 — 952,000 719,000 175,000 894,000 1.06 2019 923,000 (5,000) 928,000 753,000 139,000 892,000 1.04 2020 925,000 (11,000) 936,000 970,000 109,000 1,079,000 0.87 2021 299,000 (7,000) 306,000 735,000 48,000 783,000 0.39 2022 311,000 (140,000) 451,000 — — — — Public Buildings 2013 $ 616,041 $ 13,479 $ 602,562 $ 554,985 $ 395,073 $ 950,058 0.63 Construction 2014 431,890 14,403 417,487 412,085 439,888 851,973 0.49 2015 462,703 3,646 459,057 782,975 492,868 1,275,843 0.36 2016 413,807 6,455 407,352 1,192,065 452,796 1,644,861 0.25 2017 447,238 6,899 440,339 481,680 402,201 883,881 0.50 2018 440,902 4,023 436,879 709,805 415,551 1,125,356 0.39 2019 442,022 1,945 440,077 518,640 363,983 882,623 0.50 2020 422,614 4,430 418,184 635,985 353,371 989,356 0.42 2021 344,095 4,879 339,216 535,695 345,741 881,436 0.38 2022 366,050 7,396 358,654 1,922,085 411,384 2,333,469 0.15 High Technology 2013 $ 5,585 $ — $ 5,585 $ 22,275 $ 6,568 $ 28,843 0.19 Education 4 2014 424 — 424 24,771 847 25,618 0.02 California State 2013 $ 4,215,258 $ 5,754,800 $ (1,539,542) $ 126,395 $ 181,969 $ 308,364 (4.99) University 2014 4,505,589 6,376,502 (1,870,913) 257,964 173,424 431,388 (4.34) 2015 4,780,280 6,363,534 (1,583,254) 400,412 177,642 578,054 (2.74) 2016 4,937,116 6,672,956 (1,735,840) 114,585 166,964 281,549 (6.17) 2017 5,030,325 7,479,645 (2,449,320) 120,570 200,678 321,248 (7.62) 2018 5,393,953 9,225,942 (3,831,989) 296,516 255,133 551,649 (6.95) 2019 5,573,812 9,139,677 (3,565,865) 237,971 297,486 535,457 (6.66) 2020 5,695,853 9,908,839 (4,212,986) 299,162 342,642 641,804 (6.56) 2021 6,279,180 9,685,352 (3,406,172) 245,384 364,037 609,421 (5.59) 2022 7,675,072 9,969,192 (2,294,120) 498,712 345,120 843,832 (2.72) (continued) 337 State of California Annual Comprehensive Financial Report Schedule of Pledged Revenue Coverage (continued) For the Past Ten Fiscal Years (amounts in thousands) Net Revenue Debt Service Requirements 3 Gross Operating Available for June 30 Revenue 1 Expenses 2 Debt Service Principal Interest Total Coverage Building 2013 $ 53,441 $ — $ 53,441 $ 38,400 $ 18,390 $ 56,790 0.94 Authorities 2014 53,157 — 53,157 39,895 29,882 69,777 0.76 2015 54,090 — 54,090 38,800 19,701 58,501 0.92 2016 48,722 — 48,722 19,815 14,502 34,317 1.42 2017 40,718 — 40,718 27,420 10,096 37,516 1.09 2018 38,251 — 38,251 30,180 7,441 37,621 1.02 2019 38,327 — 38,327 31,605 6,012 37,617 1.02 2020 35,546 — 35,546 33,215 4,383 37,598 0.95 2021 25,434 — 25,434 31,580 2,774 34,354 0.74 2022 11,478 — 11,478 29,485 1,260 30,745 0.37 Golden State 2013 $ 555,392 $ — $ 555,392 $ 623,510 $ 308,056 $ 931,566 0.60 Tobacco 2014 355,918 — 355,918 50,910 325,884 376,794 0.94 Securitization 2015 414,992 394 414,598 133,900 292,173 426,073 0.97 Corporation 2016 365,300 586 364,714 70,535 299,935 370,470 0.98 2017 370,612 462 370,150 745,888 308,638 1,054,526 0.35 2018 433,836 518 433,318 2,044,750 319,550 2,364,300 0.18 2019 446,462 653 445,809 878,094 288,841 1,166,935 0.38 2020 423,369 530 422,839 154,190 265,519 419,709 1.01 2021 471,222 535 470,687 212,215 323,920 536,135 0.88 2022 482,247 371 481,876 2,981,103 799,366 3,780,469 0.13 Grant Anticipation 2013 $ 84,296 $ — $ 84,296 $ 70,990 $ 13,306 $ 84,296 1.00 Revenue 2014 84,289 — 84,289 74,400 9,889 84,289 1.00 Vehicles 4, 5 2015 84,289 — 84,289 78,090 6,199 84,289 1.00 2016 11,393 — 11,393 8,970 2,423 11,393 1.00 2017 11,390 — 11,390 9,360 2,030 11,390 1.00 2018 11,393 — 11,393 9,830 1,563 11,393 1.00 2019 11,390 — 11,390 10,320 1,070 11,390 1.00 2020 11,390 — 11,390 10,835 555 11,390 1.00 (concluded) 338 Demographic and Economic Information The demographic and economic schedules contain trend information to help the reader understand the environment in which the State’s financial activities occur. This section includes the following demographic and economic schedules. Schedule of Demographic and Economic Indicators Schedule of Employment by Industry 339 State of California Annual Comprehensive Financial Report Schedule of Demographic and Economic Indicators For the Past Ten Calendar Years 2012 2013 2014 2015 Population (in thousands) 1 California......................................................................... 