— State of California: Financial Report Year Ended June 30, 2023

State of California Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2023 Malia M. Cohen California State Controller MALIA M. COHEN CALIFORNIA STATE CONTROLLER Cover designed by Sacramento Artist Matteo Borges MALIA M. COHEN CALIFORNIA STATE CONTROLLER December 13, 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, 2023. 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 a number of factors including a partnership with the California Department of Finance and our 203 reporting state entities. While there is no statutory deadline for publishing the ACFR, its completion satisfies several compliance requirements for the State. This ACFR release represents the shortest publication timeline in the SCO’s history and is reflective of my commitment to publish the 2024-25 ACFR on time in March of 2026. California’s economic climate for the fiscal year ended June 30, 2023, was marked by ongoing high inflation, rising interest rates, a volatile stock market, job losses in high-wage sectors, and disruptions from catastrophic weather events. The State ended the fiscal year with total General Fund revenues of $192.4 billion and was supported by a strong internal borrowable cash position of $97.6 billion. Since 2018, California has published its financial statements well beyond the regulatory target deadline. As previously highlighted, when I assumed office in 2023, I determined early in my administration that untimely financial statements were unacceptable. Consistent with the SCO’s purpose, I recognized that timely, reliable, and sound financial reporting has long underpinned California’s financial stability, and immediately established an aggressive goal of publishing an on-time ACFR in 2026. With an unprecedented collaboration, referred to as “Team California,” with the Governor and his administration, the Legislature, and the Department of Finance, we have made significant progress towards achieving the goal. “Team California” has resulted in an ACFR governance structure and operating model, standardized ACFR tasks, increased efficiencies through leveraging technology, and substantive engagement with departments and agencies through technical assistance and training regarding financial reporting. 300 Capitol Mall, Suite 1850, Sacramento, CA 95814 | P.O. Box 942850, Sacramento, CA 94250 | Fax: 916.322.4404 sco.ca.gov i As of the most recent ACFR publication in March of 2024, we have realized significant milestones in our three-year path to timely submission of the ACFR. State departments and agencies have shown significant improvements in the timely and accurate submission of their financial reports. My office is now timely in publishing pension and other post-employment benefit schedules which support the independent audits of state departments that issue bonds or conduct enterprise activities that are ultimately reported in the ACFR. My office is also now current in obtaining and processing year-end budgetary/legal financial statement for all funds. These milestones are all critical components necessary to produce the ACFR, and because of “Team California’s” work we have realized a three month improvement in our ACFR publication timeline since the publication of the prior ACFR earlier this year. I extend my gratitude and appreciation to our “Team California” partners for prioritizing accountability of the State’s finances through timely and accurate financial reporting. Thank you to the California State Auditor and his team for maintaining the highest standards of professionalism as the independent auditor of the State’s finances. Finally, I must also acknowledge and recognize the remarkable State Accounting and Reporting Division in my office for always modeling our T.R.U.S.T.E.D. values and executing on our purpose to move California forward so that everyone thrives, with completing this complex financial report. Sincerely, Original signed by Malia M. Cohen NOTE: Please see Report Overview beginning on Page v for additional transmittal components. ii STATE OF CALIFORNIA Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2023 Prepared by the office of M M C . ALIA OHEN California State Controller iii . iv Table of Contents California State Controller’s Transmittal Letter........................................................................ i 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.............................................................................................. 190 Schedule of State Pension Contributions – PERF and Single-Employer Plans................. 206 Schedule of the State’s Proportionate Share of Net Pension Liability and Schedule of the State’s Contributions – CalSTRS....................................................................... 212 Schedule of Changes in Net OPEB Liability and Related Ratios – Retiree Health Benefits Program...................................................................................................... 214 Schedule of OPEB Contributions – Retiree Health Benefits Program............................... 228 Infrastructure Assets Using the Modified Approach.......................................................... 233 Budgetary Comparison Schedule – General Fund and Major Special Revenue Funds.......................................................................................................... 238 Reconciliation of Budgetary Basis Fund Balances of the General Fund and Major Special Revenue Funds to GAAP Basis Fund Balances ................................ 242 Notes to the Required Supplementary Information............................................................ 242 COMBINING FINANCIAL STATEMENTS AND SCHEDULES – NONMAJOR AND OTHER FUNDS Nonmajor Governmental Funds..................................................................................... 247 Combining Balance Sheet.................................................................................................. 250 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances.......... 254 Budgetary Comparison Schedule – Nonmajor Governmental Funds................................ 258 Internal Service Funds..................................................................................................... 259 Combining Statement of Net Position................................................................................ 260 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position.......... 264 Combining Statement of Cash Flows................................................................................. 266 Nonmajor Enterprise Funds............................................................................................ 271 Combining Statement of Net Position................................................................................ 272 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position.......... 276 Combining Statement of Cash Flows................................................................................. 278 Fiduciary Funds and Similar Component Units – Pension and Other Employee Benefit Trust Funds............................................................................... 283 Combining Statement of Fiduciary Net Position ............................................................... 286 Combining Statement of Changes in Fiduciary Net Position............................................. 288 Private Purpose Trust Funds .......................................................................................... 291 Combining Statement of Fiduciary Net Position ............................................................... 292 Combining Statement of Changes in Fiduciary Net Position............................................. 293 Investment Trust Funds................................................................................................... 295 Combining Statement of Fiduciary Net Position ............................................................... 296 Combining Statement of Changes in Fiduciary Net Position............................................. 297 vi Contents Nonmajor Component Units ........................................................................................... 299 Combining Statement of Net Position................................................................................ 300 Combining Statement of Activities.................................................................................... 304 STATISTICAL SECTION Financial Trends............................................................................................................. 309 Schedule of Net Position by Component......................................................................... 310 Schedule of Changes in Net Position............................................................................... 312 Schedule of Fund Balances – Governmental Funds ........................................................ 316 Schedule of Changes in Fund Balances – Governmental Funds...................................... 318 Revenue Capacity........................................................................................................... 321 Schedule of Revenue Base............................................................................................... 322 Schedule of Revenue Payers by Income Level/Industry.................................................. 326 Schedule of Personal Income Tax Rates.......................................................................... 328 Debt Capacity................................................................................................................. 331 Schedule of Ratios of Outstanding Debt by Type............................................................ 332 Schedule of Ratios of General Bonded Debt Outstanding............................................... 334 Schedule of General Obligation Bonds Outstanding....................................................... 336 Schedule of Pledged Revenue Coverage.......................................................................... 338 Demographic and Economic Information ................................................................... 341 Schedule of Demographic and Economic Indicators....................................................... 342 Schedule of Employment by Industry.............................................................................. 344 Operating Information.................................................................................................. 345 Schedule of Full-time Equivalent State Employees by Function..................................... 346 Schedule of Operating Indicators by Function................................................................. 348 Schedule of Capital Asset Statistics by Function............................................................. 352 Acknowledgments.......................................................................................................................... 356 vii State of California Annual Comprehensive Financial Report This page intentionally left blank viii Introductory Section i ii 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, 2023, 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, 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 certain accounts in the aforementioned financial statements 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 programs. 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, 2023, and its economic performance as of and for the year ended June 30, 2024, 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 2023, 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 v Instruction. All officers of the Executive branch are elected to a four-year term. The Legislative branch 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 13.9% of the U.S. Gross Domestic Product (GDP) in 2023 and continued to rank fifth largest in the world (in terms of GDP) at the end of the year. Sectors of California’s diverse economy include technology, trade, entertainment, manufacturing, government, tourism, construction, and services. California’s GDP totaled $3.8 trillion at fiscal year-end and, as the nation’s leader in agricultural production, the state’s farming operations generated approximately $55.9 billion in cash receipts for the 2022 crop year. In 2023, California exported $178.7 billion in products; its three largest export markets are Mexico ($33.3 billion), Canada ($19.1 billion), and China ($16.9 billion). California’s six largest exports are computer and electronic products, machinery (except electrical), chemicals, transportation equipment, agricultural products, and miscellaneous manufactured commodities. California enjoys one of the finest and most diverse collections of natural, cultural, and recreational resources in the nation. In 2023, California’s travel and vi tourism industry generated revenues of $150.4 billion, a 5.6% increase over the previous year and travel-generated state and local tax revenues of $12.7 billion, a 3.7% increase over the previous year. The increase was primarily as a result of increased prices of goods and services due to inflation. Budget Outlook Fiscal Year 2023-24 The Governor’s enacted 2023-24 Budget proposed to address the revenue shortfall caused by a declining stock market, persistently high inflation, rising interest rates, and job losses in high-wage sectors. The Budget provided balanced solutions to protect core State programs and services and preserve investments in the programs essential to millions of Californians. This included protecting commitments to address education, affordable housing, homelessness, healthcare, climate change, infrastructure, and public safety. The Budget also supported water, transportation, and clean energy projects, and continued to build budgetary reserves. The enacted Budget projected General Fund revenues of $208.7 billion and set aside a record $37.8 billion in budgetary reserves to put California on strong fiscal footing to better withstand future economic downturns or revenue declines. Fiscal Year 2024-25 California enacted the 2024-25 Budget Act on June 26, 2024. After the tumultuous conditions caused by the pandemic, the State’s economy quickly recovered and revenue volatility stabilized; however, the pandemic was followed by a statewide flooding disaster in early 2023, resulting in an unprecedented emergency tax filing and payment postponement, that delayed critical General Fund cash receipts by more than six months. As a result, the Budget faced anticipated shortfalls, necessitating cuts, reductions, and pauses in order to keep the State on a fiscally responsible long-term path and protect essential programs assisting millions of Californians while minimizing the use of critical operating reserves. By the end of the fiscal year 2024-25, the Budget estimates a decrease in total reserves by $15.6 billion, to $22.2 billion, consisting of $17.6 billion in the Budget Stabilization Account, $1.1 billion in the Public School System Stabilization Account, and $3.5 billion in the Special Fund for Economic Uncertainties. The 2024-25 Budget projects General Fund revenue of $212.1 billion ($225.6 billion after transfers) and expenditures of $211.5 billion. The Budget anticipates increased revenues from personal income taxes, sales and use taxes, and corporation taxes. Personal income taxes are estimated to contribute to the majority of General Fund revenue, at 56.2% ($116.6 billion); corporation taxes are estimated to contribute 20.5% ($42.6 billion); and sales and use taxes are estimated to contribute 16.4% ($34.0 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: • California’s economy remains strong and resilient despite persistent inflation and elevated interest rates. The 2024-25 Budget reflects a solid increase in overall expected General Fund revenues of 8.9% from the prior year, and the State’s “Big Three” General Fund revenue sources —personal income taxes, sales taxes, and corporation taxes—are projected to increase by 8.6% from the prior year. The Budget anticipates that fiscal year 2024-25 personal income tax revenues will increase from $111.2 billion in the previous fiscal year to $116.5 billion, sales and use tax revenues will increase from $33.3 billion to $34.0 billion, and corporation tax revenues will increase from $33.3 billion to $42.6 billion. • The Consumer Price Index increased 3.0% during the year ended June 30, 2024. The food index increased 2.2%, and the shelter index increased 5.2%. The energy index increased by only 1.0%, vii following a steep decrease of 16.7% in the prior year to correct for soaring pandemic energy price increases of over 40%. • Between March 17, 2022, and July 27, 2023, the Federal Reserve Board increased interest rates by 525 basis points. Since July 27, 2023, the Federal Reserve Board has decreased interest rates by 75 basis points, with the last decrease on November 8, 2024. The net increase in interest rates of 450 basis points will continue to impact the State’s future cost of borrowing. • The 2024 Budget Act reflects the State’s commitment to addressing the unfunded pension liabilities over the long term. The Budget includes $337 million in one-time supplemental Proposition 2 debt repayment funding to further reduce the unfunded liabilities of the State’s pension plans. Depending on the availability of Proposition 2 funding, an additional $3.0 billion is projected 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, 2023, more than $6.8 billion was set aside in a prefunding trust fund to pay future retiree health benefits. The trust fund is expected to approach $10.8 billion in assets by the end of fiscal year 2024-25. • The 2023 fire season saw a substantial decrease in the number and magnitude of wildfires in the state, with approximately 333,000 acres burned. The 2024 fire season was more significant, with over 1.0 million acres burned. Both years were well below the five-year average of 2.3 million acres burned per year. The 2024-25 Budget Act maintains $2.6 billion in investments over seven years to restore forest and wildland health and reduce risk of future catastrophic wildfires. • After 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 2024-25 Budget Act maintains $6.7 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. 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 State on Peace Utilities Department Public Resources of Veterans Appeals Library Officer Commission Defender Agency Affairs Standards x Financial Section Grant Parks State Auditor Mike Tilden Chief Deputy 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, 2023, 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 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, 2023, 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, 2023, 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. 621 Capitol Mall, Suite 1200 | Sacramento, CA 95814 | 916.445.0255 | 916.327.0019 fax | www.auditor.ca.gov 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 85 percent of the assets and deferred outflows, and 60 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 94 percent of the revenues of the discretely presented component units. Fund Financial Statements • The following major enterprise funds: 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 52 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 14 percent of university’s total assets and deferred outflows, and 4 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 within the Federal Fund are free from material misstatement. The issues pertaining to the Federal Fund also affect Governmental Activities. Therefore, we were unable to obtain sufficient and appropriate audit evidence about the Federal Fund balances that represent 98 percent of Other Current Liabilities within Governmental Activities. Emphasis of Matter As described in Note 1 to the financial statements, in 2023, the State of California implemented Governmental Accounting Standards Board Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements and Statement No. 96, Subscription-Based Information Technology Arrangements and restated the beginning net balances for its effect. Our opinions are not modified with respect to these matters. 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 reports 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 will issue a separate report 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 December 5, 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, 2023. 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 After a two-year span of unprecedented General Fund revenue growth, California faced an inevitable reduction in its revenue in fiscal year 2022-23. General revenues, comprised primarily of taxes, decreased by $6.9 billion (2.9%), compared to the increase of $6.6 billion (2.9%) recorded for fiscal year 2021-22. This slowdown in revenue performance was attributable to a combination of global economic challenges and shifting market dynamics. As the Federal Reserve aggressively raised interest rates to combat soaring inflation, borrowing costs for consumers and businesses escalated alongside the consumer price index, which together dampened spending and investment. This inflationary pressure ultimately contributed to a sharp stock market decline and decreased tax collections from high-income-earning Californians, whose strong capital gains and stock-based compensation played a major role in the State’s prior-year tax collection increases. Still, through prudent planning and a commitment to building operating reserves in previous budgets, California was in a fiscally responsible position to address fiscal year 2022-23 downturn. As of June 30, 2023, the Budget Stabilization Account, California’s “Rainy Day Fund,” held reserves of $22.3 billion, and accounted for a significant portion of the State’s $35.6 billion in total budgetary reserves. Expenses and transfers for the State’s governmental activities were reduced by $14.1 billion (3.3%) to accommodate for the lost revenue, and were less than total revenues received, resulting in a $6.1 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 $1.8 billion increase in the business-type activities’ net position, as restated, for fiscal year 2022-23. Net Position – Activity for fiscal year 2022-23 reflects a combined $7.9 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 an increase in the beginning net position of governmental activities of $9.1 billion, and a decrease in beginning net position of business-type activities of $207 million. Beginning net position was also restated as a result of the implementation of GASB Statement No. 94, Public-Private And Public-Public Partnerships And Availability Payment Arrangements, which was established to improve financial reporting of public-private partnerships, public-public partnerships, and availability payment arrangements. As a result of the implementation, the primary government’s beginning net position increased by $594 million. GASB Statement No. 96, Subscription-Based Information Technology Arrangements, which established uniform accounting and reporting guidance for information technology arrangements, also contributed $42 million to the restatement of the beginning net position. See Note 1 for additional details related to restatements. The primary government ended fiscal year 2022-23 with a deficit net position of $37.9 billion, an increase of $7.9 billion (17.2%) from the previous year, as restated. The total deficit net position is 7 State of California Annual Comprehensive Financial Report reduced by $134.9 billion for net investment in capital assets and by $76.5 billion for restricted net position, yielding a negative unrestricted net position of $249.4 billion. Restricted net position is dedicated for specified uses and is not available to fund current activities. Approximately 71.1%, or $177.3 billion, of the negative $249.4 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 $65.9 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, 2023, the primary government’s governmental funds reported a combined ending fund balance of $75.5 billion, a decrease of $1.3 billion over the prior fiscal year fund balance, as restated. The unrestricted fund balance, comprised of committed, assigned, and unassigned balances, was $5.0 billion, a decrease of $0.2 billion from the prior fiscal year unrestricted fund balance of $5.2 billion. The nonspendable and restricted fund balances were $4.0 billion and $66.5 billion, respectively. Proprietary Funds – As of June 30, 2023, the primary government’s proprietary funds reported a combined ending deficit net position of $18.8 billion, an increase of $2.2 billion from the prior fiscal year, as restated. The total net position is reduced by $4.2 billion for net investment in capital assets, expendable restrictions of $10.1 billion, and nonexpendable restrictions of $2 million, yielding a negative unrestricted net position of $33.1 billion. Noncurrent Assets and Liabilities As of June 30, 2023, the primary government’s noncurrent assets totaled $193.9 billion, of which $171.6 billion is related to capital assets. State highway infrastructure assets of $83.7 billion represent the largest portion of the State’s capital assets, while buildings and other depreciable property are the second largest portion at a total of $59.7 billion. The primary government’s noncurrent liabilities totaled $298.6 billion, which consists of $177.2 billion in unfunded employee-related future obligations, $75.4 billion in general obligation bonds, $29.3 billion in revenue bonds, and $16.7 billion in other noncurrent liabilities. During fiscal year 2022-23, the primary government’s noncurrent liabilities increased by $25.9 billion (9.5%) from the previously reported noncurrent liabilities. The net increase in noncurrent liabilities is driven by an increase of $35.7 billion in net pension liability, which was offset by a decrease of $12.5 billion in net other postemployment benefits liability. 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, selling electric power, and providing wildfire prevention programs. 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 $7.9 billion (17.2%), from a negative $45.8 billion, as restated, to a negative $37.9 billion at June 30, 2023. As previously mentioned, the net position at the beginning of fiscal year 2022-23 was restated as a result of the implementation of GASB Statement No. 94, 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 $134.9 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 $76.5 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, 2023, the primary government’s combined unrestricted deficit net position was $249.4 billion—$218.2 billion for governmental activities and $31.1 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, 2023 and 2022 (amounts in millions) Governmental Activities Business-type Activities Total 2023 2022 2023 2022 2023 2022 ASSETS Current and other assets............................. $ 247,267 $ 272,237 $ 31,112 $ 30,040 $ 278,379 $ 302,277 Capital assets.............................................. 154,278 148,939 17,302 16,646 171,580 165,585 Total assets............................................ 401,545 421,176 48,414 46,686 449,959 467,862 DEFERRED OUTFLOWS OF RESOURCES 42,404 29,093 6,236 3,778 48,640 32,871 Total assets and deferred outflows of resources....................... $ 443,949 $ 450,269 $ 54,650 $ 50,464 $ 498,599 $ 500,733 LIABILITIES Noncurrent liabilities.................................. $ 257,664 $ 233,183 $ 40,931 $ 39,470 $ 298,595 $ 272,653 Other liabilities........................................... 175,453 202,779 22,766 22,722 198,219 225,501 Total liabilities....................................... 433,117 435,962 63,697 62,192 496,814 498,154 DEFERRED INFLOWS OF RESOURCES 31,108 49,826 8,621 7,501 39,729 57,327 Total liabilities and deferred inflows of resources......................... 464,225 485,788 72,318 69,693 536,543 555,481 NET POSITION Net investment in capital assets................. 131,322 125,863 3,538 3,341 134,860 129,204 Restricted.................................................... 66,645 60,482 9,902 10,641 76,547 71,123 Unrestricted................................................ (218,244) (221,863) (31,108) (33,212) (249,352) (255,075) Total net position (deficit).................... (20,277) (35,518) (17,668) (19,230) (37,945) (54,748) Total liabilities, deferred inflows of resources, and net position......... $ 443,948 $ 450,270 $ 54,650 $ 50,463 $ 498,598 $ 500,733 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, 2023, the primary government 12 Management’s Discussion and Analysis recognized $177.3 billion (71.1% of the $249.4 billion unrestricted net deficit) in unfunded employee-related obligations—net pension liability, net OPEB liability and compensated absences. In addition, the primary government recognized $65.9 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, 2023 and 2022 (amounts in billions) Net Investment in 134.9 Capital Assets 129.2 76.5 Restricted 71.1 -249.4 Unrestricted -255.0 $-300 $-250 $-200 $-150 $-100 $-50 $0 $50 $100 $150 2023 2022 Changes in Net Position The expenses of the primary government totaled $441.9 billion for the fiscal year ended June 30, 2023. Of this amount, $222.0 billion (50.2%) was funded with program revenues (charges for services or program-specific grants and contributions), leaving a $219.9 billion to be funded with general revenues (mainly taxes). The primary government’s general revenues of $227.8 billion were greater than the unfunded expenses. As a result, the total net position, as restated, increased by $7.9 billion, or 17.2%. 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, 2023 and 2022 (amounts in millions) Governmental Activities Business-type Activities Total 2023 2022 2023 2022 2023 2022 REVENUES Program Revenues: Charges for services.................................... $ 39,707 $ 36,222 $ 30,367 $ 29,967 $ 70,074 $ 66,189 Operating grants and contributions............. 147,292 170,663 2,797 4,010 150,089 174,673 Capital grants and contributions................. 1,847 1,895 — — 1,847 1,895 General Revenues: Taxes........................................................... 224,272 233,194 — — 224,272 233,194 Investment and interest............................... 2,597 789 — — 2,597 789 Miscellaneous............................................. 876 660 — — 876 660 Total revenues....................................... 416,591 443,423 33,164 33,977 449,755 477,400 EXPENSES Program Expenses: General government................................... 24,946 38,760 — — 24,946 38,760 Education.................................................... 100,497 108,451 — — 100,497 108,451 Health and human services......................... 219,032 216,232 — — 219,032 216,232 Natural resources and environmental protection................................................ 13,315 12,503 — — 13,315 12,503 Business, consumer services, and housing.................................................... 5,642 7,364 — — 5,642 7,364 Transportation............................................. 19,100 15,793 — — 19,100 15,793 Corrections and rehabilitation.................... 18,205 16,526 — — 18,205 16,526 Interest on long-term debt........................... 3,705 3,508 — — 3,705 3,508 Electric Power............................................. — — — 36 — 36 Water Resources......................................... — — 1,460 1,233 1,460 1,233 State Lottery............................................... — — 9,291 8,885 9,291 8,885 Unemployment Programs........................... — — 15,534 14,966 15,534 14,966 California State University......................... — — 10,878 10,778 10,878 10,778 Other enterprise programs.......................... — — 278 271 278 271 Total expenses........................................ 404,442 419,137 37,441 36,169 441,883 455,306 Excess (deficiency) before transfers.... 12,149 24,286 (4,277) (2,192) 7,872 22,094 Gain on early extinguishment of debt......... 23 12 — — 23 12 Transfers..................................................... (6,047) (5,466) 6,047 5,466 — 0 Change in net position................................ 6,125 18,832 1,770 3,274 7,895 22,106 Net position (deficit), beginning.................. (26,403) * (54,350) * (19,437) * (22,504) * (45,840) (76,854) Net position (deficit), ending....................... $ (20,278) $ (35,518) $ (17,667) $ (19,230) $ (37,945) $ (54,748) *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 2022-23, governmental activities’ expenses and transfers totaled $410.5 billion. Program revenues totaling $188.8 billion, including $149.1 billion in federal grants and contributions, funded 46.0% of expenses and transfers, leaving $221.7 billion to be funded with general revenues (mainly taxes). General revenues for governmental activities of $227.7 billion exceeded net unfunded expenses and transfers by $6.1 billion resulting in the governmental activities’ deficit net position of $20.3 billion, after restatement, as of June 30, 2023, on par with the prior year’s restated deficit net position of $26.4 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, 2023 (amounts in billions) 8.5 General government 25.0 13.3 Education 100.5 142.2 Health and human services 218.9 12.6 Transportation 19.1 0.1 Corrections and rehabilitation 18.2 12.1 Other programs 22.7 $0 $40 $80 $120 $160 $200 $240 Program Revenues Expenses For the fiscal year ended June 30, 2023, total governmental activities’ revenue was $416.5 billion, a decrease of 6.1% from the prior year. General revenues decreased by $6.9 billion (2.9%), to $227.7 billion, and program revenues decreased by $19.9 billion (9.5%), to $188.8 billion. Corporation taxes rose marginally, by $835 million (2.3%) over the prior year due to growth in retail sales earnings. Sales and use taxes increased by $1.1 billion (2.2%) from the prior year due to an increase in consumer spending in services which also increased tax revenues. Personal income taxes decreased by $11.5 billion (9.1%) from the prior year in fiscal year 2022-23, compared to a decrease of $6.0 billion (4.5%) for fiscal year 2021-22. The decrease occurred despite an overall positive job market. This could be attributed in part to a slump in employee compensation levels due to the economic uncertainty of the 15 State of California Annual Comprehensive Financial Report pandemic and significantly fewer 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, 2023 (as a percent) Sales and use tax 12.8% Personal income tax 27.6% Corporation tax 8.8% Charges for services 9.5% Other revenue 5.5% Grants and contributions 35.8% Overall, expenses for governmental activities decreased by $14.7 billion (3.5%) from the prior year. The largest decrease in expenditures, $13.8 billion (35.6%), occurred in general government, and $8.0 billion (7.3%) in education expenditures; these decreases were partially offset by increases in other activities. The general government expenditures decreased due to a reduction in one-time spending programs and a focus on core budget priorities to align with the reduction in anticipated revenues. The decrease in education expenditures was due to a decrease in the State’s minimum funding guarantee for K-12 education and community colleges based on lower estimated General Fund revenues in fiscal year 2022-23. Chart 4 presents the percentage of total expenses for each governmental activities program. Chart 4 Expenses by Program Year ended June 30, 2023 (as a percent) Education 25.0% General government 6.2% Corrections and rehabilitation 4.5% Transportation 4.7% Other 5.8% Health and human services 53.8% 16 Management’s Discussion and Analysis Business-type Activities As of June 30, 2023, business-type activities’ expenses totaled $37.4 billion. Program revenues of $33.2 billion, primarily generated from charges for services, and $6.0 billion in transfers, exceeded business-type activities expenses. As a result, the business-type activities’ total deficit net position improved by $1.8 billion over the prior-year’s restated deficit net position of $19.5 billion, to a net deficit of $17.7 billion at June 30, 2023. 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, 2023 and 2022 (amounts in billions) 1.5 Water Resources 1.2 9.3 State Lottery 8.9 15.4 Unemployment Programs 15.0 10.9 California State University 10.8 0.3 Other enterprise programs 0.3 $0 $5 $10 $15 $20 2023 2022 Fund Financial Analysis The financial position of the State’s governmental funds declined in fiscal year 2022-23, with a combined fund balance decrease of $1.3 billion from 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 combined net decrease during the fiscal year, primarily due to a sharp decline in personal income taxes. The proprietary funds’ total net position increased by $2.2 billion during fiscal year 2022-23—comprised of a $1.8 billion increase for enterprise funds, as well as a $443 million increase for internal service funds. The increase in the enterprise funds’ net position includes a net position increase of $1.8 billion for the California State University, driven largely by subsidies, and a net position decrease of $230 million in 17 State of California Annual Comprehensive Financial Report the Unemployment Programs Fund to a deficit balance of $12.1 billion. The deficit net position for Unemployment Programs is due to the programs’ inability to confirm eligibility for unemployment benefits claims. Governmental Funds As of June 30, 2023, the governmental funds’ balance sheet reported $260.1 billion in assets, $184.6 billion in liabilities and deferred inflows of resources, and fund balances totaling $75.5 billion. Total assets of governmental funds decreased by 9.9%, while total liabilities and deferred inflows of resources decreased by 16.1%, which yielded a net fund balance decrease of $1.3 billion. Within the governmental funds’ total fund balance, $4.0 billion is classified as nonspendable, as this amount consists of long-term interfund receivables, loans receivable, and legal or contractual requirements. Another $66.4 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, $20.4 billion of the total fund balance is classified as committed for specific purposes and $20.8 billion is classified as assigned for specific purposes. The remaining unassigned balance of the governmental funds is a deficit of $36.1 billion — $17.0 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 $416.3 billion in revenues, $423.1 billion in expenditures, and $5.4 billion in net receipts from other financing sources. The ending fund balance of the governmental funds for the fiscal year ended June 30, 2023, was $75.5 billion, a $1.3 billion decrease from the prior year’s restated ending fund balance of $76.8 billion. Governmental funds’ revenue consists primarily of taxes (53.8%) and intergovernmental revenue (36.4%). Personal income taxes accounted for 51.1% of tax revenues, a decrease of $11.5 billion from the prior fiscal year. Sales and use taxes accounted for 23.9% of tax revenues, an increase of $1.2 billion over the prior fiscal year. Corporation taxes accounted for 16.4% of tax revenues, an increase of $838 million over the prior fiscal year. Intergovernmental revenue, primarily from the federal government, plummeted by $23.6 billion (13.5%) from the prior fiscal year as funding from the American Rescue Plan Act was exhausted. Governmental funds’ expenditures decreased by $22.3 billion (5.0%) from the prior fiscal year. The decrease is mainly due to a decline in general government expenditures of $14.8 billion (33.5%). The overall decrease in governmental funds’ expenditures also consists of a decrease in education expenditures of $10.2 billion (9.1%), and bond and commercial paper retirement expenditures of $3.2 billion (23.5%) from the prior fiscal year. Proposition 98 outlines the constitutional requirements that provide a minimum funding guarantee to support California’s K-12 schools and community colleges. The minimum funding guarantee decreased as a result of decreased General Fund revenue in fiscal year 2022-23 impacting expenditures. 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, 2023 and 2022 (amounts in billions) 114.4 Personal income taxes 125.9 53.5 Sales and use taxes 52.3 36.7 Corporation taxes 35.8 8.6 Motor vehicle excise taxes 8.5 3.7 Insurance taxes 3.5 Managed care organization enrollment 3.5 tax 2.6 3.7 Other taxes 4.4 $0 $20 $40 $60 $80 $100 $120 $140 2023 2022 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 $64.0 billion, a decrease of $9.1 billion from the prior year’s fund balance, as restated. The Federal Fund ended the year with a negative fund balance of $45.2 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 $10.8 billion, $20.7 billion, and $2.0 billion, respectively. The nonmajor governmental funds ended the fiscal year with a combined fund balance of $23.2 billion. General Fund: As shown on the Balance Sheet, the General Fund (the State’s main operating fund) ended fiscal year 2022-23 with assets of $133.6 billion; liabilities and deferred inflows of resources of $69.6 billion; and nonspendable, restricted, committed, and assigned fund balances of $4.0 billion, $24.8 billion, $4.2 billion, and $20.7 billion, respectively. This left the General Fund with an unassigned fund balance of $10.3 billion, a decrease of $26.2 billion from the prior year. Total assets of the General Fund decreased by $34.9 billion (20.7%) from the prior fiscal year, and total liabilities and deferred inflows of resources decreased by $24.9 billion (26.3%) 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, 2023 and 2022 (amounts in billions) 4.0 Nonspendable 3.0 66.4 Restricted 60.4 20.4 Committed 17.0 20.8 Assigned 7.3 -36.1 Unassigned -19.1 $-50 $-40 $-30 $-20 $-10 $0 $10 $20 $30 $40 $50 $60 $70 2023 2022 As shown on the Statement of Revenue, Expenditures, and Changes in Fund Balances, General Fund expenditures exceeded revenues by $1.4 billion $192.4 billion in revenues and $191.0 billion in expenditures). Approximately $182.5 billion (94.8%) of General Fund revenue is derived from the State’s largest three taxes—personal income taxes ($112.7 billion), corporation taxes ($36.7 billion), and the sales and use taxes ($33.1 billion). A total of $494 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 2022-23, total General Fund revenue decreased by $6.7 billion (3.4%), mainly due to a decrease in intergovernmental revenue and personal income taxes. Meanwhile, General Fund expenditures increased by $0.1 billion (0.1%). The largest component of the expenditure increase was health and human services, which rose by $13.4 billion. The General Fund ended the fiscal year with a fund balance of $64.0 billion, a decrease of $9.1 billion from the prior year’s restated ending fund balance of $73.1 billion. The General Fund’s ending fund balance includes $22.3 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 $127.3 billion (85.9%) of the total $148.2 billion in fund expenditures. Education and general government programs also constituted $13.2 billion (8.9%) and $1.3 billion (0.9%) of the fund’s expenditures, respectively. The Federal Fund’s revenues decreased by $23.3 billion from the prior year, while expenditures and transfers had a combined decrease of 20 Management’s Discussion and Analysis $22.4 billion, resulting in a $291 million improvement over the prior year’s restated ending deficit fund balance of $45.5 billion, to a $45.2 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 $1.2 billion (7.4%) and its expenditures increased by $3.5 billion (21.2%) 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 $2.7 billion. The Transportation Fund ended the fiscal year with a $10.8 billion fund balance, an increase of $609 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 $112 million (1.2%) over the prior year, due to the spending requirements related to the Parks and Water Bond Act of 2018 (Proposition 68), passed by voters in June 2018. Expenditures decreased marginally by $52 million (0.6%). 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 $20.7 billion fund balance, an increase of $3.0 billion (16.9%) 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 increased by $1.3 billion (13.6%), and expenditures increased by $1.2 billion (11.7%). Other financing sources provided net receipts of $539 million. The Health Care Related Programs Fund ended the fiscal year with a $2.0 billion fund balance, an increase of $294 million from the prior year. Proprietary Funds Enterprise Funds: The total deficit net position of the enterprise funds at June 30, 2023, was $17.7 billion—a $1.7 billion improvement from the prior year’s restated deficit net position of $19.4 billion. The largest portion of this improvement in net position, totaling $1.8 billion, was attributable to California State University Fund. The Unemployment Programs Fund offset this increase with a $230 million decrease to net position, ending the fiscal year with a deficit net position of $12.1 billion. The net position of nonmajor enterprise funds increased by $178 million, while the net position of the State Lottery Fund decreased by $41 million. As shown on the proprietary funds’ Statement of Net Position, total assets and deferred outflows of resources for the enterprise funds were $55.5 billion as of June 30, 2023. Of this amount, current assets totaled $16.7 billion, noncurrent assets totaled $32.6 billion, and deferred outflows of resources totaled $6.2 billion. Total liabilities and deferred inflows of resources for the enterprise funds was $73.1 billion. One of the largest liabilities of the enterprise funds is $18.1 billion due to other governments, $17.7 billion of which represents the balance in the Unemployment Programs Fund for which the program was unable to confirm unemployment benefits eligibility claims, primarily associated with federal pandemic relief programs. As of June 30, 2023, the Unemployment Programs Fund also reported a balance on deposit with the U.S. Treasury of $475 million, funds used to pay unemployment claims during the pandemic. Other noteworthy cumulative liabilities of the enterprise funds include a net OPEB liability of $14.5 billion, $14.6 billion in revenue bonds payable including the current portion, and $9.7 billion in net pension liability. 21 State of California Annual Comprehensive Financial Report Total net position for enterprise funds consisted of four segments: net investment in capital assets of $3.5 billion, nonexpendable restricted net position of $2 million, restricted expendable net position of $9.9 billion, and unrestricted net deficit of $31.1 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 $29.7 billion, operating expenses of $34.4 billion, and net revenues from other transactions and transfers of $6.4 billion. The largest sources of operating revenues were unemployment and disability insurance receipts of $15.2 billion in the Unemployment Programs Fund, and lottery ticket sales of $9.2 billion collected by the State Lottery Fund. Unemployment and disability insurance receipts in the Unemployment Programs Fund were $1.1 billion (6.6%) less than the prior fiscal year. The largest operating expenses were distributions to beneficiaries of $15.3 billion reported in the Unemployment Programs Fund, personal services expenses of $6.4 billion reported in the California State University Fund, and lottery prizes of $6.0 billion distributed by the State Lottery Fund. Internal Service Funds: The total net deficit of the internal service funds was $1.2 billion as of June 30, 2023. The net position consists of three segments: net investment in capital assets of $650 million, restricted expendable net position of $177 million, and unrestricted deficit net position of $2.0 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 $826.2 billion. The private purpose trust funds ended the fiscal year with a net position of $14.4 billion. The investment trust funds ended the fiscal year with a net position of $25.8 billion. The custodial fund ended the fiscal year with a net position of $668 million. For the fiscal year ended June 30, 2023, the fiduciary funds’ combined net position was $867.1 billion, a $39.1 billion increase from the prior-year net position. The net position increased primarily because contributions received and investment income in pension and other employee benefit trust funds exceeded payments made to participants, despite a 28.0% decrease in investment trust net position compared to the prior fiscal year. General Fund Budget Highlights The original General Fund budget of $207.3 billion was increased by $18.7 billion during fiscal year 2022-23. This increase is primarily attributed to additional funding for education and other general government expenditures. The Education budget increased due to updated revenue estimates which increased the guaranteed minimum funding levels for K-12 schools and community colleges under Proposition 98. The other general government budget increased as a result of one-time Better for Families 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, 2023 (amounts in millions) Increase/ Original Final (Decrease) Budgeted amounts Business, consumer services, and housing.................................................. $ 3,132 $ 3,310 $ 178 Transportation.............................................................................................. 473 1,009 536 Natural resources and environmental protection......................................... 7,655 9,019 1,364 Health and human services.......................................................................... 68,182 65,760 (2,422) Corrections and rehabilitation...................................................................... 14,560 15,483 923 Education..................................................................................................... 92,157 101,838 9,681 General government: Tax relief................................................................................................... 388 415 27 Debt service............................................................................................... 6,343 4,908 (1,435) Other general government......................................................................... 14,402 24,286 9,884 Total....................................................................................................... $ 207,292 $ 226,028 $ 18,736 Capital Assets and Debt Administration Capital Assets As of June 30, 2023, the State’s investment in capital assets for its governmental and business-type activities amounted to $172.0 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, 2023, the State’s capital assets increased by $6.4 billion, or 3.9% over the prior fiscal year. The majority of the increase is attributed to net additions to buildings and other depreciable property of $4.0 billion, construction/development in progress of $1.2 billion, and State highway infrastructure of $1.0 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, 2023 and 2022 (amounts in millions) Governmental Activities Business-type Activities Total 2023 2022 2023 2022 2023 2022 Land................................................................ $ 22,496 $ 21,699 $ 466 $ 448 $ 22,962 $ 22,147 State highway infrastructure........................... 83,022 81,997 — — 83,022 81,997 Collections – nondepreciable......................... 22 23 37 35 59 58 Buildings and other depreciable property................................... 38,228 35,948 21,882 20,114 60,110 56,062 Intangible assets – amortizable...................... 3,752 3,129 475 497 4,227 3,626 Right to use leased assets............................... 3,638 2,953 587 386 4,225 3,339 Less: accumulated depreciation/amortization........................... (20,452) (18,875) (8,880) (8,170) (29,332) (27,045) Construction/development in progress........... 22,741 20,917 2,598 3,210 25,339 24,127 Intangible assets – nonamortizable................ 1,254 1,148 137 126 1,391 1,274 Total....................................................... $ 154,701 $ 148,939 $ 17,302 $ 16,646 $ 172,003 $ 165,585 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 2022-23, the actual amount spent on preservation was 42.2% 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 93.7% of bridge deck area judged to be of fair or better quality and 85.3% of lane miles judged to be of fair or better quality in the last completed pavement-condition survey. The State is responsible for maintaining 12,604 bridges and tunnels and 50,607 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, 2023, the State had total bonded debt outstanding of $110.1 billion. Of this amount, $79.4 billion (72.1%) 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 $4.0 billion and the 24 Management’s Discussion and Analysis long-term portion is $75.4 billion. The remaining $30.7 billion (27.9%) 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 $29.3 billion. During the fiscal year, the State issued a total of $8.8 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, 2023 and 2022 (amounts in millions) Governmental Activities Business-type Activities Total 2023 2022 2023 2022 2023 2022 Government-wide noncurrent liabilities General obligation bonds.................................. $ 74,713 $ 72,977 $ 671 $ 533 $ 75,384 $ 73,510 Revenue bonds payable.................................... 15,278 16,310 14,008 13,858 29,286 30,168 Total bonded debt......................................... 89,991 89,287 14,679 14,391 104,670 103,678 Net pension liability.......................................... 80,146 47,921 9,686 6,248 89,832 54,169 Net other postemployment benefits liability............................................ 67,360 77,369 14,454 16,914 81,814 94,283 Mandated cost claims payable.......................... 1,810 1,923 — — 1,810 1,923 Loans payable................................................... 31 40 — — 31 40 Compensated absences payable........................ 5,312 5,225 297 287 5,609 5,512 Workers’ compensation benefits payable.......................................................... 5,390 4,909 13 15 5,403 4,924 Lease liability................................................... 2,062 2,091 319 300 2,381 2,391 Subscription liability......................................... 53 — 31 — 84 — Commercial paper............................................. 1,327 1,449 381 307 1,708 1,756 Other noncurrent liabilities............................... 4,183 2,968 1,071 1,009 5,254 3,977 Total noncurrent liabilities...................... 257,665 233,182 40,931 39,471 298,596 272,653 Current portion of long-term obligations............. 6,421 6,475 1,841 1,769 8,262 8,244 Total long-term obligations..................... $ 264,086 $ 239,657 $ 42,772 $ 41,240 $ 306,858 $ 280,897 During the fiscal year ended June 30, 2023, the primary government’s total long-term obligations increased by $26.0 billion from the prior year’s balance. The largest increase in long-term obligations during the fiscal year was a $35.7 billion increase in net pension liability resulting from a decrease in pension plan net investment income. Significant decreases included $12.5 billion in net other post employment obligation liability. 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, 2023, 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, 2023 After two years of rapid economic expansion spurred by pandemic-related federal stimulus, mounting economic headwinds began to push California’s economy toward a downturn during the year ended June 30, 2023. In an effort to maintain stable price growth and slow inflation, the Federal Reserve Board repeatedly enacted large interest rate increases, raising rates by 500 basis points between March 2022 and May 2023. The increased cost of borrowings meant that California businesses had less access to capital to expand operations and hire new workers. After record-high unemployment during the pandemic, and a rapid and steady descent thereafter, the number of unemployed workers in California rose by nearly 120,000 during the 2022-23 fiscal year, resulting in a 0.7% increase to the state’s unemployment rate. Economic difficulties were evident in California government as well, as the State conformed with federal actions postponing tax payment deadlines in response to widespread California flooding disasters in December 2022 and January 2023. Collections data showed a severe revenue decline, with total income tax collections down by 25.0% in fiscal year 2022-23. As of June 2023, California’s real gross domestic product (GDP) had reached $3.8 trillion, an increase of 5.8% during fiscal year 2022-23, compared to growth of 7.5% during the 2021-22 fiscal year, to $3.6 trillion. California’s economic growth slowed but did not trail far behind that of the United States GDP, which increased by 6.4% during fiscal year 2022-23. The California real estate market continued to experience a downshift in June 2023 as a result of the rise in interest rates. The median price of homes in California was $837,850 as of June 2023, a slight decrease of 2.4% from the prior year and a nominal increase of 2.2% over a two-year span. This stabilization in home prices is in sharp contrast to the appreciation that occurred during the pandemic, as the median price of homes in California at June 2023 was still 33.8% higher than in June 2020. By comparison, the national median home price decreased by 0.9% from the prior year to $410,100 in June 2023. The housing market saw 30-year fixed mortgage rates rise to an average of 6.7% in June 2023, compared to 5.5% in June 2022. The rate increase impacted sales of existing single-family homes; in June 2023 sales were down 19.7% from the prior year. New active listings declined by 34.0%, the largest year-over-year decrease since May 2021. The number of new privately owned residential units in California also decreased during fiscal year 2022-23 by approximately 14,199 units. Despite the dampening of the California real estate market as a result of high home prices and rising interest rates, the market could see some improvement as buyer demand stabilizes, inflation subsides, and mortgage rates and housing supply conditions improve. The real estate market was not the only segment of the state’s economy that was adjusting during the 2022-23 fiscal year. New light vehicle registrations increased by 11.6% in the first six months of 2023 compared to the prior year, due to the cessation of pandemic-induced supply chain interruptions that significantly impacted sales in the second half of 2022. Unemployment insurance claims per week, which were reduced by roughly half to 299,000 at the end of the 2021-22 fiscal year, rose significantly as California issued approximately 385,000 claims per week to unemployed workers by June 30, 2023. The unemployment rate responded comparably, increasing to 4.6% by the end of fiscal year 2022-23, compared to 3.9% at the end of the prior period. During fiscal year 2022-23, the increase of approximately 150,000 new non-farm jobs was a steep regression from the increase of one million jobs in each of the two immediately preceding fiscal years. Five of California’s 11 major industry sectors experienced job growth. The private education and health services sector saw 26 Management’s Discussion and Analysis growth for two consecutive years, with a 3.8% gain in jobs during fiscal year 2021-22 and another 169,000 jobs added in fiscal year 2022-23, an increase of 5.8%. The private education and health services sector includes jobs in private educational services as well as health care and social assistance. Californians’ personal income exhibited modest gains, increasing 4.8% during the period; this was less than the national increase of 5.6%. Since 2011, personal income of Californians has grown an average of 5.4% annually, due largely to the low unemployment rate sustained during the majority of this period. Comparatively, personal income in the United States grew an average of 4.8% during the same period. Effective January 1, 2023, California’s minimum wage increased to $15.50 per hour. The minimum wage continued to increase to $16.00 per hour on January 1, 2024, with fast food restaurant employees’ minimum wage increasing to $20.00 per hour on April 1, 2024, and certain health care workers receiving the $20.00 per hour minimum wage between October 15, 2024, and January 1, 2025. In spite of the long-term growth trend of personal earnings for Californians and other positive economic growth factors, ongoing inflationary pressures and elevated Federal Reserve interest rates will continue to pose a risk to the state’s economy. Economic Conditions for the 2023-24 Fiscal Year and Future Outlook California’s economy remained resilient during fiscal year 2023-24 despite tight financial conditions— with inflationary pressures receding, and the Federal Reserve Board in a holding pattern while waiting for an opportunity to curb a 16-month tide of interest rate hikes—alleviating concerns of a recession in the near-term. At the same time, California technology companies in the San Francisco Bay Area alone cut more than 48,000 jobs between 2022 and mid-2024, seeking to trim their workforces in response to inflation and increase efficiency in the post-pandemic era. The California technology industry was also briefly disrupted by the withdrawal of market capital available for startup and expansion loans in the aftermath of the financial fallout incited by Silicon Valley Bank in early 2023; however, the market showed signs of normalizing by the beginning of 2024. In addition, California experienced a season of severe winter storms, which produced flooding, landslides, and mudslides in early 2023, leading to a State tax filing postponement that affected 99% of California taxpayers. In spite of these challenges, California strengthened its position as the fifth largest economy in the world during the year. At June 30, 2024, the state’s GDP climbed to $4.1 trillion, an increase of 6.3% over the previous fiscal year—higher than the United States GDP increase of 5.7% over the same period. Personal income growth for Californians was robust, increasing by 7.1% during fiscal year 2023-24. Statewide personal income growth outpaced both the increase in Consumer Price Index of 3.3% during the period and the U.S. national personal income increase of 5.9%. California’s unemployment rate for the 2023-24 fiscal year rose slightly throughout the year, ending at 5.2% on June 30, 2024. The private education and health services sector saw growth for a fourth consecutive year, with a 5.3% gain in jobs during fiscal year 2023-24. The private education and health services sector includes jobs in private educational services as well as health care and social assistance. The technology sector continued to make headlines, with nearly 13,000 reported Silicon Valley job cuts in the first half of 2024, and continued layoffs tapering through the subsequent months. As a result of the Federal Reserve Board’s aggressive hoist of interest rates to tame consumer price increases, California’s statewide inflation of 8.3% in 2022 had decreased to 3.1% and 3.3% in 2023 and 2024, respectively. The Federal Reserve Board maintained a steady interest rate after July 2023, and once the national inflation retreated to a target rate of 2.0%, the Board cut its rate by 50 basis points in September 2024. The pause in rate hikes from July 2023 had a stabilizing effect on the statewide housing market, with existing home sales totaling 270,200 units in June 2024, a modest 2.7% decrease from June 2023. The 30-year fixed mortgage interest rate rose slightly, from an average of 6.7% in June 2023, to a 6.9% average in June 2024. As demand for homes outpaced supply, the statewide median home price eclipsed the $900,000 benchmark for the final three months of fiscal year 2023-24, ending at $900,700 in June 2024, an increase of 7.5% from June 2023. The U.S. national median home price 27 State of California Annual Comprehensive Financial Report increased at a lesser rate of 4.1% during the same period, landing at $432,700 in June 2024. In contrast to the 11.6% rebound in new vehicle registrations experienced in fiscal year 2022-23, the state’s automotive industry remained flat in the first six months of 2024, with a 0.7% decrease in new vehicle registrations compared to the same period during the prior year. The decrease in consumer spending on automobiles is mainly attributable to monthly finance and lease costs remaining elevated due to higher interest rates; sales may begin to increase if the Federal Reserve Board continues to cut interest rates into 2025. The state experienced a net population loss of 410,000 Californians since the last Census Bureau survey was conducted in April 2020; the loss can be primarily be attributed to displacement during the pandemic and the high cost of living in the state. Housing costs will likely remain elevated, as lower interest rates will push buyers from the sidelines into an already supply-constrained housing market. New state minimum wage increases, including the increase to $20.00 per hour in 2024 for fast-food restaurant and certain health care workers, will make it difficult for some businesses in those sectors to remain afloat, unless they are able to pass the increases on to consumers in the form of higher prices without reducing demand. California’s short-term economic outlook will likely closely correlate to the greater US economy, which has shown potential harbingers for recessions over the past few years but has adeptly managed to circumvent such an outcome. California’s 2023-24 Budget California’s 2023-24 Budget Act was enacted on June 27, 2023. The Budget Act appropriated $310.8 billion; $225.9 billion from the General Fund, $82.0 billion from special funds, and $2.9 billion from bond funds. Budgeted expenditures for the General Fund decreased by $8.7 billion, or 3.7% less than last year’s budget, and General Fund revenues were projected to be $208.7 billion. General Fund revenue comes predominantly from taxes, with personal income taxes expected to provide 56.6% of total revenue in fiscal year 2023-24. California’s major taxes, including personal income taxes, sales and use taxes, and corporation taxes were projected to supply approximately 92.8% of the General Fund’s resources in the 2023-24 fiscal year. The General Fund was projected to end the 2023-2024 fiscal year with $37.8 billion in total reserves, including $22.3 billion in the Budget Stabilization Account (BSA) for fiscal emergencies, $10.8 billion in the Public School System Stabilization Account (PSSSA), $3.8 billion in the State’s operating reserve, and $900 million in the Safety Net Reserve (SNR). The 2023-24 Budget Act increased total state expenditures by $4.4 billion over the 2022-23 budgeted level. General Fund spending decreases included $6.3 billion for General Government operations, and $4.7 billion for Legislative, Judicial, and Executive, partially offset by an increase of $5.9 billion for Health and Human Services. The General Fund’s share of the Proposition 98 guaranteed minimum funding level for K-12 schools and community colleges decreased by $660 million from the revised 2022-23 level, to $77.5 billion. The Budget included total funding of $129.2 billion for all K-12 education programs, reflecting significant Proposition 98 funding that enables increased support for core programs such as the Local Control Funding Formula, special education, transitional kindergarten, nutrition, and preschool. The Budget includes over $52.0 billion in multi-year climate investments and $5.1 billion for public transit, including $4.0 billion in Transit and Intercity Rail Capital Program funding and $1.1 billion in zero-emission vehicle transit funding. Continuing the State’s comprehensive approach to providing service and support for individuals experiencing homelessness, the Budget couples the Administration’s $15.3 billion investment in measures to address homelessness with new accountability measures. The Budget maintains the 28 Management’s Discussion and Analysis commitment to increase access to health care for all Californians, regardless of their immigration status, and especially for low-income Californians. It also maintains key investments—including more than $10.0 billion for the California Advancing and Innovating Medi-Cal program (CalAIM) and over $8.0 billion for behavioral health. After two years of unprecedented General Fund revenue growth due to unanticipated increases in tax revenue collections and federal stimulus grants, the State now faces a downturn in revenues and slower future projected revenue growth. The Budget avoids new significant ongoing commitments and maintains fiscal discipline by setting aside $37.8 billion in total budgetary reserves. It also preserves investments in programs that are essential to millions of Californians while closing a shortfall of more than $30.0 billion through a balanced package of solutions that avoids deep program cuts. The Budget protects investments in education, health care, climate, public safety and social service programs that are relied on by millions of Californians. Additionally, it is paired with the Governor’s streamlining proposals that accelerate construction of water, transportation, and clean energy projects to advance the State’s ambitious economic, climate, and social goals. In June 2024, the 2024-25 Budget Act was enacted, and provided updated estimates of fiscal year 2023-24 General Fund revenues, expenditures, and reserves. The 2024-25 Budget Act projected fiscal year 2023-24 General Fund revenue of $189.4 billion after transfers—$19.3 billion (9.2%) less than projected in the 2023-24 Budget Act—and expenditures of $223.1 billion. Total year-end reserves were estimated at $26.3 billion—$22.5 billion in the BSA, $2.9 billion in the State’s operating reserve, and $900 million in the SNR—which is $11.5 billion less than projected in the 2023-24 Budget Act. California’s 2024-25 Budget California’s fiscal year 2024-25 Budget Act was enacted on June 26, 2024, and includes projections of fiscal year 2024-25 General Fund revenues, expenditures, and reserves. General Fund revenues are anticipated to be $207.2 billion, an increase of $17.0 billion (8.9%) from revised fiscal year 2023-24 revenue estimates, primarily due to projected increases of $9.3 billion in corporation taxes, $5.4 billion in personal income taxes, and $1.5 billion in other revenue sources. General Fund expenditures for fiscal year 2024-25 are budgeted at $211.5 billion, a decrease of $11.6 billion (5.2%) compared to the fiscal year 2023-24 estimates. The Budget again avoids new significant ongoing commitments and, after subsidizing expenditures through transfers, preserves a total of $22.2 billion in budgetary reserves: $17.6 billion in the BSA for fiscal emergencies, $3.5 billion in the State’s operating reserve, and $1.1 billion in the PSSSA. The 2024-25 Budget Act maintains the State’s commitments to increase funding for K-12 schools and higher education, combat the impacts of climate change, and address homelessness. The Budget allocates total funding of $133.8 billion for K-12 education programs, and $44.6 billion for higher education programs in 2024-25. The Budget also maintains $44.6 billion in climate investments over eight years to integrate climate solutions with equity and economic opportunity. Additionally, as part of the State’s continued focus on homelessness, the Budget includes $1.3 billion in new funding for homelessness programs. Emerging from the COVID-19 pandemic, California experienced significant revenue volatility, seeing unprecedented revenue growth quickly followed by a sharp and deep correction back toward historical trends. In addressing a $46.8 billion deficit, the Budget maintains the multi-year fiscal structure by providing positive balances in the Special Fund for Economic Uncertainties (SFEU), the State’s “Rainy Day” fund, for both the 2024-25 and 2025-26 fiscal years. Additionally, the Budget includes commitments to support further budget resilience. Part of the budget agreement reached proposes 29 State of California Annual Comprehensive Financial Report additional legislation requiring the State to set aside a portion of anticipated surplus funds to be allocated in a subsequent Budget Act, adding further fiscal protection so that the State does not commit future anticipated surplus revenues until those revenues have been realized. 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 This page intentionally left blank Government-wide Financial Statements State of California Annual Comprehensive Financial Report Statement of Net Position June 30, 2023 (amounts in thousands) Primary Government Governmental Business-type Component Activities Activities Total Units ASSETS Current assets: Cash and pooled investments....................................... $ 136,506,812 $ 7,512,221 $ 144,019,033 $ 4,361,701 Amount on deposit with U.S. Treasury........................ — 475,075 475,075 — Investments................................................................... 1,932,444 4,269,940 6,202,384 14,747,794 Restricted assets: Cash and pooled investments.................................... 1,193,575 875,893 2,069,468 747,458 Investments................................................................ — — — 24,320 Due from other governments..................................... — 209,306 209,306 — Contracts and installments receivable.......................... 10,458 — 10,458 — Receivables (net).......................................................... 57,031,444 2,780,954 59,812,398 7,902,470 Internal balances........................................................... 271,786 (271,786) — — Due from primary government..................................... — — — 312,420 Due from other governments........................................ 41,855,096 305,425 42,160,521 189,465 Prepaid items................................................................ 190,202 83,042 273,244 1,994 Inventories.................................................................... 103,670 27,854 131,524 397,407 Other current assets...................................................... 718,888 7,150 726,038 712,385 Total current assets.................................................... 239,814,375 16,275,074 256,089,449 29,397,414 Noncurrent assets: Restricted assets: Cash and pooled investments.................................... 106,788 180,533 287,321 47,691 Investments................................................................ — 50,709 50,709 337,168 Loans receivable........................................................ — 5,259,875 5,259,875 — Investments................................................................... — 3,819,234 3,819,234 44,313,880 Contracts and installments receivable.......................... 183,329 — 183,329 — Receivables (net).......................................................... 2,749,971 1,684,729 4,434,700 4,433,181 Loans receivable........................................................... 4,411,935 2,856,749 7,268,684 2,919,714 Long-term prepaid charges........................................... 143 940,915 941,058 104 Capital assets: Land........................................................................... 21,824,503 466,071 22,290,574 1,899,824 State highway infrastructure...................................... 83,693,741 — 83,693,741 — Collections – nondepreciable.................................... 21,828 37,312 59,140 660,251 Buildings and other depreciable property................. 37,794,167 21,882,485 59,676,652 67,806,520 Intangible assets – amortizable................................. 7,390,334 1,061,694 8,452,028 5,890,841 Less: accumulated depreciation/amortization........... (20,441,213) (8,880,312) (29,321,525) (37,358,797) Construction/development in progress...................... 22,741,085 2,598,207 25,339,292 6,672,314 Intangible assets – nonamortizable........................... 1,253,757 136,896 1,390,653 2,420 Other noncurrent assets................................................ — 43,998 43,998 654,700 Total noncurrent assets.............................................. 161,730,368 32,139,095 193,869,463 98,279,811 Total assets........................................................... 401,544,743 48,414,169 449,958,912 127,677,225 DEFERRED OUTFLOWS OF RESOURCES........... 42,404,516 6,235,662 48,640,178 7,884,610 Total assets and deferred outflows of resources.................................................... $ 443,949,259 $ 54,649,831 $ 498,599,090 $ 135,561,835 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.......................................................... $ 47,912,117 $ 932,460 $ 48,844,577 $ 4,713,932 Due to component units................................................ 312,420 — 312,420 — Due to other governments............................................. 40,057,061 18,050,461 58,107,522 — Revenues received in advance...................................... 8,933,244 508,734 9,441,978 2,161,316 Tax overpayments......................................................... 21,740,974 — 21,740,974 — Deposits......................................................................... 524,471 — 524,471 230,978 Contracts and notes payable.......................................... 1,351 — 1,351 13,315 Unclaimed property liability......................................... 1,314,797 — 1,314,797 — Interest payable............................................................. 1,041,620 42,646 1,084,266 5,108 Securities lending obligations....................................... — — — 1,913,858 Benefits payable............................................................ 69,623 343,897 413,520 — Current portion of long-term obligations...................... 6,421,194 1,840,946 8,262,140 6,222,081 Other current liabilities................................................. 47,124,043 1,046,390 48,170,433 2,401,137 Total current liabilities.............................................. 175,452,915 22,765,534 198,218,449 17,661,725 Noncurrent liabilities: Loans payable............................................................... 31,041 — 31,041 12,766 Lottery prizes and annuities.......................................... — 622,932 622,932 — Compensated absences payable.................................... 5,311,409 296,297 5,607,706 482,961 Workers’ compensation benefits payable..................... 5,389,775 12,715 5,402,490 1,065,486 Commercial paper and other borrowings...................... 1,327,110 381,276 1,708,386 116,600 Lease liability................................................................ 2,062,136 319,390 2,381,526 2,563,532 Subscription liability..................................................... 53,136 31,093 84,229 113,700 General obligation bonds payable................................. 74,713,468 671,352 75,384,820 — Revenue bonds payable................................................. 15,277,863 14,007,493 29,285,356 30,699,095 Mandated cost claims payable...................................... 1,809,879 — 1,809,879 — Net other postemployment benefits liability................. 67,359,807 14,453,980 81,813,787 22,564,811 Net pension liability...................................................... 80,145,864 9,686,137 89,832,001 20,677,108 Revenues received in advance...................................... — 30,127 30,127 19,405 Other noncurrent liabilities........................................... 4,182,955 417,884 4,600,839 3,114,070 Total noncurrent liabilities........................................ 257,664,443 40,930,676 298,595,119 81,429,534 Total liabilities..................................................... 433,117,358 63,696,210 496,813,568 99,091,259 DEFERRED INFLOWS OF RESOURCES................ 31,108,319 8,621,198 39,729,517 10,284,346 Total liabilities and deferred inflows of resources.................................................... $ 464,225,677 $ 72,317,408 $ 536,543,085 $ 109,375,605 (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, 2023 (amounts in thousands) Primary Government Governmental Business-type Component Activities Activities Total Units NET POSITION Net investment in capital assets................................... $ 131,322,297 $ 3,538,034 $ 134,860,331 $ 14,522,596 Restricted: Nonexpendable – endowments.................................. — 1,595 1,595 10,100,018 Expendable: Endowments and gifts........................................... — — — 19,380,795 General government.............................................. 7,848,581 107,817 7,956,398 — Education............................................................... 1,520,475 130,503 1,650,978 1,801,155 Health and human services.................................... 9,392,779 2,346,722 11,739,501 — Natural resources and environmental protection............................................................. 7,203,294 3,812,796 11,016,090 — Business, consumer services, and housing............ 7,325,877 95 7,325,972 — Transportation....................................................... 10,631,851 968 10,632,819 — Corrections and rehabilitation............................... 469,735 18,334 488,069 — Unemployment programs...................................... — 3,483,072 3,483,072 — Indenture................................................................ — — — 749,992 Statute.................................................................... — — — 4,034,268 Budget stabilization............................................... 22,252,422 — 22,252,422 — Other purposes....................................................... — — — 26,497 Total expendable............................................... 66,645,014 9,900,307 76,545,321 25,992,707 Unrestricted.................................................................. (218,243,729) (31,107,513) (249,351,242) (24,429,091) Total net position (deficit)................................... (20,276,418) (17,667,577) (37,943,995) 26,186,230 Total liabilities, deferred inflows of resources, and net position........................... $ 443,949,259 $ 54,649,831 $ 498,599,090 $ 135,561,835 (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, 2023 (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................................................. $ 24,946,231 $ 6,992,729 $ 1,558,549 $ — Education................................................................. 100,496,652 111,947 13,201,197 — Health and human services...................................... 219,032,287 14,195,544 127,989,215 — Natural resources and environmental protection............................................................... 13,314,762 8,488,546 372,817 — Business, consumer services, and housing.............. 5,641,942 1,561,023 1,676,330 — Transportation.......................................................... 19,100,099 8,346,084 2,398,560 1,847,186 Corrections and rehabilitation.................................. 18,204,561 11,403 95,221 — Interest on long-term debt........................................ 3,705,403 — — — Total governmental activities................................ 404,441,937 39,707,276 147,291,889 1,847,186 Business-type activities: Water Resources...................................................... 1,460,049 1,531,195 — — State Lottery............................................................. 9,291,352 9,250,527 — — Unemployment Programs........................................ 15,533,539 15,303,547 — — California State University...................................... 10,877,952 3,977,056 2,645,177 — State Water Pollution Control Revolving................ 46,948 83,654 37,996 — Safe Drinking Water State Revolving ..................... 28,052 30,890 113,877 — Housing Loan........................................................... 50,682 53,383 — — Other enterprise programs........................................ 152,586 136,636 — — Total business-type activities................................ 37,441,160 30,366,888 2,797,050 — Total primary government.............................. $ 441,883,097 $ 70,074,164 $ 150,088,939 $ 1,847,186 Component Units University of California.............................................. 52,377,894 33,563,275 13,087,883 50,064 California Housing Finance Agency.......................... 95,580 190,304 — — Nonmajor component units........................................ 2,498,465 856,996 1,276,326 43,626 Total component units...................................... $ 54,971,939 $ 34,610,575 $ 14,364,209 $ 93,690 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 $ (16,394,953) $ (16,394,953) (87,183,508) (87,183,508) (76,847,528) (76,847,528) (4,453,399) (4,453,399) (2,404,589) (2,404,589) (6,508,269) (6,508,269) (18,097,937) (18,097,937) (3,705,403) (3,705,403) (215,595,586) (215,595,586) 71,146 71,146 (40,825) (40,825) (229,992) (229,992) (4,255,719) (4,255,719) 74,702 74,702 116,715 116,715 2,701 2,701 (15,950) (15,950) (4,277,222) (4,277,222) $ (215,595,586) $ (4,277,222) $ (219,872,808) $ (5,676,672) 94,724 (321,517) $ (5,903,465) $ 114,593,854 $ — $ 114,593,854 $ — 53,471,988 — 53,471,988 — 36,685,982 — 36,685,982 — 8,654,176 — 8,654,176 — 3,720,620 — 3,720,620 — 3,478,815 — 3,478,815 — 3,667,941 — 3,667,941 — 2,596,512 — 2,596,512 3,682,122 876,112 — 876,112 — — — — 4,708,743 22,783 — 22,783 — (6,047,026) 6,047,026 — — 221,721,757 6,047,026 227,768,783 8,390,865 6,126,171 1,769,804 7,895,975 2,487,400 (26,402,589) (19,437,381) (45,839,970) 23,698,830 $ (20,276,418) $ (17,667,577) $ (37,943,995) $ 26,186,230 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, 2023 (amounts in thousands) General Federal ASSETS Cash and pooled investments............................................................................................... $ 71,968,861 $ 6,986,275 Investments.......................................................................................................................... — — Receivables (net).................................................................................................................. 46,621,774 2,076,598 Due from other funds........................................................................................................... 6,933,803 165,231 Due from other governments............................................................................................... 4,075,837 37,069,188 Interfund receivables............................................................................................................ 3,914,413 — Loans receivable.................................................................................................................. 45,225 384,293 Other assets.......................................................................................................................... 6,244 601,252 Total assets....................................................................................................................... $ 133,566,157 $ 47,282,837 LIABILITIES Accounts payable................................................................................................................. $ 14,422,777 $ 24,499,200 Due to other funds................................................................................................................ 3,911,973 3,865,533 Due to component units....................................................................................................... 264,995 — Due to other governments.................................................................................................... 21,808,112 11,125,464 Interfund payables................................................................................................................ 2,692,941 — Benefits payable................................................................................................................... — 69,623 Revenues received in advance............................................................................................. 25,891 6,675,956 Tax overpayments................................................................................................................ 21,740,974 — Deposits................................................................................................................................ 4,231 — Unclaimed property liability................................................................................................ 1,314,797 — Other liabilities..................................................................................................................... 522,844 46,256,400 Total liabilities................................................................................................................. 66,709,535 92,492,176 DEFERRED INFLOWS OF RESOURCES....................................................................... 2,852,934 10,709 Total liabilities and deferred inflows of resources..................................................... 69,562,469 92,502,885 FUND BALANCES Nonspendable....................................................................................................................... 3,950,919 — Restricted............................................................................................................................. 24,830,454 1,210,267 Committed............................................................................................................................ 4,210,891 — Assigned............................................................................................................................... 20,714,283 — Unassigned........................................................................................................................... 10,297,141 (46,430,315) Total fund balances (deficit)........................................................................................... 64,003,688 (45,220,048) Total liabilities, deferred inflows of resources, and fund balances.......................... $ 133,566,157 $ 47,282,837 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 $ 12,218,246 $ 19,745,829 $ 2,886,735 $ 19,553,625 $ 133,359,571 — — — 1,932,444 1,932,444 1,464,551 672,252 7,169,919 1,662,319 59,667,413 800,984 325,038 58,803 3,457,675 11,741,534 4,861 22,441 523,951 119,754 41,816,032 178,574 1,296,285 154,364 881,119 6,424,755 2,811 763,027 5,086 3,207,097 4,407,539 12,242 — — 99,153 718,891 $ 14,682,269 $ 22,824,872 $ 10,798,858 $ 30,913,186 $ 260,068,179 $ 1,689,842 $ 625,531 $ 4,275,671 $ 770,940 $ 46,283,961 315,056 203,266 3,859,353 242,811 12,397,992 6,788 3,548 — 37,089 312,420 1,057,488 494,304 504,519 5,184,767 40,174,654 642 528,808 — 40,200 3,262,591 — — — — 69,623 15,768 242,662 1,206 362,307 7,323,790 — — — — 21,740,974 3,024 235 — 515,832 523,322 — — — — 1,314,797 765,191 3,822 — 182,414 47,730,671 3,853,799 2,102,176 8,640,749 7,336,360 181,134,795 51,748 20,076 122,959 332,599 3,391,025 3,905,547 2,122,252 8,763,708 7,668,959 184,525,820 — — — 95,021 4,045,940 10,727,030 6,860,380 1,476,870 21,362,816 66,467,817 49,692 13,842,240 558,280 1,708,472 20,369,575 — — — 77,937 20,792,220 — — — (19) (36,133,193) 10,776,722 20,702,620 2,035,150 23,244,227 75,542,359 $ 14,682,269 $ 22,824,872 $ 10,798,858 $ 30,913,186 $ 260,068,179 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 $ 75,542,359 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 21,822,423 State highway infrastructure 83,693,741 Collections – nondepreciable 21,828 Buildings and other depreciable property 37,119,583 Intangible assets – amortizable 6,648,977 Less: accumulated depreciation/amortization (19,775,504) Construction/development in progress 20,322,927 Intangible assets – nonamortizable 1,253,757 151,107,732 • State revenues that are earned and measurable, but not available within 12 months of the end of 2,605,117 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 (9,171,277) building construction and architectural, 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 (8,034,927) and are included in the governmental activities in the Statement of Net Position. • Deferred inflows and outflows of resources related to pension transactions are not reported in the 11,884,611 funds. • Deferred inflows and outflows of resources resulting from bond refunding gains and losses, (88,323) respectively, are amortized over the life of the bonds and are not reported in the funds. • General obligation bonds and related accrued interest totaling $71,593,206, revenue bonds totaling (80,441,406) $7,521,090, and commercial paper totaling $1,327,110 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 (5,122,966) Lease, subscription, and financed purchase liability (2,411,642) Net pension liability (78,654,519) Net other postemployment benefits liability (65,956,698) Mandated cost claims (1,809,879) Workers’ compensation (5,339,431) Pollution remediation obligations (1,830,566) Other noncurrent liabilities (2,554,603) (163,680,304) Net position of governmental activities $ (20,276,418) 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, 2023 (amounts in thousands) General Federal REVENUES Personal income taxes.......................................................................................................... $ 112,736,701 $ — Sales and use taxes............................................................................................................... 33,128,145 — Corporation taxes................................................................................................................. 36,662,999 — Motor vehicle excise taxes................................................................................................... 156,321 — Insurance taxes..................................................................................................................... 3,720,620 — Managed care organization enrollment tax.......................................................................... — — Other taxes........................................................................................................................... 682,050 — Intergovernmental................................................................................................................ 3,200 149,131,716 Licenses and permits............................................................................................................ 7,806 — Charges for services............................................................................................................. 420,749 — Fees...................................................................................................................................... 16,717 — Penalties............................................................................................................................... 872,820 16 Investment and interest........................................................................................................ 2,435,353 147,166 Escheat................................................................................................................................. 876,109 — Other.................................................................................................................................... 732,591 — Total revenues.................................................................................................................. 192,452,181 149,278,898 EXPENDITURES Current: General government.......................................................................................................... 13,557,086 1,317,833 Education........................................................................................................................... 86,822,520 13,223,519 Health and human services................................................................................................ 61,477,274 127,292,302 Natural resources and environmental protection............................................................... 5,906,134 340,744 Business, consumer services, and housing........................................................................ 1,722,649 1,716,132 Transportation................................................................................................................... 656,436 4,245,521 Corrections and rehabilitation........................................................................................... 14,903,847 73,764 Capital outlay....................................................................................................................... 165,706 2,526 Debt service: Bond, commercial paper, and lease principal retirement.................................................. 2,922,769 10,836 Interest and fiscal charges................................................................................................. 2,876,197 321 Total expenditures........................................................................................................... 191,010,618 148,223,498 Excess (deficiency) of revenues over (under) expenditures........................................... 1,441,563 1,055,400 OTHER FINANCING SOURCES (USES) General obligation bonds and commercial paper issued...................................................... — — Refunding debt issued ......................................................................................................... — — Payment to refund long-term debt....................................................................................... — — Premium on bonds issued.................................................................................................... 223,296 — Proceeds from leases............................................................................................................ 164,366 2,503 Transfers in.......................................................................................................................... 889,336 — Transfers out........................................................................................................................ (11,827,908) (766,920) Total other financing sources (uses).............................................................................. (10,550,910) (764,417) Net change in fund balances........................................................................................... (9,109,347) 290,983 Fund balances – beginning.................................................................................................... 73,113,035 * (45,511,031) * Fund balances (deficits) – ending......................................................................................... $ 64,003,688 $ (45,220,048) * 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 $ — $ — $ — $ 1,702,918 $ 114,439,619 1,429,431 — — 18,912,155 53,469,731 — — — — 36,662,999 8,260,535 100,428 — 136,892 8,654,176 — — — — 3,720,620 — — 3,478,815 — 3,478,815 — 245,391 — 2,763,401 3,690,842 — — 1,542,804 820,808 151,498,528 5,784,917 480,827 — 4,459,526 10,733,076 131,985 163,849 231 410,714 1,127,528 2,188,779 3,004,096 5,162,307 4,203,080 14,574,979 9,285 75,199 3,964 419,728 1,381,012 251,002 392,830 111,325 272,399 3,610,075 — — — 39,602 915,711 87,983 4,729,833 654,222 2,173,615 8,378,244 18,143,917 9,192,453 10,953,668 36,314,838 416,335,955 565,869 283,846 8,610 13,694,620 29,427,864 9,658 5,912 216,152 1,304,286 101,582,047 6,658 57,444 10,936,664 19,232,289 219,002,631 217,443 6,362,287 299 298,713 13,125,620 113,695 107,307 — 1,984,527 5,644,310 16,798,133 395,728 — 22,410 22,118,228 — — — 2,301,518 17,279,129 121,131 226,654 8,125 381,185 905,327 2,322,167 1,195,345 17,443 3,775,002 10,243,562 56,900 9,400 11,418 802,387 3,756,623 20,211,654 8,643,923 11,198,711 43,796,937 423,085,341 (2,067,737) 548,530 (245,043) (7,482,099) (6,749,386) 2,360,075 1,951,405 262,305 2,248,840 6,822,625 1,416,480 338,735 — 1,946,675 3,701,890 — — — (37,408) (37,408) 154,180 109,864 11,264 180,925 679,529 121,131 16,165 8,125 58,441 370,731 25,165 124,039 258,931 7,074,762 8,372,233 (1,400,173) (98,193) (1,152) (390,925) (14,485,271) 2,676,858 2,442,015 539,473 11,081,310 5,424,329 609,121 2,990,545 294,430 3,599,211 (1,325,057) 10,167,601 17,712,075 * 1,740,720 * 19,645,016 * 76,867,416 $ 10,776,722 $ 20,702,620 $ 2,035,150 $ 23,244,227 $ 75,542,359 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 $ (1,325,057) 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 4,981,665 Disposal of assets (244,928) Depreciation expense, net of asset disposal (985,220) 3,751,517 • Some revenues in the Statement of Activities do not provide current financial resources and, 214,840 therefore, are unavailable in governmental funds. • Internal service funds are used by management to charge the costs of certain activities, such as 442,658 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 (8,590,580) (218,300) (1,715,635) (10,524,515) Premium on debt issued (671,557) (7,972) — (679,529) Accreted interest — (25,913) — (25,913) Principal repayments 7,102,962 737,487 1,837,250 9,677,699 Payments to refund/remarket long-term debt 37,408 — — 37,408 Related expenses not reported in governmental funds: Premium/discount amortization 506,375 187 — 506,562 Deferred gain/loss on refunding 17,588 (134,372) — (116,784) Prepaid insurance — — — — Accrued interest (5,293) 228 — (5,065) (1,603,097) 351,345 121,615 (1,130,137) (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 (88,536) Lease, subscription, and financed purchase liability 17,282 Net pension liability 3,580,959 Net other postemployment benefits liability 1,296,578 Mandated cost claims 113,089 Workers’ compensation (483,190) Proposition 98 funding guarantee — Pollution remediation obligations (122,005) Other noncurrent liabilities (141,827) 4,172,350 Change in net position of governmental activities $ 6,126,171 (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, 2023 (amounts in thousands) Water State Resources Lottery ASSETS Current assets: Cash and pooled investments............................................................................................... $ 792,486 $ 661,696 Amount on deposit with U.S. Treasury................................................................................ — — Investments........................................................................................................................... — 83,628 Restricted assets: Cash and pooled investments............................................................................................ — — Due from other governments............................................................................................ — — Contracts and installments receivable.................................................................................. — — Receivables (net).................................................................................................................. 192,770 777,976 Due from other funds............................................................................................................ — 7,391 Due from other governments................................................................................................ 121,566 — Prepaid items........................................................................................................................ — — Inventories............................................................................................................................ 4,945 16,577 Other current assets.............................................................................................................. — 7,150 Total current assets........................................................................................................... 1,111,767 1,554,418 Noncurrent assets: Restricted assets: Cash and pooled investments............................................................................................ 180,533 — Investments....................................................................................................................... 50,709 — Loans receivable............................................................................................................... — — Investments........................................................................................................................... — 562,301 Contracts and installments receivable.................................................................................. — — Receivables (net).................................................................................................................. — — Interfund receivables............................................................................................................ 183,169 — Loans receivable................................................................................................................... 6,917 — Long-term prepaid charges................................................................................................... 931,688 9,227 Capital assets: Land.................................................................................................................................. 210,769 18,798 Collections – nondepreciable............................................................................................ — — Buildings and other depreciable property......................................................................... 7,423,903 308,981 Intangible assets – amortizable......................................................................................... 98,430 24,244 Less: accumulated depreciation/amortization................................................................... (2,770,080) (168,577) Construction/development in progress............................................................................. 1,387,524 — Intangible assets – nonamortizable................................................................................... 125,052 — Other noncurrent assets........................................................................................................ — — Total noncurrent assets..................................................................................................... 7,828,614 754,974 Total assets................................................................................................................... 8,940,381 2,309,392 DEFERRED OUTFLOWS OF RESOURCES................................................................... 414,932 108,494 Total assets and deferred outflows of resources................................................... $ 9,355,313 $ 2,417,886 50 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Governmental Business-type Activities – Enterprise Funds Activities Unemployment California State Nonmajor Internal Programs University Enterprise Total Service Funds $ 3,691,745 $ 1,457,611 $ 908,683 $ 7,512,221 $ 3,147,241 475,075 — — 475,075 — — 4,186,312 — 4,269,940 — — — 875,893 875,893 1,193,575 — — 209,306 209,306 — — — — — 564,176 1,312,602 353,423 144,183 2,780,954 106,579 79,957 2,833 39,781 129,962 836,835 96,615 — 87,244 305,425 39,064 — 83,012 30 83,042 190,202 — — 6,332 27,854 103,670 — — — 7,150 — 5,655,994 6,083,191 2,271,452 16,676,822 6,181,342 — — — 180,533 106,788 — — — 50,709 — — — 5,259,875 5,259,875 — — 3,245,642 11,291 3,819,234 — — — — — 7,643,992 1,040,204 644,525 — 1,684,729 7,421 235,250 — 6,615 425,034 40,856 7,751 32,526 2,809,555 2,856,749 4,396 — — — 940,915 143 — 235,231 1,273 466,071 2,080 — 37,312 — 37,312 — 29,816 14,093,455 26,330 21,882,485 674,584 244,118 669,382 25,520 1,061,694 741,357 (97,319) (5,815,782) (28,554) (8,880,312) (665,709) — 1,210,577 106 2,598,207 2,418,158 — 11,844 — 136,896 — — 35,566 8,432 43,998 — 1,459,820 14,400,278 8,120,443 32,564,129 10,974,066 7,115,814 20,483,469 10,391,895 49,240,951 17,155,408 197,188 5,480,742 34,306 6,235,662 887,052 $ 7,313,002 $ 25,964,211 $ 10,426,201 $ 55,476,613 $ 18,042,460 (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, 2023 (amounts in thousands) Water State Resources Lottery LIABILITIES Current liabilities: Accounts payable.................................................................................................................. $ 150,961 $ 56,270 Due to other funds................................................................................................................ 133,313 596,100 Due to other governments..................................................................................................... 354,550 — Revenues received in advance.............................................................................................. — 2,739 Deposits................................................................................................................................ — — Contracts and notes payable................................................................................................. — — Interest payable..................................................................................................................... 9,759 — Benefits payable................................................................................................................... — — Current portion of long-term obligations.............................................................................. 259,941 956,449 Other current liabilities......................................................................................................... — 202 Total current liabilities...................................................................................................... 908,524 1,611,760 Noncurrent liabilities: Interfund payables................................................................................................................ 14,511 3,244 Lottery prizes and annuities.................................................................................................. — 622,932 Compensated absences payable............................................................................................ 32,368 — Workers’ compensation benefits payable............................................................................. — 8,337 Commercial paper and other borrowings............................................................................. 250,093 — Lease liability....................................................................................................................... 27,551 1,152 Subscription liability............................................................................................................. 1,253 256 General obligation bonds payable........................................................................................ 35 — Revenue bonds payable........................................................................................................ 3,168,395 — Net other postemployment benefits liability........................................................................ 585,339 182,078 Net pension liability.............................................................................................................. 625,680 164,757 Revenues received in advance.............................................................................................. — — Other noncurrent liabilities................................................................................................... 109,568 — Total noncurrent liabilities................................................................................................ 4,814,793 982,756 Total liabilities............................................................................................................. 5,723,317 2,594,516 DEFERRED INFLOWS OF RESOURCES........................................................................ 2,393,647 102,441 Total liabilities and deferred inflows of resources............................................... 8,116,964 2,696,957 NET POSITION Net investment in capital assets............................................................................................ 1,150,237 179,672 Restricted: Nonexpendable – endowments......................................................................................... — — Expendable: Construction.................................................................................................................. — — Debt service.................................................................................................................. 88,112 — Security for revenue bonds........................................................................................... — — Lottery........................................................................................................................... — — Unemployment programs.............................................................................................. — — Other purposes.............................................................................................................. — — Total expendable....................................................................................................... 88,112 — Unrestricted.......................................................................................................................... — (458,743) Total net position (deficit).......................................................................................... 1,238,349 (279,071) Total liabilities, deferred inflows of resources, and net position........................ $ 9,355,313 $ 2,417,886 52 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Governmental Business Type Activities – Enterprise Funds Activities Unemployment California State Nonmajor Internal Programs University Enterprise Total Service Funds $ 309,566 $ 397,546 $ 18,049 $ 932,392 $ 494,022 — — 23,110 752,523 692,019 17,695,762 — 149 18,050,461 31,761 61,003 444,956 36 508,734 1,609,454 — — — — 1,149 — — — — 34,368 — — 32,887 42,646 97,758 343,897 — — 343,897 — — 472,417 152,139 1,840,946 641,544 106,435 939,753 — 1,046,390 23,814 18,516,663 2,254,672 226,370 23,517,989 3,625,889 — 34,420 22,152 74,327 3,584,768 — — — 622,932 — 95,000 155,859 13,070 296,297 201,302 — — 4,378 12,715 50,344 — 131,183 — 381,276 — — 271,869 18,818 319,390 226,754 — 29,169 415 31,093 1,342 — — 671,317 671,352 — — 8,879,457 1,959,641 14,007,493 7,991,925 313,242 13,342,974 30,347 14,453,980 1,403,109 364,482 8,484,855 46,363 9,686,137 1,491,345 — 30,127 — 30,127 — — 282,587 25,729 417,884 21,343 772,724 31,642,500 2,792,230 41,005,003 14,972,232 19,289,387 33,897,172 3,018,600 64,522,992 18,598,121 115,563 5,962,940 46,607 8,621,198 601,235 19,404,950 39,860,112 3,065,207 73,144,190 19,199,356 237,211 1,968,845 2,069 3,538,034 649,606 — 1,595 — 1,595 — — 34,673 — 34,673 177,197 — 2,089 500,118 590,319 — — — 3,097,871 3,097,871 — — — — — — 3,483,072 — — 3,483,072 — — 93,741 2,600,631 2,694,372 — 3,483,072 130,503 6,198,620 9,900,307 177,197 (15,812,231) (15,996,844) 1,160,305 (31,107,513) (1,983,699) (12,091,948) (13,895,901) 7,360,994 (17,667,577) (1,156,896) $ 7,313,002 $ 25,964,211 $ 10,426,201 $ 55,476,613 $ 18,042,460 (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, 2023 (amounts in thousands) Water State Resources Lottery OPERATING REVENUES Unemployment and disability insurance.............................................................................. $ — $ — Lottery ticket sales............................................................................................................... — 9,239,353 Power sales........................................................................................................................... 