37,970 38,291 38,636 38,966 % Change...................................................................... 0.8% 0.8% 0.9% 0.9% United States................................................................... 314,344 316,735 319,270 321,829 % Change...................................................................... 0.8% 0.8% 0.8% 0.8% Total personal income (in millions) 1 California......................................................................... $ 1,814,763 $ 1,840,885 $ 1,955,718 $ 2,097,050 % Change...................................................................... 5.9% 1.4% 6.2% 7.2% United States................................................................... $ 13,905,749 $ 14,063,283 $ 14,778,160 $ 15,467,113 % Change...................................................................... 4.6% 1.1% 5.1% 4.7% Per capita personal income 1, 2 California......................................................................... $ 47,794 $ 48,076 $ 50,619 $ 53,817 % Change...................................................................... 5.0% 0.6% 5.3% 6.3% United States................................................................... $ 44,237 $ 44,401 $ 46,287 $ 48,060 % Change...................................................................... 3.7% 0.4% 4.2% 3.8% Labor force and employment (in thousands) California Civilian labor force....................................................... 18,511 18,573 18,941 18,996 Employed...................................................................... 16,740 17,044 17,600 17,894 Unemployed.................................................................. 1,771 1,530 1,341 1,102 Unemployment rate...................................................... 9.6% 8.2% 7.1% 5.8% United States employment rate....................................... 8.1% 7.4% 6.2% 5.3% Sources: Economic Research Unit, California Department of Finance; Bureau of Economic Analysis, U.S. Department of Commerce; Labor Market Information Division, California Employment Development Department; and Bureau of Labor Statistics, U.S. Department of Labor. Note: This schedule presents data available as of September 2023. 1 Some prior years were updated based on more current information. 2 Calculated by dividing total personal income by population. 340 Statistical Section 2016 2017 2018 2019 2020 2021 39,223 39,424 39,536 39,548 39,502 39,143 0.7% 0.5% 0.3% — -0.1% -0.9% 324,368 326,623 328,542 330,233 331,512 332,032 0.8% 0.7% 0.6% 0.5% 0.4% 0.2% $ 2,191,138 $ 2,295,049 $ 2,411,055 $ 2,537,951 $ 2,767,521 $ 3,013,677 4.5% 4.7% 5.1% 5.3% 9.0% 8.9% $ 15,884,741 $ 16,658,962 $ 17,514,402 $ 18,343,601 $ 19,609,985 $ 21,392,812 2.7% 4.9% 5.1% 4.7% 6.9% 9.1% $ 55,863 $ 58,214 $ 60,984 $ 64,174 $ 70,061 $ 76,991 3.8% 4.2% 4.8% 5.2% 9.2% 9.9% $ 48,971 $ 51,004 $ 53,309 $ 55,547 $ 59,153 $ 64,430 1.9% 4.2% 4.5% 4.2% 6.5% 8.9% 19,099 19,319 19,534 18,743 18,920 19,234 18,141 18,515 18,740 16,104 17,367 18,445 957 804 794 2,640 1,553 789 5.0% 4.2% 4.1% 14.1% 8.2% 4.1% 4.9% 4.4% 3.9% 3.7% 8.1% 5.3% 341 State of California Annual Comprehensive Financial Report Schedule of Employment by Industry For Calendar Years 2012 and 2021 2012 2021 Percent Percent of Total State of Total State Employees Employment Employees Employment Industry Services ............................................................... 6,584,800 43.4 % 7,679,000 44.7 % Government Federal .............................................................. 189,200 1.3 187,000 1.1 Military ............................................................. 