129,898 — Student tuition and fees........................................................................................................ — — Services and sales................................................................................................................ 1,373,766 — Investment and interest........................................................................................................ — — Rent...................................................................................................................................... — — Grants and contracts............................................................................................................. — — Other.................................................................................................................................... — — Total operating revenues................................................................................................. 1,503,664 9,239,353 OPERATING EXPENSES Lottery prizes....................................................................................................................... — 5,960,302 Power purchases (net of recoverable power costs).............................................................. 355,582 — Personal services.................................................................................................................. 494,647 100,872 Supplies................................................................................................................................ — 19,813 Services and charges............................................................................................................ 58,234 911,698 Depreciation......................................................................................................................... 151,939 15,613 Scholarships and fellowships............................................................................................... — — Distributions to beneficiaries............................................................................................... — — Interest expense.................................................................................................................... — — Amortization of long-term prepaid charges......................................................................... — — Other.................................................................................................................................... 16,091 — Total operating expenses................................................................................................. 1,076,493 7,008,298 Operating income (loss).................................................................................................. 427,171 2,231,055 NONOPERATING REVENUES (EXPENSES) Donations and grants............................................................................................................ — — Private gifts.......................................................................................................................... — — Investment and interest income (loss).................................................................................. 27,531 11,167 Interest expense and fiscal charges...................................................................................... (88,668) (26,216) Lottery payments for education........................................................................................... — (2,256,838) Other.................................................................................................................................... (294,888) 7 Total nonoperating revenues (expenses)........................................................................ (356,025) (2,271,880) Income (loss) before capital contributions and transfers................................................ 71,146 (40,825) Gain on early extinguishment of debt.................................................................................. — — Transfers in.......................................................................................................................... — — Transfers out........................................................................................................................ — — Change in net position..................................................................................................... 71,146 (40,825) Total net position (deficit) – beginning............................................................................... 1,167,203 (238,246) Total net position (deficit) – ending..................................................................................... $ 1,238,349 $ (279,071) * 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 Unemployment California State Nonmajor Internal Programs University Enterprise Total Service Funds $ 15,206,667 $ — $ — $ 15,206,667 $ — — — — 9,239,353 — — — — 129,898 — — 2,319,592 — 2,319,592 — — 813,337 128,631 2,315,734 5,237,640 — — 132,472 132,472 31,378 — — — — 330,997 — 82,796 — 82,796 — — 306,937 3,028 309,965 — 15,206,667 3,522,662 264,131 29,736,477 5,600,015 — — — 5,960,302 — — — — 355,582 — 174,345 6,391,241 38,318 7,199,423 592,592 — 2,356,069 61,795 2,437,677 32,078 92,467 — 91,845 1,154,244 4,184,626 11,870 565,582 3,336 748,340 124,410 — 1,243,155 — 1,243,155 — 15,254,298 — — 15,254,298 — — — 32,082 32,082 307,942 — — — — 38 — — 8,886 24,977 — 15,532,980 10,556,047 236,262 34,410,080 5,241,686 (326,313) (7,033,385) 27,869 (4,673,603) 358,329 — 2,645,177 151,873 2,797,050 — — 73,477 — 73,477 — 96,880 298,874 38,424 472,876 3,832 (559) (321,905) (41,764) (479,112) (12,424) — — — (2,256,838) — — 82,043 1,766 (211,072) 4,126 96,321 2,777,666 150,299 396,381 (4,466) (229,992) (4,255,719) 178,168 (4,277,222) 353,863 — — — — 22,783 — 6,047,026 — 6,047,026 103,421 — — — — (37,409) (229,992) 1,791,307 178,168 1,769,804 442,658 (11,861,956) * (15,687,208) 7,182,826 * (19,437,381) (1,599,554) $ (12,091,948) $ (13,895,901) $ 7,360,994 $ (17,667,577) $ (1,156,896) 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, 2023 (amounts in thousands) Water State Resources Lottery CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers/employers.............................................................................. $ 1,408,224 $ 9,213,349 Receipts from interfund services provided.................................................................... — — Payments to suppliers.................................................................................................... (407,807) (349,071) Payments to power suppliers......................................................................................... (494,647) — Payments to employees.................................................................................................. — (116,588) Payments for interfund services used............................................................................ — (14,885) Payments for lottery prizes............................................................................................ — (6,914,987) Claims paid to other than employees............................................................................. — (633,207) Other receipts (payments).............................................................................................. (9,921) 956,434 Net cash provided by (used in) operating activities............................................... 495,849 2,141,045 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Changes in notes receivable and leases receivable........................................................ — — Changes in interfund receivables................................................................................... — — Changes in interfund payables and loans payable......................................................... — — Proceeds from general obligation bonds........................................................................ — — 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..................................................................................... — (2,220,805) Other receipts (payments).............................................................................................. — — Net cash provided by (used in) noncapital financing activities............................. — (2,220,805) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets........................................................................................... (390,757) (2,241) Proceeds from sale of capital assets............................................................................... — 56 Proceeds from notes payable and commercial paper..................................................... 200,664 — Principal paid on notes payable and commercial paper................................................. (158,514) — Proceeds from long-term capital financing.................................................................... — — Payment on long-term capital financing........................................................................ — (2,776) Retirement of general obligation bonds......................................................................... (85) — Proceeds from revenue bonds........................................................................................ 99,015 — Retirement of revenue bonds......................................................................................... (217,147) — Interest paid.................................................................................................................... (80,061) — Grants received.............................................................................................................. 62,000 — Net cash used in capital and related financing activities ....................................... (484,885) (4,961) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments................................................................................................. (100,870) (44,129) Proceeds from maturity and sale of investments........................................................... 101,987 72,589 Change in loans receivable............................................................................................ 794 — Earnings on investments................................................................................................ 20,174 27,594 Net cash provided by (used in) investing activities................................................. 22,085 56,054 Net increase (decrease) in cash and pooled investments.......................................... 33,049 (28,667) Cash and pooled investments – beginning..................................................................... 939,970 690,363 Cash and pooled investments – ending.......................................................................... $ 973,019 $ 661,696 56 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Governmental Business-type Activities - Enterprise Funds Activities Unemployment California State Nonmajor Internal Programs University Enterprise Total Service Funds $ 14,915,944 $ 3,173,253 $ 282,881 $ 28,993,651 $ 17,771 93,369 — 107,912 201,281 7,243,571 (50,924) (2,338,867) (133,837) (3,280,506) (4,191,980) — — — (494,647) — (173,692) (6,410,485) (12,710) (6,713,475) (927,185) (17,514) — (26,686) (59,085) (18,094) — — — (6,914,987) — (15,314,603) — (108,162) (16,055,972) — (198,193) (825,878) (601,922) (679,480) (397,362) (745,613) (6,401,977) (492,524) (5,003,220) 1,726,721 — (4,250) (64) (4,314) — 158,683 — 2,916 161,599 (9,183) — (6,982) 496 (6,486) 758,930 — — 169,568 169,568 — — — (29,955) (29,955) — — — 692,470 692,470 — — (28,365) (124,005) (152,370) — — 16,629 — 16,629 — — (16,076) (57,454) (73,530) (97) — 5,589,077 — 5,589,077 999,004 — — — — (35,867) — 2,865,951 148,324 3,014,275 — — — — (2,220,805) — — — (49,058) (49,058) — 158,683 8,415,984 753,238 7,107,100 1,712,787 (528) (888,471) (21,266) (1,303,263) (2,007,686) — 18,947 11 19,014 350,758 — — — 200,664 — — — — (158,514) — — — 19,233 19,233 10,206 — (275,635) (194) (278,605) (15,959) — — — (85) — — 45,106 — 144,121 886,174 — — — (217,147) (1,294,870) (559) (318,828) (76) (399,524) (12,322) — 55,496 — 117,496 — (1,087) (1,363,385) (2,292) (1,856,610) (2,083,699) — (10,677,078) — (10,822,077) — 5,366 9,412,338 8,271 9,600,551 — — — — 794 (5) 96,880 185,075 30,533 360,256 3,744 102,246 (1,079,665) 38,804 (860,476) 3,739 (485,771) (429,043) 297,226 (613,206) 1,359,548 4,177,516 1,886,654 * 1,487,350 * 9,181,853 3,088,056 $ 3,691,745 $ 1,457,611 $ 1,784,576 $ 8,568,647 $ 4,447,604 (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, 2023 (amounts in thousands) Water State Resources Lottery RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss).................................................................................................. $ 427,171 $ 2,231,055 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation................................................................................................................ 151,939 15,613 Provisions and allowances.......................................................................................... — 9,111 Amortization of premiums and discounts................................................................... — — Amortization of long-term prepaid charges and credits............................................. (118,933) — Other........................................................................................................................... — 61 Change in account balances: Receivables................................................................................................................ (9,921) (57,052) Due from other funds................................................................................................ (129,504) (454) Due from other governments..................................................................................... 9,293 — Prepaid items............................................................................................................. — (2,371) Inventories................................................................................................................. 195 634 Contracts and installments receivable....................................................................... — — Leases receivable....................................................................................................... — — Other current assets................................................................................................... — (2,269) Loans receivable........................................................................................................ — — Deferred outflow of resources................................................................................... — — Accounts payable...................................................................................................... 80,025 (37,078) Due to other funds..................................................................................................... 73,105 (36,058) Due to other governments......................................................................................... 22,780 — Deposits..................................................................................................................... — — Contracts and notes payable...................................................................................... — — Interest payable......................................................................................................... — — Revenues received in advance................................................................................... — 140 Other current liabilities.............................................................................................. — (1,897) Benefits payable........................................................................................................ — — Lottery prizes and annuities...................................................................................... — 1,594 Compensated absences payable................................................................................ — — Other noncurrent liabilities........................................................................................ (10,301) 20,016 Deferred inflow of resources..................................................................................... — — Total adjustments..................................................................................................... 68,678 (90,010) Net cash provided by (used in) operating activities................................................... $ 495,849 $ 2,141,045 Noncash investing, capital, and financing activities: Long-term debt retirement from bond issuance.......................................................... $ 149,245 $ — Amortization/defeasance of bond premium and discount.......................................... 46,996 — Amortization of deferred loss on refundings.............................................................. 12,648 — Unrealized loss on investments................................................................................... — 39,929 Unclaimed lottery prizes directly allocated to another entity..................................... — 51,827 Other miscellaneous noncash transactions.................................................................. — 44,946 * Restated 58 The notes to the financial statements are an integral part of this statement. Fund Financial Statements Governmental Business-type Activities – Enterprise Funds Activities Unemployment California State Nonmajor Internal Programs University Enterprise Total Service Funds $ (326,313) $ (7,033,385) $ 27,869 $ (4,673,603) $ 358,329 11,870 565,582 3,336 748,340 124,410 — — 1 9,112 — — — (1,031) (1,031) (124,045) — — — (118,933) 38 — (8,851) (17,004) (25,794) 9,061 (105,575) (18,364) (2,779) (193,691) (67,096) 143,325 3,744 (3,055) 14,056 56,271 10,190 — (865) 18,618 4,636 — 752 (9) (1,628) 580 — — (634) 195 (21,891) — — — — 1,072,166 — — — — (2,289) — — 1,021 (1,248) — — — (472,200) (472,200) — (109,521) (1,750,296) (17,440) (1,877,257) (330,455) (6,265) 9,177 (2,740) 43,119 35,552 (55,582) — (4,031) (22,566) 375,294 (169,123) — (258) (146,601) (29,030) — — — — (1,216) — — — — (100) — — 728 728 (762) (185,148) 157,919 (17) (27,106) 245,431 (51,148) (26,381) (7,374) (86,800) 6,012 (12,497) 16,851 — 4,354 (2) — — — 1,594 — 4,308 19,029 (258) 23,079 (6,916) 125,242 816,977 15,518 967,452 174,869 (19,376) 845,269 (11,302) 814,591 (152,126) (419,300) 631,408 (520,393) (329,617) 1,368,392 $ (745,613) $ (6,401,977) $ (492,524) $ (5,003,220) $ 1,726,721 (concluded) $ — $ — $ — $ 149,245 $ — — — — 46,996 — — — — 12,648 — — — — 39,929 — — — — 51,827 — — — 1,690 46,636 891,366 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, 2023 (amounts in thousands) Pension and Other Employee Private Benefit Purpose Investment Trust Trust Trust Custodial ASSETS Cash and pooled investments.................................... $ 2,700,314 $ 88,307 $ 25,665,008 $ 2,529,803 Investments, at fair value: Short-term............................................................... 14,337,678 451,985 282 — Equity securities..................................................... 353,672,151 7,362,869 64,017 — Debt securities........................................................ 176,482,976 3,207,034 76,072 — Real estate.............................................................. 115,319,878 369,889 — — Securities lending collateral................................... 34,012,415 — — — Other....................................................................... 168,573,309 2,961,008 — — Total investments................................................. 862,398,407 14,352,785 140,371 — Receivables (net)....................................................... 23,923,705 2,917 220,778 3,037,677 Due from other funds................................................ 1,069,439 4 — 64,760 Due from other governments.................................... — — — 43 Interfund receivable.................................................. — — — 31,041 Loans receivable....................................................... 5,648,418 — — 1,023 Other assets............................................................... 948,173 259,572 — 15 Total assets............................................................ 896,688,456 14,703,585 26,026,157 5,664,362 DEFERRED OUTFLOWS OF RESOURCES....... 400,346 — 37 254 Total assets and deferred outflows of resources....................................................... 897,088,802 14,703,585 26,026,194 5,664,616 LIABILITIES Accounts payable...................................................... 7,072,102 28,577 46 810,043 Due to other governments......................................... 12 — 208,402 3,134,415 Tax overpayments..................................................... — — — 208 Benefits payable........................................................ 605,620 — 170 — Revenues received in advance.................................. — 8,445 — 695 Deposits..................................................................... — 259,547 — 1,034,849 Securities lending obligations................................... 40,742,449 — — — Loans payable........................................................... 5,669,435 — — — Other liabilities.......................................................... 16,400,134 — 49 15,944 Total liabilities...................................................... 70,489,752 296,569 208,667 4,996,154 DEFERRED INFLOWS OF RESOURCES........... 433,486 — 75 282 Total liabilities and deferred inflows of resources....................................................... 70,923,238 296,569 208,742 4,996,436 NET POSITION Restricted: Pension benefits........................................................ 784,081,793 — 140,123 — Other postemployment benefits................................ 17,659,344 — — — Deferred compensation participants......................... 24,416,126 — — — Pool participants........................................................ — — 25,677,329 — Individuals, organizations, or other governments..... 8,301 14,407,016 — 668,180 Total net position.................................................. $ 826,165,564 $ 14,407,016 $ 25,817,452 $ 668,180 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, 2023 (amounts in thousands) Pension and Other Employee Private Benefit Purpose Investment Trust Trust Trust Custodial ADDITIONS Contributions: Employer................................................................. $ 37,521,702 $ — $ 51,713 $ 31,783 Plan member............................................................ 11,099,231 — — — Non-employer.......................................................... 3,719,874 — — — Total contributions................................................ 52,340,807 — 51,713 31,783 Investment income: Net appreciation (depreciation) in fair value of investments.............................................................. 37,878,390 46,115 4,861 — Interest, dividends, and other investment income... 15,774,180 1,167,419 653,636 18,436 Less: investment expense........................................ (3,291,737) (5,620) (54) — Net investment income (loss)................................ 50,360,833 1,207,914 658,443 18,436 Receipts from depositors............................................ — 3,411,550 16,377,539 — Other........................................................................... 354,978 — 243 48,376 Total additions....................................................... 103,056,618 4,619,464 17,087,938 98,595 DEDUCTIONS Distributions paid and payable to participants........... 53,438,710 — 651,638 49,671 Refunds of contributions............................................ 534,474 — — — Administrative expense.............................................. 589,680 246 2,025 1,524 Interest expense.......................................................... 272,756 — — — Payments to and for depositors.................................. 828,699 2,832,030 26,463,987 — Total deductions..................................................... 55,664,319 2,832,276 27,117,650 51,195 Change in net position.......................................... 47,392,299 1,787,188 (10,029,712) 47,400 Net position – beginning............................................. 778,773,265 12,619,828 35,847,164 620,780 * Net position – ending.................................................. $ 826,165,564 $ 14,407,016 $ 25,817,452 $ 668,180 * 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, 2023 (amounts in thousands) California University Housing Nonmajor of Finance Component California Agency Units Total ASSETS Current assets: Cash and pooled investments...................................... $ 822,358 $ 1,896,902 $ 1,642,441 $ 4,361,701 Investments................................................................. 13,914,685 54 833,055 14,747,794 Restricted assets: Cash and pooled investments................................... — — 747,458 747,458 Investments............................................................... — — 24,320 24,320 Receivables (net)......................................................... 7,066,489 225,436 610,545 7,902,470 Due from primary government................................... 312,292 — 128 312,420 Due from other governments...................................... 178,365 11,100 — 189,465 Prepaid items............................................................... — 433 1,561 1,994 Inventories................................................................... 397,407 — — 397,407 Other current assets..................................................... 601,632 65,454 45,299 712,385 Total current assets................................................... 23,293,228 2,199,379 3,904,807 29,397,414 Noncurrent assets: Restricted assets: Cash and pooled investments................................... — — 47,691 47,691 Investments............................................................... — — 337,168 337,168 Investments................................................................. 40,877,878 299,399 3,136,603 44,313,880 Receivables (net)......................................................... 3,724,297 — 708,884 4,433,181 Loans receivable......................................................... — 2,413,954 505,760 2,919,714 Long-term prepaid charges......................................... — — 104 104 Capital assets: Land.......................................................................... 1,719,374 — 180,450 1,899,824 Collections – nondepreciable................................... 647,193 — 13,058 660,251 Buildings and other depreciable property................ 65,652,958 599 2,152,963 67,806,520 Intangible assets – amortizable................................ 5,523,104 27,987 339,750 5,890,841 Less: accumulated depreciation/amortization.......... (36,003,685) (5,423) (1,349,689) (37,358,797) Construction/development in progress..................... 6,264,963 — 407,351 6,672,314 Intangible assets – nonamortizable.......................... — — 2,420 2,420 Other noncurrent assets............................................... 574,605 27,578 52,517 654,700 Total noncurrent assets............................................. 88,980,687 2,764,094 6,535,030 98,279,811 Total assets........................................................... 112,273,915 4,963,473 10,439,837 127,677,225 DEFERRED OUTFLOWS OF RESOURCES......... 7,694,282 21,982 168,346 7,884,610 Total assets and deferred outflows of resources..................................................... $ 119,968,197 $ 4,985,455 $ 10,608,183 $ 135,561,835 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.......................................................... $ 3,792,444 $ 41,478 $ 880,010 $ 4,713,932 Revenues received in advance....................................... 1,983,286 — 178,030 2,161,316 Deposits......................................................................... — 229,759 1,219 230,978 Contracts and notes payable.......................................... — — 13,315 13,315 Interest payable............................................................. — 2,079 3,029 5,108 Securities lending obligations....................................... 1,913,858 — — 1,913,858 Current portion of long-term obligations...................... 6,029,132 5,805 187,144 6,222,081 Other current liabilities.................................................. 2,053,772 156,542 190,823 2,401,137 Total current liabilities............................................... 15,772,492 435,663 1,453,570 17,661,725 Noncurrent liabilities: Compensated absences payable.................................... 466,650 2,556 13,755 482,961 Workers’ compensation benefits payable..................... 1,058,806 — 6,680 1,065,486 Loans payable................................................................ — 1,201 11,565 12,766 Commercial paper and other borrowings...................... — — 116,600 116,600 Lease liability................................................................ 2,330,725 21,615 211,192 2,563,532 Subscription liability..................................................... 110,145 — 3,555 113,700 Revenue bonds payable................................................. 29,761,483 40,525 897,087 30,699,095 Net other postemployment benefits liability................. 22,327,431 44,476 192,904 22,564,811 Net pension liability...................................................... 20,385,317 39,718 252,073 20,677,108 Revenues received in advance....................................... — — 19,405 19,405 Other noncurrent liabilities............................................ 1,774,152 628,123 711,795 3,114,070 Total noncurrent liabilities......................................... 78,214,709 778,214 2,436,611 81,429,534 Total liabilities........................................................ 93,987,201 1,213,877 3,890,181 99,091,259 DEFERRED INFLOWS OF RESOURCES................ 9,705,316 46,489 532,541 10,284,346 Total liabilities and deferred inflows of resources........................................................ 103,692,517 1,260,366 4,422,722 109,375,605 NET POSITION Net investment in capital assets.................................... 13,777,714 (384) 745,266 14,522,596 Restricted: Nonexpendable – endowments................................... 8,243,388 — 1,856,630 10,100,018 Expendable: Endowments and gifts............................................. 19,362,032 — 18,763 19,380,795 Education................................................................. 344,376 — 1,456,779 1,801,155 Indenture.................................................................. — 749,992 — 749,992 Statute...................................................................... — 3,015,725 1,018,543 4,034,268 Other purposes......................................................... — — 26,497 26,497 Total expendable................................................... 19,706,408 3,765,717 2,520,582 25,992,707 Unrestricted................................................................... (25,451,830) (40,244) 1,062,983 (24,429,091) Total net position...................................................... 16,275,680 3,725,089 6,185,461 26,186,230 Total liabilities, deferred inflows of resources, and net position................................................. $ 119,968,197 $ 4,985,455 $ 10,608,183 $ 135,561,835 (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, 2023 (amounts in thousands) California University Housing Nonmajor of Finance Component California Agency Units Total OPERATING EXPENSES Personal services.......................................................... $ 33,092,815 $ 13,194 $ 531,756 $ 33,637,765 Scholarships and fellowships....................................... 892,943 — 104,593 997,536 Supplies........................................................................ 5,922,349 — 21,745 5,944,094 Services and charges.................................................... 529,740 9,442 1,592,924 2,132,106 Department of Energy laboratories.............................. 1,104,266 — — 1,104,266 Depreciation................................................................. 2,829,698 2,953 101,939 2,934,590 Interest expense and fiscal charges.............................. 1,158,643 17,525 51,521 1,227,689 Other............................................................................. 6,847,440 52,466 93,987 6,993,893 Total operating expenses........................................ 52,377,894 95,580 2,498,465 54,971,939 PROGRAM REVENUES Charges for services..................................................... 33,563,275 190,304 856,996 34,610,575 Operating grants and contributions.............................. 13,087,883 — 1,276,326 14,364,209 Capital grants and contributions................................... 50,064 — 43,626 93,690 Total program revenues.......................................... 46,701,222 190,304 2,176,948 49,068,474 Net revenues (expenses)......................................... (5,676,672) 94,724 (321,517) (5,903,465) GENERAL REVENUES Investment and interest income (loss).......................... 3,188,304 164,688 329,130 3,682,122 Other............................................................................. 3,692,772 57,325 958,646 4,708,743 Total general revenues............................................ 6,881,076 222,013 1,287,776 8,390,865 Change in net position............................................ 1,204,404 316,737 966,259 2,487,400 Net position – beginning............................................... 15,071,276 * 3,408,352 5,219,202 * 23,698,830 Net position – ending..................................................... $ 16,275,680 $ 3,725,089 $ 6,185,461 $ 26,186,230 * 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.................................................................... 74 3. Discretely Presented Component Units.................................................. 74 4. Joint Venture........................................................................................... 76 5. Jointly Governed Organization............................................................... 76 6. Related Organizations............................................................................. 77 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............................................................................... 83 H. Capital Assets and Right-to-Use Assets............................................................. 83 I. Long-term Obligations ....................................................................................... 84 J. Compensated Absences....................................................................................... 86 K. Deferred Outflows and Deferred Inflows of Resources..................................... 86 1. Deferred Outflows of Resources.............................................................. 86 2. Deferred Inflows of Resources................................................................ 87 L. Nonmajor Enterprise Segment Information....................................................... 89 M. Net Position and Fund Balance......................................................................... 89 1. Net Position.............................................................................................. 89 2. Fund Balance ........................................................................................... 90 3. Stabilization Arrangements...................................................................... 90 a. Budget Stabilization Account ..................................................... 90 b. Special Fund for Economic Uncertainties.................................. 91 c. Public School System Stabilization Account.............................. 91 N. Restatement of Beginning Fund Balances and Net Position.............................. 92 1. Fund Financial Statements....................................................................... 92 2. Government-wide Financial Statements.................................................. 92 67 State of California Annual Comprehensive Financial Report O. Guaranty Deposits.............................................................................................. 93 Note 2. Budgetary and Legal Compliance...................................................................................... 93 A. Budgeting and Budgetary Control........................................................................ 93 B. Legal Compliance................................................................................................. 93 Note 3. Deposits and Investments................................................................................................... 94 A. Primary Government............................................................................................ 94 1. Control of State Funds............................................................................. 94 2. Valuation of State Investments................................................................ 95 3. Oversight of Investing Activities............................................................. 97 4. Risk of Investments.................................................................................. 98 a. Interest Rate Risk........................................................................ 99 b. Credit Risk.................................................................................. 100 c. Custodial Credit Risk.................................................................. 100 d. Concentration of Credit Risk...................................................... 100 B. Fiduciary Funds.................................................................................................... 101 C. Discretely Presented Component Units................................................................ 101 Note 4. Accounts Receivable.......................................................................................................... 102 Note 5. Restricted Assets................................................................................................................ 104 Note 6. Capital Assets..................................................................................................................... 105 Note 7. Deferred Outflows and Deferred Inflows of Resources..................................................... 109 Note 8. Accounts Payable............................................................................................................... 110 Note 9. Long-term Obligations....................................................................................................... 112 Note 10. Pension Trusts.................................................................................................................... 116 A. California Public Employees’ Retirement System............................................... 117 1. Public Employees’ Retirement Fund (PERF)......................................... 117 2. Single-employer Plans............................................................................ 127 B. California State Teachers’ Retirement System..................................................... 136 C. Trial Court Pension Plans..................................................................................... 140 Note 11. Other Postemployment Benefits......................................................................................... 142 A. Retiree Health Benefits Program.......................................................................... 142 B. Trial Court OPEB Plans....................................................................................... 158 Note 12. Commercial Paper and Other Long-term Borrowings....................................................... 160 Note 13. Leases and Subscription-Based Information Technology Arrangements.......................... 160 68 Notes to the Financial Statements Note 14. Commitments..................................................................................................................... 162 Note 15. General Obligation Bonds.................................................................................................. 164 A. Variable-rate General Obligation Bonds.............................................................. 164 B. Build America Bonds........................................................................................... 165 C. Debt Service Requirements.................................................................................. 166 D. General Obligation Bond Defeasances ................................................................ 166 1. Current Year Activity ............................................................................. 166 2. Outstanding Balance............................................................................... 167 Note 16. Revenue Bonds................................................................................................................... 167 A. Governmental Activities ...................................................................................... 167 B. Business-type Activities....................................................................................... 168 C. Discretely Presented Component Units................................................................ 168 D. Revenue Bond Defeasances................................................................................. 170 1. Current Year – Governmental Activities................................................ 170 2. Current Year – Business-type Activities................................................. 171 3. Outstanding Balances.............................................................................. 171 Note 17. Risk Management............................................................................................................... 171 Note 18. Interfund Balances and Transfers....................................................................................... 174 A. Interfund Balances................................................................................................ 174 B. Interfund Transfers............................................................................................... 180 Note 19. Fund Balances, Net Position Deficits, and Endowments................................................... 182 A. Fund Balances...................................................................................................... 182 B. Net Position Deficits............................................................................................. 183 C. Discretely Presented Component Unit Endowments and Gifts............................ 183 Note 20. Conduit Debt...................................................................................................................... 183 Note 21. Contingent Liabilities......................................................................................................... 184 A. Litigation.............................................................................................................. 184 B. Federal Audit Exceptions..................................................................................... 186 Note 22. Subsequent Events.............................................................................................................. 186 A. Debt Issuances...................................................................................................... 186 B. Other..................................................................................................................... 187 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, 2023: GASB Statement No. 91, Conduit Debt Obligations is effective for the fiscal year ended June 30, 2023. This Statement provides a single method of reporting conduit debt obligations by issuers and eliminates diversity in practice associated with (a) commitments extended by issuers, (b) arrangements associated with conduit debt obligations, and (c) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation, establishing that a conduit debt obligation is not a liability of the issuer, establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations, and improving required note disclosures. Implementation of GASB Statement No. 91 resulted in minor changes to conduit debt reporting in the notes to the financial statements. GASB Statement No. 93, Replacement of Interbank Offered Rates is effective for the fiscal year ended June 30, 2023. This Statement addresses the accounting and financial reporting implications that result from the replacement of an Interbank Offered Rate (IBOR). This Statement achieves that objective by: a. Providing exceptions for certain hedging derivative instruments to the hedge accounting termination provisions when an IBOR is replaced as the reference rate of the hedging derivative instrument’s variable payment. b. Clarifying the hedge accounting termination provisions when a hedged item is amended to replace the reference rate. c. Clarifying that the uncertainty related to the continued availability of IBORs does not, by itself, affect the assessment of whether the occurrence of a hedged expected transaction is probable. d. Removing London Interbank Offered Rate (LIBOR) as an appropriate benchmark interest rate for the qualitative evaluation of the effectiveness of an interest rate swap. e. Identifying a Secured Overnight Financing Rate and the Effective Federal Funds Rate as appropriate benchmark interest rates for the qualitative evaluation of the effectiveness of an interest rate swap. f. Clarifying the definition of reference rate, as it is used in Statement No. 53, as amended. g. Providing an exception to the lease modifications guidance in Statement No. 87, as amended, for certain lease contracts that are amended solely to replace an IBOR as the rate upon which variable payments depend. The implementation of GASB Statement No. 93 had an insignificant impact to the State’s ACFR. 71 State of California Annual Comprehensive Financial Report GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements is effective for the fiscal year ended June 30, 2023. The Statement improves financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). As used in this Statement, a PPP is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or another capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction. Some PPPs meet the definition of a service concession arrangement, which is defined in this Statement as a PPP in which (a) the operator collects and is compensated by fees from third parties; (b) the transferor determines or has the ability to modify or approve which services the operator is required to provide, to whom the operator is required to provide the services, and the prices or rates that can be charged for the services; and (c) the transferor is entitled to significant residual interest in the service utility of the underlying PPP asset at the end of the arrangement. This Statement also provides guidance for accounting and financial reporting for availability payment arrangements (APAs). As defined in this Statement, an APA is an arrangement in which a government compensates an operator for services that may include designing, constructing, financing, maintaining, or operating an underlying nonfinancial asset for a period of time in an exchange or exchange-like transaction. This Statement requires that PPPs that meet the definition of a lease apply GASB 87 guidance. A transferor will generally recognize an underlying PPP asset as a capital asset, a related receivable, a receivable for installment payments (if any), and a deferred inflow of resources. An operator should recognize an intangible right-to-use asset and related liability, and a liability for installment payments if applicable. This Statement requires that APAs related to designing, constructing, and financing a nonfinancial asset in which ownership of the asset transfers to the State by the end of the contract should be accounted for as a financed purchase by recognizing a capital asset and related installment contract liability. The implementation of GASB Statement No. 94 had a material impact the financial statements and the notes to the financial statements including a restatement of beginning net position, the recognition of new capital assets, and recognition of new long-term obligations. Previously reported receivables and deferred inflows related to service concession arrangements of the primary government are no longer reported as a result of the implementation of GASB Statement No. 94. GASB Statement No. 96, Subscription-Based Information Technology Arrangements is effective for the fiscal year ended June 30, 2023. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for subscription-based information technology arrangements (SBITAs) by governments. The Statement establishes uniform accounting and financial reporting requirements for SBITAs. Under this Statement, a government is required to recognize a SBITA liability and an intangible right-to- use SBITA asset, thereby enhancing the relevance and consistency of information about SBITAs. GASB 96 defines a SBITA as a contract that conveys control of the right to use another party’s (a SBITA vendor) IT software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction. Any contract that meets this definition should be accounted for under the SBITAs guidance, unless specifically excluded in this Statement. The implementation of GASB Statement No. 96 had a material impact to the financial statements and the notes to the financial statements including a restatement of beginning net position, the recognition of new capital assets, and recognition of new long-term obligations. 72 Notes to the Financial Statements GASB Statement No. 99, Omnibus 2022 is effective for the fiscal year ended June 30, 2023. 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. The practice issues addressed by this Statement are as follows: a. Clarification of provisions in Statement No. 87, Leases, as amended, related to the determination of the lease term, classification of a lease as a short-term lease, recognition and measurement of a lease liability and a lease asset, and identification of lease incentives. b. Clarification of provisions in Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, related to (a) the determination of the public-private and public-public partnership (PPP) term, and (b) recognition and measurement of installment payments and the transfer of the underlying PPP asset. c. Clarification of provisions in Statement No. 96, Subscription-Based Information Technology Arrangements, related to the SBITA term, classification of a SBITA as a short-term SBITA, and recognition and measurement of a subscription liability. The implementation of GASB Statement No. 99 had an insignificant impact to the State’s ACFR. 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 73 State of California Annual Comprehensive Financial Report 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 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 74 Notes to the Financial Statements 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 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, 2022). 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 75 State of California Annual Comprehensive Financial Report 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, 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, 2023, CADA had total assets and deferred outflows of resources of $81.2 million, total liabilities and deferred inflows of resources of $53.8 million, and total net position of $27.4 million. Total revenues for the fiscal year were $17.9 million and expenses were $12.4 million, resulting in an increase in net position of $5.5 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. Jointly Governed Organization A jointly governed organization is a regional government or other multigovernmental arrangement that is governed by representatives from each of the governments that create the organization, but that is not a joint venture because the participants do not retain an ongoing financial interest or responsibility. These entities are not part of the primary government or a component unit. The State participates in a jointly governed organization called the California Residential Mitigation Program (CRMP). CRMP was created in 2011 by the joint exercise of powers agreement between the primary government and the California Earthquake Authority (CEA); a related organization. The purpose of CRMP is to provide for the joint exercise of powers common to the primary government and the CEA by funding and managing programming to supply grants, assistance, and incentives to owners of dwellings in California who wish to retrofit their homes to protect against earthquake damage. CRMP is a public entity, separate from the primary government and the CEA; it is administered by a board composed of four members – two appointed by the primary government, and two appointed by the CEA. As the primary government does not have an ongoing financial interest or responsibility for CRMP, 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 CRMP, go to its website at www.californiaresidentialmitigationprogram.com. 76 Notes to the Financial Statements 6. 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 mobile home 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 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. 77 State of California Annual Comprehensive Financial Report 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. 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. 78 Notes to the Financial Statements 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 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. 79 State of California Annual Comprehensive Financial Report 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 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. 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. 80 Notes to the Financial Statements 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. The Custodial Fund generally accounts for fiduciary activities that are not held under a trust agreement or equivalent, such as receipts and disbursements of sales tax, use tax, and other assessments held for local agencies, cash deposits for bail solicitors, and condemnation deposits. 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. 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 81 State of California Annual Comprehensive Financial Report 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. 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. 82 Notes to the Financial Statements 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 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 five 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 one to 100 years. 83 State of California Annual Comprehensive Financial Report 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 two to 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. The State has noncancelable SBITAs for the right to use information technology (IT) arrangements. For SBITAs that meet the capitalization threshold of $50,000 or greater in total payments over the subscription term, the State recognizes right-to-use SBITA assets at the commencement of a SBITA. Right-to-use SBITA assets represent the State’s right to use underlying IT assets for the subscription term. The right-to-use SBITA asset is measured at the initial value of the subscription liability, plus any subscription payments made to the SBITA vendor before commencement of the subscription term and capitalizable implementation costs, less any vendor incentive received at or before the SBITA commencement date. The right-to-use SBITA asset is amortized over the shorter of the subscription term or useful life of the underlying IT assets, ranging from two to 10 years, using the straight-line method. SBITAs below the capitalization threshold and SBITAs 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 bonds, 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 84 Notes to the Financial Statements 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. 