61,300 0.4 64,400 0.4 State and Local ................................................. 2,125,700 14.0 2,218,200 12.9 Retail trade .......................................................... 1,560,100 10.3 1,581,400 9.2 Manufacturing ..................................................... 1,262,100 8.3 1,282,900 7.5 Information, finance, and insurance .................... 960,600 6.4 1,102,100 6.4 Construction and utilities..................................... 650,000 4.3 943,600 5.5 Wholesale trade.................................................... 658,000 4.3 649,200 3.8 Transportation and warehousing ......................... 430,100 2.8 734,100 4.3 Farming ............................................................... 399,900 2.6 409,800 2.4 Real estate ........................................................... 251,100 1.7 289,500 1.7 Natural resources and mining ............................. 28,400 0.2 19,100 0.1 Total ....................................................................... 15,161,300 100.0 % 17,160,300 100.0 % Source: Labor Market Information Division, California Employment Development Department 342 Operating Information The operating information schedules assist the reader in evaluating the size, efficiency, and effectiveness of the State’s government. This section includes the following operating information schedules. Schedule of Full-time Equivalent State Employees by Function Schedule of Operating Indicators by Function Schedule of Capital Asset Statistics by Function 343 State of California Annual Comprehensive Financial Report Schedule of Full-time Equivalent State Employees by Function For the Past Ten Fiscal Years Natural Resources Health and State and Business, Corrections General and Human Environmental Consumer Transportation, and Government Education Services Protection Services and Housing Rehabilitation Total Fiscal Year 2013 43,241 132,492 43,431 23,796 5,395 39,222 58,742 346,319 Natural Resources Business, Health and Consumer Corrections General and Human Environmental Services, and Government1 Education Services Protection and Housing1 Transportation1 Rehabilitation Total Fiscal Year 2014 43,858 136,244 44,343 24,156 5,409 39,015 60,871 353,896 2015 45,383 139,958 44,589 24,996 5,552 39,636 60,745 360,859 2016 42,904 146,552 40,943 22,804 5,083 39,050 53,344 350,680 2017 44,844 154,479 41,350 23,880 5,153 38,375 53,662 361,743 2018 44,041 161,842 40,399 21,785 5,327 38,488 56,638 368,520 2019 44,989 164,337 40,761 24,447 5,644 39,670 57,140 376,988 2020 45,028 166,059 41,965 25,410 5,876 40,316 57,812 382,466 2021 45,300 166,799 48,596 26,187 6,008 40,454 57,350 390,694 2022 50,360 169,350 51,137 30,701 7,430 41,444 61,823 412,245 Source: Annual Governor’s Budget Summary, California Department of Finance Note: The number of full-time equivalent employees is calculated by counting each person who works full time as one full-time equivalent and those who work part time as fractional equivalents based on time worked. 1 Effective July 1, 2013, under the Governor’s 2012 Reorganization Plan No. 2, a significant reorganization took place that impacted previously reported functions. The Government Operations Agency, including but not limited to Franchise Tax Board, Department of General Services, and the Public Employees’ Retirement System, was created and added to the General Government function. Also, the business and housing components under the previously reported Business, Transportation, and Housing function merged with the State and Consumer Services function and the remaining transportation components now comprise the Transportation Agency. Information reported under the new functions are not comparable to that of prior years. 