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. Subscription liabilities represent the State’s obligation to make subscription payments arising from a SBITA contract. Subscription liabilities are recognized by the State at the SBITA commencement date based on the present value of future subscription payments expected to be made during the subscription 85 State of California Annual Comprehensive Financial Report term. The present value of subscription payments is discounted based on a borrowing rate explicitly stated in the SBITA contract, the incremental borrowing rate published on the State Controller’s Office website, or other determined incremental borrowing rates. Variable payments based on future performance of the government, usage of the underlying IT assets, or number of user seats are expensed as incurred, and are not included in the measurement of the subscription liability. The State assesses each subscription liability annually for changes in the terms of the SBITA, interest rate, impairment of the underlying IT assets, or other factors that may impact the expected future subscription payments. SBITA amendments and other modifications could necessitate remeasuring the subscription liability. Availability Payment Arrangement (APA) liabilities represent the State’s obligation to make APA payments arising from an APA agreement where the operator provides the design, construction, or financing of a nonfinancial asset whose ownership transfers to the State at the end of the agreement. APA liabilities are recognized by the State when the APA asset is placed into service and are based on the present value of future APA payments expected to be made during the APA term. The present value of APA payments is discounted based on a borrowing rate explicitly stated in the APA agreement, the incremental borrowing rate published on the State Controller’s Office website, or other determined incremental borrowing rates. APA agreements are reported as a financed purchase by the State. 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. 86 Notes to the Financial Statements • 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 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 (OPEB) 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. 87 State of California Annual Comprehensive Financial Report • 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. • Service Concession Arrangements: The University of California, a discretely presented component unit of the State, has entered into service concession arrangements with third parties for park facility services, student housing, and certain other services. The facilities are reported as capital assets when placed in service, and a corresponding deferred inflow of resources is reported. • 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. 88 Notes to the Financial Statements • 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. L. Nonmajor Enterprise Segment Information Four 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. Electric Power Fund: The acquisition and resale of electric power to retail end-use customers, and charges to public utilities for wildfire prevention and recovery. 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, 2023, the government-wide financial statements show restricted net position for the primary government of $76.5 billion, of which $19.2 billion is due to enabling legislation. Unrestricted net position is neither restricted nor invested in capital assets. 89 State of California Annual Comprehensive Financial Report 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. 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 90 Notes to the Financial Statements 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 (a) interfund loans, (b) specified debts to local governments, and (c) debts for pension and retiree health benefits. 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 (a) a natural disaster or other event that creates a condition of extreme peril to the safety of persons or property, or (b) 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 no budget emergency occurred in the prior fiscal year, then no more than one-half of the Budget Stabilization Account balance may be withdrawn; however, the entire remaining balance may 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, 2023, the Budget Stabilization Account had a restricted fund balance of $22.3 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, 2023, the SFEU represented $3.3 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, 2023, the PSSSA represented $9.5 billion of cash reported in the General Fund, $8.4 billion of which was due to other governments. Accordingly, the PSSSA reported no fund balance as of June 30, 2023. 91 State of California Annual Comprehensive Financial Report N. Restatement of Beginning Fund Balances and Net Position 1. Fund Financial Statements The beginning fund balance of governmental funds increased by $8.3 billion. The increase is comprised of the following items: • Increases to the Federal Fund beginning balance of $9.2 billion for a prior period correction of ineligible unemployment claims, and $8 million for restatement of pandemic program activity. • Decreases to the General Fund beginning balance of $912 million for a prior period correction of grant accruals, $8 million for restatement of pandemic program activity, and $14 million due to unemployment benefit overpayments. • A $69 million increase to the beginning balance of the Environmental and Natural Resources Fund due to the shift in activity described below for the Custodial Fund. • A $29 million decrease to the beginning balance of the Health Care Related Programs Fund to recognize prior year pass through expenditures. • A $3 thousand increase to nonmajor governmental funds due to unreported prior year activity. The beginning net position of enterprise funds decreased by $207 million. The decrease is comprised of $130 million in net adjustments to prior period unemployment benefit payments in the Unemployment Programs Fund, and a $77 million restatement to nonmajor enterprise funds to correct the beginning balances of accounts receivable. The beginning balance of cash and pooled investments in the California State University Fund was restated by $333 million to comply with GASB Statement No. 84, which resulted in the reallocation of cash aggregated for centralized state payroll. There was no impact to the fund’s net position. The beginning net position of discretely presented component units increased by $2 million. The restatement is comprised of a $10 million increase for the University of California due to the implementation of GASB Statement No. 96 and an $8 million decrease in the beginning net position of a nonmajor discretely presented component unit to reflect the implementation of new accounting standards and corrections of accounting errors. 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. The beginning net position of the Custodial Fund decreased by $69 million due to a shift in activity between custodial funds and governmental funds to comply with GASB Statement No. 84. 2. Government-wide Financial Statements The beginning net position of governmental activities increased by $9.1 billion. In addition to the $8.3 billion increase described in the previous section for governmental funds, the restatement also includes a $594 million increase due to the recognition of availability payment arrangements from the implementation of GASB Statement No. 94; a $218 million increase due to understatement of prior period capital assets; a $42 million increase due to the implementation of GASB Statement No. 96; and a $30 million decrease due to understatement of prior period pollution remediation obligations. 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. 92 Notes to the Financial Statements 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, 2023, increased the spending authority for the budgetary/legal basis-reported General Fund, Transportation Funds, Environmental and Natural Resources Funds, and the Health Care Related Programs Funds. 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. 93 State of California Annual Comprehensive Financial Report 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 or visit State Government Annual Financial Reports. 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 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, 2023, these discretely presented component units and related organizations account for approximately 1.91% 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, 2023, totaling approximately $6.6 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, 2023, the State Treasurer’s Office had on deposit with a fiscal agent amounts totaling $19 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. 94 Notes to the Financial Statements 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 $2.3 billion in interest revenue received by the General Fund from the pooled investment program in the fiscal year 2022-23 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. 95 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, 2023 (amounts in thousands) Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Identical Observable Assets Inputs June 30, 2023 (Level 1) (Level 2) Pooled Investments U.S. Treasury bills and notes................................................................. $ 110,538,034 $ 110,538,034 $ — U.S. Agency bonds and discount notes.................................................. 28,951,028 28,951,028 — Supranational debentures and discount notes........................................ 9,574,054 9,574,054 — Small Business Administration loans.................................................... 303,681 303,681 — Mortgage-backed securities................................................................... 2,796 2,796 — Certificates of deposit............................................................................ 13,189,092 — 13,189,092 Bank notes.............................................................................................. 199,864 — 199,864 Commercial paper.................................................................................. 7,803,585 — 7,803,585 Corporate bonds..................................................................................... 438,965 — 438,965 Total pooled investments at fair value............................................. 171,001,099 $ 149,369,593 $ 21,631,506 Other primary government investments U.S. Treasuries and agencies ................................................................ 4,030,860 $ 1,636,544 $ 2,394,316 Commercial paper.................................................................................. 315,482 — 315,482 Corporate debt securities ...................................................................... 1,633,335 — 1,633,335 Other...................................................................................................... 3,128,660 124,527 3,004,133 Total other primary government investments at fair value........... 9,108,337 $ 1,761,071 $ 7,347,266 Investments measured at the net asset value (NAV) Money market funds/2a-7 money market funds.................................... 917,089 Short Term Investments......................................................................... 46,901 Total investments measured at the NAV......................................... 963,990 Other investment instruments State and Local Government Series securities1..................................... 2,180,673 Total other investment instruments................................................. 2,180,673 Funds outside primary government included in pooled investments Less: investment trust funds ................................................................. 25,665,081 Less: other trust and custodial funds...................................................... 2,071,014 Less: discretely presented component units and related organizations. 3,367,651 Total primary government investments .......................................... $ 152,150,353 1 Reported at carrying value 96 Notes to the Financial Statements As of June 30, 2023, the weighted average maturity of the securities in the pooled investment program administered by the State Treasurer’s Office was approximately 263 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, 2023, 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 (a) realized investment gains and losses calculated on an amortized cost basis, (b) interest income based on stated rates (both paid and accrued), (c) amortization of discounts and premiums on a straight-line basis, and (d) 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, 2023, structured notes and medium-term asset-backed securities comprised approximately 1.52% of the pooled investments. A portion of the structured notes was callable agency securities, which represented 1.35% 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 97 State of California Annual Comprehensive Financial Report holdings were short-term, asset-backed commercial paper (ABCP), which represented 1.39% 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-2/P-2/F-2 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. 98 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 $5.1 billion of time deposits and $359 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, 2023, only $3 million, or less than 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, 2023 (amounts in thousands) Weighted Average Fair Value Maturity at Year End (in years) Pooled investments U.S. Treasury bills and notes............................................................................................... $ 110,538,034 0.85 U.S. Agency bonds and discount notes................................................................................ 28,951,028 0.60 Supranational debentures and discount notes...................................................................... 9,574,054 0.62 Small Business Administration loans.................................................................................. 303,681 0.25 Mortgage-backed securities................................................................................................. 2,796 0.94 Certificates of deposit.......................................................................................................... 13,189,092 0.23 Bank notes............................................................................................................................ 199,864 0.13 Commercial paper................................................................................................................ 7,803,585 0.22 Corporate bonds................................................................................................................... 438,965 2.16 Total pooled investments................................................................................................ 171,001,099 Other primary government investments U.S. Treasuries and agencies............................................................................................... 4,030,860 2.18 Commercial paper................................................................................................................ 315,482 0.03 State and Local Go vernment Series securities1................................................................... 2,180,673 — Corporate debt securities..................................................................................................... 1,633,335 2.44 Other.................................................................................................................................... 4,092,650 2.01 Total other primary government investments.............................................................. 12,253,000 Funds outside primary government included in pooled investments Less: investment trust funds................................................................................................ 25,665,081 Less: other trust and custodial funds.................................................................................... 2,071,014 Less: discretely presented component units and related organizations............................... 3,367,651 Total primary government investments........................................................................ $ 152,150,353 1 Reported at carrying value 99 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, 2023 (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 $ 32,588,311 A-1/P-1/F-1 AA/Aa/AA 27,145,626 A-2/P-2/F-2 A/A/A 425,447 Not rated ..................................................................... — Not applicable.............................................................. 110,841,715 Total pooled investments ....................................... $ 171,001,099 Other primary government investments A-1+/P-1/F-1+ AAA/Aaa/AAA $ 1,765,308 A-1/P-1/F-1 AA/Aa/AA 3,167,384 A-2/P-2/F-2 A/A/A 1,670,258 A-3/P-3/F-3 BBB/Baa/BBB 9,662 B/NP/B BB/Ba/BB 71,079 B/NP/B B2/B 214,266 Not rated...................................................................... 5,355,043 Total other primary government investments..... $ 12,253,000 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, 2023, 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, 2023, the State had investments in the Federal Home Loan Bank totaling 8.9% of the total pooled investments and other primary government investments. 100 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 96.07% 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 92.71% 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. 101 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, leases, and other charges. The University of California, a discretely presented component unit of the State, reported current and noncurrent lease receivables of $42 million and $676 million, respectively. The State’s nonmajor component units reported current and noncurrent lease receivables of $27 million and $475 million, respectively. Additional disclosures for the University of California are included in the University’s separately issued financial statements, which may be found on its website at www.ucop.edu. Table 5 Schedule of Accounts Receivable June 30, 2023 (amounts in thousands) Licenses, Permits, Lottery Taxes and Fees Retailers Current governmental activities General Fund ...................................................................... $ 44,236,614 $ 99 $ — Federal Fund ....................................................................... — — — Transportation Fund ........................................................... 936,487 388,108 — Environmental and Natural Resources Fund ...................... 30,017 484,956 — Health Care Related Programs Fund................................... 2,050,768 4,983,145 — Nonmajor governmental funds............................................ 767,990 463,113 — Internal service funds.......................................................... — — — Adjustment: Unavailable revenue¹........................................................ (2,118,205) (10,462) — Leases receivable.............................................................. — — — Total current governmental activities........................... $ 45,903,671 $ 6,308,959 $ — Amounts not scheduled for collection during the subsequent year (unavailable revenue)..................... $ 2,118,205 $ 10,462 $ — Current business-type activities Water Resources Fund........................................................ — — — State Lottery Fund .............................................................. — — 777,976 Unemployment Programs Fund ......................................... — — — California State University ................................................. — — — Nonmajor enterprise funds.................................................. — — — Total current business-type activities........................... $ — $ — $ 777,976 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. 102 Notes to the Financial Statements California Unemployment State Programs University Other Total $ 678,855 $ — $ 1,706,206 $ 46,621,774 — — 2,076,598 2,076,598 — — 139,956 1,464,551 — — 157,279 672,252 — — 136,006 7,169,919 — — 431,216 1,662,319 — — 114,000 114,000 (250,238) — (226,212) (2,605,117) — — (144,852) (144,852) $ 428,617 $ — $ 4,390,197 $ 57,031,444 $ 250,238 $ — $ 371,066 $ 2,749,971 — — 192,770 192,770 — — — 777,976 1,312,602 — — 1,312,602 — 353,423 — 353,423 — — 144,183 144,183 $ 1,312,602 $ 353,423 $ 336,953 $ 2,780,954 $ 1,040,204 $ 644,525 $ — $ 1,684,729 103 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, 2023 (amounts in thousands) Cash Due From and Pooled Other Loans Investments Investments Governments Receivable Total Primary government Debt service.................................................... $ 1,048,383 $ 50,709 $ 209,306 $ 5,259,875 $ 6,568,273 Construction.................................................... 1,246,311 — — — 1,246,311 Operations....................................................... 60,805 — — — 60,805 Other............................................................... 1,290 — — — 1,290 Total primary government........................ 2,356,789 50,709 209,306 5,259,875 7,876,679 Discretely presented component units Debt service.................................................... 637,676 361,488 — — 999,164 Other............................................................... 157,473 — — — 157,473 Total discretely presented component units....................................... 795,149 361,488 — — 1,156,637 Total restricted assets............................. $ 3,151,938 $ 412,197 $ 209,306 $ 5,259,875 $ 9,033,316 104 Notes to the Financial Statements NOTE 6: CAPITAL ASSETS Table 7 summarizes the capital assets activity for the primary government. Table 7 Schedule of Changes in Capital Assets – Primary Government June 30, 2023 (amounts in thousands) Beginning Ending Balance Additions Deductions Balance Governmental activities Capital assets not being depreciated/amortized Land..................................................................................... $ 21,634,395 * $ 202,287 $ 12,179 $ 21,824,503 State highway infrastructure................................................ 82,760,028 * 943,397 9,684 83,693,741 Collections........................................................................... 22,682 — 854 21,828 Construction/development in progress................................ 20,697,645 * 4,720,349 2,676,909 22,741,085 Intangible assets................................................................... 1,114,779 * 138,978 — 1,253,757 Total capital assets not being depreciated/amortized.... 126,229,529 6,005,011 2,699,626 129,534,914 Capital assets being depreciated/amortized Buildings and improvements............................................... 30,424,261 * 459,775 323,468 30,560,568 Infrastructure....................................................................... 752,834 * 3,119 22 755,931 Equipment and other depreciable assets.............................. 6,189,107 * 493,863 205,302 6,477,668 Other intangible assets......................................................... 3,127,869 * 649,141 25,139 3,751,871 Total capital assets being depreciated/amortized........... 40,494,071 1,605,898 553,931 41,546,038 Less accumulated depreciation/amortization for: Buildings and improvements............................................... 11,266,969 * 739,510 190,875 11,815,604 Infrastructure....................................................................... 467,818 14,767 — 482,585 Equipment and other depreciable assets.............................. 5,092,667 * 416,502 199,440 5,309,729 Other intangible assets......................................................... 1,570,337 * 298,663 24,402 1,844,598 Total accumulated depreciation/amortization................ 18,397,791 1,469,442 414,717 19,452,516 Total capital assets being depreciated/amortized, net.... 22,096,280 136,456 139,214 22,093,522 Right to use assets being amortized Right to use leased land....................................................... 39,014 * 3,737 363 42,388 Right to use leased buildings............................................... 3,943,117 * 333,174 989,321 3,286,970 Right to use leased equipment............................................. 6,566 17,090 5,953 17,703 Right to use subscription-based information technology arrangements........................................................................ 208,074 * 83,328 — 291,402 Total right to use assets being amortized........................ 4,196,771 437,329 995,637 3,638,463 Less accumulated amortization for: Right to use leased land....................................................... 2,800 * 4,627 318 7,109 Right to use leased buildings............................................... 474,596 * 483,301 85,094 872,803 Right to use leased equipment............................................. 3,099 5,111 5,953 2,257 Right to use subscription-based information technology arrangements........................................................................ — 106,528 — 106,528 Total accumulated amortization...................................... 480,495 599,567 91,365 988,697 Total right to use assets being amortized, net................. 3,716,276 (162,238) 904,272 2,649,766 Governmental activities, capital assets, net.......................... $ 152,042,085 $ 5,979,229 $ 3,743,112 $ 154,278,202 *Restated (continued) 105 State of California Annual Comprehensive Financial Report Table 7 (continued) Schedule of Changes in Capital Assets – Primary Government (continued) June 30, 2023 (amounts in thousands) Beginning Ending Balance Additions Deductions Balance Business-type activities Capital assets not being depreciated/amortized Land..................................................................................... $ 448,053 $ 18,018 $ — $ 466,071 Collections........................................................................... 35,492 1,820 — 37,312 Construction/development in progress................................ 3,210,423 1,094,943 1,707,159 2,598,207 Intangible assets................................................................... 125,527 12,234 865 136,896 Total capital assets not being depreciated/amortized.... 3,819,495 1,127,015 1,708,024 3,238,486 Capital assets being depreciated/amortized Buildings and improvements............................................... 18,356,706 1,543,399 6,383 19,893,722 Infrastructure....................................................................... 624,041 164,911 8,833 780,119 Equipment and other assets................................................. 1,133,469 * 93,787 18,612 1,208,644 Other intangible assets......................................................... 496,750 15,724 37,695 474,779 Total capital assets being depreciated/amortized .......... 20,610,966 1,817,821 71,523 22,357,264 Less accumulated depreciation/amortization for: Buildings and improvements............................................... 6,839,703 533,656 2,831 7,370,528 Infrastructure....................................................................... 183,170 26,422 8,238 201,354 Equipment and other assets................................................. 836,211 85,143 16,998 904,356 Other intangible assets......................................................... 267,981 15,200 7,465 275,716 Total accumulated depreciation/amortization................ 8,127,065 660,421 35,532 8,751,954 Total capital assets being depreciated/amortized, net.... 12,483,901 1,157,400 35,991 13,605,310 Right to use assets being amortized Right to use leased land....................................................... 6,959 122 — 7,081 Right to use leased buildings............................................... 370,317 * 62,578 2,245 430,650 Right to use leased equipment............................................. 8,862 5,004 2,304 11,562 Right to use subscription-based information technology arrangements........................................................................ 110,024 * 27,944 346 137,622 Total right to use assets being amortized........................ 496,162 95,648 4,895 586,915 Less accumulated amortization for: Right to use leased land....................................................... 472 524 — 996 Right to use leased buildings............................................... 40,618 41,526 2,422 79,722 Right to use leased equipment............................................. 2,377 2,815 609 4,583 Right to use subscription-based information technology arrangements........................................................................ — 43,057 — 43,057 Total accumulated amortization...................................... 43,467 87,922 3,031 128,358 Total right to use assets being amortized, net................. 452,695 7,726 1,864 458,557 Business-type activities, capital assets, net........................... $ 16,756,091 $ 2,292,141 $ 1,745,879 $ 17,302,353 * Restated (concluded) 106 Notes to the Financial Statements Table 8 summarizes the depreciation and amortization expense charged to the activities of the primary government. Table 8 Schedule of Depreciation and Amortization Expense – Primary Government June 30, 2023 (amounts in thousands) Amount Governmental activities General government.................................................................................................................................................. $ 522,879 Education................................................................................................................................................................... 135,499 Health and human services........................................................................................................................................ 319,078 Natural resources and environmental protection....................................................................................................... 211,340 Business, consumer services, and housing................................................................................................................ 50,218 Transportation............................................................................................................................................................ 338,021 Corrections and rehabilitation................................................................................................................................... 367,564 Internal service funds (charged to the activities that utilize the fund)....................................................................... 124,410 Total governmental activities............................................................................................................................... 2,069,009 Business-type activities............................................................................................................................................... 748,340 Total primary government................................................................................................................................ $ 2,817,349 107 State of California Annual Comprehensive Financial Report Table 9 summarizes the capital assets activity for discretely presented component units. Table 9 Schedule of Changes in Capital Assets – Discretely Presented Component Units June 30, 2023 (amounts in thousands) Beginning Ending Balance Additions Deductions Balance Capital assets not being depreciated/amortized Land..................................................................................... $ 1,725,990 * $ 189,179 $ 15,345 $ 1,899,824 Collections........................................................................... 630,251 31,638 1,638 660,251 Construction/development in progress................................ 4,876,598 * 1,885,977 90,261 6,672,314 Intangible assets................................................................... 5,214 8 2,802 2,420 Total capital assets not being depreciated/amortized..... 7,238,053 2,106,802 110,046 9,234,809 Capital assets being depreciated/amortized Buildings and improvements............................................... 51,463,351 * 1,521,298 154,110 52,830,539 Infrastructure........................................................................ 1,051,048 * 97,230 — 1,148,278 Equipment and other depreciable assets.............................. 13,252,599 939,104 364,000 13,827,703 Other intangible assets......................................................... 1,840,039 * 54,461 56,493 1,838,007 Total capital assets being depreciated/amortized........... 67,607,037 2,612,093 574,603 69,644,527 Less accumulated depreciation/amortization for: Buildings and improvements............................................... 22,684,948 * 1,593,348 130,612 24,147,684 Infrastructure........................................................................ 548,609 * 36,172 176 584,605 Equipment and other depreciable assets.............................. 9,615,051 719,510 320,261 10,014,300 Other intangible assets......................................................... 1,258,378 174,691 37,190 1,395,879 Total accumulated depreciation/amortization................ 34,106,986 2,523,721 488,239 36,142,468 Total capital assets being depreciated/amortized, net.... 33,500,051 88,372 86,364 33,502,059 Right to use assets being amortized Right to use leased land....................................................... 106,991 3,325 21,410 88,906 Right to use leased buildings............................................... 3,011,429 632,716 287,979 3,356,166 Right to use leased equipment............................................. 171,416 53,924 23,888 201,452 Right to use subscription-based information technology arrangements........................................................................ 327,905 * 87,560 9,155 406,310 Total right to use assets being amortized......................... 3,617,741 777,525 342,432 4,052,834 Less accumulated amortization for: Right to use leased land....................................................... 9,420 4,397 1,704 12,113 Right to use leased buildings............................................... 696,453 327,872 78,063 946,262 Right to use leased equipment............................................. 77,386 41,267 19,646 99,007 Right to use subscription-based information technology arrangements........................................................................ 68,263 * 99,839 9,155 158,947 Total accumulated amortization....................................... 851,522 473,375 108,568 1,216,329 Total right to use assets being amortized, net................. 2,766,219 304,150 233,864 2,836,505 Capital assets, net.................................................................... $ 43,504,323 $ 2,499,324 $ 430,274 $ 45,573,373 * Restated 108 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 $3.4 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, 2023 (amounts in thousands) Primary Government Governmental Business-type Component Activities Activities Total Units Deferred outflows of resources: Loss on refunding of debt..................................... $ 855,550 $ 181,363 $ 1,036,913 $ 188,194 Decrease in fair value of hedging derivative instruments............................................................ — — — 22,747 Net pension liability.............................................. 29,370,857 3,330,514 32,701,371 3,080,176 Net other postemployment benefits liability......... 12,178,109 2,723,785 14,901,894 4,510,118 Deferred asset retirement obligation..................... — — — 82,467 Other deferred outflows........................................ — — — 908 Total deferred outflows of resources.............. $ 42,404,516 $ 6,235,662 $ 48,640,178 $ 7,884,610 Deferred inflows of resources: Gain on refunding of debt..................................... $ 890,643 $ 3,666 $ 894,309 $ 47,162 Service concession arrangements......................... — — — 227,323 Irrevocable split-interest agreements.................... — — — 307,509 Net pension liability.............................................. 6,597,283 724,078 7,321,361 131,759 Net other postemployment benefits liability......... 22,826,346 5,681,578 28,507,924 8,131,493 Other deferred inflows.......................................... 794,047 2,211,876 3,005,923 1,439,100 Total deferred inflows of resources................ $ 31,108,319 $ 8,621,198 $ 39,729,517 $ 10,284,346 109 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, 2023 (amounts in thousands) General Health and Government Education Human Services Governmental activities General Fund .............................................................. $ 1,985,915 $ 850,707 $ 10,469,907 Federal Fund .............................................................. 334,669 223,475 23,645,179 Transportation Fund.................................................... 12,229 6,793 396 Environmental and Natural Resources Fund.............. 2,862 3,420 56 Health Care Related Programs Fund........................... — 867 4,274,804 Nonmajor governmental funds................................... 450,813 22,705 127,417 Internal service funds ................................................. 260,243 149 190,002 Adjustment: Fiduciary funds......................................................... 1,081,633 — — Total governmental activities ............................ $ 4,128,364 $ 1,108,116 $ 38,707,761 Business-type activities Water Resources Fund ............................................... $ — $ — $ — State Lottery Fund....................................................... 56,270 — — Unemployment Programs Fund ................................. — — 309,566 California State University......................................... — 397,546 — Nonmajor enterprise funds ......................................... 189 807 270 Adjustment: Fiduciary funds......................................................... — — — Total business-type activities............................. $ 56,459 $ 398,353 $ 309,836 110 Notes to the Financial Statements Natural Resources and Environmental Protection Transportation Other Total $ 417,795 $ 8,950 $ 689,503 $ 14,422,777 85,057 139,601 71,219 24,499,200 5,960 1,662,068 2,396 1,689,842 517,257 89,379 12,557 625,531 — — — 4,275,671 23,773 310 145,922 770,940 30,556 — 13,072 494,022 — 50,923 1,578 1,134,134 $ 1,080,398 $ 1,951,231 $ 936,247 $ 47,912,117 $ 150,961 $ — $ — $ 150,961 — — — 56,270 — — — 309,566 — — — 397,546 14,257 — 2,526 18,049 — — 68 68 $ 165,218 $ — $ 2,594 $ 932,460 111 State of California Annual Comprehensive Financial Report NOTE 9: LONG-TERM OBLIGATIONS As of June 30, 2023, the primary government had long-term obligations totaling $306.9 billion. Of that amount, $8.3 billion is due within one year. Governmental activities had a net increase in long-term obligations of $23.1 billion, primarily due to an increase of $32.2 billion in net pension liability offset by a decrease of $10.0 billion in net other postemployment benefits (OPEB) liability. Other significant increases included general obligation bonds payable of $1.3 billion. Increases to governmental activities also included a $161 million restatement to the beginning balance of subscription liability due to the implementation of GASB Statement No. 96, and a $1.0 billion restatement to the beginning balance of other long-term obligations due to the implementation of GASB Statement No. 94. 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, 2023, pollution remediation obligations increased by $121 million from the prior fiscal year-end, to $1.8 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, 2023, the State estimates that remediation costs at Stringfellow will total $577 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, 2023, the State estimates that the oil field abandonment liability is $1.0 billion, 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 Water Resources Revolving Fund notes payable of $26 million, availability payment arrangements of $1.0 billion, lessee-type financed 112 Notes to the Financial Statements purchases of $23 million, Technology Services Revolving Fund notes payable of $28 million and a Transportation Fund performance obligation of $512 million. The net pension liability, net OPEB liability, compensated absences, and availability payment arrangements 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 increase in long-term obligations of $1.4 billion. Significant increases included $3.4 billion in net pension liability offset by a decrease of $2.5 billion in net OPEB liability. Increases to business-type activities included a $95 million restatement to the beginning subscription liability due to the implementation of GASB Statement No. 96. 113 State of California Annual Comprehensive Financial Report Table 12 summarizes the changes in long-term obligations during the fiscal year ended June 30, 2023. Table 12 Schedule of Changes in Long-term Obligations (amounts in thousands) Balance July 1, 2022 Additions Governmental activities Loans payable adjustment for fiduciary funds........................................................ $ 40,323 $ — Compensated absences payable.............................................................................. 5,245,333 1,802,081 Workers’ compensation benefits payable............................................................... 5,457,692 1,244,814 Commercial paper and other borrowings................................................................ 1,448,725 1,715,635 Lease liability.......................................................................................................... 2,659,291 * 353,977 Subscription liability............................................................................................... 160,866 * 78,144 General obligation bonds outstanding.................................................................... 69,215,805 8,590,580 Premiums................................................................................................................ 8,130,325 671,556 Total general obligation bonds payable................................................................ 77,346,130 9,262,136 Revenue bonds outstanding.................................................................................... 15,616,571 979,615 Accreted interest..................................................................................................... 739,587 25,913 Premiums................................................................................................................ 802,019 132,831 Discounts................................................................................................................. (786) — Total revenue bonds payable................................................................................ 17,157,391 1,138,359 Mandated cost claims payable................................................................................ 1,976,349 195,509 Net other postemployment benefits liability........................................................... 77,369,354 10,368,411 Net pension liability................................................................................................ 47,920,644 49,721,423 Other long-term obligations: Lessee-type financed purchases and availability payment arrangements............ 1,055,776 * — Oil field abandonment liability............................................................................. 939,660 106,660 Pollution remediation obligations......................................................................... 1,709,747 * 274,411 Other..................................................................................................................... 535,643 * 180,809 Total other long-term obligations..................................................................... 4,240,826 561,880 Total governmental activities......................................................................... $ 241,022,924 $ 76,442,369 Business-type activities Lottery prizes and annuities.................................................................................... $ 1,587,437 $ 6,942,799 Compensated absences payable.............................................................................. 456,058 156,683 Workers’ compensation benefits payable............................................................... 14,535 — Commercial paper and other borrowings................................................................ 323,313 253,353 Lease liability.......................................................................................................... 332,851 * 66,350 Subscription liability............................................................................................... 95,145 * 23,599 General obligation bonds outstanding.................................................................... 525,695 167,130 Premiums................................................................................................................ 11,237 2,867 Discounts................................................................................................................. (580) — Total general obligation bonds payable................................................................ 536,352 169,997 Revenue bonds outstanding.................................................................................... 13,248,995 881,955 Premiums................................................................................................................ 1,172,848 101,913 Discounts................................................................................................................. (342) — Total revenue bonds payable................................................................................ 14,421,501 983,868 Net other postemployment benefits liability........................................................... 16,913,829 2,268,972 Net pension liability................................................................................................ 6,248,484 5,863,365 Other long-term obligations.................................................................................... 405,773 121,783 Total business-type activities......................................................................... $ 41,335,278 $ 16,850,769 * Restated 114 Notes to the Financial Statements Balance Due Within Noncurrent Deductions June 30, 2023 One Year Liabilities $ 9,282 $ 31,041 $ — $ 31,041 1,720,461 5,326,953 15,544 5,311,409 678,374 6,024,132 634,357 5,389,775 1,837,250 1,327,110 — 1,327,110 499,393 2,513,875 451,739 2,062,136 102,547 136,463 83,327 53,136 7,140,310 70,666,075 3,453,370 67,212,705 774,859 8,027,022 526,259 7,500,763 7,915,169 78,693,097 3,979,629 74,713,468 2,032,357 14,563,829 702,726 13,861,103 — 765,500 — 765,500 165,541 769,309 117,417 651,892 (60) (726) (94) (632) 2,197,838 16,097,912 820,049 15,277,863 212,625 1,959,233 149,354 1,809,879 20,377,958 67,359,807 — 67,359,807 17,496,203 80,145,864 — 80,145,864 29,053 1,026,723 30,008 996,715 — 1,046,320 — 1,046,320 152,979 1,831,179 65,981 1,765,198 150,524 565,928 191,206 374,722 332,556 4,470,150 287,195 4,182,955 $ 53,379,656 $ 264,085,637 $ 6,421,194 $ 257,664,443 $ 6,966,815 $ 1,563,421 $ 940,489 $ 622,932 138,138 474,603 178,306 296,297 1,820 12,715 — 12,715 174,862 401,804 20,528 381,276 40,753 358,448 39,058 319,390 51,940 66,804 35,711 31,093 30,040 662,785 4,010 658,775 1,017 13,087 — 13,087 (70) (510) — (510) 30,987 675,362 4,010 671,352 699,840 13,431,110 576,360 12,854,750 100,052 1,174,709 21,660 1,153,049 (36) (306) — (306) 799,856 14,605,513 598,020 14,007,493 4,728,821 14,453,980 — 14,453,980 2,425,712 9,686,137 — 9,686,137 54,720 472,836 24,825 448,011 $ 15,414,424 $ 42,771,623 $ 1,840,947 $ 40,930,676 115 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 116 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, 2022, included the primary government and certain discretely presented component units; 1,335 school employers, including charter schools; and 1,601 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, 2021 Actuarial Valuation Report, which may be found on the CalPERS website at www.CalPERS.ca.gov. 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. 117 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, 2022 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, 2022 State Peace California State State State Officers and Highway Total Miscellaneous Industrial Safety Firefighters Patrol PERF Plans Inactive employees or beneficiaries currently receiving benefits................. 209,673 17,356 30,202 47,598 9,951 314,780 Inactive employees entitled to but not yet receiving benefits.................... 75,327 4,386 10,300 8,785 604 99,402 Active employees.................................. 205,505 19,187 32,976 46,882 6,893 311,443 Total................................................... 490,505 40,929 73,478 103,265 17,448 725,625 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. 118 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, 2022. Table 14 Contribution Rates – PERF Plans June 30, 2022 State Peace California State State State Officers and Highway Miscellaneous Industrial Safety Firefighters Patrol Average active employee rate..................... 7.17 % 8.19 % 10.65 % 11.69 % 12.50 % Employer rate of annual payroll................. 29.20 17.34 19.45 32.84 62.73 Total........................................................ 36.37 % 25.53 % 30.10 % 44.53 % 75.23 % Actuarial Methods and Assumptions: The total pension liability for PERF plans was measured as of June 30, 2022 (measurement date), by rolling forward the total pension liability determined by the June 30, 2021 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, 2021 Actuarial cost method: Entry age normal in accordance with the requirements of GASB 68 Actuarial assumptions: Discount rate 6.9% Inflation 2.30% Salary increases Varies by entry age and service Investment rate of return 6.90% net of pension plan investment expense but without reduction for administrative expenses; includes inflation Mortality Mortality rates are based on the 2021 CalPERS Experience Study adopted by the CalPERS Board, and incorporate full generational mortality improvement using 80% of Scale MP-2020, published by the Society of Actuaries Post-retirement benefit The lesser of Contract COLA or 2.30% until Purchasing Power Protection Allowance adjustments (COLAs) floor on purchasing power applies; 2.30% thereafter Discount Rate: The discount rate used to measure the total pension liability was 6.90% 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 119 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 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-term and long-term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 basis points. 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 Assumed Asset Asset Class Allocation Real Return 1,2 Global Equity - Cap-weighted....................................................... 30.0 % 4.54 % Global Equity - Non-Cap-weighted............................................... 12.0 3.84 Private Equity................................................................................ 13.0 7.28 Treasury......................................................................................... 5.0 0.27 Mortgage-backed Securities.......................................................... 5.0 0.50 Investment Grade Corporates........................................................ 10.0 1.56 High Yield..................................................................................... 5.0 2.27 Emerging Market Debt.................................................................. 5.0 2.48 Private Debt................................................................................... 5.0 3.57 Real Assets..................................................................................... 15.0 3.21 Leverage........................................................................................ (5.0) (0.59) Total........................................................................................... 100.0 % 1 An expected inflation rate of 2.30% used for this period. 2 Figures are based on the 2021 Asset Liability Management study. 120 Notes to the Financial Statements This page intentionally left blank 121 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, 2021 .............................. $ 126,608,681 $ 104,318,731 * $ 22,289,950 $ 5,392,740 $ 4,950,152 * $ 442,588 Changes recognized for the measurement period: Service cost.............................................. 2,438,345 — 2,438,345 145,767 — 145,767 Interest on total pension liability ............. 8,752,910 — 8,752,910 374,401 — 374,401 Changes of assumptions .......................... 3,728,965 — 3,728,965 153,761 — 153,761 Difference between expected and actual experience ................................... (1,115,641) — (1,115,641) (65,431) — (65,431) Plan to plan resource movement.............. — (2,559) 2,559 — 281 (281) Employer contributions .......................... — 5,110,275 (5,110,275) — 187,746 (187,746) Employee contributions........................... — 1,081,816 (1,081,816) — 67,664 (67,664) Net investment income............................ — (7,836,089) 7,836,089 — (374,909) 374,909 Benefit payments, including refunds of employee contributions ..................... (7,174,817) (7,174,817) — (255,704) (255,704) — Administrative expense .......................... — (64,984) 64,984 — (3,084) 3,084 Net changes................................................. 6,629,762 (8,886,358) 15,516,120 352,794 (378,006) 730,800 Balance at June 30, 2022 (Measurement Date) ................................. $ 133,238,443 $ 95,432,373 $ 37,806,070 $ 5,745,534 $ 4,572,146 $ 1,173,388 *Restated 122 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 $ 15,981,838 $ 14,951,368 * $ 1,030,470 $ 55,399,417 $ 46,175,077 * $ 9,224,340 574,216 — 574,216 1,167,715 — 1,167,715 1,110,294 — 1,110,294 3,864,043 — 3,864,043 455,219 — 455,219 2,190,080 — 2,190,080 (238,531) — (238,531) (805,030) — (805,030) — 950 (950) — 1,076 (1,076) — 561,227 (561,227) — 2,171,675 (2,171,675) — 244,938 (244,938) — 477,347 (477,347) — (1,131,785) 1,131,785 — (3,524,277) 3,524,277 (788,819) (788,819) — (2,735,400) (2,735,400) — — (9,314) 9,314 — (28,764) 28,764 1,112,379 (1,122,803) 2,235,182 3,681,408 (3,638,343) 7,319,751 $ 17,094,217 $ 13,828,565 $ 3,265,652 $ 59,080,825 $ 42,536,734 $ 16,544,091 (continued) 123 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, 2021 .............................. $ 15,103,300 $ 11,924,803 * $ 3,178,497 $ 218,485,976 $ 182,320,131 $ 36,165,845 Changes recognized for the measurement period: Service cost.............................................. 292,213 — 292,213 4,618,256 — 4,618,256 Interest on total pension liability ............. 1,062,411 — 1,062,411 15,164,059 — 15,164,059 Changes of assumptions .......................... 695,673 — 695,673 7,223,698 — 7,223,698 Difference between expected and actual experience ................................... (178,097) — (178,097) (2,402,730) — (2,402,730) Plan to plan resource movement.............. — 252 (252) — — — Employer contributions .......................... — 628,308 (628,308) — 8,659,231 (8,659,231) Employee contributions........................... — 109,080 (109,080) — 1,980,845 (1,980,845) Net investment income............................ — (901,987) 901,987 — (13,769,047) 13,769,047 Benefit payments, including refunds of employee contributions ..................... (739,443) (739,443) — (11,694,183) (11,694,183) — Administrative expense .......................... — (7,428) 7,428 — (113,574) 113,574 Net changes................................................. 1,132,757 (911,218) 2,043,975 12,909,100 (14,936,728) 27,845,828 Balance at June 30, 2022 (Measurement Date) ................................. $ 16,236,057 $ 11,013,585 $ 5,222,472 $ 231,395,076 $ 167,383,403 $ 64,011,673 Reported in governmental activities $ 52,090,647 Reported in business-type activities 9,686,137 Reported by discretely presented component units 136,797 Not reported in government-wide Statement of Net Position 1 2,098,092 Total net pension liability – PERF plans $ 64,011,673 (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, 2022; and minor differences related to amounts reported in separately issued financial statements of proprietary funds and discretely presented component units. *Restated 124 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 6.90%, 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 (5.90%) or one percentage point higher (7.90%) than the current rate. Table 18 Net Pension Liability Sensitivity – PERF Plans June 30, 2023 (amounts in thousands) Current Rate Current Rate Current Rate -1% 6.9% +1% State Miscellaneous..................................................................... $ 54,400,244 $ 37,806,070 $ 23,952,435 State Industrial............................................................................. 1,975,108 1,173,388 515,577 State Safety.................................................................................. 5,568,108 3,265,652 1,368,007 State Peace Officers and Firefighters.......................................... 24,810,999 16,544,091 9,789,064 California Highway Patrol........................................................... 7,521,782 5,222,472 3,346,606 Total PERF plans................................................................... $ 94,276,241 $ 64,011,673 $ 38,971,689 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, 2023, the State recognized pension expense of $9.0 billion. At June 30, 2023, 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, 2022, but prior to the fiscal year ended June 30, 2023. 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. 125 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, 2023 (amounts in thousands) State Peace California Total State State State Officers and Highway PERF Miscellaneous Industrial Safety Firefighters Patrol Plans Pension Expense........................... $ 5,075,081 $ 201,294 $ 606,432 $ 2,419,869 $ 719,150 $ 9,021,826 Deferred Outflows of Resources: Employer contributions.............. 