344 Statistical Section This page intentionally left blank 345 State of California Annual Comprehensive Financial Report Schedule of Operating Indicators by Function For the Past Ten Fiscal Years 2013 2014 2015 2016 General Government State Lottery Total revenue 1........................................................ $ 4,446 $ 5,035 $ 5,525 $ 6,276 Allocation to Education Fund 1............................... $ 1,262 $ 1,328 $ 1,364 $ 1,563 Judicial Council of California Supreme Court 2, 9 Cases filed........................................................... 8,029 7,907 7,861 8,081 Cases disposed..................................................... 8,482 7,770 7,553 7,952 Courts of Appeal 9 Notices of appeal filed 3 Civil................................................................. 6,052 5,983 6,062 5,935 Criminal........................................................... 6,004 6,373 7,113 6,714 Juvenile............................................................ 2,713 2,857 3,036 3,025 Trial Courts 9 Total civil cases 4 Filings.............................................................. 1,358,481 1,264,983 1,145,892 1,148,205 Dispositions..................................................... 1,327,078 1,216,185 1,118,443 1,031,105 Department of Food and Agriculture Milk production (million lbs.) 5, 9............................ 41,256 42,339 40,897 40,469 Farm land (thousand acres) 5................................... 25,300 25,200 24,900 24,800 Education Public Colleges and Universities Fall enrollment 9 Community Colleges........................................... 1,664,430 1,664,174 1,674,652 1,674,798 California State University.................................. 446,530 460,200 474,571 478,638 University of California...................................... 244,126 252,263 257,438 270,112 K-12 Schools Fall enrollment 9 Public................................................................... 6,226,989 6,236,672 6,235,520 6,226,737 Private.................................................................. 516,119 511,286 503,295 500,543 Sources: California State Lottery; Judicial Council of California; U.S. Department of Agriculture, National Agricultural Statistics Service; California Departments of the California Highway Patrol, Finance, Fish and Wildlife, Education, Public Health, Motor Vehicles, Transportation, Corrections and Rehabilitation; Employment Development Department; California Energy Commission; Franchise Tax Board; California Community Colleges Chancellor’s Office; The California State University, and California Department of Education. Note: This schedule presents data available as of September 2023. 1 Dollars in millions. 2 Includes death penalty cases, habeas corpus related to automatic appeals, petitions for review, original proceedings, and State Bar matters. 3 Includes only one notice of appeal per case. 4 Includes personal injury, property damage, wrongful death, small claims, family law, probate, and other cases. 5 Data based on calendar year. 6 Total nonfarm and farm. 7 Data compiled from a 10% sample of California licensed drivers. 8 A center-line mile is measured by the yellow dividing strip that runs down the middle of the road, regardless of the number of lanes on each side. 9 Some prior years were updated based on more current information. 10 The amount for fiscal year 2022 is projected. N/A = Not Available 346 Statistical Section 2017 2018 2019 2020 2021 2022 $ 6,233 $ 6,966 $ 7,388 $ 6,622 $ 8,418 $ 8,853 $ 1,499 $ 1,665 $ 1,825 $ 1,437 $ 1,863 $ 2,020 7,318 6,812 6,896 6,470 6,522 N/A 6,995 6,728 7,052 6,362 6,311 N/A 5,975 6,002 5,697 5,144 4,769 N/A 5,593 5,221 5,577 6,286 4,546 N/A 3,029 3,068 3,332 2,818 3,223 N/A 1,198,076 1,235,568 1,289,017 1,112,151 989,009 1,019,646 1,039,092 985,039 1,110,908 996,686 571,582 575,268 39,798 40,404 40,595 41,311 41,861 41,787 24,500 24,300 24,300 24,300 24,200 24,000 1,681,195 1,681,514 1,659,399 1,459,960 1,355,658 1,388,411 484,297 481,210 481,929 485,550 477,466 457,992 278,996 286,271 285,216 285,862 294,662 294,309 6,228,235 6,220,413 6,186,278 6,163,001 6,002,523 5,852,544 490,966 488,854 495,693 488,984 471,653 498,486 (continued) 347 State of California Annual Comprehensive Financial Report Schedule of Operating Indicators by Function (continued) For the Past Ten Fiscal Years 2013 2014 2015 2016 Health and Human Services Department of Public Health Vital statistics Live births 5, 10......................................................... 494,392 502,973 491,789 488,925 Department of Social Services Calfresh programs households (avg. per month)......... 1,898,283 2,004,016 2,102,031 2,130,583 Employment Development Department Number of employed 5, 6, 9.......................................... 15,563,700 15,992,600 16,474,800 16,906,200 Resources Department of Fish and Wildlife Sport fishing licenses sold 5, 9..................................... 2,540,439 2,491,578 2,485,400 2,508,490 Hunting licenses sold 5, 9............................................. 2,033,573 1,980,655 2,131,655 2,143,146 California Energy Commission Electrical energy generation plus net imports (gigawatt hours) 9......................... 296,280 296,147 295,878 290,797 Business, Consumer Services, and Housing Franchise Tax Board Personal Income Tax 5, 9 Number of tax returns filed...................................... 15,495,383 15,856,019 16,257,600 16,586,622 Taxable income 1..................................................... $ 949,346 $ 1,057,520 $ 1,107,474 $ 1,159,688 Total tax liability 1.................................................. $ 55,622 $ 65,459 $ 68,498 $ 71,558 Corporation Tax 5, 9 Number of tax returns filed..................................... 801,041 828,080 865,593 900,358 Income reported for taxation 1................................ $ 101,942 $ 122,976 $ 140,534 $ 129,452 Total tax liability 1.................................................. $ 7,124 $ 8,593 $ 9,235 $ 9,276 Transportation California Highway Patrol Total number of DUI arrests 5.................................... 60,807 75,871 65,016 63,210 Department of Motor Vehicles Motor vehicle registration 5, 9...................................... 32,903,847 32,980,355 34,346,325 34,721,195 License issued by age 5, 7, 9 Under age 18........................................................... 221,385 223,024 221,250 225,569 Between 18-80........................................................ 23,824,697 24,195,705 25,089,910 25,639,270 Over age 80.............................................................. 597,350 595,739 603,691 619,807 Department of Transportation Highway center-line miles – rural 5, 8, 9....................... 10,315 10,312 10,407 10,259 Highway center-line miles – urban 5, 8, 9..................... 4,789 4,788 4,686 4,833 Correctional Programs Department of Corrections and Rehabilitation Division of Adult Institutions Institution population at December 31 each year... 134,333 134,431 127,815 129,415 Division of Juvenile Justice Institution population at June 30 each year............. 712 675 681 690 348 Statistical Section 2017 2018 2019 2020 2021 2022 471,806 454,244 446,548 448,758 419,271 419,802 2,032,818 1,979,526 1,782,500 2,249,323 2,446,529 2,618,623 17,249,800 17,594,500 17,854,100 16,594,600 17,160,200 18,111,800 2,502,863 2,498,077 2,371,800 2,780,352 2,713,545 2,430,559 2,143,026 2,113,888 2,043,323 2,404,425 2,387,932 2,066,144 292,115 285,884 278,177 274,254 281,001 288,010 16,888,470 17,101,753 17,530,141 18,381,491 17,978,845 N/A $ 1,259,819 $ 1,357,636 $ 1,412,083 $ 1,519,003 $ 1,842,709 N/A $ 79,927 $ 87,168 $ 90,071 $ 103,753 $ 125,851 N/A 936,211 974,652 1,003,389 1,048,599 1,063,592 N/A $ 127,290 $ 172,954 $ 191,621 $ 168,413 $ 264,189 N/A $ 8,822 $ 11,625 $ 13,861 $ 15,174 $ 27,754 N/A 58,894 59,708 66,059 55,692 60,271 57,244 