6,271,650 256,852 771,612 3,371,914 674,103 11,346,131 Changes of assumptions............. 2,861,764 108,537 346,833 1,724,106 542,388 5,583,628 Difference between expected and actual experience.................. 597,799 11,893 35,110 544,080 156,228 1,345,110 Net difference between projected and actual earnings on pension plan investments............ 4,926,703 237,178 712,610 2,170,151 561,045 8,607,687 Deferred Inflows of Resources: Difference between expected and actual experience.................. 856,190 46,187 200,336 633,747 138,520 1,874,980 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 2024................................. $ 1,810,556 $ 75,210 $ 196,174 $ 936,010 $ 287,600 $ 3,305,550 2025................................. 1,520,068 63,941 151,497 756,730 249,672 2,741,908 2026................................. 1,019,304 29,127 103,621 564,951 181,566 1,898,569 2027................................. 3,180,148 143,143 442,925 1,546,899 402,303 5,715,418 Payable to the Pension Plans: At June 30, 2023, the State reported a payable of $1.1 billion for the outstanding amount of contributions to the PERF pension plans required for the fiscal year ended June 30, 2023. 126 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 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, to the extent funded, 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. 127 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, 2022 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, 2022 Judges’ Judges’ II Legislators’ Total Inactive employees or beneficiaries currently receiving benefits........... 1,647 444 189 2,280 Inactive employees entitled to but not yet receiving benefits................. 2 3 3 8 Active employees.................................................................................... 99 1,625 2 1,726 Total.................................................................................................... 1,748 2,072 194 4,014 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. 128 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, 2022 actuarial valuation as 32.1%. 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, 2022. Table 22 Contribution Rates – Single-employer Plans June 30, 2022 Judges’ Judges’ II Legislators’ Average active employee rate.................................................................. “Pay- 9.62 % 8.00 % Employer rate of annual payroll.............................................................. as-you- 24.24 29.38 Total..................................................................................................... go” 33.86 % 37.38 % 129 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, 2022 (measurement date), by rolling forward the total pension liability determined by the June 30, 2021 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, 2021 Actuarial cost method: Entry age normal in accordance with the requirements of GASB 68 Actuarial assumptions: Discount rate Judges’ 3.69%, Judges’ II 6.15%, Legislators’ 4.85% Inflation All single-employer plans – 2.30% Salary increases All single-employer plans – 2.80% Investment rate of return Judges’ 3.69%, Judges’ II 6.15%, Legislators’ 4.85%, net of pension plan investment without reduction of administrative expense Mortality Mortality rates are based on the 2021 CalPERS Experience Study adopted by the CalPERS Board, and incorporate full generational mortality improvement using 80% of Scale MP-2020, published by the Society of Actuaries Post-retirement benefit Judges’ – 2.80% adjustments (COLAs) Judges’ II – 2.30% Legislators’ – 2.30% 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’ – 3.69%, reflecting the short-term nature of the assets. As the plan is insufficiently funded, CalPERS uses a discount rate of 3.69%, 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 – 6.15% Legislators’ – 4.85% 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. 130 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’ Assumed Asset Assumed Asset Real Return 1,2 Asset Class Allocation Allocation Years 1 – 10 1 Public equity ................................................ 51.0 % 18.0 % 4.50 % Global fixed income .................................... 21.0 45.0 1.40 Inflation sensitive ........................................ 5.0 20.0 0.50 Commodities ............................................... 3.0 3.0 1.10 Real estate .................................................... 20.0 14.0 3.70 Total ......................................................... 100.0 % 100.0 % 1 An expected inflation rate of 2.30% used for this period. 2 Figures are based on the 2021 Asset Liability Management study. 131 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, 2021 (Valuation Date) ..................................... $ 3,326,289 $ 61,640 $ 3,264,649 $ 2,063,342 $ 2,398,029 $ (334,687) Changes recognized for the measurement period: Service cost ........................................ 10,345 — 10,345 115,808 — 115,808 Interest on total pension liability ........ 93,559 — 93,559 120,585 — 120,585 Difference between expected and actual experience........................ (92,633) — (92,633) (67,751) — (67,751) Changes of assumptions...................... (598,096) — (598,096) (59,394) — (59,394) Employer contributions....................... — 194,960 (194,960) — 92,773 (92,773) Employee contributions ...................... — 1,956 (1,956) — 36,529 (36,529) Net investment income........................ — 194 (194) — (324,365) 324,365 Benefit payments, including refunds of employee contributions.... (210,491) (210,491) — (66,739) (66,739) — Administrative expense....................... — (1,677) 1,677 — (1,842) 1,842 Other miscellaneous income............... — 2,305 (2,305) — 4 (4) Net changes ............................................ (797,316) (12,753) (784,563) 42,509 (263,640) 306,149 Balance at June 30, 2022 (Measurement Date)............................... $ 2,528,973 $ 48,887 $ 2,480,086 $ 2,105,851 $ 2,134,389 $ (28,538) 132 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) $ 91,867 $ 122,048 $ (30,181) $ 5,481,498 $ 2,581,717 $ 2,899,781 108 — 108 126,261 — 126,261 4,299 — 4,299 218,443 — 218,443 (992) — (992) (161,376) — (161,376) 1,024 — 1,024 (656,466) — (656,466) — 85 (85) — 287,818 (287,818) — 23 (23) — 38,508 (38,508) — (12,450) 12,450 — (336,621) 336,621 (6,647) (6,647) — (283,877) (283,877) — — (436) 436 — (3,955) 3,955 — 1 (1) — 2,310 (2,310) (2,208) (19,424) 17,216 (757,015) (295,817) (461,198) $ 89,659 $ 102,624 $ (12,965) $ 4,724,483 $ 2,285,900 $ 2,438,583 Reported in governmental activities $ 2,438,583 133 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 3.69%; Judges’ II used 6.15%; and Legislators’ used 4.85%. 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, 2023 (amounts in thousands) Current Rate Current Rate Current Rate -1% +1% Judges’ (3.69%) .......................................................................... $ 2,719,270 $ 2,480,086 $ 2,273,420 Judges’ II (6.15%)....................................................................... 215,687 (28,538) (231,408) Legislators’ (4.85%) ................................................................... (1,953) (12,965) (21,833) Total Single-employer Plans................................................. $ 2,933,004 $ 2,438,583 $ 2,020,179 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, 2022, the State recognized pension income of $540 million. At June 30, 2023, 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, 2022, but prior to June 30, 2023, which will be recognized as a reduction of the net pension liability in the subsequent year. 134 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, 2023 (amounts in thousands) Judges’ Judges’ II Legislators’ Total Pension Expense............................................................................ $ (592,085) $ 51,754 $ 312 $ (540,019) Deferred Outflows of Resources: Employer contributions subsequent to the measurement date..... 207,835 73,614 44 281,493 Changes of assumptions.............................................................. — 17,308 — 17,308 Difference between expected and actual experience................... — 13,226 — 13,226 Net difference between projected and actual earnings on pension plan investments...................................................... 1,807 191,087 8,088 200,982 Deferred Inflows of Resources: Difference between expected and actual experience................... — 86,970 — 86,970 Changes of assumptions.............................................................. — 68,721 — 68,721 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) Year Ending June 30 Judges’ Judges’ II Legislators’ Total 2024.................................................... $ 410 $ 13,668 $ 1,126 $ 15,204 2025.................................................... 491 16,968 1,541 19,000 2026.................................................... 538 4,450 1,781 6,769 2027.................................................... 368 75,565 3,640 79,573 2028.................................................... — (17,954) — (17,954) Thereafter............................................ — (26,767) — (26,767) 135 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, 458,000 active and 235,000 inactive program members, and 329,000 benefit recipients as of June 30, 2023. The payroll for employees covered by the DB Program for the fiscal year ended June 30, 2022, was approximately $40.1 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 16.92% of creditable compensation, respectively. The General Fund contributed an additional 6.311% of total creditable compensation of the fiscal year ending in the prior calendar year. Contributions will remain at 6.311% in the next year and may increase until the fiscal year 2045-46. Accordingly, the State contributed $3.7 billion for the fiscal year 2022-23. CalSTRS’ June 30, 2021 Defined Benefit Actuarial Valuation Report may be found on CalSTRS’ website at www.CalSTRS.com. 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, 2022, the CBB Program had 29 contributing school districts and 41,419 contributing participants. 136 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, 2022, 316 individuals were receiving benefits from the RB program. Actuarial Methods and Assumptions: The total pension liability in the June 30, 2021 actuarial valuation (valuation date) was determined using the actuarial methods and assumptions shown in Table 29, applied to the measurement period ended June 30, 2022. Table 29 Actuarial Methods and Assumptions – CalSTRS Valuation date.............................................................................................................. June 30, 2021 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, 137 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, 2022 (measurement date), by applying update procedures and rolling forward the total pension liability determined by the actuarial valuation as of June 30, 2021 (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, 2022, the State’s proportionate share of the CalSTRS’ net pension liability was 33.37%, or $23.2 billion; this amount is reported in the governmental activities column of the government-wide Statement of Net Position as of June 30, 2023. 138 Notes to the Financial Statements As a result of its requirement to contribute to CalSTRS, the State recognized expense of $2.4 billion for the fiscal year ended June 30, 2023, 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, 2023 (amounts in thousands) Deferred Outflows Deferred Inflows of Resources of Resources Changes of assumptions................................................................................. $ 1,149,896 $ — Net difference between projected and actual earnings on pension plan investments......................................................................... — 1,133,879 Difference between expected and actual experiences.................................... 19,020 1,738,524 Proportionate share change............................................................................. 97,168 1,595,223 State contributions subsequent to the measurement date............................... 3,719,874 — Total............................................................................................................ $ 4,985,958 $ 4,467,626 The $3.7 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, 2024. 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 2024............................................................................................................................................................ $ (544,822) 2025............................................................................................................................................................ (1,684,437) 2026............................................................................................................................................................ (2,045,610) 2027............................................................................................................................................................ 1,485,733 2028............................................................................................................................................................ (320,686) Thereafter................................................................................................................................................... (91,720) 139 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, 2023 (amounts in thousands) Current Rate Current Rate Current Rate –1% 7.10% +1% State’s proportionate share of net pension liability...................... $ 39,379,758 $ 23,186,783 $ 9,741,746 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 52 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 30 of the CalPERS agent multiple-employer defined benefit plans, the net pension liability was measured as of June 30, 2022, and valued as of June 30, 2021. For 16 of the cost-sharing multiple-employer defined benefit plans, the net pension liability was measured as of June 30, 2022. Of these plans, five had a valuation date of June 30, 2022, and 11 had a valuation date of June 30, 2021. For six of the cost- sharing multiple-employer plans, the net pension liability was measured as of December 31, 2022. Of these plans, three had an actuarial valuation date of December 31, 2021, two had a valuation date of January 1, 2022, and one had a valuation date of December 31, 2022. Two agent multiple-employer 140 Notes to the Financial Statements defined benefit plans and four cost-sharing multiple employer defined benefit plans did not provide an actuarial valuation for this reporting period. 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: 30 22 Valuation date(s): June 30, 2021 Eleven plans as of June 30, 2021. Three plans as of December 31, 2021. Two plans as of January 1, 2022. Five plans as of June 30, 2022. One plan as of December 31, 2022. Actuarial assumptions: Discount rate 6.90% Rates ranging from 6.42% to 7.25% 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 6.90%. 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 7.25% as of the respective measurement date. Pension Accounting Elements: For the trial court pension plans, the State reported total pension liability of $11.9 billion and fiduciary net position of $9.5 billion, which resulted in a net pension liability of $2.4 billion as of June 30, 2023. For the fiscal year ended June 30, 2023, the State recognized pension expense of $285 million. At June 30, 2023, the State reported deferred outflows of resources of $1.2 billion and deferred inflows of resources of $365 million. The reported deferred outflows of resources included $360 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, 2024. 141 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. 142 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, 2023 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, 2022 (June 30, 2022 Actuarial Valuation Report), on the State Controller’s Office website, at www.sco.ca.gov. 143 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, 2022 Inactive employees or beneficiaries currently receiving Active OPEB Plan benefits Employees Total Service Employees International Union (SEIU) Plan.................................. 76,368 115,564 191,932 Bargaining Unit 5 Plan................................................................................. 7,545 6,959 14,504 Bargaining Unit 6 Plan................................................................................. 28,239 29,456 57,695 Bargaining Unit 9 Plan................................................................................. 8,605 13,629 22,234 Bargaining Unit 12 Plan............................................................................... 10,476 12,885 23,361 Other Funded Plans...................................................................................... 32,520 48,752 81,272 Unfunded Plan.............................................................................................. 43,300 54,053 97,353 Total.......................................................................................................... 207,053 281,298 488,351 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 2022 monthly State contribution was $816 for one-party coverage, $1,548 for two-party coverage, and $1,983 for family coverage. For the year ended June 30, 2022, the State contributed $4.0 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. 144 Notes to the Financial Statements For the measurement period ended June 30, 2022 (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, 2022 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 6.00% when assets are available to pay benefits, otherwise 20-year Municipal G.O. Bond AA Index rate of 3.69% 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 2023, increasing to 7.00% in 2024, grading down to 4.50% from 2029 to 2037, and 4.25% for 2038 and later years Post-Medicare coverage: Actual rates for 2023, increasing to rates ranging from 7.00% to 8.06% in 2024, grading down to 4.50% from 2031 to 2037, and 4.25% for 2038 and later years Dental coverage: 0.03% for 2023, 2.00% for 2024, 3.00% for 2025, 4.00% for 2026, and 4.25% for 2027 and later years Mortality Derived using CalPERS’ membership data for all members Other demographic assumptions used in the June 30, 2022 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 five years) and the long-term (six-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 145 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, 2022 total OPEB liability consist of the 20-year Municipal G.O. Bond AA Index rate of 3.69% as of June 30, 2022, 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, 2022 includes the impact of the temporary suspensions of employee contributions under the Personal Leave Program that was in effect during the years ended June 30, 2021 and June 30, 2022. 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, 2022, on the State Controller’s Office website, at www.sco.ca.gov. Blended rates for the June 30, 2023 valuation will be determined using the Fidelity Index 20-year Municipal G.O. Bond AA Index rate of 3.86% when prefunding assets are not available to pay benefits. 146 Notes to the Financial Statements This page intentionally left blank 147 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, 2021........................................................ $ 32,759,998 $ 914,261 $ 31,845,737 Changes recognized for the measurement period: Service cost .......................................................................... 1,297,725 — 1,297,725 Interest on total OPEB liability ........................................... 908,980 — 908,980 Difference between expected and actual experiences.......... 831,414 — 831,414 Changes of assumptions....................................................... (6,216,338) — (6,216,338) Employer contributions........................................................ — 1,576,970 (1,576,970) Employee contributions........................................................ — 286,986 (286,986) Net investment income......................................................... — (228,601) 228,601 Benefit payments.................................................................. (1,038,983) (1,038,983) — Administrative expense........................................................ — (333) 333 Net changes............................................................................ (4,217,202) 596,039 (4,813,241) Balance at June 30, 2022 (Measurement Date)............................................................. $ 28,542,796 $ 1,510,300 $ 27,032,496 148 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 $ 5,994,057 $ 631,538 $ 5,362,519 $ 18,187,008 $ 1,218,428 $ 16,968,580 209,691 — 209,691 655,259 — 655,259 181,784 — 181,784 531,126 — 531,126 (92,802) — (92,802) 916,117 — 916,117 (1,359,809) — (1,359,809) (3,595,519) — (3,595,519) — 212,763 (212,763) — 623,643 (623,643) — 8,452 (8,452) — 119,564 (119,564) — (102,287) 102,287 — (209,053) 209,053 (92,183) (92,183) — (389,079) (389,079) — — (177) 177 — (353) 353 (1,153,319) 26,568 (1,179,887) (1,882,096) 144,722 (2,026,818) $ 4,840,738 $ 658,106 $ 4,182,632 $ 16,304,912 $ 1,363,150 $ 14,941,762 (continued) 149 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, 2021........................................................ $ 4,646,254 $ 225,215 $ 4,421,039 Changes recognized for the measurement period: Service cost .......................................................................... 173,027 — 173,027 Interest on total OPEB liability............................................ 129,982 — 129,982 Difference between expected and actual experiences.......... 222,406 — 222,406 Changes of assumptions....................................................... (879,542) — (879,542) Employer contributions........................................................ — 182,205 (182,205) Employee contributions........................................................ — 33,871 (33,871) Net investment income......................................................... — (42,399) 42,399 Benefit payments.................................................................. (120,334) (120,334) — Administrative expense........................................................ — (69) 69 Net changes............................................................................ (474,461) 53,274 (527,735) Balance at June 30, 2022 (Measurement Date)............................................................ $ 4,171,793 $ 278,489 $ 3,893,304 150 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 $ 4,212,096 $ 186,671 $ 4,025,425 $ 16,061,952 $ 841,359 $ 15,220,593 145,385 — 145,385 674,238 — 674,238 118,610 — 118,610 464,427 — 464,427 227,285 — 227,285 1,023,794 — 1,023,794 (760,893) — (760,893) (3,182,977) — (3,182,977) — 203,008 (203,008) — 698,670 (698,670) — 31,356 (31,356) — 137,487 (137,487) — (37,298) 37,298 — (164,073) 164,073 (139,651) (139,651) — (436,182) (436,182) — — (59) 59 — (263) 263 (409,264) 57,356 (466,620) (1,456,700) 235,639 (1,692,339) $ 3,802,832 $ 244,027 $ 3,558,805 $ 14,605,252 $ 1,076,998 $ 13,528,254 (continued) 151 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, 2021........................................................ $ 17,666,441 $ — $ 17,666,441 Changes recognized for the measurement period: Service cost .......................................................................... 828,893 — 828,893 Interest on total OPEB liability ........................................... 350,040 — 350,040 Difference between expected and actual experiences.......... 1,171,850 — 1,171,850 Changes of assumptions....................................................... (4,210,439) — (4,210,439) Employer contributions........................................................ — 530,610 (530,610) Employee contributions........................................................ — — — Net investment income......................................................... — — — Benefit payments.................................................................. (530,610) (530,610) — Administrative expense........................................................ — — — Net changes............................................................................ (2,390,266) — (2,390,266) Balance at June 30, 2022 (Measurement Date)............................................................ $ 15,276,175 $ — $ 15,276,175 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, 2022, 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 152 Notes to the Financial Statements Total Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability $ 99,527,806 $ 4,017,472 $ 95,510,334 3,984,218 — 3,984,218 2,684,949 — 2,684,949 4,300,064 — 4,300,064 (20,205,517) — (20,205,517) — 4,027,869 (4,027,869) — 617,716 (617,716) — (783,711) 783,711 (2,747,022) (2,747,022) — — (1,254) 1,254 (11,983,308) 1,113,598 (13,096,906) $ 87,544,498 $ 5,131,070 $ 82,413,428 Reported in governmental activities $ 65,766,546 Reported in business-type activities 14,453,980 Reported by discretely presented component units 105,186 Not reported in government-wide Statement of Net Position1 2,087,716 Total net OPEB liability $ 82,413,428 (concluded) 153 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 3.69% to 4.23%, 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, 2023 (amounts in thousands) Blended Blended Discount Rates Blended Discount Rates OPEB Plan Blended Rate -1% Discount Rates +1% Service Employees International Union (SEIU) Plan.............................. 4.12% $ 31,608,238 $ 27,032,496 $ 23,312,853 Bargaining Unit 5 Plan........................ 4.22% 5,103,992 4,182,632 3,463,835 Bargaining Unit 6 Plan........................ 4.12% 17,836,869 14,941,762 12,657,749 Bargaining Unit 9 Plan........................ 4.11% 4,556,134 3,893,304 3,353,802 Bargaining Unit 12 Plan...................... 4.13% 4,140,605 3,558,805 3,085,046 Other Funded Plans............................. 4.06% to 4.23% 15,966,711 13,528,254 11,569,846 Unfunded Plan..................................... 3.69% 17,610,446 15,276,175 13,371,931 Total.................................................................................. $ 96,822,995 $ 82,413,428 $ 70,815,062 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, 2023 (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 ............ $ 22,958,281 $ 27,032,496 $ 32,217,042 Bargaining Unit 5 Plan............................................................ 3,428,794 4,182,632 5,162,447 Bargaining Unit 6 Plan............................................................ 12,541,803 14,941,762 18,019,662 Bargaining Unit 9 Plan............................................................ 3,305,376 3,893,304 4,637,102 Bargaining Unit 12 Plan.......................................................... 3,055,449 3,558,805 4,191,198 Other Funded Plans................................................................. 11,400,552 13,528,254 16,252,502 Unfunded Plan......................................................................... 13,209,683 15,276,175 17,890,649 Total.................................................................................. $ 69,899,938 $ 82,413,428 $ 98,370,602 154 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 $737 million for the year ended June 30, 2023. 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. 155 State of California Annual Comprehensive Financial Report As of June 30, 2023, 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, 2023 (amounts in thousands) Service Employees International Union (SEIU) Bargaining Bargaining Bargaining Description Plan Unit 5 Plan Unit 6 Plan Unit 9 Plan OPEB Expense........................................................................ $ 27,955 $ 91,047 $ 275,599 $ 2,101 Deferred Outflows of Resources: Employer contributions subsequent to the measurement date...................................................... 1,369,690 143,430 513,110 164,497 Difference between expected and actual experiences........... 721,067 16,752 762,178 190,170 Changes of assumptions........................................................ 1,756,233 729,062 1,661,882 222,658 Net difference between projected and actual earnings on OPEB plan investments......................................................... 178,203 59,478 131,466 28,594 Deferred Inflows of Resources: Difference between expected and actual experiences........... 3,266,897 603,040 1,372,373 348,761 Changes of assumptions........................................................ 6,106,933 1,229,114 3,170,562 793,282 The $3.5 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 year ended June 30, 2024. 156 Notes to the Financial Statements Bargaining Other Funded Unit 12 Plan Plans Unfunded Plan Total $ (40,360) $ 209,215 $ 171,094 $ 736,651 175,199 593,704 527,794 3,487,424 193,301 900,772 998,272 3,782,512 180,637 1,022,814 1,016,876 6,590,162 26,013 112,951 — 536,705 419,696 1,547,101 1,527,926 9,085,794 677,937 3,089,601 3,954,528 19,021,957 157 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 2024 2025 2026 2027 2028 Thereafter Service Employees International Union (SEIU) Plan....................... $ (1,702,192) $ (1,320,976) $ (807,921) $ (829,263) $ (887,062) $ (1,170,913) Bargaining Unit 5.............. (240,702) (179,910) (163,359) (212,665) (230,226) — Bargaining Unit 6.............. (601,059) (344,699) (294,166) (320,774) (426,711) — Bargaining Unit 9.............. (181,039) (120,944) (101,081) (102,256) (109,653) (85,648) Bargaining Unit 12............ (200,962) (126,257) (121,322) (104,322) (89,921) (54,898) Other Funded Plans........... (660,935) (510,643) (402,509) (331,353) (316,459) (378,266) Unfunded Plan................... (921,501) (681,068) (445,918) (413,849) (447,663) (557,307) Total............................... $ (4,508,390) $ (3,284,497) $ (2,336,276) $ (2,314,482) $ (2,507,695) $ (2,247,032) 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, 2022 (measurement date), and the remaining 52 valuations had a measurement date of June 30, 2022. One of the courts had an actuarial valuation date of December 31, 2021, and 53 courts were valued as of June 30, 2021. 158 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 Plans 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 3.69%. Blended and single rates ranging from Single rates ranging from 6.50% to 3.69% to 7.00%. 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 2034 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, 2022 total OPEB liability consist of the 20-year Municipal G.O. Bond AA Index rate of 3.69% as of June 30, 2022, 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 3.69% 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 $1.9 billion and fiduciary net position of $289 million, which resulted in a net OPEB liability of $1.6 billion as of June 30, 2023, reported in governmental activities. For the year ended June 30, 2023, the State recognized OPEB expense of $43 million. At June 30, 2023, the State reported deferred outflows of resources of $288 million and deferred inflows of resources of $517 million. Deferred outflows of resources included $92 million from OPEB contributions made subsequent to the measurement date, which will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2024. 159 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, 2023, 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 $2.5 billion. As of June 30, 2023, the general obligation commercial paper program had $1.3 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, 2023, the enterprise fund commercial paper program had $250 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, 2023, $152 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 AND SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS The State leases land, buildings, equipment, and other assets as a lessee under a variety of non- cancelable long-term lease agreements. The State also has noncancelable subscription-based information technology arrangements (SBITAs) for the right to use information technology software. As of June 30, 2023, the primary government had a lease liability of $2.5 billion and a subscription liability of $136 million for governmental activities. For business-type activities, the lease liability was $358 million, and the subscription liability was $67 million. The State is required to make principal and interest payments through maturity of the lease and SBITA agreements. For governmental activities, the required payments are discounted using either the rates explicit in the lease and SBITA agreements or the State’s incremental borrowing rates. The State’s incremental borrowing rates ranged from 2.40% to 3.22%, depending on the duration of the lease or subscription term at the inception of each lease or SBITA agreement during the 2022-23 fiscal year. Required payments for business-type activities are discounted using the rates explicit in the lease and SBITA agreements, the State’s incremental borrowing rates, or other determined incremental borrowing rates. 160 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 - Lease Liability (amounts in thousands) Primary Government Governmental Activities Business-type Activities Total Year Ending June 30 Principal Interest Principal Interest Principal Interest 2024............................................................ $ 451,739 $ 30,426 $ 39,058 $ 8,742 $ 490,797 $ 39,168 2025............................................................ 382,965 26,209 38,423 7,893 421,388 34,102 2026............................................................ 328,483 22,549 30,321 7,119 358,804 29,668 2027............................................................ 275,655 19,065 25,230 6,515 300,885 25,580 2028............................................................ 242,969 16,031 20,908 5,965 263,877 21,996 2029-2033................................................... 573,189 43,836 85,701 22,832 658,890 66,668 2034-2038................................................... 208,716 10,226 62,012 13,038 270,728 23,264 2039-2043................................................... 39,818 1,904 36,076 5,953 75,894 7,857 2044-2048................................................... 4,751 627 17,218 2,197 21,969 2,824 2049-2053................................................... 3,430 282 3,300 81 6,730 363 Thereafter.................................................... 2,160 270 201 888 2,361 1,158 Total........................................................... $ 2,513,875 $ 171,425 $ 358,448 $ 81,223 $ 2,872,323 $ 252,648 Less: current portion................................... 451,739 39,058 490,797 Lease liability, net of current portion..... $ 2,062,136 $ 319,390 $ 2,381,526 161 State of California Annual Comprehensive Financial Report Table 45 includes the principal and interest requirements to maturity for the subscription liability of the primary government. Table 45 Schedule of Principal and Interest Requirements to Maturity - Subscription Liability (amounts in thousands) Primary Government Governmental Activities Business-type Activities Total Year Ending June 30 Principal Interest Principal Interest Principal Interest 2024............................................................ $ 83,327 $ 2,227 $ 35,711 $ 2,943 $ 119,038 $ 5,170 2025............................................................ 39,382 953 18,760 1,396 58,142 2,349 2026............................................................ 11,447 216 7,599 468 19,046 684 2027............................................................ 2,239 26 1,668 188 3,907 214 2028............................................................ 68 — 1,137 122 1,205 122 2029-2033................................................... — — 1,929 114 1,929 114 Total........................................................... $ 136,463 $ 3,422 $ 66,804 $ 5,231 $ 203,267 $ 8,653 Less: current portion................................... 83,327 35,711 119,038 Subscription liability, net of current portion........................................................ $ 53,136 $ 31,093 $ 84,229 Certain lease and SBITA agreements require variable payments that are not included in the lease and subscription liabilities or related right-to-use lease and SBITA assets. The primary government recognized expenses of $101 million from variable lease payments and $5 million from subscription variable payments for the year ended June 30, 2023. As of June 30, 2023, 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 and subscription liabilities for information technology software. Additional disclosures for the University of California’s lease and subscription liabilities 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, 2023, the primary government had commitments of $8.9 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 $7.8 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 $10.6 billion for various education programs, $3.5 billion for housing and community development programs, $746 million for terrorism prevention and disaster-preparedness response projects, $699 million for services provide under various public health programs, $406 million for community service programs, $194 million for health services related to 162 Notes to the Financial Statements Medi-Cal to private individuals, $41 million for planning and research program, and $31 million for services provided under the child support program. The primary government had other commitments, totaling $29.4 billion, that are not included as a liability on the Balance Sheet or the Statement of Net Position. The $29.4 billion in commitments includes grant agreements totaling approximately $21.5 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 $29.4 billion in commitments includes $3.4 billion in undisbursed loan commitments to qualified agencies for clean water projects and $1.7 billion in undisbursed loan commitments for various programs aimed at providing housing and emergency shelter to persons in need. The $29.4 billion in commitments also includes contracts of $1.0 billion 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 $1.2 billion for CSU construction projects. In addition, CSU participates in forward-purchase contracts of electricity. As of June 30, 2023, CSU’s obligation under these special purchase arrangements requires it to purchase at fixed prices an estimated total of $25 million in electricity through December 2024. The California State Lottery Commission had commitments of $610 million for gaming and telecommunication systems and services. The primary government also had commitments of $36 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, 2023, the primary government encumbered expenditures of $12.0 billion for the General Fund, $5.0 billion for the Transportation Fund, $2.5 billion for the Environmental and Natural Resources Fund, $19 million for the Health Care Related Programs Fund, and $2.0 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, 2023, 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. 163 State of California Annual Comprehensive Financial Report 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, 2023, the State had $70.7 billion in outstanding general obligation bonds related to governmental activities and $663 million related to business-type activities. In addition, $26.6 billion in long-term general obligation bonds had been authorized but not issued, of which $25.8 billion is related to governmental activities and $804 million is related to business-type activities. The total amount authorized but not issued (which may first be issued as commercial paper notes) includes $9.1 billion authorized by the applicable finance committees for issuance in the form of commercial paper notes or bonds. In addition, the State had $1.3 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, 2023. A. Variable-rate General Obligation Bonds The State issues both fixed and variable-rate general obligation bonds. As of June 30, 2023, the State had $727 million in variable-rate general obligation bonds outstanding, consisting of $219 million in daily-rate bonds with credit enhancement, and $508 million in weekly-rate bonds with credit enhancement. The interest rates associated with the credit-enhanced bonds are determined by the remarketing agents, 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 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 bond documents. Upon a tender, the remarketing agent 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 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 164 Notes to the Financial Statements applicable credit agreement. A bank bond may be remarketed at any time during the amortization period. There were no bank bonds during the 2022-23 fiscal year. The letters of credit for the Series 2003 variable-rate bonds have expiration dates of December 16, 2024; August 25, 2025; and May 10, 2028. 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 November 18, 2024; April 22, 2025; and May 8, 2026. 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 2022-23 fiscal year. B. Build America Bonds As of June 30, 2023, 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 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. 165 State of California Annual Comprehensive Financial Report C. Debt Service Requirements Table 46 shows the debt service requirements for all general obligation bonds as of June 30, 2023. The estimated debt service requirements for the $727 million variable-rate general obligation bonds are calculated using the actual interest rates in effect on June 30, 2023. 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 46 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 2024................................. $ 3,453,370 $ 3,469,705 $ 6,923,075 $ 4,010 $ 23,430 $ 27,440 2025................................. 3,477,330 3,320,487 6,797,817 10,225 23,296 33,521 2026................................. 3,490,720 3,160,768 6,651,488 6,965 23,125 30,090 2027................................. 3,609,420 2,993,510 6,602,930 26,585 22,686 49,271 2028................................. 3,750,005 2,831,367 6,581,372 23,880 21,987 45,867 2029 - 2033...................... 18,493,590 11,650,038 30,143,628 177,230 93,797 271,027 2034 - 2038...................... 16,579,470 7,242,772 23,822,242 105,675 69,220 174,895 2039 - 2043...................... 10,662,220 2,976,972 13,639,192 104,380 53,325 157,705 2044 - 2048...................... 4,784,950 992,098 5,777,048 136,615 29,494 166,109 2049 - 2053...................... 2,365,000 208,728 2,573,728 67,220 7,801 75,021 Total.................................. $ 70,666,075 $ 38,846,445 $ 109,512,520 $ 662,785 $ 368,161 $ 1,030,946 D. General Obligation Bond Defeasances 1. Current Year Activity On September 20, 2022, the primary government issued $1.0 billion in general obligation bonds to current refund $1.1 billion in outstanding fixed and variable-rate general obligation bonds with principal redemptions scheduled in the fiscal years ended June 30, 2024 to 2033, 2036 to 2037, and 2043. 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 $115 million and resulted in an economic gain of $79 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 3.56% per year over the life of the new bonds. On November 3, 2022, the primary government issued $1.2 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 2033, 2038, and 2043 to 2048. 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 $137 million and resulted in an economic gain of $93 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 3.77% per year over the life of the new bonds. 166 Notes to the Financial Statements On November 17, 2022, the primary government issued $37 million in general obligation bonds to advance refund $37 million in outstanding fixed rate general obligation bonds with principal redemptions scheduled in the fiscal years ended June 30, 2027, 2033, 2036, and 2044. 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 $27 million. The purpose of this refunding was to effect a favorable reorganization of the debt structure of the State. On April 13, 2023, the primary government issued $1.2 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, 2026 to 2028, 2030, 2032 to 2034, 2037, and 2043. 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 $198 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 3.05% 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, 2023, there are $37 million in 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 $2.4 billion, payable through 2041. Interest paid in the current year totaled $59 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 167 State of California Annual Comprehensive Financial Report 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 $9.4 billion, payable through 2066. 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 $700 million, while Tobacco Settlement Revenue and interest earned totaled $476 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 $10.9 billion, payable through 2048. 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, 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. 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 the fiscal year 2022-23, which may be found on its website at www.ucop.edu. 168 Notes to the Financial Statements 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. 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 the fiscal year 2022-23, which may be found on its website at www.CalHFA.ca.gov. Table 47 shows outstanding revenue bonds of the primary government and the discretely presented component units. Table 47 Schedule of Revenue Bonds Payable June 30, 2023 (amounts in thousands) Primary government Governmental activities Transportation Fund....................................................................................................................... $ 426 Public Buildings Construction Fund.............................................................................................. 8,585,648 Nonmajor governmental funds: Golden State Tobacco Securitization Corporation Fund............................................................ 5,770,403 No Place Like Home Program.................................................................................................... 1,741,435 Total governmental activities................................................................................................... 16,097,912 Business-type activities Water Resources Fund................................................................................................................... 3,392,570 California State University............................................................................................................. 9,107,077 Nonmajor enterprise funds............................................................................................................. 2,105,866 Total business-type activities.................................................................................................... 14,605,513 Total primary government.................................................................................................... 30,703,425 Discretely presented component units University of California................................................................................................................. 31,893,528 California Housing Finance Agency.............................................................................................. 40,955 Nonmajor component units............................................................................................................ 920,404 Total discretely presented component units........................................................................ 32,854,887 Total revenue bonds payable............................................................................................... $ 63,558,312 169 State of California Annual Comprehensive Financial Report Table 48 shows the debt service requirements for fixed-rate and variable-rate bonds. It excludes unamortized premiums and discounts that are included in Table 48. Table 48 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 * 2024......................... $ 702,726 $ 584,369 $ 576,360 $ 504,852 $ 714,278 $ 1,322,695 2025......................... 723,255 554,763 592,485 482,061 1,098,584 1,293,702 2026......................... 748,020 525,468 601,745 459,598 1,168,208 1,253,503 2027......................... 781,290 494,718 600,115 439,310 1,201,496 1,217,688 2028......................... 818,300 466,794 626,530 418,710 789,546 1,180,772 2029-2033............... 3,899,440 1,956,086 3,004,850 1,735,238 5,972,615 5,274,441 2034-2038 ............... 3,698,295 1,273,839 2,456,100 1,158,325 4,555,639 4,071,921 2039-2043 ............... 1,926,124 831,086 1,850,495 758,127 4,591,311 2,947,981 2044-2048 ............... 973,595 587,672 1,873,320 390,504 4,232,158 1,914,562 2049-2053 ............... 1,004,120 86,702 1,141,470 98,629 3,676,002 1,060,030 2054-2058 ............... — — 107,640 14,212 339,408 592,183 2059 and th ereafter.. 54,164 — — — 2,590,544 4,379,579 Total........................... $ 15,329,329 $ 7,361,497 $ 13,431,110 $ 6,459,566 $ 30,929,789 $ 26,509,057 * Includes interest on variable-rate bonds based on rates in effect on June 30, 2023. D. Revenue Bond Defeasances 1. Current Year – Governmental Activities During the 2022-23 fiscal year, the GSTSC issued $218 million in Enhanced Tobacco Settlement Asset-Backed refunding bonds. The bond proceeds were used to current refund $361 million 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 $316 million and resulted in an economic gain of $88 million. During the 2022-23 fiscal year, the SPWB issued $711 million in lease revenue refunding bonds. The bond proceeds were used to refund $868 million 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 $177 million and resulted in an economic gain of $142 million. The lease revenue bonds are reported in the Public Buildings Construction Fund, an internal service fund. 170 Notes to the Financial Statements 2. Current Year – Business-type Activities In September 2022, the Department of Water Resources issued $248 million in tax-exempt water system revenue bonds to refund $149 million in outstanding water system 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 liability for those bonds has been removed from the financial statements. The refunding decreased debt service payments by $4 million and resulted in an economic gain of $1 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, 2023, the outstanding balance of defeased revenue bonds was $599 million for business-type activities. Of this amount, the outstanding balance of bonds that were defeased using the State’s own existing resources was $5 million. All defeased revenue bonds for governmental activities were redeemed by June 30, 2023. 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 $6.0 billion as of June 30, 2023. 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 $8.4 billion is discounted to $6.0 billion using a 3.5% interest rate. Of the total discounted liability, $634 million is a current liability, of which $470 million is included in the General Fund, $160 million in the special revenue funds, and $5 million in the internal service funds. The remaining $5.4 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. 171 State of California Annual Comprehensive Financial Report Table 49 shows the changes in the self-insurance claims liability for the primary government. Table 49 Schedule of Changes in Self-insurance Claims Year Ended June 30 (amounts in thousands) 2023 2022 Unpaid claims, beginning..................................................................................................... $ 5,472,227 $ 4,953,720 Incurred claims..................................................................................................................... 1,244,814 1,112,513 Claim payments.................................................................................................................... (680,194) (594,006) Unpaid claims, ending..................................................................................................... $ 6,036,847 $ 5,472,227 172 Notes to the Financial Statements This page intentionally left blank 173 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 50 shows the amounts due from and due to other funds. Table 50 Schedule of Due From Other Funds and Due To Other Funds June 30, 2023 (amounts in thousands) Due To Environmental Health Care and Natural Related Nonmajor General Federal Transportation Resources Programs Governmental Due From Fund Fund Fund Fund Fund Fund Governmental funds General Fund ................................... $ — $ — $ 40,856 $ — $ — $ 2,427,020 Federal Fund.................................... 2,996,607 — 653,237 87,527 — 91,769 Transportation Fund ........................ — — — 49,415 — 206,721 Environmental and Natural Resources Fund.............................. 147,578 — — — — 14,394 Health Care Related Programs Fund............................... 3,701,292 152,800 — 38 — 4,568 Nonmajor governmental funds ........ 66,526 — 4,442 18,941 46,453 21,076 Total governmental funds.......... 6,912,003 152,800 698,535 155,921 46,453 2,765,548 Enterprise funds Water Resources Fund..................... — 15 — 315 — — State Lottery Fund ........................... 511 — — — — 595,589 Nonmajor enterprise funds .............. 985 — 6 21,286 — 556 Total enterprise funds............... 1,496 15 6 21,601 — 596,145 Internal service funds...................... 20,304 12,416 102,443 147,516 12,350 95,982 Total due from other funds... $ 6,933,803 $ 165,231 $ 800,984 $ 325,038 $ 58,803 $ 3,457,675 174 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 $ — $ 48,576 $ 2,833 $ 2,545 $ 308,315 $ 1,081,828 $ 3,911,973 — 379 — 25,094 10,769 151 3,865,533 — — — — 7,997 50,923 315,056 — — — 2,000 39,294 — 203,266 — — — — 655 — 3,859,353 — — — — 85,369 4 242,811 — 48,955 2,833 29,639 452,399 1,132,906 12,397,992 — — — — 132,983 — 133,313 — — — — — — 596,100 — — — — 209 68 23,110 — — — — 133,192 68 752,523 7,391 31,002 — 10,142 251,244 1,229 692,019 $ 7,391 $ 79,957 $ 2,833 $ 39,781 $ 836,835 $ 1,134,203 $ 13,842,534 175 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 $2.0 billion of interfund loans. There is an additional $68 million reported as loans receivable from entities outside of the State’s primary government. Table 51 shows the primary government’s interfund receivables and payables. Table 51 Schedule of Interfund Receivables and Payables June 30, 2023 (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............................................................ $ — $ 134,189 $ 1,259,305 $ 149,051 Transportation Fund.................................................. — — — — Environmental and Natural Resources Fund....................................................... 516,389 10,000 — — Nonmajor governmental funds................................. 8,752 31,448 — — Total governmental funds................................... 525,141 175,637 1,259,305 149,051 Enterprise funds Water Resources Fund.............................................. — 603 7,590 1,090 State Lottery Fund.................................................... — 135 1,697 244 California State University Fund.............................. — 1,429 18,004 2,587 Nonmajor enterprise funds....................................... 21,720 18 226 32 Total enterprise funds.......................................... 21,720 2,185 27,517 3,953 Internal service funds............................................... 3,367,552 752 9,463 1,360 Total interfund receivables............................... $ 3,914,413 $ 178,574 $ 1,296,285 $ 154,364 176 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 $ 865,231 $ — $ 227,154 $ 6,387 $ 21,651 $ 29,973 $ 2,692,941 — — — — 642 — 642 — — — — 2,419 — 528,808 — — — — — — 40,200 865,231 — 227,154 6,387 24,712 29,973 3,262,591 3,261 — 1,662 47 39 219 14,511 729 — 371 10 9 49 3,244 7,735 — 3,942 111 92 520 34,420 97 — 49 2 1 7 22,152 11,822 — 6,024 170 141 795 74,327 4,066 183,169 2,072 58 16,003 273 3,584,768 $ 881,119 $ 183,169 $ 235,250 $ 6,615 $ 40,856 $ 31,041 $ 6,921,686 177 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 52 shows the amounts due from the primary government and due to component units. Table 52 Schedule of Due From Primary Government and Due To Component Units June 30, 2023 (amounts in thousands) Due To Component Units University Nonmajor of Component Due From California Units Total Governmental funds General Fund....................................................................................... $ 264,995 $ — $ 264,995 Transportation Fund............................................................................ 6,788 — 6,788 Environmental and Natural Resources Fund...................................... 3,420 128 3,548 Nonmajor governmental funds........................................................... 37,089 — 37,089 Total governmental funds............................................................. 312,292 128 312,420 Total due from primary government....................................... $ 312,292 $ 128 $ 312,420 178 Notes to the Financial Statements This page intentionally left blank 179 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 $6.0 billion to the California State University, an enterprise fund. The General Fund also transferred $5.5 billion to nonmajor governmental funds, mainly for support of trial courts and mental health services. The Transportation Fund transferred $1.4 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 $700 million to the General Fund for administration of the Unemployment Insurance Program. Table 53 shows interfund transfers of the primary government. Table 53 Schedule of Interfund Transfers June 30, 2023 (amounts in thousands) Transferred To Environmental and Natural General Transportation Resources Transferred From Fund Fund Fund Governmental funds General Fund.................................................................................. $ — $ 10,805 $ 63,825 Federal Fund................................................................................... 700,073 13,601 16,393 Transportation Fund....................................................................... 166 — 17,620 Environmental and Natural Resources Fund.................................. 92,371 728 — Health Care Related Programs Fund.............................................. — — — Nonmajor governmental funds....................................................... 63,901 31 26,201 Total governmental funds................................................ 856,511 25,165 124,039 Internal service funds...................................................................... 32,825 — — Total transfers from other funds.................................. $ 889,336 $ 25,165 $ 124,039 180 Notes to the Financial Statements Transferred To Health Care California Related Nonmajor State Internal Total Programs Governmental University Service Transfers To Fund Funds Fund Funds Other Funds $ 120,600 $ 5,490,512 $ 6,047,026 $ 95,140 $ 11,827,908 52 31,133 — 5,668 766,920 — 1,382,387 — — 1,400,173 — 5,094 — — 98,193 — 1,152 — — 1,152 138,279 162,513 — — 390,925 258,931 7,072,791 6,047,026 100,808 14,485,271 — 1,971 — 2,613 37,409 $ 258,931 $ 7,074,762 $ 6,047,026 $ 103,421 $ 14,522,680 181 State of California Annual Comprehensive Financial Report NOTE 19: FUND BALANCES, NET POSITION DEFICITS, AND ENDOWMENTS A. Fund Balances Table 54 shows the composition of the governmental fund balances. Table 54 Schedule of Fund Balances by Function June 30, 2023 (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.... $ 3,914,412 $ — $ — $ — $ — $ — Long-term loans receivable ........... 36,507 — — — — — Other .............................................. — — — — — 95,021 Total nonspendable................... 3,950,919 — — — — 95,021 Restricted General government....................... 153,220 590,099 — 13,059 24,730 6,890,276 Education ...................................... 84,013 — 1,226 — 265,172 1,170,064 Health and human services ........... 2,110,510 235,604 — 86,402 1,186,333 5,773,930 Natural resources and environmental protection............. (133) 718 — 6,704,540 635 497,534 Business, consumer services, and housing.................................. 829 383,846 211,195 56,379 — 6,673,628 Transportatio n ................................ — — 10,514,609 — — 117,242 Corrections and rehabilitation........ 229,593 — — — — 240,142 Budget stabilization ...................... 22,252,422 — — — — — Total restricted .......................... 24,830,454 1,210,267 10,727,030 6,860,380 1,476,870 21,362,816 Committed General government....................... 2,201,593 — — 14,200 — 631,555 Education ...................................... 557,723 — — — — 55,525 Health and human services ........... 1,400,883 — 428 — 558,280 397,573 Natural resources and environmental protection............. 43,376 — 3 13,711,566 — 496,164 Business, consumer services, and housing.................................. — — — 116,474 — 123,222 Transportation................................ — — 49,261 — — 3,386 Corrections and rehabilitation........ 7,316 — — — — 1,047 Total committed 4,210,891 — 49,692 13,842,240 558,280 1,708,472 Assigned General government....................... 6,592,376 — — — — 77,937 Education ...................................... 69,823 — — — — — Health and human services ........... 6,618,578 — — — — — Natural resources and environmental protection............. 5,227,485 — — — — — Business, consumer services, and housing.................................. 667,319 — — — — — Transportation................................ 616,898 — — — — — Corrections and rehabilitation........ 921,804 — — — — — Total assigned 20,714,283 — — — — 77,937 Unassigned....................................... 10,297,141 (46,430,315) — — — (19) Total fund balances......................... $ 64,003,688 $ (45,220,048) $ 10,776,722 $ 20,702,620 $ 2,035,150 $ 23,244,227 182 Notes to the Financial Statements B. Net Position Deficits Table 55 shows the net position deficit balances. Table 55 Schedule of Net Position Deficits June 30, 2023 (amounts in thousands) Governmental Internal Service Enterprise Funds Funds Funds Federal Fund.............................................................................. $ 45,220,048 $ — $ — Architecture R evolving Fund.................................................... — 431 — Service Revolving Fund ........................................................... — 669,839 — Technology Services Revolving Fund...................................... — 349,112 — Water Resources Revolving Fund............................................. — 18,633 — Other Internal Service Programs Fund...................................... — 737,626 — State Lottery Fund............................... . ..................................... — — 279,071 Unemployment Programs Fund ............................................... — — 12,091,948 California State University Fund ............................................... — — 13,895,901 Total net position deficits..................................................... $ 45,220,048 $ 1,775,641 $ 26,266,920 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, 2023, the value of restricted endowments and gifts totaled $27.6 billion, and unrestricted endowments and gifts totaled $11.0 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 $3.6 billion at June 30, 2023. 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 $1.9 billion and $19 million, respectively. NOTE 20: CONDUIT 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, 2023, CalHFA had $5.5 billion of conduit debt obligations outstanding. CalHFA provides a limited commitment for such debt. Neither CalHFA, nor the State assumes the liabilities for the debt service of the debt issuances in the event of default. Revenues and other assets pledged and assigned under applicable indentures and agreements secure the debt. 183 State of California Annual Comprehensive Financial Report 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. As of June 30, 2023, the nonmajor component units had approximately $4.7 billion of conduit debt obligations outstanding. The nonmajor component units provide a limited commitment for such debt. Neither the nonmajor component units, nor the State assume the liabilities for the debt service of the debt issuances in the event of default. Revenues and other assets pledged and assigned under applicable indentures and agreements secure the debt. 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, 2023; those in progress as of June 30, 2023, and settled or decided against the primary government as of December 5, 2024; and those having a high probability of resulting in a decision against the primary government as of December 5, 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: 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 (DWR) 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 seeking non-contract-based (writ of mandamus) relief. DWR and the Department of Fish and Wildlife 184 Notes to the Financial Statements have prepared the administrative records relative to their administrative decisions that are being challenged, and have augmented 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. 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 was 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 that 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 judgment 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 was argued on April 10, 2024. In July 2024, the appellate court vacated the district court’s decision and dismissed the underlying proceedings as prudently unripe on the basis that the 2021 determination did not itself result in the denial of certification of any particular grant 185 State of California Annual Comprehensive Financial Report application. This outcome effectively requires the parties to re-litigate their claims anew upon the denial of certification (or approval of same) for a specific grant application. There was no settlement or monetary judgment against the State for this case; however, there is a likelihood of follow-up litigation where similar claims would be litigated. There is a reasonable possibility that the outcome of those claims will be unfavorable to the State. 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 judgment on March 1, 2024, dismissing Bear Mountain’s breach of contract action. The State is pursuing cross claims against defendants and third parties. Plaintiff is seeking damages of $799 million for the State’s cancellation of a contract for delivery of PPE. 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, 2023, but prior to the date of the auditor’s report. A. Debt Issuances In July 2023 and August 2024, the California State University (CSU) issued $1.6 billion 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. In August 2023, and January, March, and July 2024, the University of California, a major component unit, through its conduit, issued a total of $4.9 billion in revenue bonds to finance or refinance certain capital projects of the University, refund certain prior bonds, purchase obligations of the United States and certain federal agencies and pay related issuance costs. In September, October, and November 2023, and March, April, August, and October 2024, the primary government issued a total of $12.5 billion in General Obligation bonds to fund various capital projects 186 Notes to the Financial Statements 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 for debt service savings. In September and October 2023, and April, September, and October 2024, the State Public Works Board issued a total of $3.0 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, fund capitalized interest on bonds, and pay related issuance costs. In February 2024, the California Infrastructure and Economic Development Bank, a component unit, issued a total of $273 million in revenue bonds to finance Clean Water State Revolving Fund project obligations, and pay related costs of issuance. In July 2024, the California Earthquake Authority issued $250 million in revenue bonds to enhance its claim-paying capacity. In October 2024, the primary government issued a total of $230 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 funding deferred payment assistant loans for the closing costs of the residential property. B. Other In recent years California has faced historically lengthy and severe wildfire seasons, with millions of acres burned annually. The 2023 fire season was less catastrophic by comparison, with just under 7,400 fires and 333,000 acres burned. The 2024 fire season saw approximately 7,900 fires and 1,049,000 acres burned. The 2024-25 Budget Act maintains $2.6 billion in investments over seven years for the restoration of forest and wildland health, in an effort to reduce the risk of wildfires. California continues to experience large swings between drought and flood conditions; these swings are becoming more severe due to climate change. The 2024-25 Budget Act maintains a total of $6.7 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 a series of atmospheric river storms during December 2022 and continuing into January 2023, the federal government extended the 2022 tax payment and filing deadlines 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 2023-24 fiscal year. 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 187 State of California Annual Comprehensive Financial Report 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, 2023, the State had $17.7 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 $2.9 billion after the fiscal year to a balance of approximately $20.5 billion as of November 15, 2024. In August 2024, 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, 2023, which will be used to measure the State’s net Other Post-Employment Benefits (OPEB) liability as of June 30, 2024. Based on the Actuarial Valuation Report, the State will report a net OPEB liability as of June 30, 2024, of $85.2 billion, an increase of $2.8 billion from the net OPEB liability reported as of June 30, 2023. The report is available on the State Controller’s Office website, at www.sco.ca.gov. In the November 5, 2024, general election, California voters approved the following propositions: • Proposition 2 authorizes the State to issue up to $10.0 billion in bonds for repair, upgrade, and construction of K-12 public schools (including charter schools). The bonds will result in estimated increased state education costs of up to $500 million annually. • Proposition 4 authorizes the State to issue up to $10.0 billion in bonds for various projects to reduce climate risks and impacts. The projects include increasing water resilience and available safe drinking water supplies; wildfire prevention and extreme heat mitigation; the protection of natural lands, parks, and wildlife; the protection of coastal lands, bays and oceans; clean energy infrastructure; and agriculture. The bonds will result in estimated increased costs of up to $400 million annually. • Proposition 35 makes permanent the existing Managed Care Organization Provider Tax (“health plan tax”), which was set to expire in 2026. This tax provides revenues to fund health care services including primary and specialty care, emergency care, family planning, mental health, and prescription drugs under Medi-Cal program. The proposition implements new rules that direct how the State must spend these tax revenues on Medi-Cal expenditures, which will result in estimated increased General Fund costs between $1.0 billion and $2.0 billion annually. In December 2023, the U.S. Department of Labor (DOL) released Unemployment Insurance Program Letter 05-24 which provided guidance to states to apply their finality laws to Coronavirus Aid, Relief, and Economic Security (CARES) Act Unemployment Compensation (UC) claims. In February 2024, the Employment Development Department (EDD) responded to this letter in reference to federal compliance monitoring findings by requesting DOL’s approval of its assertion that the California Unemployment Insurance Code’s finality laws apply to the State’s UC claims from federal pandemic programs, which are reported within $46.3 billion of other liabilities in the Federal Fund as of June 30, 2023. In May 2024, DOL accepted EDD’s assertion regarding the application of finality laws to its pandemic program UC claims. Due to the application of the guidance in Unemployment Insurance Program Letter 05-24, EDD should be able to recognize this event in the 2023-24 financial statements as a forgiveness of debt. 188 Required Supplementary Information State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios For the Past Nine Fiscal Years1 (amounts in thousands) 20143 20153 20163 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE MISCELLANEOUS2 Total pension liability Service cost....................................................................................... $ 1,477,762 $ 1,576,695 $ 1,668,682 Interest on total pension liability...................................................... 6,670,928 6,970,837 7,220,961 Differences between expected and actual experience....................... — 693,639 (101,381) Changes of assumptions................................................................... — — — Benefit payments, including refunds of employee contributions..... (4,844,631) (5,098,222) (5,346,864) Net change in total pension liability............................................. 3,304,059 4,142,949 3,441,398 Total pension liability – beginning.................................................... 88,885,115 92,189,174 96,332,123 Total pension liability – ending (a)................................................... $ 92,189,174 $ 96,332,123 $ 99,773,521 Plan fiduciary net position Contributions – employer................................................................. $ 2,156,312 $ 2,608,785 $ 2,818,406 Contributions – employee................................................................. 766,896 771,046 801,023 Net investment income..................................................................... 10,370,838 1,505,042 339,588 Benefit payments, including refunds of employee contributions..... (4,844,631) (5,098,222) (5,346,864) Net plan to plan resource movement................................................ — (354) (1,154) Administrative expense.................................................................... (86,473) (76,678) (41,497) Other miscellaneous income/(expense) — — — Net change in plan fiduciary net position..................................... 8,362,942 (290,381) (1,430,498) Plan fiduciary net position – beginning............................................ 60,017,620 68,380,562 68,090,181 Plan fiduciary net position – ending (b)........................................... $ 68,380,562 $ 68,090,181 $ 66,659,683 State’s net pension liability – ending (a) – (b).................................. $ 23,808,612 $ 28,241,942 $ 33,113,838 Plan fiduciary net position as a percentage of the total pension liability.......................................................................... 74.17 % 70.68 % 66.81 % Covered payroll.................................................................................... $ 10,019,739 $ 10,640,884 $ 11,189,932 State’s net pension liability as a percentage of covered payroll........... 237.62 % 265.41 % 295.93 % 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. *Restated 190 Required Supplementary Information 20173 20183 20193 20203 20213 20223 $ 1,927,531 $ 1,953,761 $ 2,042,862 $ 2,125,738 $ 2,212,280 $ 2,438,345 7,381,049 7,571,997 7,970,572 8,288,391 8,603,225 8,752,910 (387,041) 445,743 2,032,459 742,481 628,341 (1,115,641) 5,667,561 (1,377,556) — — — 3,728,965 (5,572,707) (5,865,849) (6,190,738) (6,513,916) (6,851,024) (7,174,817) 9,016,393 2,728,096 5,855,155 4,642,694 4,592,822 6,629,762 99,773,521 108,789,914 111,518,010 117,373,165 122,015,859 126,608,681 $ 108,789,914 $ 111,518,010 $ 117,373,165 $ 122,015,859 $ 126,608,681 $ 133,238,443 $ 3,094,941 $ 7,044,360 $ 3,777,484 $ 5,008,537 $ 3,778,435 $ 5,110,276 843,772 870,402 942,980 1,005,830 928,152 1,081,816 7,329,859 6,127,761 5,163,147 4,138,143 19,299,096 (7,836,089) (5,572,707) (5,865,849) (6,190,738) (6,513,916) (6,851,024) (7,174,817) (2,737) (1,340) (1,344) (4,213) (2,558) (2,559) (98,419) (112,592) (57,163) (118,050) (87,165) (64,984) — (213,815) 185 — — — 5,594,709 7,848,927 3,634,551 3,516,331 17,064,936 (8,886,357) 66,659,683 72,254,392 80,103,319 83,737,870 87,254,201 104,318,730 * $ 72,254,392 $ 80,103,319 $ 83,737,870 $ 87,254,201 $ 104,319,137 $ 95,432,373 $ 36,535,522 $ 31,414,691 $ 33,635,295 $ 34,761,658 $ 22,289,544 $ 37,806,070 66.42 % 71.83 % 71.34 % 71.51 % 82.39 % 71.63 % $ 11,591,576 $ 12,254,527 $ 12,913,195 $ 13,579,610 $ 12,909,399 $ 14,727,596 315.19 % 256.35 % 260.47 % 255.98 % 172.66 % 256.70 % (continued) 191 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Nine Fiscal Years1 (amounts in thousands) 20143 20153 20163 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE INDUSTRIAL2 Total pension liability Service cost...................................................................................... $ 92,324 $ 100,006 $ 107,868 Interest on total pension liability...................................................... 241,278 257,527 273,308 Differences between expected and actual experience...................... — 26,976 7,009 Changes of assumptions................................................................... — — — Benefit payments, including refunds of employee contributions..... (146,977) (157,029) (167,359) Net change in total pension liability............................................. 186,625 227,480 220,826 Total pension liability – beginning................................................... 3,181,282 3,367,907 3,595,387 Total pension liability – ending (a)................................................... $ 3,367,907 $ 3,595,387 $ 3,816,213 Plan fiduciary net position Contributions – employer................................................................. $ 88,516 $ 107,238 $ 116,730 Contributions – employee................................................................ 44,459 49,482 52,775 Net investment income..................................................................... 423,076 62,385 14,444 Benefit payments, including refunds of employee contributions..... (146,977) (157,029) (167,359) Net plan to plan resource movement................................................ — 30 216 Administrative expense.................................................................... (3,583) (3,252) (1,758) Other miscellaneous income/(expense)............................................ — — — Net change in plan fiduciary net position..................................... 405,491 58,854 15,048 Plan fiduciary net position – beginning........................................... 2,420,958 2,826,449 2,885,303 Plan fiduciary net position – ending (b)........................................... $ 2,826,449 $ 2,885,303 $ 2,900,351 State’s net pension liability – ending (a) – (b)................................. $ 541,458 $ 710,084 $ 915,862 Plan fiduciary net position as a percentage of the total pension liability.......................................................................... 83.92 % 80.25 % 76.00 % Covered payroll.................................................................................... $ 532,490 $ 577,711 $ 625,220 State’s net pension liability as a percentage of covered payroll.......... 101.68 % 122.91 % 146.49 % 192 Required Supplementary Information 20173 20183 20193 20203 20213 20223 $ 124,792 $ 119,521 $ 127,006 $ 131,508 $ 136,918 $ 145,767 290,058 301,134 324,909 343,896 363,230 374,401 21,516 (19,063) 106,233 24,610 21,852 (65,431) 245,450 (54,062) — — — 153,761 (177,654) (190,683) (205,544) (220,912) (238,188) (255,704) 504,162 156,847 352,604 279,102 283,812 352,794 3,816,213 4,320,375 4,477,222 4,829,826 5,108,928 5,392,740 $ 4,320,375 $ 4,477,222 $ 4,829,826 $ 5,108,928 $ 5,392,740 $ 5,745,534 $ 123,163 $ 241,062 $ 148,494 $ 244,773 $ 128,161 $ 187,745 54,114 58,404 61,338 65,268 58,867 67,664 322,150 272,379 233,027 191,982 911,996 (374,909) (177,654) (190,683) (205,544) (220,912) (238,188) (255,704) (141) 268 (754) (1,037) (663) 281 (4,282) (5,014) (2,558) (5,383) (4,090) (3,084) — (9,522) 8 — — — 317,350 366,894 234,011 274,691 856,083 (378,007) 2,900,351 3,217,701 3,584,595 3,818,606 4,093,297 4,950,153 * $ 3,217,701 $ 3,584,595 $ 3,818,606 $ 4,093,297 $ 4,949,380 $ 4,572,146 $ 1,102,674 $ 892,627 $ 1,011,220 $ 1,015,631 $ 443,360 $ 1,173,388 74.48 % 80.06 % 79.06 % 80.12 % 91.78 % 79.58 % $ 643,295 $ 695,014 $ 728,609 $ 765,840 $ 706,128 $ 802,709 171.41 % 128.43 % 138.79 % 132.62 % 62.79 % 146.18 % (continued) 193 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Nine Fiscal Years1 (amounts in thousands) 20143 20153 20163 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE SAFETY2 Total pension liability Service cost..................................................................................... $ 402,902 $ 422,634 $ 438,147 Interest on total pension liability.................................................... 663,219 734,333 786,096 Differences between expected and actual experience.................... — (4,150) (2,235) Changes of assumptions................................................................. — — — Benefit payments, including refunds of employee contributions... (429,353) (469,275) (502,427) Net change in total pension liability........................................... 636,768 683,542 719,581 Total pension liability – beginning.................................................. 8,682,750 9,626,597 10,310,139 Total pension liability – ending (a)................................................. $ 9,319,518 $ 10,310,139 $ 11,029,720 Plan fiduciary net position Contributions – employer............................................................... $ 339,232 $ 393,925 $ 401,108 Contributions – employee............................................................... 196,148 215,482 221,615 Net investment income................................................................... 1,162,050 175,677 42,258 Benefit payments, including refunds of employee contributions... (429,353) (469,275) (502,427) Net plan to plan resource movement.............................................. — 499 548 Administrative expense.................................................................. (9,945) (9,200) (4,966) Other miscellaneous income/(expense).......................................... — — — Net change in plan fiduciary net position................................... 1,258,132 307,108 158,136 Plan fiduciary net position – beginning.......................................... 6,583,260 7,841,392 8,148,500 Plan fiduciary net position – ending (b)......................................... $ 7,841,392 $ 8,148,500 $ 8,306,636 State’s net pension liability – ending (a) – (b)................................ $ 1,478,126 $ 2,161,639 $ 2,723,084 Plan fiduciary net position as a percentage of the total pension liability........................................................................ 84.14 % 79.03 % 75.31 % Covered payroll.................................................................................. $ 1,901,235 $ 2,003,777 $ 2,100,295 State’s net pension liability as a percentage of covered payroll........ 77.75 % 107.88 % 129.65 % 194 Required Supplementary Information 20173 20183 20193 20203 20213 20223 $ 497,129 $ 504,383 $ 536,173 $ 553,316 $ 564,198 $ 574,216 827,412 877,944 951,075 1,012,593 1,072,105 1,110,294 (109,901) (21,592) 227,078 16,473 (33,477) (238,531) 673,183 (41,225) — — — 455,219 (538,735) (578,504) (626,451) (677,362) (733,697) (788,819) 1,349,088 741,006 1,087,875 905,020 869,129 1,112,379 11,029,720 12,378,808 13,119,814 14,207,689 15,112,709 15,981,838 $ 12,378,808 $ 13,119,814 $ 14,207,689 $ 15,112,709 $ 15,981,838 $ 17,094,217 $ 433,232 $ 774,759 $ 523,076 $ 747,441 $ 429,347 $ 561,229 231,364 245,021 257,071 267,822 223,408 244,938 926,106 797,214 691,911 575,732 2,758,504 (1,131,785) (538,735) (578,504) (626,451) (677,362) (733,697) (788,819) 295 532 1,482 3,907 1,513 950 (12,264) (14,565) (7,524) (16,047) (12,272) (9,314) — (27,658) 24 — — — 1,039,998 1,196,799 839,589 901,493 2,666,803 (1,122,801) 8,306,636 9,346,634 10,543,433 11,383,022 12,284,515 14,951,366 * $ 9,346,634 $ 10,543,433 $ 11,383,022 $ 12,284,515 $ 14,951,318 $ 13,828,565 $ 3,032,174 $ 2,576,381 $ 2,824,667 $ 2,828,194 $ 1,030,520 $ 3,265,652 75.51 % 80.36 % 80.12 % 81.29 % 93.55 % 80.90 % $ 2,167,429 $ 2,339,642 $ 2,468,018 $ 2,566,403 $ 2,367,960 $ 2,633,568 139.90 % 110.12 % 114.45 % 110.20 % 43.52 % 124.00 % (continued) 195 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Nine Fiscal Years1 (amounts in thousands) 20143 20153 20163 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE PEACE OFFICERS AND FIREFIGHTERS2 Total pension liability Service cost..................................................................................... $ 816,836 $ 838,628 $ 861,694 Interest on total pension liability..................................................... 2,622,406 2,759,982 2,902,900 Differences between expected and actual experience..................... — 288,526 18,316 Changes of assumptions.................................................................. — — — Benefit payments, including refunds of employee contributions... (1,568,738) (1,697,676) (1,822,841) Net change in total pension liability............................................ 1,870,504 2,189,460 1,960,069 Total pension liability – beginning.................................................. 34,655,771 36,219,196 38,408,656 Total pension liability – ending (a)................................................. $ 36,526,275 $ 38,408,656 $ 40,368,725 Plan fiduciary net position Contributions – employer............................................................... $ 959,741 $ 1,146,192 $ 1,265,145 Contributions – employee............................................................... 331,956 366,419 381,185 Net investment income................................................................... 3,964,754 584,142 137,927 Benefit payments, including refunds of employee contributions... (1,568,738) (1,697,676) (1,822,841) Net plan to plan resource movement.............................................. — 194 114 Administrative expense................................................................... (33,334) (30,069) (16,295) Other miscellaneous income/(expense).......................................... — — — Net change in plan fiduciary net position.................................... 3,654,379 369,202 (54,765) Plan fiduciary net position – beginning.......................................... 22,713,610 26,367,989 26,737,191 Plan fiduciary net position – ending (b)......................................... $ 26,367,989 $ 26,737,191 $ 26,682,426 State’s net pension liability – ending (a) – (b)................................ $ 10,158,286 $ 11,671,465 $ 13,686,299 Plan fiduciary net position as a percentage of the total pension liability........................................................................ 72.19 % 69.61 % 66.10 % Covered payroll.................................................................................. $ 3,241,895 $ 3,115,287 $ 3,241,895 State’s net pension liability as a percentage of covered payroll........ 313.34 % 374.65 % 422.17 % 196 Required Supplementary Information 20173 20183 20193 20203 20213 20223 $ 980,897 $ 1,011,482 $ 1,044,955 $ 1,062,486 $ 1,111,888 $ 1,167,715 3,018,186 3,185,628 3,381,608 3,547,687 3,745,062 3,864,043 (286,527) 354,089 664,430 172,204 585,665 (805,030) 2,608,752 (25,104) — — — 2,190,080 (1,938,027) (2,065,007) (2,209,557) (2,359,940) (2,560,165) (2,735,400) 4,383,281 2,461,088 2,881,436 2,422,437 2,882,450 3,681,408 40,368,725 44,752,006 47,213,094 50,094,530 52,516,967 55,399,417 $ 44,752,006 $ 47,213,094 $ 50,094,530 $ 52,516,967 $ 55,399,417 $ 59,080,825 $ 1,427,240 $ 3,068,270 $ 1,665,872 $ 3,220,740 $ 1,310,946 $ 2,171,675 399,946 421,662 437,937 462,370 423,995 477,347 2,954,170 2,522,044 2,175,528 1,812,785 8,602,827 (3,524,276) (1,938,027) (2,065,007) (2,209,557) (2,359,941) (2,560,165) (2,735,400) 1,628 (104) 350 735 (66) 1,076 (39,395) (45,950) (23,765) (49,832) (38,396) (28,764) — (87,261) 77 — — — 2,805,562 3,813,654 2,046,442 3,086,857 7,739,141 (3,638,342) 26,682,426 29,487,988 33,301,642 35,348,084 38,434,941 46,175,076 * $ 29,487,988 $ 33,301,642 $ 35,348,084 $ 38,434,941 $ 46,174,082 $ 42,536,734 $ 15,264,018 $ 13,911,452 $ 14,746,446 $ 14,082,026 $ 9,225,335 $ 16,544,091 65.89 % 70.53 % 70.56 % 73.19 % 83.35 % 72.00 % $ 3,416,627 $ 3,557,011 $ 3,676,854 $ 3,904,615 $ 3,629,097 $ 4,035,339 446.76 % 391.10 % 401.06 % 360.65 % 254.20 % 409.98 % (continued) 197 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Nine Fiscal Years1 (amounts in thousands) 20143 20153 20163 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS CALIFORNIA HIGHWAY PATROL Total pension liability Service cost...................................................................................... $ 191,730 $ 198,665 $ 210,619 Interest on total pension liability...................................................... 724,474 764,348 809,691 Differences between expected and actual experience...................... — 75,593 125,614 Changes of assumptions................................................................... — — — Benefit payments, including refunds of employee contributions..... (460,991) (487,061) (516,723) Net change in total pension liability............................................. 455,213 551,545 629,201 Total pension liability – beginning................................................... 9,604,872 10,060,085 10,611,630 Total pension liability – ending (a)................................................... $ 10,060,085 $ 10,611,630 $ 11,240,831 Plan fiduciary net position Contributions – employer................................................................. $ 277,702 $ 351,197 $ 375,928 Contributions – employee................................................................ 83,161 85,791 86,111 Net investment income..................................................................... 1,005,007 146,782 33,918 Benefit payments, including refunds of employee contributions..... (460,991) (487,061) (516,723) Net plan to plan resource movement................................................ — (214) 292 Administrative expense.................................................................... (8,417) (7,600) (4,111) Other miscellaneous income/(expense)............................................ — — — Net change in plan fiduciary net position..................................... 896,462 88,895 (24,585) Plan fiduciary net position – beginning........................................... 5,759,985 6,656,447 6,745,342 Plan fiduciary net position – ending (b)........................................... $ 6,656,447 $ 6,745,342 $ 6,720,757 State’s net pension liability – ending (a) – (b)................................. $ 3,403,638 $ 3,866,288 $ 4,520,074 Plan fiduciary net position as a percentage of the total pension liability.......................................................................... 66.17 % 63.57 % 59.79 % Covered payroll.................................................................................... $ 765,283 $ 809,610 $ 808,032 State’s net pension liability as a percentage of covered payroll.......... 444.76 % 477.55 % 559.39 % 198 Required Supplementary Information 20173 20183 20193 20203 20213 20223 $ 237,064 $ 248,531 $ 257,384 $ 266,192 $ 268,009 $ 292,213 833,062 878,113 926,056 974,410 1,022,074 1,062,411 (158,392) 103,283 135,148 120,496 98,575 (178,097) 721,972 12,213 — — — 695,673 (543,456) (579,080) (612,298) (651,832) (695,055) (739,443) 1,090,250 663,060 706,290 709,266 693,603 1,132,757 11,240,831 12,331,081 12,994,141 13,700,431 14,409,697 15,103,300 $ 12,331,081 $ 12,994,141 $ 13,700,431 $ 14,409,697 $ 15,103,300 $ 16,236,057 $ 426,603 $ 978,060 $ 507,055 $ 559,585 $ 802,064 $ 628,308 91,116 95,482 100,080 103,159 95,784 109,080 747,272 639,591 556,379 450,669 2,200,671 (901,987) (543,456) (579,080) (612,298) (651,832) (695,055) (739,443) 1,050 330 265 638 1,773 252 (9,923) (11,583) (6,090) (12,800) (9,519) (7,428) — (21,997) 20 — — — 712,662 1,100,803 545,411 449,419 2,395,718 (911,218) 6,720,757 7,433,419 8,534,222 9,079,633 9,529,052 11,924,803 * $ 7,433,419 $ 8,534,222 $ 9,079,633 $ 9,529,052 $ 11,924,770 $ 11,013,585 $ 4,897,662 $ 4,459,919 $ 4,620,798 $ 4,880,645 $ 3,178,530 $ 5,222,472 60.28 % 65.68 % 66.27 % 66.13 % 78.95 % 67.83 % $ 851,427 $ 884,197 $ 933,689 $ 948,000 $ 882,119 $ 936,496 575.23 % 504.40 % 494.90 % 514.84 % 360.33 % 557.66 % (continued) 199 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Nine Fiscal Years1 (amounts in thousands) 20143 20153 20163 SINGLE-EMPLOYER PLANS JUDGES’ Total pension liability Service cost..................................................................................... $ 27,581 $ 27,841 $ 29,314 Interest on total pension liability..................................................... 140,256 133,181 107,514 Differences between expected and actual experience..................... — 57,568 (59,421) Changes of assumptions.................................................................. — 158,646 384,306 Benefit payments, including refunds of employee contributions.... (193,935) (201,868) (199,349) Net change in total pension liability............................................ (26,098) 175,368 262,364 Total pension liability – beginning.................................................. 3,383,310 3,357,212 3,532,580 Total pension liability – ending (a).................................................. $ 3,357,212 $ 3,532,580 $ 3,794,944 Plan fiduciary net position Contributions – employer................................................................ $ 191,148 $ 180,910 $ 192,287 Contributions – employee............................................................... 7,248 3,877 3,559 Net investment income.................................................................... 59 88 193 Benefit payments, including refunds of employee contributions.... (193,935) (201,867) (199,349) Administrative expense................................................................... (1,141) (1,227) (642) Other miscellaneous income/(expense)........................................... — 2,198 2,568 Net change in plan fiduciary net position.................................... 3,379 (16,021) (1,384) Plan fiduciary net position – beginning.......................................... 53,820 57,199 41,178 Plan fiduciary net position – ending (b).......................................... $ 57,199 $ 41,178 $ 39,794 State’s net pension liability – ending (a) – (b)................................ $ 3,300,013 $ 3,491,402 $ 3,755,150 Plan fiduciary net position as a percentage of the total pension liability......................................................................... 1.70 % 1.17 % 1.05 % Covered payroll................................................................................... $ 163,574 $ 28,770 $ 23,537 State’s net pension liability as a percentage of covered payroll......... 2017.44 % 12135.56 % 15954.24 % 200 Required Supplementary Information 20173 20183 20193 20203 20213 20223 $ 22,733 $ 19,131 $ 20,073 $ 17,026 $ 17,861 $ 10,345 115,067 109,395 99,427 79,720 64,481 93,559 (366,200) (121,259) 86,873 (41,794) 40,006 (92,633) (107,670) (20,879) 153,651 218,684 179,421 (598,096) (200,440) (207,823) (221,954) (213,234) (210,951) (210,491) (536,510) (221,435) 138,070 60,402 90,818 (797,316) 3,794,944 3,258,434 3,036,999 3,175,069 3,235,471 3,326,289 $ 3,258,434 $ 3,036,999 $ 3,175,069 $ 3,235,471 $ 3,326,289 $ 2,528,973 $ 204,475 $ 199,241 $ 195,903 $ 243,132 $ 225,824 $ 194,960 3,398 3,061 2,679 2,843 2,146 1,956 424 846 1,166 885 163 194 (200,440) (207,823) (221,954) (213,234) (210,951) (210,491) (1,771) (2,106) (10,032) (2,270) (1,731) (1,677) 2,395 (1,863) 2,776 2,202 2,462 2,305 8,481 (8,644) (29,462) 33,558 17,913 (12,753) 39,794 48,275 39,631 10,169 43,727 61,640 $ 48,275 $ 39,631 $ 10,169 $ 43,727 $ 61,640 $ 48,887 $ 3,210,159 $ 2,997,368 $ 3,164,900 $ 3,191,744 $ 3,264,649 $ 2,480,086 1.48 % 1.30 % 0.32 % 1.35 % 1.85 % 1.93 % $ 26,102 $ 24,007 $ 22,117 $ 16,017 $ 13,444 $ 14,061 12298.52 % 12485.39 % 14309.81 % 19927.23 % 24283.32 % 17638.05 % (continued) 201 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Nine Fiscal Years1 (amounts in thousands) 20143 20153 20163 SINGLE-EMPLOYER PLANS JUDGES’ II Total pension liability Service cost..................................................................................... $ 78,670 $ 79,641 $ 86,635 Interest on total pension liability.................................................... 61,044 69,128 78,412 Differences between expected and actual experience.................... — (17,319) (4,546) Changes of assumptions................................................................. — (16,619) — Benefit payments, including refunds of employee contributions... (8,950) (14,041) (21,704) Net change in total pension liability........................................... 130,764 100,790 138,797 Total pension liability – beginning.................................................. 837,198 967,962 1,068,752 Total pension liability – ending (a)................................................. $ 967,962 $ 1,068,752 $ 1,207,549 Plan fiduciary net position Contributions – employer............................................................... $ 57,027 $ 65,629 $ 65,839 Contributions – employee............................................................... 20,413 22,242 24,598 Net investment income................................................................... 150,168 (2,402) 20,810 Benefit payments, including refunds of employee contributions... (8,950) (14,041) (21,704) Administrative expense.................................................................. (785) (1,127) (732) Other miscellaneous income/(expense).......................................... — — — Net change in plan fiduciary net position................................... 217,873 70,301 88,811 Plan fiduciary net position – beginning.......................................... 795,967 1,013,840 1,084,141 Plan fiduciary net position – ending (b)......................................... $ 1,013,840 $ 1,084,141 $ 1,172,952 State’s net pension liability/(asset) – ending (a) – (b).................... $ (45,878) $ (15,389) $ 34,597 Plan fiduciary net position as a percentage of the total pension liability........................................................................ 104.74 % 101.44 % 97.13 % Covered payroll.................................................................................. $ 40,476 $ 180,230 $ 192,739 State’s net pension liability as a percentage of covered payroll........ -113.35 % -8.54 % 17.95 % 202 Required Supplementary Information 20173 20183 2019 20203 20213 20223 $ 97,679 $ 95,843 $ 103,791 $ 114,486 $ 116,782 $ 115,808 85,654 91,418 103,889 115,517 126,949 120,585 (26,382) (26,875) 30,292 (2,797) (10,976) (67,751) 69,233 (41,763) — — — (59,394) (22,406) (31,795) (36,204) (34,547) (61,994) (66,739) 203,778 86,828 201,768 192,659 170,761 42,509 1,207,549 1,411,327 1,498,154 1,699,922 1,892,581 2,063,342 $ 1,411,327 $ 1,498,155 $ 1,699,922 $ 1,892,581 $ 2,063,342 $ 2,105,851 $ 67,102 $ 79,699 $ 84,099 $ 91,147 $ 84,147 $ 92,773 25,076 27,514 31,375 35,796 34,094 36,529 115,057 101,820 106,781 80,074 463,478 (324,365) (22,406) (31,795) (36,204) (34,547) (61,994) (66,739) (1,682) (2,370) (1,477) (2,552) (1,703) (1,842) — (5,451) — — — 4 183,147 169,417 184,574 169,918 518,022 (263,640) 1,172,952 1,356,099 1,525,515 1,710,089 1,880,007 2,398,029 $ 1,356,099 $ 1,525,516 $ 1,710,089 $ 1,880,007 $ 2,398,029 $ 2,134,389 $ 55,228 $ (27,361) $ (10,167) $ 12,574 $ (334,687) $ (28,538) 96.09 % 101.83 % 100.60 % 99.34 % 116.22 % 101.36 % $ 192,786 $ 202,433 $ 220,742 $ 246,968 $ 233,316 $ 242,525 28.65 % -13.52 % -4.61 % 5.09 % -143.45 % -11.77 % (continued) 203 State of California Annual Comprehensive Financial Report Schedule of Changes in Net Pension Liability and Related Ratios (continued) For the Past Nine Fiscal Years1 (amounts in thousands) 20143 20153 20163 SINGLE-EMPLOYER PLANS LEGISLATORS’ Total pension liability Service cost..................................................................................... $ 732 $ 769 $ 608 Interest on total pension liability.................................................... 6,465 6,268 5,978 Differences between expected and actual experience.................... — (4,246) (3,530) Changes of assumptions................................................................. — (2,654) — Benefit payments, including refunds of employee contributions... (7,482) (9,087) (7,407) Net change in total pension liability........................................... (285) (8,950) (4,351) Total pension liability – beginning.................................................. 115,806 115,521 106,571 Total pension liability – ending (a)................................................. $ 115,521 $ 106,571 $ 102,220 Plan fiduciary net position Contributions – employer............................................................... $ 565 $ 590 $ 549 Contributions – employee............................................................... 113 105 96 Net investment income................................................................... 15,372 (94) 4,545 Benefit payments, including refunds of employee contributions... (7,482) (9,087) (7,407) Administrative expense.................................................................. (362) (399) (202) Other miscellaneous income/(expense).......................................... — — — Net change in plan fiduciary net position................................... 8,206 (8,885) (2,419) Plan fiduciary net position – beginning.......................................... 122,148 130,354 121,469 Plan fiduciary net position – ending (b)......................................... $ 130,354 $ 121,469 $ 119,050 State’s net pension liability/(asset) – ending (a) – (b).................... $ (14,833) $ (14,898) $ (16,830) Plan fiduciary net position as a percentage of the total pension liability........................................................................ 112.84 % 113.98 % 116.46 % Covered payroll.................................................................................. $ 1,471 $ 1,397 $ 1,298 State’s net pension liability as a percentage of covered payroll........ -1008.36 % -1066.43 % -1296.61 % 204 Required Supplementary Information 20173 20183 20193 20203 20213 20223 $ 639 $ 542 $ 268 $ 100 $ 101 $ 108 5,291 4,987 4,873 4,885 4,749 4,299 (5,998) (2,061) (427) 2,320 (732) (992) 7,857 (2,529) — — — 1,024 (7,249) (6,918) (7,350) (6,939) (6,761) (6,647) 540 (5,979) (2,636) 366 (2,643) (2,208) 102,220 102,760 96,780 94,144 94,510 91,867 $ 102,760 $ 96,781 $ 94,144 $ 94,510 $ 91,867 $ 89,659 $ 517 $ 467 $ 250 $ 98 $ 78 $ 85 94 82 92 22 21 23 5,047 5,486 7,860 7,011 15,099 (12,450) (7,249) (6,918) (7,350) (6,939) (6,761) (6,647) (575) (670) (324) (550) (450) (436) — (1,454) — 2 13 1 (2,166) (3,007) 528 (356) 8,000 (19,424) 119,050 116,884 113,876 114,404 114,048 122,048 $ 116,884 $ 113,877 $ 114,404 $ 114,048 $ 122,048 $ 102,624 $ (14,124) $ (17,096) $ (20,260) $ (19,538) $ (30,181) $ (12,965) 113.74 % 117.66 % 121.52 % 120.67 % 132.85 % 114.46 % $ 1,270 $ 1,121 $ 684 $ 284 $ 267 $ 290 -1112.13 % -1525.07 % -2961.99 % -6879.58 % -11303.75 % -4470.69 % (concluded) 205 State of California Annual Comprehensive Financial Report Schedule of State Pension Contributions For the Past Nine Fiscal Years1 (amounts in thousands) 2015 2016 2017 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS STATE MISCELLANEOUS2 Actuarially determined contribution...................................... $ 2,421,157 $ 2,718,895 $ 3,078,232 Contributions in relation to the actuarially determined contribution....................................................... (2,583,400) (2,814,126) (3,098,305) Contribution deficiency (excess)......................................... $ (162,243) $ (95,231) $ (20,073) Covered payroll..................................................................... $ 10,655,117 $ 11,197,607 $ 11,591,576 Contributions as a percentage of covered payroll.................................................................... 24.25 % 25.13 % 26.73 % STATE INDUSTRIAL2 Actuarially determined contribution...................................... $ 92,024 $ 103,293 $ 116,880 Contributions in relation to the actuarially determined contribution....................................................... (104,769) (116,594) (123,789) Contribution deficiency (excess)......................................... $ (12,745) $ (13,301) $ (6,909) Covered payroll..................................................................... $ 577,713 $ 625,220 $ 643,295 Contributions as a percentage of covered payroll.................................................................... 18.14 % 18.65 % 19.24 % STATE SAFETY2 Actuarially determined contribution...................................... $ 341,509 $ 368,444 $ 400,379 Contributions in relation to the actuarially determined contribution....................................................... (387,508) (404,595) (431,991) Contribution deficiency (excess)......................................... $ (45,999) $ (36,151) $ (31,612) Covered payroll..................................................................... $ 2,003,716 $ 2,100,289 $ 2,167,429 Contributions as a percentage of covered payroll.................................................................... 19.34 % 19.26 % 19.93 % STATE PEACE OFFICERS AND FIREFIGHTERS2 Actuarially determined contribution...................................... $ 1,086,102 $ 1,197,160 $ 1,343,177 Contributions in relation to the actuarially determined contribution....................................................... (1,148,597) (1,263,436) (1,431,851) Contribution deficiency (excess)......................................... $ (62,495) $ (66,276) $ (88,674) Covered payroll..................................................................... $ 3,115,364 $ 3,241,763 $ 3,416,627 Contributions as a percentage of covered payroll.................................................................... 36.87 % 38.97 % 41.91 % 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 Updated based on more current information. 206 Required Supplementary Information 2018 2019 2020 2021 2022 2023 $ 3,397,736 $ 3,631,721 $ 4,006,672 $ 4,324,789 $ 4,160,143 $ 4,452,668 (3,482,291) (3,794,379) (5,032,209) (3,791,620) (4,281,402) (4,918,505) $ (84,555) $ (162,658) $ (1,025,537) $ 533,169 $ (121,259) $ (465,837) $ 12,254,527 $ 12,913,195 $ 13,579,610 $ 12,909,399 $ 14,727,596 $ 15,486,977 28.42 % 29.38 % 37.06 % 29.37 % 29.07 % 31.76 % $ 131,131 $ 134,969 $ 153,724 $ 166,535 $ 132,980 $ 157,441 (141,832) (148,790) (245,757) (128,407) (138,688) (174,595) $ (10,701) $ (13,821) $ (92,033) $ 38,128 $ (5,708) $ (17,154) $ 695,014 $ 728,609 $ 765,840 $ 706,128 $ 802,709 $ 837,312 20.41 % 20.42 % 32.09 % 18.18 % 17.28 % 20.85 % $ 435,662 $ 466,765 $ 526,375 $ 553,298 $ 476,457 $ 537,135 (481,479) (531,360) (759,505) (473,147) (499,621) (579,316) $ (45,817) $ (64,595) $ (233,130) $ 80,151 $ (23,164) $ (42,181) $ 2,339,642 $ 2,468,018 $ 2,566,403 $ 2,367,960 $ 2,633,568 $ 2,637,846 20.58 % 21.53 % 29.59 % 19.98 % 18.97 % 21.96 % $ 1,462,630 $ 1,581,049 $ 1,755,306 $ 1,871,841 $ 1,262,871 $ 1,850,940 (1,573,299) (1,667,839) (3,234,348) (1,312,046) (1,325,451) (2,071,961) $ (110,669) $ (86,790) $ (1,479,042) $ 559,795 $ (62,580) $ (221,021) $ 3,557,011 $ 3,676,854 $ 3,904,615 $ 3,629,097 $ 4,035,339 $ 4,148,789 44.23 % 45.36 % 82.83 % 36.15 % 32.85 % 49.94 % (continued) 207 State of California Annual Comprehensive Financial Report Schedule of State Pension Contributions (continued) For the Past Nine Fiscal Years1 (amounts in thousands) 2015 2016 2017 PUBLIC EMPLOYEES’ RETIREMENT FUND PLANS CALIFORNIA HIGHWAY PATROL Actuarially determined contribution.......................... $ 323,393 $ 363,634 $ 414,975 Contributions in relation to the actuarially determined contribution........................................... (352,139) (377,534) (426,014) Contribution deficiency (excess)............................. $ (28,746) $ (13,900) $ (11,039) Covered payroll.......................................................... $ 809,610 $ 808,032 $ 851,427 Contributions as a percentage of covered payroll......................................................... 43.49 % 46.72 % 50.04 % SINGLE-EMPLOYER PLANS JUDGES’ Actuarially determined contribution.......................... $ 1,884,555 $ 463,073 $ 448,636 Contributions in relation to the actuarially determined contribution........................................... (3,598) (3,252) (202,368) Contribution deficiency (excess)............................. $ 1,880,957 $ 459,821 $ 246,268 Covered payroll.......................................................... $ 167,542 $ 29,771 $ 23,822 Contributions as a percentage of covered payroll......................................................... 2.15 % 10.92 % 849.50 % JUDGES’ II Actuarially determined contribution.......................... $ 63,193 $ 58,362 $ 66,951 Contributions in relation to the actuarially determined contribution........................................... (59,982) (60,476) (55,965) Contribution deficiency (excess)............................. $ 3,211 $ (2,114) $ 10,986 Covered payroll.......................................................... $ 41,458 $ 186,505 $ 195,066 Contributions as a percentage of covered payroll......................................................... 144.68 % 32.43 % 28.69 % LEGISLATORS’ Actuarially determined contribution.......................... $ 260 $ 141 $ — Contributions in relation to the actuarially determined contribution........................................... (544) (549) (516) Contribution deficiency (excess)............................. $ (284) $ (408) $ (516) Covered payroll.......................................................... $ 1,397 $ 1,298 $ 1,270 Contributions as a percentage of covered payroll......................................................... 38.94 % 42.30 % 40.63 % 208 Required Supplementary Information 2018 2019 2020 2021 2022 2023 $ 447,376 $ 484,056 $ 532,159 $ 574,509 $ 600,841 $ 599,039 (478,354) (514,683) (560,538) (530,587) (590,087) (660,340) $ (30,978) $ (30,627) $ (28,379) $ 43,922 $ 10,754 $ (61,301) $ 884,197 $ 933,689 $ 948,000 $ 882,119 $ 936,496 $ 977,794 54.10 % 55.12 % 59.13 % 60.15 % 63.01 % 67.53 % $ 438,156 $ 415,110 $ 414,849 $ 366,446 $ 352,881 $ 313,118 (197,017) (194,189) (241,993) (224,928) (193,763) (207,835) $ 241,139 $ 220,921 $ 172,856 $ 141,518 $ 159,118 $ 105,283 $ 27,003 $ 25,748 $ 16,017 $ 13,444 $ 14,061 $ 20,083 729.61 % 754.19 % 1,510.85 % 1,673.07 % 1,378.02 % 1,034.89 % $ 79,181 $ 75,862 $ 81,782 $ 88,439 $ 89,938 $ 86,154 (73,916) (76,155) (83,872) (78,784) (81,960) (73,614) $ 5,265 $ (293) $ (2,090) $ 9,655 $ 7,978 $ 12,540 $ 199,438 $ 217,112 $ 246,968 $ 233,316 $ 242,525 $ 378,328 37.06 % 35.08 % 33.96 % 33.77 % 33.79 % 19.46 % $ 20 $ — $ 101 $ 84 $ 88 $ 48 (467) (261) (100) (79) (85) (44) $ (447) $ (261) $ 1 $ 5 $ 3 $ 4 $ 1,121 $ 684 $ 284 $ 267 $ 290 $ 138 41.66 % 38.16 % 35.21 % 29.59 % 29.31 % 31.80 % (continued) 209 State of California Annual Comprehensive Financial Report Schedule of State Pension Contributions (continued) For the Past Nine 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, 2021. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal Amortization method See each plan’s June 30, 2020 Funding Valuation Report. Asset valuation method PERF – Fair Value of assets; for details see plan’s June 30, 2020 Funding Valuation Report. Judges’ – Fair Value of Assets Judges’ II – Fair Value of Assets Legislators’ – Fair 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’ – 3.00% Judges’ II – 6.50% Legislators’ – 5.00% 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) 210 Required Supplementary Information This page intentionally left blank 211 State of California Annual Comprehensive Financial Report Schedule of the State’s Proportionate Share of Net Pension Liability – CalSTRS For the Past Nine Fiscal Years1 (amounts in thousands) 20142 20152 20162 State’s proportion of CalSTRS’ net pension liability........................ 37.65 % 34.59 % 36.28 % State’s proportionate share of CalSTRS’ net pension liability......... $ 22,001,531 $ 23,289,391 $ 29,343,626 Plan fiduciary net position as a percentage of the total pension liability............................................................................................ 76.52 % 74.02 % 70.04 % 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 Nine Fiscal Years1 (amounts in thousands) 2015 2016 2017 Statutorily required contribution...................................................... $ 1,486,004 $ 1,935,288 $ 2,472,993 Contributions in relation to the statutorily required contribution..... 1,486,004 1,935,288 2,472,993 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. 