35,391,347 35,707,821 36,423,657 35,820,417 36,229,205 35,656,590 219,572 213,402 215,084 182,187 205,668 207,465 26,078,773 26,275,559 26,439,138 26,063,084 26,560,379 26,763,045 659,530 647,831 650,998 624,254 696,062 750,908 10,259 10,259 10,511 10,458 10,430 N/A 4,833 4,833 4,547 4,564 4,597 N/A 130,263 127,709 124,027 95,432 99,729 91,385 638 629 720 782 677 558 (concluded) 349 State of California Annual Comprehensive Financial Report Schedule of Capital Asset Statistics by Function For the Past Ten Fiscal Years 2013 2014 2015 2016 General Government Department of Food and Agriculture Vehicles and mobile equipment ................................. 792 747 747 752 Square footage of structures (in thousands)................ 455 455 455 455 Department of Justice Vehicles and mobile equipment.................................. 527 520 520 484 Department of Military Vehicles and mobile equipment.................................. 211 211 211 217 Square footage of structures (in thousands)................. 3,623 4,019 3,977 3,965 Department of Veterans Affairs Veterans homes............................................................ 8 8 8 8 Vehicles and mobile equipment.................................. 267 285 285 235 Square footage of structures (in thousands)................ 2,488 2,543 2,541 2,541 Education California State University Vehicles and mobile equipment ................................. 4,467 4,555 4,619 4,945 Campuses..................................................................... 23 23 23 23 Square footage of structures (in thousands)................ 73,866 73,316 73,988 75,292 Health and Human Services Department of Developmental Services Vehicles and mobile equipment.................................. 632 424 571 640 Developmental centers................................................ 4 4 3 3 Square footage of structures (in thousands)................ 5,279 5,308 4,699 3,664 Department of State Hospitals Vehicles and mobile equipment.................................. 699 886 752 678 State hospitals.............................................................. 7 7 7 8 Square footage of structures (in thousands)................ 6,457 6,460 6,445 6,445 Source: California Department of General Services (DGS). Note: This schedule presents data available as of June 2023. 350 Statistical Section 2017 2018 2019 2020 2021 2022 677 823 633 780 752 672 462 384 384 384 394 394 511 509 495 485 549 536 218 261 221 241 212 212 3,954 3,770 3,268 3,254 3,253 3,217 8 8 8 8 8 8 280 292 247 276 279 278 2,552 2,552 2,536 2,541 2,541 2,541 4,838 5,216 5,246 5,397 5,447 5,434 23 23 23 23 23 23 75,786 76,227 76,969 78,447 79,572 80,271 559 616 600 490 418 392 3 3 2 2 2 2 3,664 3,595 3,578 2,321 2,321 2,321 674 728 820 969 900 973 5 5 5 5 5 5 5,944 5,944 6,425 6,433 6,478 6,485 (continued) 351 State of California Annual Comprehensive Financial Report Schedule of Capital Asset Statistics by Function (continued) For the Past Ten Fiscal Years 2013 2014 2015 2016 Resources Department of Fish and Wildlife Vehicles and mobile equipment................................... 2,896 2,954 2,954 3,104 Square footage of structures (in thousands)................ 1,317 1,311 1,311 1,297 Department of Forestry and Fire Protection Vehicles and mobile equipment.................................. 2,845 2,748 2,748 3,151 Square footage of structures (in thousands)................ 3,641 3,632 3,664 3,666 Department of Parks and Recreation Vehicles and mobile equipment................................... 3,311 3,489 3,489 3,538 State Parks................................................................... 280 279 280 280 Acres of state park land (in thousands)........................ 1,590 1,590 1,605 1,605 Square footage of structures (in thousands)................ 6,598 6,751 6,761 6,790 State Lands Commission Vehicles and mobile equipment.................................. 