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/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 212 Required Supplementary Information 20172 20182 20192 20202 20212 20222 37.17 % 36.41 % 35.30 % 34.02 % 33.47 % 33.37 % $ 34,374,816 $ 33,462,419 $ 31,880,645 $ 32,963,596 $ 15,233,348 $ 23,186,783 69.46 % 70.99 % 72.56 % 71.82 % 87.21 % 81.25 % 2018 2019 2020 2021 2022 2023 $ 2,790,444 $ 3,082,316 $ 4,446,836 $ 3,730,902 $ 4,279,964 $ 3,719,874 2,790,444 3,082,316 4,446,836 3,730,902 4,279,964 3,719,874 $ — $ — $ — $ — $ — $ — 213 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios For the Past Four 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, 2022, 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. * Restated 214 Required Supplementary Information 20212 20222 $ 1,190,049 $ 1,297,725 1,028,924 908,980 (2,498,623) 831,414 1,275,481 (6,216,338) (962,640) (1,038,983) 33,191 (4,217,202) 32,726,807 32,759,998 $ 32,759,998 $ 28,542,796 $ 962,640 $ 1,038,983 241,973 537,987 — 286,986 162,795 (228,601) (962,640) (1,038,983) (229) (333) — — 404,539 596,039 509,722 914,261 $ 914,261 $ 1,510,300 $ 31,845,737 $ 27,032,496 2.79 % 5.29 % $ 7,477,126 $ 8,705,771 425.91 % 310.51 % (continued) 215 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Six 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 % 216 Required Supplementary Information 20192 20202 20212 20222 $ 140,545 $ 159,410 $ 183,703 $ 209,691 199,637 204,078 202,901 181,784 41,288 (64,174) (699,133) (92,802) 318,292 466,272 531,615 (1,359,809) (78,501) (84,544) (87,872) (92,183) 621,261 681,042 131,214 (1,153,319) 4,560,540 5,181,801 5,862,843 5,994,057 $ 5,181,801 $ 5,862,843 $ 5,994,057 $ 4,840,738 $ 78,501 $ 84,544 $ 87,872 $ 92,183 57,567 59,296 1 120,580 3,943 4,061 — 8,452 23,834 16,069 136,197 (102,287) (78,501) (84,544) (87,872) (92,183) (77) (217) (188) (177) — — — — 85,267 79,209 136,010 26,568 331,052 * 416,319 495,528 631,538 $ 416,319 $ 495,528 $ 631,538 $ 658,106 $ 4,765,482 $ 5,367,315 $ 5,362,519 $ 4,182,632 8.03 % 8.45 % 10.54 % 13.60 % $ 942,765 $ 958,694 $ 890,777 $ 950,596 505.48 % 559.86 % 602.00 % 440.00 % (continued) 217 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Six 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 % 218 Required Supplementary Information 20192 20202 20212 20222 $ 503,829 $ 535,696 $ 578,629 $ 655,259 622,325 608,903 562,522 531,126 (460,414) (354,942) (1,113,335) 916,117 912,754 675,803 1,438,841 (3,595,519) (294,213) (357,726) (370,922) (389,079) 1,284,281 1,107,734 1,095,735 (1,882,096) 14,699,258 15,983,539 17,091,273 18,187,008 $ 15,983,539 $ 17,091,273 $ 18,187,008 $ 16,304,912 $ 294,213 $ 357,726 $ 370,922 $ 389,079 106,592 129,540 109,211 234,564 106,592 129,540 — 119,564 33,447 24,249 247,525 (209,053) (294,213) (357,726) (370,922) (389,079) (94) (342) (343) (353) — — — — 246,537 282,987 356,393 144,722 332,511 * 579,048 862,035 1,218,428 $ 579,048 $ 862,035 $ 1,218,428 $ 1,363,150 $ 15,404,491 $ 16,229,238 $ 16,968,580 $ 14,941,762 3.62 % 5.04 % 6.70 % 8.36 % $ 2,819,233 $ 2,989,457 $ 2,709,765 $ 2,983,435 546.41 % 542.88 % 626.20 % 500.82 % (continued) 219 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Six 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 % 220 Required Supplementary Information 20192 20202 20212 20222 $ 127,060 $ 136,522 $ 155,301 $ 173,027 165,399 159,587 144,901 129,982 (88,806) (55,316) (308,759) 222,406 145,634 93,540 166,566 (879,542) (84,522) (100,777) (109,002) (120,334) 264,765 233,556 49,007 (474,461) 4,098,926 4,363,691 4,597,247 4,646,254 $ 4,363,691 $ 4,597,247 $ 4,646,254 $ 4,171,793 $ 84,522 $ 100,777 $ 109,002 $ 120,334 13,311 31,649 28,942 61,871 13,311 31,649 — 33,871 4,789 3,793 44,511 (42,399) (84,522) (100,777) (109,002) (120,334) (14) (55) (62) (69) — — — — 31,397 67,036 73,391 53,274 53,391 * 84,788 151,824 225,215 $ 84,788 $ 151,824 $ 225,215 $ 278,489 $ 4,278,903 $ 4,445,423 $ 4,421,039 $ 3,893,304 1.94 % 3.30 % 4.85 % 6.68 % $ 1,502,529 $ 1,596,949 $ 1,498,878 $ 1,770,060 284.78 % 278.37 % 294.96 % 219.95 % (continued) 221 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Six 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 % 222 Required Supplementary Information 20192 20202 20212 20222 $ 129,311 $ 134,649 $ 137,010 $ 145,385 162,948 154,691 135,412 118,610 (97,510) (149,086) (348,753) 227,285 152,849 21,353 165,715 (760,893) (120,833) (127,671) (132,052) (139,651) 226,765 33,936 (42,668) (409,264) 3,994,063 4,220,828 4,254,764 4,212,096 $ 4,220,828 $ 4,254,764 $ 4,212,096 $ 3,802,832 $ 120,833 $ 127,671 $ 132,052 $ 139,651 16,268 26,329 31,233 63,357 16,268 26,329 — 31,356 3,552 2,974 36,034 (37,298) (120,833) (127,671) (132,052) (139,651) (9) (43) (52) (59) — — — — 36,079 55,589 67,215 57,356 27,788 * 63,867 119,456 186,671 $ 63,867 $ 119,456 $ 186,671 $ 244,027 $ 4,156,961 $ 4,135,308 $ 4,025,425 $ 3,558,805 1.51 % 2.81 % 4.43 % 6.42 % $ 723,964 $ 748,801 $ 673,098 $ 805,625 574.19 % 552.26 % 598.04 % 441.74 % (continued) 223 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Six 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 % 224 Required Supplementary Information 20192, 4 20202 20212 20222 $ 528,502 $ 546,766 $ 597,140 $ 674,238 581,170 570,727 508,583 464,427 (221,816) (517,882) (1,092,126) 1,023,794 506,543 305,572 811,046 (3,182,977) (364,207) (371,323) (401,508) (436,182) 1,030,192 533,860 423,135 (1,456,700) 14,074,765 15,104,957 15,638,817 16,061,952 $ 15,104,957 $ 15,638,817 $ 16,061,952 $ 14,605,252 $ 364,207 $ 371,323 $ 401,508 $ 436,182 71,376 124,916 127,043 262,488 71,376 124,916 — 137,487 16,116 13,386 163,783 (164,073) (364,207) (371,323) (401,508) (436,182) (43) (194) (230) (263) — — — — 158,825 263,024 290,596 235,639 128,914 * 287,739 550,763 841,359 $ 287,739 $ 550,763 $ 841,359 $ 1,076,998 $ 14,817,218 $ 15,088,054 $ 15,220,593 $ 13,528,254 1.90 % 3.52 % 5.24 % 7.37 % $ 4,162,765 $ 4,363,200 $ 3,875,766 $ 4,500,952 355.95 % 345.80 % 392.71 % 300.56 % 225 State of California Annual Comprehensive Financial Report Schedule of Changes in Net OPEB Liability and Related Ratios (continued) For the Past Six 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 % 226 Required Supplementary Information 20192,4,6 20202 20212 20222 $ 651,082 $ 695,884 $ 826,026 $ 828,893 576,896 547,791 447,744 350,040 (41,161) (665,066) (1,270,439) 1,171,850 863,523 583,238 476,706 (4,210,439) (546,742) (512,702) (522,538) (530,610) 1,503,598 649,145 (42,501) (2,390,266) 15,556,199 17,059,797 17,708,942 17,666,441 $ 17,059,797 $ 17,708,942 $ 17,666,441 $ 15,276,175 $ 546,742 $ 512,702 $ 522,538 $ 530,610 — — — — — — — — — — — — (546,742) (512,702) (522,538) (530,610) — — — — — — — — — — — — — — — — $ — $ — $ — $ — $ 17,059,797 $ 17,708,942 $ 17,666,441 $ 15,276,175 — % — % — % — % $ 3,366,371 $ 3,536,386 $ 3,483,142 $ 3,539,212 506.77 % 500.76 % 507.20 % 431.63 % 227 State of California Annual Comprehensive Financial Report Schedule of OPEB Contributions For the Past Six 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. 228 Required Supplementary Information 20203 2021 2022 2023 $ 1,543,231 $ 1,584,331 $ 1,336,683 $ 1,453,078 (1,077,554) (1,204,613) (1,576,969) (1,369,690) $ 465,677 $ 379,718 $ (240,286) $ 83,388 $ 7,701,525 $ 7,477,126 $ 8,705,771 $ 8,705,889 13.99 % 16.11 % 18.11 % 15.73 % $ 229,183 $ 240,749 $ 239,989 $ 230,075 (139,230) (87,872) (212,763) (143,430) $ 89,953 $ 152,877 $ 27,226 $ 86,645 $ 958,694 $ 890,777 $ 950,596 $ 993,733 14.52 % 9.86 % 22.38 % 14.43 % $ 676,241 $ 772,683 $ 681,831 $ 769,312 (477,342) (480,133) (623,643) (513,110) $ 198,899 $ 292,550 $ 58,188 $ 256,202 $ 2,989,457 $ 2,709,765 $ 2,983,435 $ 2,996,198 15.97 % 17.72 % 20.90 % 17.13 % $ 194,353 $ 212,002 $ 182,301 $ 205,694 (131,031) (137,944) (182,205) (164,497) $ 63,322 $ 74,058 $ 96 $ 41,197 $ 1,596,949 $ 1,498,878 $ 1,770,060 $ 1,796,847 8.21 % 9.20 % 10.29 % 9.15 % (continued) 229 State of California Annual Comprehensive Financial Report Schedule of OPEB Contributions (continued) For the Past Six 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 % 230 Required Supplementary Information 20203 2021 2022 2023 $ 198,316 $ 203,358 $ 169,461 $ 190,550 (153,368) (160,882) (203,007) (175,199) $ 44,948 $ 42,476 $ (33,546) $ 15,351 $ 748,801 $ 673,098 $ 805,625 $ 824,956 20.48 % 23.90 % 25.20 % 21.24 % $ 707,352 $ 756,965 $ 645,590 $ 738,895 (492,373) (522,778) (698,669) (593,704) $ 214,979 $ 234,187 $ (53,079) $ 145,191 $ 4,363,200 $ 3,875,766 $ 4,500,952 $ 5,075,978 11.28 % 13.49 % 15.52 % 11.70 % $ 977,820 $ 944,654 $ 915,632 $ 1,056,808 (512,702) (504,813) (530,610) (527,794) $ 465,118 $ 439,841 $ 385,022 $ 529,014 $ 3,536,386 $ 3,483,142 $ 3,539,212 $ 3,805,373 14.50 % 14.49 % 14.99 % 13.87 % (concluded) 231 State of California Annual Comprehensive Financial Report Schedule of OPEB Contributions (continued) For the Past Fiscal Year 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, 2022. 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, 2022 Actuarial Valuation Report Inflation 2.30% Healthcare cost trend Pre-Medicare coverage: Actual rates for 2023, increasing to 7.00% in 2024, grading rates down to 4.50% in 2029 to 2037, and 4.25% for 2038 and later years. Post-Medicare coverage: Actual rates for 2023, increasing to rates ranging from 7.00% to 8.06% in 2024, grading down to 4.50% from 2031 to 2037, and 4.25% on and after 2038. Dental coverage: 0.03% in 2023, 2.00% for 2024, 3.00% for 2025, 4.00% for 2026, and 4.25% for 2027 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 ongoing mortality improvements using 80% of scale MP-2020 published by the Society of Actuaries. (concluded) 232 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, 2023, are in the following categories and amounts: state highway infrastructure, consisting of completed highway projects totaling $83.0 billion; land purchased for highway projects totaling $15.3 billion; infrastructure construction-in-progress (uncompleted highway projects) totaling $10.0 billion; and high-speed rail system infrastructure, consisting of construction-in-progress (uncompleted rail construction projects) totaling $6.5 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, 2023, there were no donations of infrastructure land, and relinquishments were $9 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, the Caltrans Bridge Element Inspection Manual, National Tunnel Inspection Standards, Specifications for the National Tunnel Inventory, and the Tunnel Operations Maintenance Inspection and Evaluation Manual. The State’s established condition baseline for fiscal year 2022-23 is to have at least 90% of the State’s bridge deck area in fair or better condition. 233 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 2021 90.0% Fair or Better 95.7% Fair or Better 2022 90.0% Fair or Better 94.1% Fair or Better 2023 90.0% Fair or Better 93.7% 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, 2023: Number of Condition Bridges/Tunnels Deck Area (sq. ft.) Deck Area (%) Good 6,401 116,723,528 45.36 % Fair 5,643 124,507,704 48.38 Poor 560 16,116,249 6.26 Total 12,604 257,347,481 100.00 % 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. 234 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 April 2022 18,000 6,872 13.6 % July 2023 18,000 6,980 13.8 September 2024 18,000 7,453 14.7 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 32,788 — Fair 10,365 — Poor 7,453 7,453 Total 50,606 7,453 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. 235 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 2019 $ 298 $ 292 2020 228 228 2021 257 248 2022 215 200 2023 254 164 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 2019 $ 4,987 $ 4,921 2020 5,063 4,820 2021 5,261 4,728 2022 5,119 4,094 2023 6,963 2,883 1Some prior years were updated based on more current information. 236 Required Supplementary Information This page intentionally left blank 237 State of California Annual Comprehensive Financial Report Budgetary Comparison Schedule General Fund and Major Special Revenue Funds Year Ended June 30, 2023 (amounts in thousands) General Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Corporation tax ................................................................... $ 38,481,707 $ 36,336,922 $ 37,551,271 $ 1,214,349 Intergovernmental ............................................................... — — — — Cigarette and tobacco taxes ................................................ 48,509 47,201 47,201 — Insurance gross premiums tax ............................................ 3,641,466 3,707,199 3,707,199 — Vehicle license fees ............................................................ 769 939 939 — Motor vehicle fuel tax ......................................................... — — — — Personal income tax ............................................................ 128,905,038 100,450,582 102,561,393 2,110,811 Retail sales and use taxes .................................................... 32,850,523 33,323,599 33,323,599 — Other major taxes and licenses ........................................... 436,024 420,539 420,539 — Other revenues .................................................................... 6,381,703 4,940,470 4,803,812 (136,658) Total revenues ............................................................. 210,745,739 179,227,451 182,415,953 3,188,502 EXPENDITURES Business, consumer services, and housing ......................... 3,131,938 3,310,327 2,997,506 (312,821) Transportation ..................................................................... 473,228 1,009,246 988,621 (20,625) Natural resources and environmental protection ................ 7,654,809 9,018,415 8,368,689 (649,726) Health and human services ................................................. 68,182,080 65,760,267 59,430,579 (6,329,688) Corrections and rehabilitation ............................................ 14,634,659 15,483,240 14,832,803 (650,437) Education............................................................................. 92,157,271 101,837,523 101,402,091 (435,432) General government: Tax relief .......................................................................... 387,750 415,001 387,750 (27,251) Debt service ..................................................................... 6,342,917 4,907,848 4,890,740 (17,108) Other general government ............................................... 12,826,614 24,243,456 21,994,019 (2,249,437) Total expenditures ...................................................... 205,791,266 225,985,323 215,292,798 (10,692,525) OTHER FINANCING SOURCES (USES) Transfers from other funds ................................................. — — 9,591,878 — Transfers to other funds ...................................................... — — (9,303,055) — Other additions (deductions) .............................................. — — (4,490,094) — Total other financing sources (uses) .......................... — — (4,201,271) — Excess (deficiency) of revenues and other sources over (under) expenditures and other uses ................ — — (37,078,116) — Fund balances – beginning .................................................. — — 69,181,771 — Fund balances – ending........................................................ $ — $ — $ 32,103,655 $ — 238 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 $ — $ — $ — $ — $ — $ — $ — $ — 128,307,708 128,307,708 128,307,708 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 9,592,558 8,705,462 9,549,259 843,797 — — — — — — — — — — — — — — — — — — — — 8,685,701 8,494,737 7,836,203 (658,534) 113,114 113,114 113,114 — 1,403,598 694,405 628,339 (66,066) 128,420,822 128,420,822 128,420,822 — 19,681,857 17,894,604 18,013,801 119,197 1,072,895 1,072,895 1,072,895 — 126,864 131,137 119,745 (11,392) 4,248,821 4,248,821 4,248,821 — 10,222,551 17,844,342 16,222,937 (1,621,405) 409,472 409,472 409,472 — 198,000 202,402 190,311 (12,091) 105,626,983 105,626,983 105,626,983 — 9,402 9,479 8,136 (1,343) 95,301 95,301 95,301 — — — — — 7,175,287 7,175,287 7,175,287 — 8,899 10,951 9,431 (1,520) — — — — — — — — — — — — 29,209 30,056 29,774 (282) 2,428,594 2,428,594 2,428,594 — 540,457 544,900 529,246 (15,654) 121,057,353 121,057,353 121,057,353 — 11,135,382 18,773,267 17,109,580 (1,663,687) — — 501,903 — — — 21,862,637 — — — (7,865,357) — — — (23,373,813) — — — — — — — 816,639 — — — (7,363,454) — — — (694,537) — — — 15 — — — 209,684 — — — 659 — — — 9,318,754 — $ — $ — $ 674 $ — $ — $ — $ 9,528,438 $ — (continued) 239 State of California Annual Comprehensive Financial Report Budgetary Comparison Schedule (continued) General Fund and Major Special Revenue Funds Year Ended June 30, 2023 (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.............................................. — — — — Insurance gross premiums tax .......................................... — — — — Vehicle license fees........................................................... — — — — Motor vehicle fuel tax....................................................... — — — — Personal income tax ......................................................... — — — — Retail sales and use taxes ................................................. — — — — Other major taxes and licenses ........................................ 173,523 173,523 173,523 — Other revenues ................................................................. 8,790,055 8,790,055 8,790,055 — Total revenues .......................................................... 8,963,578 8,963,578 8,963,578 — EXPENDITURES Business, consumer services, and housing ...................... 298,110 302,271 253,362 (48,909) Transportation................................................................... 455,301 455,332 454,090 (1,242) Natural resources and environmental protection.............. 6,741,265 7,543,705 6,775,783 (767,922) Health and human services .............................................. 66,567 88,441 66,859 (21,582) Corrections and rehabilitation .......................................... — — — — Education ......................................................................... 2,908 2,909 2,908 (1) General government: Tax relief ....................................................................... — — — — Debt service .................................................................. 5,072 5,072 5,072 — Other general government.............................................. 187,114 213,513 197,498 (16,015) Total expenditures ................................................... 7,756,337 8,611,243 7,755,572 (855,671) OTHER FINANCING SOURCES (USES) Transfers from other funds................................................ — — 1,346,558 — Transfers to other funds ................................................... — — (577,174) — Other additions (deductions) ............................................ — — 1,564,709 — Total other financing sources (uses)........................ — — 2,334,093 — Excess (deficiency) of revenues and other sources over (under) expenditures and other uses ............. — — 3,542,099 — Fund balances – beginning ................................................ — — 16,977,499 — Fund balances – ending...................................................... $ — $ — $ 20,519,598 $ — * Restated 240 Required Supplementary Information Health Care Related Programs Budgeted Amounts Actual Variance with Original Final Amounts Final Budget $ — $ — $ — $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 2,074,055 2,074,055 2,074,055 — 135,832,783 135,832,783 135,832,783 — 137,906,838 137,906,838 137,906,838 — — — — — — — — — (788) 548 292 (256) 127,332,212 138,132,482 138,111,484 (20,998) — — — — 713,286 713,286 713,286 — — — — — (7,987) 11,266 11,266 — (511,445) (515,564) (515,564) — 127,525,278 138,342,018 138,320,764 (21,254) — — 138,860 — — — (2,089) — — — 273,993 — — — 410,764 — — — (3,162) — — — 3,228,796 * — $ — $ — $ 3,225,634 $ — (concluded) 241 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, 2023 (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... $ 32,103,655 $ 674 $ 9,528,438 $ 20,519,598 $ 3,225,634 Basis difference: Interfund receivables............................... 3,796,413 — 93,258 221,823 — Loans receivable...................................... 45,225 384,293 — 727,627 — Interfund payables................................... (2,783,597) — (481,322) (585,286) (1,231) Escheat property...................................... (1,444,663) — — — Tax revenues............................................ (1,064,781) — — — — Fund classification changes..................... 44,425,698 3,616,052 — — — Other........................................................ (6,962,284) (38,136,244) 2,053,296 (177,402) (13,412) Timing difference: Liabilities budgeted in subsequent years.................................... (4,111,978) (11,084,823) (416,948) (3,740) (1,175,841) GAAP fund balance – ending................. $ 64,003,688 $ (45,220,048) $ 10,776,722 $ 20,702,620 $ 2,035,150 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 242 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 $3.8 billion in the General Fund, $93 million in the Transportation Fund, and $222 million in the Environmental and Natural Resources Fund. The adjustments related to loans receivable caused increases of $45 million in the General Fund, $384 million in the Federal Fund, and $728 million in the Environmental and Natural Resources 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 $2.8 billion in the General Fund, $481 million in the Transportation Fund, $585 million in the Environmental and Natural Resources Fund, and $1 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 $1.4 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 $1.1 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 $44.4 billion in the General Fund and $3.6 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 $7.0 billion in the General Fund, a decrease of $38.1 billion in the Federal Fund, an increase of $2.1 billion in the Transportation Fund, a decrease of $177 million in the Environmental and Natural Resources Fund, and a decrease of $13 million in the Health Care Related Programs Fund. 243 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 $4.1 billion in the General Fund, $11.1 billion in the Federal Fund, $417 million in the Transportation Fund, $4 million in the Environmental and Natural Resources Fund, and $1.2 billion in the Health Care Related Programs Fund. The large decrease in the General Fund primarily consists of $4.8 billion for medical assistance and $470 million for workers’ compensation claims. The large decrease in the Federal Fund consists of $8.0 billion for unemployment programs, and $3.4 billion for coronavirus relief. The decrease in the Health Care Related Programs Fund primarily consists of medical assistance. 244 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) 247 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. 248 Nonmajor Governmental Funds This page intentionally left blank 249 State of California Annual Comprehensive Financial Report Combining Balance Sheet Nonmajor Governmental Funds June 30, 2023 (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................................................................. $ 2,364,797 $ 2,984,675 $ 2,841,565 Investments............................................................................................. — 829,133 — Receivables (net).................................................................................... 176,613 194,744 580,362 Due from other funds.............................................................................. 47,932 2,444,699 62,928 Due from other governments.................................................................. 8,867 3,565 38,254 Interfund receivables.............................................................................. 187,387 64,994 23,220 Loans receivable..................................................................................... 70,938 2,841,558 765 Other assets............................................................................................. — — — Total assets......................................................................................... $ 2,856,534 $ 9,363,368 $ 3,547,094 LIABILITIES Accounts payable.................................................................................... $ 133,689 $ 19,356 $ 90,456 Due to other funds.................................................................................. 38,653 5,842 21,365 Due to component units.......................................................................... — — 29,481 Due to other governments....................................................................... 10,030 226,859 342,890 Interfund payables.................................................................................. 25,129 — — Revenues received in advance................................................................ 64,083 991 — Deposits.................................................................................................. — — 26,281 Other liabilities....................................................................................... 32,829 208 7 Total liabilities................................................................................... 304,413 253,256 510,480 DEFERRED INFLOWS OF RESOURCES......................................... — — 281,063 Total liabilities and deferred inflows of resources..................... 304,413 253,256 791,543 FUND BALANCES Nonspendable......................................................................................... — — — Restricted................................................................................................ 1,824,613 8,884,139 2,755,551 Committed.............................................................................................. 727,508 225,973 — Assigned................................................................................................. — — — Unassigned.............................................................................................. — — — Total fund balances........................................................................... 2,552,121 9,110,112 2,755,551 Total liabilities, deferred inflows of resources, and fund balances........................................................................ $ 2,856,534 $ 9,363,368 $ 3,547,094 250 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 $ 3,892,699 $ 1,167,777 $ 80,516 $ 4,956,590 $ 18,288,619 — 868,011 235,300 — 1,932,444 5,410 167,010 219,585 316,626 1,660,350 201,858 6,705 — 676,424 3,440,546 — 37,839 — 29,720 118,245 41,886 49,643 — 509,589 876,719 1,380 1,636 — 62,473 2,978,750 — 99,153 — — 99,153 $ 4,143,233 $ 2,397,774 $ 535,401 $ 6,551,422 $ 29,394,826 $ 5,587 $ 234,639 $ 11 $ 277,655 $ 761,393 91,544 55,016 — 24,579 236,999 — — — 7,608 37,089 3,944,153 109,445 — 551,322 5,184,699 — — — 15,071 40,200 — 197,116 — 100,117 362,307 — 390,699 — 98,852 515,832 — 115,762 — 33,608 182,414 4,041,284 1,102,677 11 1,108,812 7,320,933 — 1,898 — 46,189 329,150 4,041,284 1,104,575 11 1,155,001 7,650,083 — 95,021 — — 95,021 37,029 950,250 535,390 4,958,882 19,945,854 64,920 169,991 — 437,558 1,625,950 — 77,937 — — 77,937 — — — (19) (19) 101,949 1,293,199 535,390 5,396,421 21,744,743 $ 4,143,233 $ 2,397,774 $ 535,401 $ 6,551,422 $ 29,394,826 (continued) 251 State of California Annual Comprehensive Financial Report Combining Balance Sheet (continued) Nonmajor Governmental Funds June 30, 2023 (amounts in thousands) Debt Service Total No Place Transportation Nonmajor Like Home Debt Debt Debt Service Service Service ASSETS Cash and pooled investments................................................................ $ 84,828 $ — $ 84,828 Investments............................................................................................ — — — Receivables (net)................................................................................... — — — Due from other funds............................................................................ 1,108 — 1,108 Due from other governments................................................................. — — — Interfund receivables............................................................................. — — — Loans receivable.................................................................................... — — — Other assets........................................................................................... — — — Total assets....................................................................................... $ 85,936 $ — $ 85,936 LIABILITIES Accounts payable.................................................................................. $ 202 $ — $ 202 Due to other funds................................................................................. 20 — 20 Due to component units......................................................................... — — — Due to other governments..................................................................... — — — Interfund payables................................................................................. — — — Revenues received in advance............................................................... — — — Deposits................................................................................................. — — — Other liabilities...................................................................................... — — — Total liabilities.................................................................................. 222 — 222 DEFERRED INFLOWS OF RESOURCES....................................... — — — Total liabilities and deferred inflows of resources..................... 222 — 222 FUND BALANCES Nonspendable........................................................................................ — — — Restricted............................................................................................... 85,714 — 85,714 Committed............................................................................................. — — — Assigned................................................................................................ — — — Unassigned............................................................................................ — — — Total fund balances......................................................................... 85,714 — 85,714 Total liabilities, deferred inflows of resources, and fund balances....................................................................... $ 85,936 $ — $ 85,936 252 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 $ 207,487 $ 39,464 $ 725,162 $ — $ 208,065 $ 1,180,178 $ 19,553,625 — — — — — — 1,932,444 76 — — — 1,893 1,969 1,662,319 1,707 368 5,584 — 8,362 16,021 3,457,675 — — 1,480 — 29 1,509 119,754 — — — — 4,400 4,400 881,119 — — — — 228,347 228,347 3,207,097 — — — — — — 99,153 $ 209,270 $ 39,832 $ 732,226 $ — $ 451,096 $ 1,432,424 $ 30,913,186 $ — $ 449 $ — $ — $ 8,896 $ 9,345 $ 770,940 — — 2,918 — 2,874 5,792 242,811 — — — — — — 37,089 — — — — 68 68 5,184,767 — — — — — — 40,200 — — — — — — 362,307 — — — — — — 515,832 — — — — — — 182,414 — 449 2,918 — 11,838 15,205 7,336,360 — — — — 3,449 3,449 332,599 — 449 2,918 — 15,287 18,654 7,668,959 — — — — — — 95,021 209,270 39,383 729,308 — 353,287 1,331,248 21,362,816 — — — — 82,522 82,522 1,708,472 — — — — — — 77,937 — — — — — — (19) 209,270 39,383 729,308 — 435,809 1,413,770 23,244,227 $ 209,270 $ 39,832 $ 732,226 $ — $ 451,096 $ 1,432,424 $ 30,913,186 (concluded) 253 State of California Annual Comprehensive Financial Report Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended June 30, 2023 (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.................................................................................. $ — $ 1,702,918 $ — Sales and use taxes....................................................................................... — — — Motor vehicle excise taxes........................................................................... 78,978 57,914 — Other taxes................................................................................................... 1,054 822,967 1,939,380 Intergovernmental........................................................................................ — — — Licenses and permits.................................................................................... 874,263 15,592 200 Charges for services..................................................................................... 52,046 2,607 857 Fees.............................................................................................................. 1,823,260 266,497 400 Penalties....................................................................................................... 14,510 268 — Investment and interest................................................................................ 45,304 57,867 13,934 Escheat......................................................................................................... 3 — — Other............................................................................................................ 15,764 60,426 (4,376) Total revenues....................................................................................... 2,905,182 2,987,056 1,950,395 EXPENDITURES Current: General government.................................................................................. 957,134 793,597 112,246 Education.................................................................................................. 25,818 255 141,914 Health and human services....................................................................... 606,280 2,085,658 1,761,796 Natural resources and environmental protection...................................... 40,204 76,259 72,750 Business, consumer services, and housing............................................... 827,912 1,106,894 19,117 Transportation........................................................................................... 7,174 — 13,257 Corrections and rehabilitation................................................................... — 557 5,568 Capital outlay............................................................................................... 34,128 — 718 Debt service: Bond, commercial paper, and lease principal retirement.......................... 49,994 167,091 722 Interest and fiscal charges......................................................................... 5,831 1,179 167 Total expenditures................................................................................ 2,554,475 4,231,490 2,128,255 Excess (deficiency) of revenues over (under) expenditures................ 350,707 (1,244,434) (177,860) OTHER FINANCING SOURCES (USES) General obligation bonds and commercial paper issued.............................. — 424,845 — Refunding debt issued.................................................................................. — 39,280 — Payment to refund long-term debt............................................................... — (37,408) — Premium on bonds issued............................................................................ — 2,627 — Proceeds from leases.................................................................................... 32,565 — 718 Transfers in.................................................................................................. 102,245 2,880,766 11,808 Transfers out................................................................................................ (19,298) (164,004) (17,416) Total other financing sources (uses) ................................................... 115,512 3,146,106 (4,890) Net change in fund balances................................................................ 466,219 1,901,672 (182,750) Fund balances – beginning........................................................................... 2,085,902 7,208,440 2,938,301 Fund balances – ending................................................................................ $ 2,552,121 $ 9,110,112 $ 2,755,551 254 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 $ — $ — $ — $ — $ 1,702,918 18,912,155 — — — 18,912,155 — — — — 136,892 — — — — 2,763,401 318 820,490 — — 820,808 3,429,382 — — 140,089 4,459,526 — 56,168 — 299,036 410,714 — 495,433 — 1,617,490 4,203,080 153 193,410 — 211,387 419,728 18,810 22,217 5,985 83,965 248,082 — 39,599 — — 39,602 — 151,225 470,366 1,478,375 2,171,780 22,360,818 1,778,542 476,351 3,830,342 36,288,686 6,252,488 3,840,237 1,194 1,665,684 13,622,580 — — — 7,342 175,329 13,756,220 — — 1,022,335 19,232,289 — — — 79,864 269,077 7,384 173 — 17,538 1,979,018 — — — 1,979 22,410 2,295,337 — — 56 2,301,518 — 11,726 — 13,432 60,004 — 31,536 644,351 12,825 906,519 2 21,043 55,867 2,148 86,237 22,311,431 3,904,715 701,412 2,823,203 38,654,981 49,387 (2,126,173) (225,061) 1,007,139 (2,366,295) — — — — 424,845 — — 218,300 — 257,580 — — — — (37,408) — — 7,972 — 10,599 — 11,726 — 13,432 58,441 1 2,332,897 — 165,436 5,493,153 (45,017) (2,264) — (139,803) (387,802) (45,016) 2,342,359 226,272 39,065 5,819,408 4,371 216,186 1,211 1,046,204 3,453,113 97,578 1,077,013 534,179 4,350,217 18,291,630 $ 101,949 $ 1,293,199 $ 535,390 $ 5,396,421 $ 21,744,743 (continued) 255 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, 2023 (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.......................................................................... 3,062 — 3,062 Escheat.................................................................................................. — — — Other...................................................................................................... — — — Total revenues................................................................................ 3,062 — 3,062 EXPENDITURES Current: General government ........................................................................... 307 — 307 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................... 82,060 744,333 826,393 Interest and fiscal charges .................................................................. 58,604 639,255 697,859 Total expenditures ......................................................................... 140,971 1,383,588 1,524,559 Excess (deficiency) of revenues over (under) expenditures......... (137,909) (1,383,588) (1,521,497) OTHER FINANCING SOURCES (USES) General obligation bonds and commercial paper issued....................... — — — Refunding debt issued ........................................................................... — — — Payment to refund long-term debt......................................................... — — — Premium on bonds issued...................................................................... — — — Proceeds from leases ............................................................................. — — — Transfers in............................................................................................ 140,003 1,383,588 1,523,591 Transfers out.......................................................................................... — — — Total other financing sources (uses)............................................. 140,003 1,383,588 1,523,591 Net change in fund balances......................................................... 2,094 — 2,094 Fund balances – beginning.................................................................... 83,620 — 83,620 Fund balances – ending......................................................................... $ 85,714 $ — $ 85,714 * Restated 256 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 $ — $ — $ — $ — $ — $ — $ 1,702,918 — — — — — — 18,912,155 — — — — — — 136,892 — — — — — — 2,763,401 — — — — — — 820,808 — — — — — — 4,459,526 — — — — — — 410,714 — — — — — — 4,203,080 — — — — — — 419,728 5,413 58 14,481 3 1,300 21,255 272,399 — — — — — — 39,602 — — — — 1,835 1,835 2,173,615 5,413 58 14,481 3 3,135 23,090 36,314,838 — 52,485 — — 19,248 71,733 13,694,620 — — 1,128,957 — — 1,128,957 1,304,286 — — — — — — 19,232,289 — — — — 29,636 29,636 298,713 — — — — 5,509 5,509 1,984,527 — — — — — — 22,410 — — — — — — 2,301,518 293,040 773 9,518 — 17,850 321,181 381,185 350,425 107,535 1,512,335 10,650 61,145 2,042,090 3,775,002 3,047 73 14,824 268 79 18,291 802,387 646,512 160,866 2,665,634 10,918 133,467 3,617,397 43,796,937 (641,099) (160,808) (2,651,153) (10,915) (130,332) (3,594,307) (7,482,099) 330,730 175,160 1,226,900 — 91,205 1,823,995 2,248,840 312,570 — 1,376,525 — — 1,689,095 1,946,675 — — — — — — (37,408) 32,202 14,673 123,035 — 416 170,326 180,925 — — — — — — 58,441 — — — 1,971 56,047 58,018 7,074,762 — — (937) — (2,186) (3,123) (390,925) 675,502 189,833 2,725,523 1,971 145,482 3,738,311 11,081,310 34,403 29,025 74,370 (8,944) 15,150 144,004 3,599,211 174,867 10,358 654,938 * 8,944 420,659 1,269,766 19,645,016 $ 209,270 $ 39,383 $ 729,308 $ — $ 435,809 $ 1,413,770 $ 23,244,227 (concluded) 257 State of California Annual Comprehensive Financial Report Budgetary Comparison Schedule Nonmajor Governmental Funds1 Year Ended June 30, 2023 (amounts in thousands) Budgeted Actual Variance with Amounts Amounts Final Budget REVENUES Cigarette and tobacco taxes.................................................................... $ 344,317 $ 344,317 $ — Vehicle license fees ............................................................................... 2,593,123 2,593,123 — Personal income tax .............................................................................. 1,702,918 1,702,918 — Retail sales and use taxes ...................................................................... 18,931,646 18,931,646 — Other major taxes and licenses .............................................................. 1,888 1,888 — Other revenues ....................................................................................... 9,328,886 9,328,886 — Total revenues .................................................................................. 32,902,778 32,902,778 — EXPENDITURES Business, consumer services, and housing ............................................ 2,207,273 2,083,545 (123,728) Transportation ....................................................................................... 1,411,793 1,410,944 (849) Natural resources and environmental protection ................................... 384,531 321,439 (63,092) Health and human services .................................................................... 23,455,812 22,727,333 (728,479) Corrections and rehabilitation ............................................................... 2,586 2,544 (42) Education ............................................................................................... 1,446,818 1,374,387 (72,431) General government: Tax relief ............................................................................................ 5,661 5,661 — Other general government ................................................................. 9,946,427 9,407,163 (539,264) Total expenditures ........................................................................... 38,860,901 37,333,016 (1,527,885) OTHER FINANCING SOURCES (USES) Transfers from other funds .................................................................... — 42,817,222 — Transfers to other funds ......................................................................... — (37,881,763) — Other additions....................................................................................... — 2,574,157 — Total other financing sources (uses) ............................................... — 7,509,616 — Excess of revenues and other sources over expenditures and other uses........................................................... — 3,079,378 — Fund balances – beginning, restated..................................................... — 13,269,552 Fund balances – ending .......................................................................... $ — $ 16,348,930 $ — 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. 258 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. 259 State of California Annual Comprehensive Financial Report Combining Statement of Net Position Internal Service Funds June 30, 2023 (amounts in thousands) Public Buildings Architecture Construction Revolving ASSETS Current assets: Cash and pooled investments............................................................................................... $ — $ 1,590,041 Restricted assets: Cash and pooled investments............................................................................................ 1,193,575 — Contracts and installments receivable.................................................................................. 564,176 — Receivables (net).................................................................................................................. — 1,611 Due from other funds............................................................................................................ 231,241 67,443 Due from other governments................................................................................................ — — Prepaid items........................................................................................................................ — 15,013 Inventories............................................................................................................................ — — Total current assets............................................................................................................ 1,988,992 1,674,108 Noncurrent assets: Restricted assets: Cash and pooled investments............................................................................................ 106,788 — Contracts and installments receivable.................................................................................. 7,643,992 — Receivables (net).................................................................................................................. — — Interfund receivables............................................................................................................ — — Loans receivable................................................................................................................... — — Long-term prepaid charges................................................................................................... 143 — Capital assets: Land................................................................................................................................... — — Buildings and other depreciable property.......................................................................... — 211 Intangible assets – amortizable.......................................................................................... — — Less: accumulated depreciation/amortization................................................................... — (211) Construction/development in progress.............................................................................. 2,405,575 — Total noncurrent assets...................................................................................................... 10,156,498 — Total assets.................................................................................................................... 12,145,490 1,674,108 DEFERRED OUTFLOWS OF RESOURCES.................................................................... 94,792 — Total assets and deferred outflows of resources...................................................... $ 12,240,282 $ 1,674,108 260 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ 239,398 $ 403,619 $ 8,811 $ 61,599 $ 72,410 $ 771,363 $ 3,147,241 — — — — — — 1,193,575 — — — — — — 564,176 3,814 6,356 — 4,911 1,042 88,845 106,579 207,452 2,268 — 59,187 253,419 15,825 836,835 1,969 197 — 16,787 — 20,111 39,064 166,384 1,426 2,000 692 3,222 1,465 190,202 24,332 58,671 — — 721 19,946 103,670 643,349 472,537 10,811 143,176 330,814 917,555 6,181,342 — — — — — — 106,788 — — — — — — 7,643,992 2,624 — — — — 4,797 7,421 — — — — — 40,856 40,856 — — — — — 4,396 4,396 — — — — — — 143 — — — — — 2,080 2,080 175,156 219,879 2,977 160,361 33,436 82,564 674,584 246,798 7,564 349,281 33,041 12,176 92,497 741,357 (177,707) (166,557) (33,852) (142,098) (38,107) (107,177) (665,709) — 11,310 — — — 1,273 2,418,158 246,871 72,196 318,406 51,304 7,505 121,286 10,974,066 890,220 544,733 329,217 194,480 338,319 1,038,841 17,155,408 299,006 74,801 — 118,876 — 299,577 887,052 $ 1,189,226 $ 619,534 $ 329,217 $ 313,356 $ 338,319 $ 1,338,418 $ 18,042,460 (continued) 261 State of California Annual Comprehensive Financial Report Combining Statement of Net Position (continued) Internal Service Funds June 30, 2023 (amounts in thousands) Public Buildings Architecture Construction Revolving LIABILITIES Current liabilities: Accounts payable.................................................................................................................. $ 46,388 $ 49 Due to other funds................................................................................................................. 44,967 158,791 Due to other governments..................................................................................................... 24,820 954 Revenues received in advance.............................................................................................. — 1,511,436 Deposits................................................................................................................................. — — Contracts and notes payable.................................................................................................. — — Interest payable..................................................................................................................... 97,758 — Current portion of long-term obligations.............................................................................. 593,723 — Other current liabilities......................................................................................................... 10,040 — Total current liabilities....................................................................................................... 817,696 1,671,230 Noncurrent liabilities: Interfund payables................................................................................................................. 3,211,902 3,019 Compensated absences payable............................................................................................ — — Workers’ compensation benefits payable............................................................................. — 290 Lease liability........................................................................................................................ — — Subscription liability............................................................................................................. — — Revenue bonds payable......................................................................................................... 7,991,925 — Net other postemployment benefits liability......................................................................... — — Net pension liability.............................................................................................................. — — Other noncurrent liabilities................................................................................................... — — Total noncurrent liabilities................................................................................................. 11,203,827 3,309 Total liabilities............................................................................................................... 12,021,523 1,674,539 DEFERRED INFLOWS OF RESOURCES........................................................................ 41,562 — Total liabilities and deferred inflows of resources.................................................. 12,063,085 1,674,539 NET POSITION Net investment in capital assets............................................................................................ — — Restricted – expendable: Construction.................................................................................................................... 177,197 — Total expendable.......................................................................................................... 177,197 — Unrestricted........................................................................................................................... — (431) Total net position (deficit)............................................................................................ 177,197 (431) Total liabilities, deferred inflows of resources, and net position........................... $ 12,240,282 $ 1,674,108 262 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ 95,252 $ 13,071 $ — $ 37,245 $ 30,283 $ 271,734 $ 494,022 47,254 3,735 — 756 1,210 435,306 692,019 3,458 — — — 8 2,521 31,761 17,094 2,934 — — 1,147 76,843 1,609,454 1,149 — — — — — 1,149 1,351 — — 13,753 19,264 — 34,368 — — — — — — 97,758 20,882 4,528 — 6,676 — 15,735 641,544 10,812 2,946 — — 16 — 23,814 197,252 27,214 — 58,430 51,928 802,139 3,625,889 28,349 1,142 37,650 4,556 298,150 — 3,584,768 97,126 14,534 — 44,495 — 45,147 201,302 28,118 20,580 — 136 — 1,220 50,344 171,062 — — 5,084 — 50,608 226,754 — — — 52 — 1,290 1,342 — — — — — — 7,991,925 576,699 202,081 — 228,554 — 395,775 1,403,109 555,751 81,596 — 222,532 — 631,466 1,491,345 — — — 14,469 6,874 — 21,343 1,457,105 319,933 37,650 519,878 305,024 1,125,506 14,972,232 1,654,357 347,147 37,650 578,308 356,952 1,927,645 18,598,121 204,708 122,406 — 84,160 — 148,399 601,235 1,859,065 469,553 37,650 662,468 356,952 2,076,044 19,199,356 243,775 72,196 318,405 14,673 — 557 649,606 — — — — — — 177,197 — — — — — — 177,197 (913,614) 77,785 (26,838) (363,785) (18,633) (738,183) (1,983,699) (669,839) 149,981 291,567 (349,112) (18,633) (737,626) (1,156,896) $ 1,189,226 $ 619,534 $ 329,217 $ 313,356 $ 338,319 $ 1,338,418 $ 18,042,460 (concluded) 263 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, 2023 (amounts in thousands) Public Buildings Architecture Construction Revolving OPERATING REVENUES Services and sales.................................................................................................................... $ — $ 1,418,603 Investment and interest ........................................................................................................... 31,278 — Rent.......................................................................................................................................... 329,270 — Total operating revenues.................................................................................................... 360,548 1,418,603 OPERATING EXPENSES Personal services ..................................................................................................................... — 1,313 Supplies .................................................................................................................................. — — Services and charges ............................................................................................................... 3,936 1,418,920 Depreciation............................................................................................................................. — — Interest expense....................................................................................................................... 307,543 — Amortization of long-term prepaid charges ............................................................................ 38 — Total operating expenses ................................................................................................... 311,517 1,420,233 Operating income (loss) .................................................................................................... 49,031 (1,630) NONOPERATING REVENUES (EXPENSES) Investment and interest income .............................................................................................. — — Interest expense and fiscal charges ......................................................................................... — — Other........................................................................................................................................ 6,327 — Total nonoperating revenues (expenses)........................................................................... 6,327 — Income (loss) before transfers ........................................................................................... 55,358 (1,630) Gain on early extinguishment of debt ..................................................................................... 22,783 — Transfers in ............................................................................................................................. — — Transfers out ........................................................................................................................... — — Change in net position........................................................................................................ 78,141 (1,630) Total net position (deficit) – beginning.................................................................................... 99,056 1,199 Total net position (deficit) – ending ........................................................................................ $ 177,197 $ (431) 264 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ 793,961 $ 374,083 $ — $ 468,875 $ 732,211 $ 1,449,907 $ 5,237,640 25 — — — — 75 31,378 1,470 — — — — 257 330,997 795,456 374,083 — 468,875 732,211 1,450,239 5,600,015 306,574 95,922 — 37,968 — 150,815 592,592 — 2,565 — — 29,513 — 32,078 426,431 224,996 301 371,766 683,979 1,054,297 4,184,626 37,657 10,140 28,960 22,329 4,328 20,996 124,410 — — — 399 — — 307,942 — — — — — — 38 770,662 333,623 29,261 432,462 717,820 1,226,108 5,241,686 24,794 40,460 (29,261) 36,413 14,391 224,131 358,329 — 270 — 818 — 2,744 3,832 (3,787) (96) — (500) — (8,041) (12,424) — (748) — (1,453) — — 4,126 (3,787) (574) — (1,135) — (5,297) (4,466) 21,007 39,886 (29,261) 35,278 14,391 218,834 353,863 — — — — — — 22,783 70,189 — — 27,286 — 5,946 103,421 (4,584) — — — (765) (32,060) (37,409) 86,612 39,886 (29,261) 62,564 13,626 192,720 442,658 (756,451) 110,095 320,828 (411,676) (32,259) (930,346) (1,599,554) $ (669,839) $ 149,981 $ 291,567 $ (349,112) $ (18,633) $ (737,626) $ (1,156,896) 265 State of California Annual Comprehensive Financial Report Combining Statement of Cash Flows Internal Service Funds Year Ended June 30, 2023 (amounts in thousands) Public Buildings Architecture Construction Revolving CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers ....................................................................................................... $ 17,771 $ — Receipts from interfund services provided ........................................................................... 