42 41 41 41 Acres of land (in thousands)........................................ 4,489 4,489 4,482 4,480 Business, Consumer Services, and Housing Department of Consumer Affairs Vehicles and mobile equipment.................................. 518 554 554 588 Department of General Services Vehicles and mobile equipment.................................. 5,226 5,053 5,053 4,697 Square footage of structures (in thousands)................ 19,098 19,367 19,448 19,311 Transportation California Highway Patrol Vehicles and mobile equipment.................................. 5,341 5,170 5,170 5,167 Square footage of structures (in thousands)................ 1,149 1,166 1,169 1,211 Department of Motor Vehicles Vehicles and mobile equipment................................ 294 295 295 287 Square footage of structures (in thousands).............. 1,842 1,845 1,786 1,780 Department of Transportation Vehicles and mobile equipment.................................. 11,767 11,596 11,596 11,776 Square footage of structures (in thousands)................ 8,170 7,960 7,965 7,968 Correctional Programs Department of Corrections and Rehabilitation Vehicles and mobile equipment.................................. 5,156 5,137 5,968 5,291 Prisons and juvenile facilities...................................... 37 37 39 39 Square footage of structures (in thousands)................ 40,606 40,726 40,590 40,485 352 Statistical Section 2017 2018 2019 2020 2021 2022 3,126 2,970 3,266 3,334 3,392 3,167 1,322 1,322 1,333 1,333 1,333 1,334 3,073 3,115 3,144 3,090 3,681 3,608 3,677 3,640 3,626 3,654 3,765 3,762 3,542 3,804 3,571 3,794 3,835 3,878 280 280 280 280 279 280 1,617 1,619 1,618 1,641 1,360 1,643 7,363 7,360 7,544 7,554 7,558 7,429 43 48 42 43 44 43 4,480 4,480 4,480 4,480 4,480 4,480 596 600 622 671 614 612 4,476 4,465 4,552 4,664 4,838 4,838 19,487 19,565 19,490 20,267 20,285 22,017 5,336 4,912 4,946 4,807 5,656 5,362 1,191 1,182 1,199 1,301 1,302 1,308 276 283 266 314 308 314 1,777 1,785 1,785 1,785 1,785 1,785 11,585 11,494 11,483 11,449 11,416 11,303 7,960 7,933 8,074 8,096 8,365 8,402 8,079 7,571 7,139 7,312 7,632 8,356 40 39 39 39 38 37 42,198 42,209 42,605 42,936 42,932 42,932 (concluded) 353 State of California Annual Comprehensive Financial Report STATE OF CALIFORNIA Office of the State Controller MALIA M. COHEN CALIFORNIA STATE CONTROLLER Executive Office Cathy Leal Regina Evans Michael Carter Acting Chief Operating Officer Chief of Staff Acting Chief Administrative Officer State Accounting and Reporting Division Ted Lambert Division Chief James Anderson, CPA Assistant Division Chief State Government Reporting Vacant Bureau Chief Managers Supervisors Gabriel Flores April Ramos, CPA Christopher Bradford Hao Phan May Lam Kao Saephan Will LeMarQuand Janti Tam Yumi Li Yi-Wen Tsai Modupe Otusanya Karla Uriarte Eli Paul Staff Kutaiba Al Badri Alexander Francisco Bing Leng Heather Nguyen Moses Reginalds Mark Awad Meredith Hatai Garcia Daniel Lopez Elizabeth Ocaranza Eric Sarell Nicole Caccam Devon Golez Josey Lu Marissa Parris Xiaoqing Sun Rahul Chaudhary Yolandalynn Green Nia Bianca Mandlik Lijo Paul Fatima Toure Janet Delorey Nina Johnson Sally Masterson Jessica Phan Wendy Tram Aqel Elhady Harpreet Khinda Adnan Muhammad Randy Phan Tuyen Truong Forrest Flanagan, CPA Samantha Lam Anh Nguyen Cameron Quinn Carrie Wylie Alex Formanyuk Nangcua Lee Technical Advisors Editors Special Thanks Andy Leung Jenna Lewis Muhammad Atif Ash Kaur Rod Renteria Estelle Manticas Jil Barraza Harleen Khangura Garin Casaleggio KC Mohseni Staff Diana Frierson Nancy Nguyen Ross Boyer Carl Walker Richard Hamner Allen Nunley Megan Hang Thomas Wong Chinh Hoang Caroline Vue MALIA M. COHEN California State Controller’s Office State Accounting and Reporting Division P.O. Box 942850 I Sacramento, CA 94250 I 916.445.2636 www.sco.ca.gov