1,362,445 1,691,337 Payments to suppliers ........................................................................................................... (1,647) (1,433,490) Payments to employees ......................................................................................................... — (1,358) Payments for interfund services used.................................................................................... — — Other receipts (payments)...................................................................................................... (375,057) (74) Net cash provided by (used in) operating activities....................................................... 1,003,512 256,415 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Changes in interfund receivables........................................................................................... — — Changes in interfund payables and loans payable ................................................................ 692,498 (170) Interest paid ........................................................................................................................... — — Transfers in ........................................................................................................................... 901,083 — Transfers out.......................................................................................................................... (3,906) — Net cash provided by (used in) noncapital financing activities..................................... 1,589,675 (170) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets .................................................................................................. (1,572,506) — Proceeds from sale of capital assets ...................................................................................... — — Proceeds from long-term capital financing............................................................................ — — Payment on long-term capital financing................................................................................ — — Proceeds from revenue bonds................................................................................................ 886,174 — Retirement of revenue bonds................................................................................................. (1,294,870) — Interest paid............................................................................................................................ — — Net cash used in capital and related financing activities............................................... (1,981,202) — 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.................................................. 611,985 256,245 Cash and pooled investments – beginning ........................................................................... 688,378 1,333,796 Cash and pooled investments – ending................................................................................. $ 1,300,363 $ 1,590,041 266 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ — $ — $ — $ — $ — $ — $ 17,771 838,684 381,788 — 476,879 673,581 1,818,857 7,243,571 (451,951) (222,185) — (361,132) (691,248) (1,030,327) (4,191,980) (365,291) (113,904) — (113,519) — (333,113) (927,185) — (17,505) (589) — — — (18,094) (22,171) (54) — 5,241 (15,011) 9,764 (397,362) (729) 28,140 (589) 7,469 (32,678) 465,181 1,726,721 — — — 577 (9,760) (9,183) (1,094) (1,092) — (2,660) 72,243 (795) 758,930 — (96) — — — (1) (97) 70,189 — — 27,286 — 446 999,004 (4,584) — — — (765) (26,612) (35,867) 64,511 (1,188) — 25,203 71,478 (36,722) 1,712,787 (26,172) (7,058) (346,517) (25,248) (1,735) (28,450) (2,007,686) 1,077 15 346,517 2,535 — 614 350,758 1,691 — — — — 8,515 10,206 (11,236) — — (1,540) — (3,183) (15,959) — — — — — — 886,174 — — — — — — (1,294,870) (3,787) — — (500) — (8,035) (12,322) (38,427) (7,043) — (24,753) (1,735) (30,539) (2,083,699) — — — — — (5) (5) — 182 — 818 — 2,744 3,744 — 182 — 818 — 2,739 3,739 25,355 20,091 (589) 8,737 37,065 400,659 1,359,548 214,043 383,528 9,400 52,862 35,345 370,704 3,088,056 $ 239,398 $ 403,619 $ 8,811 $ 61,599 $ 72,410 $ 771,363 $ 4,447,604 (continued) 267 State of California Annual Comprehensive Financial Report Combining Statement of Cash Flows (continued) Internal Service Funds Year Ended June 30, 2023 (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)........................................................................................................... $ 49,031 $ (1,630) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation.......................................................................................................................... — — Amortization of premiums and discounts............................................................................. (124,045) — Amortization of long-term prepaid charges.......................................................................... 38 — Other...................................................................................................................................... 9,115 — Change in account balances: Receivables......................................................................................................................... — 2,048 Due from other funds.......................................................................................................... (30,595) 18,189 Due from other governments.............................................................................................. — — Prepaid items...................................................................................................................... — (6) Inventories.......................................................................................................................... — — Contracts and installments receivable................................................................................ 1,072,166 — Leases receivable................................................................................................................ — — Deferred outflow of resources............................................................................................ 22,783 — Accounts payable................................................................................................................ (623) (14,564) Due to other funds.............................................................................................................. 4,193 55,498 Due to other governments................................................................................................... — (61) Deposits.............................................................................................................................. — — Contracts and notes payable............................................................................................... — — Interest payable................................................................................................................... (762) — Revenues received in advance............................................................................................ (1,475) 196,999 Other current liabilities....................................................................................................... 3,686 (13) Benefits payable................................................................................................................. — — Compensated absences payable.......................................................................................... — (130) Other noncurrent liabilities................................................................................................. — 85 Deferred inflow of resources.............................................................................................. — — Total adjustments............................................................................................................. 954,481 258,045 Net cash provided by (used in) operating activities............................................................ $ 1,003,512 $ 256,415 Noncash investing, capital, and financing activities Transfers of construction work-in-progress to state departments ........................................ $ 891,279 $ — Miscellaneous noncash activities transactions...................................................................... — — 268 Internal Service Funds Other Financial Technology Water Internal Service Prison Information Services Resources Service Revolving Industries Systems Revolving Revolving Programs Total $ 24,794 $ 40,460 $ (29,261) $ 36,413 $ 14,391 $ 224,131 $ 358,329 37,657 10,140 28,960 22,329 4,328 20,996 124,410 — — — — — — (124,045) — — — — — — 38 — (54) — — — — 9,061 (856) 259 — (1,107) (254) (67,186) (67,096) 60,187 (703) — 10,129 (56,451) 55,515 56,271 (379) 47 — (2,356) 1,000 6,324 4,636 (12,488) 1,799 — 514 9,205 1,556 580 (18,330) (891) — — 145 (2,815) (21,891) — — — — — — 1,072,166 (2,624) — — — — 335 (2,289) (140,290) (26,064) — (48,976) — (137,908) (330,455) 5,298 (3,046) (155) 10,519 12,894 25,229 35,552 (15,573) 2,354 (133) (1,018) (2,896) 332,869 375,294 (19,796) — — — (8,960) (213) (29,030) (1,216) — — — — — (1,216) (1,489) — — 2,451 (1,062) — (100) — — — — — — (762) 2,094 (243) — — 971 47,085 245,431 709 (2,003) — — (20) 3,653 6,012 — — — — — (2) (2) (586) (922) — (1,949) — (3,329) (6,916) 126,975 (27,720) — 8,847 (5,969) 72,651 174,869 (44,816) 34,727 — (28,327) — (113,710) (152,126) (25,523) (12,320) 28,672 (28,944) (47,069) 241,050 1,368,392 $ (729) $ 28,140 $ (589) $ 7,469 $ (32,678) $ 465,181 $ 1,726,721 (concluded) $ — $ — $ — $ — $ — $ — $ 891,279 — 87 — — — — 87 269 State of California Annual Comprehensive Financial Report This page intentionally left blank 270 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. The Electric Power Fund accounts for assistance in mitigating the effects of a statewide energy supply emergency. 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. 271 State of California Annual Comprehensive Financial Report Combining Statement of Net Position Nonmajor Enterprise Funds June 30, 2023 (amounts in thousands) State Water Safe Drinking Pollution Control Water State Revolving Revolving ASSETS Current assets: Cash and pooled investments........................................................................................ $ 202,073 $ 88,828 Restricted assets: Cash and pooled investments..................................................................................... 750,719 64,369 Due from other governments...................................................................................... 190,373 18,933 Receivables (net)........................................................................................................... — 4,192 Due from other funds.................................................................................................... 12,175 21,179 Due from other governments......................................................................................... 43,086 43,963 Prepaid items................................................................................................................. — — Inventories..................................................................................................................... — — Total current assets..................................................................................................... 1,198,426 241,464 Noncurrent assets: Restricted assets: Loans receivable......................................................................................................... 4,532,783 727,092 Investments.................................................................................................................... — — Interfund receivables..................................................................................................... 2,933 — Loans receivable............................................................................................................ 578,855 1,350,225 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............................................................................................... 5,114,571 2,077,317 Total assets.............................................................................................................. 6,312,997 2,318,781 DEFERRED OUTFLOWS OF RESOURCES........................................................... — — Total assets and deferred outflows of resources............................................... $ 6,312,997 $ 2,318,781 272 Nonmajor Enterprise Funds Other Housing Enterprise Loan Electric Power Programs Total $ 362,868 $ 1,195 $ 253,719 $ 908,683 — 60,805 — 875,893 — — — 209,306 33,911 105,495 585 144,183 — — 6,427 39,781 87 — 108 87,244 — — 30 30 — — 6,332 6,332 396,866 167,495 267,201 2,271,452 — — — 5,259,875 11,291 — — 11,291 — — 3,682 6,615 835,342 — 45,133 2,809,555 444 — 829 1,273 16,260 — 10,070 26,330 — 717 24,803 25,520 (16,260) (191) (12,103) (28,554) — — 106 106 8,432 — — 8,432 855,509 526 72,520 8,120,443 1,252,375 168,021 339,721 10,391,895 5,520 11,962 16,824 34,306 $ 1,257,895 $ 179,983 $ 356,545 $ 10,426,201 (continued) 273 State of California Annual Comprehensive Financial Report Combining Statement of Net Position (continued) Nonmajor Enterprise Funds June 30, 2023 (amounts in thousands) State Water Safe Drinking Pollution Control Water State Revolving Revolving LIABILITIES Current liabilities: Accounts payable.......................................................................................................... $ — $ — Due to other funds......................................................................................................... 1,669 20,157 Due to other governments............................................................................................. — — Revenues received in advance....................................................................................... 4 — Interest payable............................................................................................................. 17,222 796 Current portion of long-term obligations...................................................................... 114,304 8,016 Total current liabilities................................................................................................ 133,199 28,969 Noncurrent liabilities: Interfund payables......................................................................................................... — — Compensated absences payable.................................................................................... — — Workers’ compensation benefits payable..................................................................... — — Lease liability................................................................................................................ — — Subscription liability..................................................................................................... — — General obligation bonds payable................................................................................. — — Revenue bonds payable................................................................................................. 1,493,758 64,273 Net other postemployment benefits liability................................................................. — — Net pension liability...................................................................................................... — — Other noncurrent liabilities............................................................................................ — — Total noncurrent liabilities.......................................................................................... 1,493,758 64,273 Total liabilities........................................................................................................ 1,626,957 93,242 DEFERRED INFLOWS OF RESOURCES............................................................... — — Total liabilities and deferred inflows of resources........................................................................................................ 1,626,957 93,242 NET POSITION Net investment in capital assets.................................................................................... — — Restricted – expendable: Debt service................................................................................................................ 500,118 — Security for revenue bonds......................................................................................... 3,097,871 — Other purposes............................................................................................................ — 2,225,539 Total expendable...................................................................................................... 3,597,989 2,225,539 Unrestricted................................................................................................................... 1,088,051 — Total net position.................................................................................................... 4,686,040 2,225,539 Total liabilities, deferred inflows of resources, and net position.................... $ 6,312,997 $ 2,318,781 274 Nonmajor Enterprise Funds Other Housing Enterprise Loan Electric Power Programs Total $ 1 $ 12,104 $ 5,944 $ 18,049 447 — 837 23,110 105 — 44 149 — — 32 36 14,869 — — 32,887 27,830 477 1,512 152,139 43,252 12,581 8,369 226,370 432 — 21,720 22,152 — — 13,070 13,070 — — 4,378 4,378 — 356 18,462 18,818 — 8 407 415 671,317 — — 671,317 401,610 — — 1,959,641 6,292 5,530 18,525 30,347 13,464 5,838 27,061 46,363 4,093 — 21,636 25,729 1,097,208 11,732 125,259 2,792,230 1,140,460 24,313 133,628 3,018,600 8,933 30,295 7,379 46,607 1,149,393 54,608 141,007 3,065,207 685 — 1,384 2,069 — — — 500,118 — — — 3,097,871 107,817 125,375 141,900 2,600,631 107,817 125,375 141,900 6,198,620 — — 72,254 1,160,305 108,502 125,375 215,538 7,360,994 $ 1,257,895 $ 179,983 $ 356,545 $ 10,426,201 (concluded) 275 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, 2023 (amounts in thousands) State Water Safe Drinking Pollution Control Water State Revolving Revolving OPERATING REVENUES Services and sales.............................................................................................................. $ 12,140 $ — Investment and interest...................................................................................................... 53,435 28,007 Other ................................................................................................................................. — — Total operating revenues.............................................................................................. 65,575 28,007 OPERATING EXPENSES Personal services............................................................................................................... 1,178 18,713 Supplies............................................................................................................................. — — Services and charges......................................................................................................... 5,543 — Depreciation...................................................................................................................... — — Interest expense................................................................................................................. — — Other.................................................................................................................................. 1,087 7,799 Total operating expenses.............................................................................................. 7,808 26,512 Operating income (loss)............................................................................................... 57,767 1,495 NONOPERATING REVENUES (EXPENSES) Donations and grants......................................................................................................... 37,996 113,877 Investment and interest income......................................................................................... 18,079 2,883 Interest expense and fiscal charges................................................................................... (39,140) (1,540) Other.................................................................................................................................. — — Total nonoperating revenues (expenses)..................................................................... 16,935 115,220 Income (loss) before capital contributions and transfers............................................................................................................... 74,702 116,715 Transfers in........................................................................................................................ — — Transfers out...................................................................................................................... — — Change in net position 74,702 116,715 Total net position – beginning........................................................................................... 4,611,338 2,108,824 Total net position – ending................................................................................................ $ 4,686,040 $ 2,225,539 * Restated 276 Nonmajor Enterprise Funds Other Housing Enterprise Loan Electric Power Programs Total $ 1,384 $ 1,195 $ 113,912 $ 128,631 49,255 — 1,775 132,472 2,744 — 284 3,028 53,383 1,195 115,971 264,131 1,131 — 17,296 38,318 — — 61,795 61,795 17,227 5,355 63,720 91,845 — 190 3,146 3,336 32,082 — — 32,082 — — — 8,886 50,440 5,545 145,957 236,262 2,943 (4,350) (29,986) 27,869 — — — 151,873 — 3,383 14,079 38,424 — (1,001) (83) (41,764) (242) 2,008 — 1,766 (242) 4,390 13,996 150,299 2,701 40 (15,990) 178,168 — — — — — — — — 2,701 40 (15,990) 178,168 105,801 * 125,335 * 231,528 7,182,826 $ 108,502 $ 125,375 $ 215,538 $ 7,360,994 277 State of California Annual Comprehensive Financial Report Combining Statement of Cash Flows Nonmajor Enterprise Funds Year Ended June 30, 2023 (amounts in thousands) State Water Safe Drinking Pollution Control Water State Revolving Revolving CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers/employers............................................................................ $ 46,314 $ 29,199 Receipts from interfund services provided................................................................... — — Payments to suppliers................................................................................................... (6,135) (28,711) Payments to employees................................................................................................ — — Payments for interfund services used........................................................................... (256) — Claims paid to other than employees........................................................................... — (108,162) Other payments............................................................................................................ (350,722) — Net cash provided by (used in) operating activities.............................................. (310,799) (107,674) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Changes in notes and leases receivable........................................................................ — — Changes in interfund receivables and loans receivable................................................ 989 — Changes in interfund payables and loans payable........................................................ — — Proceeds from general obligation bonds...................................................................... — — Retirement of general obligation bonds....................................................................... — — Proceeds from revenue bonds...................................................................................... 602,511 — Retirement of revenue bonds........................................................................................ (92,820) (6,040) Interest paid.................................................................................................................. (54,053) (3,394) Grants received............................................................................................................. 33,164 115,160 Other receipts (payments)............................................................................................ — — Net cash provided by (used in) noncapital financing activities........................... 489,791 105,726 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets......................................................................................... — — Proceeds from sale of capital assets............................................................................. — — Proceeds from long-term capital financing.................................................................. — — Payment on long-term capital financing...................................................................... — — Interest paid.................................................................................................................. — — Net cash used in capital and related financing activities..................................... — — CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity and sale of investments.......................................................... — — Earnings on investments............................................................................................... 12,294 2,193 Net cash provided by investing activities............................................................... 12,294 2,193 Net increase (decrease) in cash and pooled investments........................................ 191,286 245 Cash and pooled investments – beginning.................................................................. 761,506 152,952 Cash and pooled investments – ending........................................................................ $ 952,792 $ 153,197 278 Nonmajor Enterprise Funds Other Housing Enterprise Loan Electric Power Programs Total $ 181,732 $ — $ 25,636 $ 282,881 — 1,195 106,717 107,912 (18,259) (938) (79,794) (133,837) (1,131) (4,031) (7,548) (12,710) (432) — (25,998) (26,686) — — — (108,162) (201,578) — (49,622) (601,922) (39,668) (3,774) (30,609) (492,524) — — (64) (64) — — 1,927 2,916 432 — 64 496 169,568 — — 169,568 (29,955) — — (29,955) 89,959 — — 692,470 (25,145) — — (124,005) — — (7) (57,454) — — — 148,324 — (49,058) — (49,058) 204,859 (49,058) 1,920 753,238 — — (21,266) (21,266) — — 11 11 — — 19,233 19,233 — (194) — (194) — — (76) (76) — (194) (2,098) (2,292) 8,271 — — 8,271 — 1,967 14,079 30,533 8,271 1,967 14,079 38,804 173,462 (51,059) (16,708) 297,226 189,406 113,059 270,427 1,487,350 $ 362,868 $ 62,000 $ 253,719 $ 1,784,576 (continued) 279 State of California Annual Comprehensive Financial Report Combining Statement of Cash Flows (continued) Nonmajor Enterprise Funds Year Ended June 30, 2023 (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).................................................................................................. $ 57,767 $ 1,495 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation................................................................................................................. — — Provisions and allowances........................................................................................... — — Amortization of premiums and discounts.................................................................... — — Other............................................................................................................................. (16,671) — Change in account balances: Receivables................................................................................................................ — — Due from other funds................................................................................................. (256) — Due from other governments..................................................................................... (2,235) 1,192 Prepaid items............................................................................................................. — — Inventories................................................................................................................. — — Other current assets................................................................................................... — — Loans receivable........................................................................................................ (351,077) (108,162) Deferred outflow of resources................................................................................... — — Accounts payable....................................................................................................... — — Due to other funds..................................................................................................... 1,673 (2,199) Due to other governments.......................................................................................... — — Interest payable.......................................................................................................... — — Revenues received in advance................................................................................... — — Other current liabilities.............................................................................................. — — Compensated absences payable................................................................................. — — Other noncurrent liabilities........................................................................................ — — Deferred inflows of resources.................................................................................... — — Total adjustments.................................................................................................... (368,566) (109,169) Net cash provided by (used in) operating activities................................................... $ (310,799) $ (107,674) Noncash investing, capital, and financing activities Miscellaneous noncash activities transactions............................................................. $ — $ — 280 Nonmajor Enterprise Funds Other Housing Electric Enterprise Loan Power Programs Total $ 2,943 $ (4,350) $ (29,986) $ 27,869 — 190 3,146 3,336 1 — — 1 (1,031) — — (1,031) (333) — — (17,004) (2,819) — 40 (2,779) — — (2,799) (3,055) — — 178 (865) — — (9) (9) — — (634) (634) 1,021 — — 1,021 (31,908) — 18,947 (472,200) (9,153) (337) (7,950) (17,440) 543 (105) (3,178) (2,740) (1,718) — (1,787) (4,031) — — (258) (258) 728 — — 728 — — (17) (17) 421 — (7,795) (7,374) — — (258) (258) 5,063 672 9,783 15,518 (3,426) 156 (8,032) (11,302) (42,611) 576 (623) (520,393) $ (39,668) $ (3,774) $ (30,609) $ (492,524) (concluded) $ 1,690 $ — $ — $ 1,690 281 State of California Annual Comprehensive Financial Report This page intentionally left blank 282 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) 283 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. 284 This page intentionally left blank 285 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, 2023 (amounts in thousands) Defined Benefit Public State Employees’ Teachers’ Judges’ Retirement Retirement Retirement ASSETS Cash and pooled investments............................................................................ $ 2,315,379 $ 329,090 $ 5,390 Investments, at fair value: Short-term....................................................................................................... 1,252,634 10,039,798 46,805 Equity securities............................................................................................. 200,861,111 124,435,441 — Debt securities................................................................................................ 123,736,430 44,243,745 — Real estate....................................................................................................... 68,759,263 46,560,615 — Securities lending collateral............................................................................ 6,735,918 27,276,497 — Other............................................................................................................... 71,065,455 92,862,467 — Total investments......................................................................................... 472,410,811 345,418,563 46,805 Receivables (net)............................................................................................... 16,561,426 7,181,174 1,372 Due from other funds........................................................................................ 1,068,243 860 121 Loans receivable............................................................................................... — 5,641,476 — Other assets....................................................................................................... 216,058 732,114 — Total assets.................................................................................................... 492,571,917 359,303,277 53,688 DEFERRED OUTFLOWS OF RESOURCES............................................... 218,708 174,427 1,003 Total assets and deferred outflows of resources...................................... 492,790,625 359,477,704 54,691 LIABILITIES Accounts payable.............................................................................................. 10,521 7,050,297 291 Due to other governments................................................................................. — 12 — Benefits payable................................................................................................ 88,746 426,849 — Securities lending obligations........................................................................... 13,357,902 27,384,547 — Loans payable................................................................................................... — 5,669,435 — Other liabilities.................................................................................................. 14,599,996 1,757,019 7,366 Total liabilities............................................................................................... 28,057,165 42,288,159 7,657 DEFERRED INFLOWS OF RESOURCES................................................... 155,301 271,035 707 Total liabilities and deferred inflows of resources.................................. 28,212,466 42,559,194 8,364 NET POSITION Restricted: Pension benefits................................................................................................ 464,578,159 316,918,510 46,327 Other postemployment benefits........................................................................ — — — Deferred compensation participants................................................................. — — — Individuals, organizations, or other governments............................................. — — — Total net position.......................................................................................... $ 464,578,159 $ 316,918,510 $ 46,327 286 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 $ 5,516 $ 1,454 $ 11,387 $ 17,838 $ 14,260 $ 2,700,314 52 3 46,714 2,936,194 15,478 14,337,678 1,738,697 34,379 12,256,248 14,284,298 61,977 353,672,151 580,402 61,300 5,316,261 2,507,530 37,308 176,482,976 — — — — — 115,319,878 — — — — — 34,012,415 — — — 4,645,387 — 168,573,309 2,319,151 95,682 17,619,223 24,373,409 114,763 862,398,407 10,561 55 127,657 37,084 4,376 23,923,705 66 — 99 30 20 1,069,439 — — — 6,942 — 5,648,418 — — — 1 — 948,173 2,335,294 97,191 17,758,366 24,435,304 133,419 896,688,456 1,187 314 2,367 1,867 473 400,346 2,336,481 97,505 17,760,733 24,437,171 133,892 897,088,802 320 83 1,082 2,905 6,603 7,072,102 — — — — — 12 — 19 87,977 1,464 565 605,620 — — — — — 40,742,449 — — — — — 5,669,435 6,535 1,554 10,224 14,318 3,122 16,400,134 6,855 1,656 99,283 18,687 10,290 70,489,752 844 180 2,106 2,358 955 433,486 7,699 1,836 101,389 21,045 11,245 70,923,238 2,328,782 95,669 — — 114,346 784,081,793 — — 17,659,344 — — 17,659,344 — — — 24,416,126 — 24,416,126 — — — — 8,301 8,301 $ 2,328,782 $ 95,669 $ 17,659,344 $ 24,416,126 $ 122,647 $ 826,165,564 287 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, 2023 (amounts in thousands) Defined Benefit Public State Employees’ Teachers’ Judges’ Retirement Retirement Retirement ADDITIONS Contributions: Employer..................................................................................................... $ 24,227,246 $ 7,746,196 $ 208,785 Plan member................................................................................................ 5,672,430 4,304,648 1,697 Non-employer.............................................................................................. — 3,719,874 — Total contributions................................................................................... 29,899,676 15,770,718 210,482 Investment income: Net appreciation (depreciation) in fair value of investments...................... 20,776,650 13,564,262 — Interest, dividends, and other investment income....................................... 8,152,283 7,572,558 2,242 Less: investment expense............................................................................ (1,821,087) (1,461,919) (9) Net investment income (loss)................................................................... 27,107,846 19,674,901 2,233 Other............................................................................................................... 9,981 303,053 3,028 Total additions 57,017,503 35,748,672 215,743 DEDUCTIONS Distributions to beneficiaries......................................................................... 31,084,243 18,244,899 216,271 Refunds of contributions................................................................................ 391,113 138,940 — Administrative expense.................................................................................. 323,014 229,857 2,031 Interest expense.............................................................................................. — 272,751 — Payments to and for depositors...................................................................... — — — Total deductions........................................................................................ 31,798,370 18,886,447 218,302 Change in net position.............................................................................. 25,219,133 16,862,225 (2,559) Net position – beginning.................................................................................. 439,359,026 300,056,285 48,886 Net position – ending....................................................................................... $ 464,578,159 $ 316,918,510 $ 46,327 288 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 $ 89,970 $ 44 $ 5,220,760 $ 2,889 $ 25,812 $ 37,521,702 38,669 11 — 1,036,948 44,828 11,099,231 — — — — — 3,719,874 128,639 55 5,220,760 1,039,837 70,640 52,340,807 152,253 667 947,792 2,428,391 8,375 37,878,390 437 15 3,561 42,717 367 15,774,180 (945) (81) (6,838) (802) (56) (3,291,737) 151,745 601 944,515 2,470,306 8,686 50,360,833 4 2 13,723 25,110 77 354,978 280,388 658 6,178,998 3,535,253 79,403 103,056,618 83,573 7,088 3,617,896 115,258 69,482 53,438,710 295 — — 4,126 — 534,474 2,126 525 4,608 26,716 803 589,680 — — — 4 1 272,756 — — 229,444 593,490 5,765 828,699 85,994 7,613 3,851,948 739,594 76,051 55,664,319 194,394 (6,955) 2,327,050 2,795,659 3,352 47,392,299 2,134,388 102,624 15,332,294 21,620,467 119,295 778,773,265 $ 2,328,782 $ 95,669 $ 17,659,344 $ 24,416,126 $ 122,647 $ 826,165,564 289 State of California Annual Comprehensive Financial Report This page intentionally left blank 290 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. 291 State of California Annual Comprehensive Financial Report Combining Statement of Fiduciary Net Position Private Purpose Trust Funds June 30, 2023 (amounts in thousands) Scholarshare Other Private Program Unclaimed Purpose Trust Property Trust Total ASSETS Cash and pooled investments ...................................... $ 4,812 $ 61,005 $ 22,490 $ 88,307 Investments, at fair value: Short-term................................................................. 451,985 — — 451,985 Equity securities....................................................... 7,319,927 — 42,942 7,362,869 Debt securities.......................................................... 3,182,160 — 24,874 3,207,034 Real estate ............................................................... 369,889 — — 369,889 Other......................................................................... 2,351,285 — 609,723 2,961,008 Total investments ................................................. 13,675,246 — 677,539 14,352,785 Receivables (net).......................................................... 1,834 660 423 2,917 Due from other funds .................................................. — — 4 4 Other assets.................................................................. — 259,547 25 259,572 Total assets.............................................................. 13,681,892 321,212 700,481 14,703,585 LIABILITIES Accounts payable......................................................... 6,959 2,653 18,965 28,577 Revenues received in advance..................................... — — 8,445 8,445 Deposits........................................................................ — 259,547 — 259,547 Total liabilities........................................................ 6,959 262,200 27,410 296,569 NET POSITION Restricted for individuals, organizations, or other governments.................................................. $ 13,674,933 $ 59,012 $ 673,071 $ 14,407,016 292 Investment Trust Funds Combining Statement of Changes in Fiduciary Net Position Private Purpose Trust Funds Year Ended June 30, 2023 (amounts in thousands) Scholarshare Other Private Program Unclaimed Purpose Trust Property Trust Total ADDITIONS Investment income: Net appreciation (depreciation) in fair value of investments........................................................ $ — $ — $ 46,115 $ 46,115 Interest, dividends, and other investment income.... 1,158,761 — 8,658 1,167,419 Less: investment expense......................................... (3,046) — (2,574) (5,620) Net investment income (loss)................................ 1,155,715 — 52,199 1,207,914 Receipts from depositors............................................. 1,925,966 1,053,950 431,634 3,411,550 Total additions..................................................... 3,081,681 1,053,950 483,833 4,619,464 DEDUCTIONS Administrative expenses............................................. — — 246 246 Payments to and for depositors................................... 1,666,934 1,058,519 106,577 2,832,030 Total deductions.................................................. 1,666,934 1,058,519 106,823 2,832,276 Change in net position........................................ 1,414,747 (4,569) 377,010 1,787,188 Net position – beginning............................................... 12,260,186 63,581 296,061 12,619,828 Net position – ending.................................................... $ 13,674,933 $ 59,012 $ 673,071 $ 14,407,016 293 State of California Annual Comprehensive Financial Report This page intentionally left blank 294 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. 295 State of California Annual Comprehensive Financial Report Combining Statement of Fiduciary Net Position Investment Trust Funds June 30, 2023 (amounts in thousands) California Employers’ Pension Local Agency Prefunding Investment Trust Total ASSETS Cash and pooled investments............................................................... $ 25,664,992 $ 16 $ 25,665,008 Investments, at fair value: Short-term.......................................................................................... — 282 282 Equity securities................................................................................ — 64,017 64,017 Debt securities................................................................................... — 76,072 76,072 Total investments............................................................................ — 140,371 140,371 Receivables (net).................................................................................. 220,773 5 220,778 Total assets....................................................................................... 25,885,765 140,392 26,026,157 DEFERRED OUTFLOWS OF RESOURCES.................................. — 37 37 Total assets and deferred outflows of resources.................................................................................. 25,885,765 140,429 26,026,194 LIABILITIES Accounts payable................................................................................. 34 12 46 Due to other governments.................................................................... 208,402 — 208,402 Other liabilities..................................................................................... — 49 49 Total liabilities................................................................................. 208,436 231 208,667 DEFERRED INFLOWS OF RESOURCES...................................... — 75 75 Total liabilities and deferred inflows of resources.................................................................................. 208,436 306 208,742 NET POSITION Restricted: Pension and other postemployment benefits........................................ — 140,123 140,123 Pool participants................................................................................... 25,677,329 — 25,677,329 Total net position............................................................................. $ 25,677,329 $ 140,123 $ 25,817,452 296 Investment Trust Funds Combining Statement of Changes in Fiduciary Net Position Investment Trust Funds Year Ended June 30, 2023 (amounts in thousands) California Employers’ Pension Local Agency Prefunding Investment Trust Total ADDITIONS Contributions: Employer............................................................................................ $ — $ 51,713 $ 51,713 Total contributions........................................................................... — 51,713 51,713 Investment income: Net appreciation (depreciation) in fair value of investments............. — 4,861 4,861 Interest, dividends, and other investment income.............................. 653,600 36 653,636 Less: investment expense................................................................... — (54) (54) Net investment income.................................................................... 653,600 4,843 658,443 Receipts from depositors....................................................................... 16,377,539 — 16,377,539 Other...................................................................................................... — 243 243 Total additions.................................................................................. 17,031,139 56,799 17,087,938 DEDUCTIONS Distributions paid and payable to participants...................................... 651,638 — 651,638 Administrative expense......................................................................... 1,961 64 2,025 Payments to and for depositors............................................................. 26,462,306 1,681 26,463,987 Total deductions................................................................................ 27,115,905 1,745 27,117,650 Change in net position..................................................................... (10,084,766) 55,054 (10,029,712) Net position – beginning........................................................................ 35,762,095 85,069 35,847,164 Net position – ending............................................................................. $ 25,677,329 $ 140,123 $ 25,817,452 297 State of California Annual Comprehensive Financial Report This page intentionally left blank 298 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, 2022. 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. 299 State of California Annual Comprehensive Financial Report Combining Statement of Net Position Nonmajor Component Units June 30, 2023 (amounts in thousands) California State University Financing Auxiliary Authorities Organizations ASSETS Current assets: Cash and pooled investments................................................................................................ $ 11,570 $ 684,468 Investments............................................................................................................................ — 833,055 Restricted assets: Cash and pooled investments.............................................................................................. 637,676 — Investments.......................................................................................................................... 16,578 — Receivables (net)................................................................................................................... 32,593 534,486 Due from primary government.............................................................................................. 128 — Due from other governments................................................................................................. — — Prepaid items......................................................................................................................... — — Other current assets............................................................................................................... — 41,420 Total current assets.............................................................................................................. 698,545 2,093,429 Noncurrent assets: Restricted assets: Cash and pooled investments.............................................................................................. — 47,691 Investments.......................................................................................................................... 333,839 — Investments............................................................................................................................ — 2,929,390 Receivables (net)................................................................................................................... — 705,101 Loans receivable.................................................................................................................... 505,760 — Long-term prepaid charges.................................................................................................... — — Capital assets: Land..................................................................................................................................... — 145,494 Collections – nondepreciable.............................................................................................. — 12,623 Buildings and other depreciable property........................................................................... 9 1,137,057 Intangible assets – amortizable........................................................................................... — 336,644 Less: accumulated depreciation/amortization..................................................................... (9) (709,291) Construction/development in progress................................................................................ — 116,606 Intangible assets – nonamortizable..................................................................................... — 2,304 Other noncurrent assets......................................................................................................... — 42,721 Total noncurrent assets........................................................................................................ 839,599 4,766,340 Total assets....................................................................................................................... 1,538,144 6,859,769 DEFERRED OUTFLOWS OF RESOURCES.................................................................... 18,867 76,691 Total assets and deferred outflows of resources........................................................ $ 1,557,011 $ 6,936,460 300 Nonmajor Component Units District Other Agricultural Component Associations Units Total $ 215,802 $ 730,601 $ 1,642,441 — — 833,055 19,183 90,599 747,458 7,742 — 24,320 10,069 33,397 610,545 — — 128 — — — 1,070 491 1,561 3,879 — 45,299 257,745 855,088 3,904,807 — — 47,691 3,329 — 337,168 — 207,213 3,136,603 — 3,783 708,884 — — 505,760 — 104 104 29,709 5,247 180,450 — 435 13,058 821,888 194,009 2,152,963 — 3,106 339,750 (581,963) (58,426) (1,349,689) 43,242 247,503 407,351 — 116 2,420 — 9,796 52,517 316,205 612,886 6,535,030 573,950 1,467,974 10,439,837 42,792 29,996 168,346 $ 616,742 $ 1,497,970 $ 10,608,183 (continued) 301 State of California Annual Comprehensive Financial Report Combining Statement of Net Position (continued) Nonmajor Component Units June 30, 2023 (amounts in thousands) California State University Financing Auxiliary Authorities Organizations LIABILITIES Current liabilities: Accounts payable................................................................................................................... $ 4,308 $ 143,558 Revenues received in advance............................................................................................... 1,024 166,708 Deposits.................................................................................................................................. — — Contracts and notes payable................................................................................................... — 13,315 Interest payable...................................................................................................................... 2,571 — Current portion of long-term obligations............................................................................... 18,290 161,205 Other current liabilities.......................................................................................................... 15,838 132,544 Total current liabilities......................................................................................................... 42,031 617,330 Noncurrent liabilities: Compensated absences payable............................................................................................. 527 5,708 Workers’ compensation benefits payable.............................................................................. — 6,680 Loans payable........................................................................................................................ — 3,176 Commercial paper and other borrowings............................................................................... 211 — Capital lease obligations........................................................................................................ — 116,600 Subscription Liability............................................................................................................. — 211,171 Revenue bonds payable.......................................................................................................... 384,981 47,850 Net other postemployment benefits liability.......................................................................... 6,341 80,825 Net pension liability............................................................................................................... 11,569 115,236 Revenues received in advance............................................................................................... — — Other noncurrent liabilities.................................................................................................... 86,002 581,694 Total noncurrent liabilities................................................................................................... 489,631 1,168,940 Total liabilities................................................................................................................. 531,662 1,786,270 DEFERRED INFLOWS OF RESOURCES......................................................................... 2,705 458,730 Total liabilities and deferred inflows of resources..................................................... 534,367 2,245,000 NET POSITION Net investment in capital assets............................................................................................. — 396,572 Restricted: Nonexpendable – endowments............................................................................................ — 1,830,118 Expendable: Endowments and gifts....................................................................................................... — — Education........................................................................................................................... — 1,457,874 Statute................................................................................................................................ 1,018,543 — Other purposes................................................................................................................... 3,994 — Total expendable............................................................................................................. 1,022,537 1,457,874 Unrestricted............................................................................................................................ 107 1,006,896 Total net position............................................................................................................... 1,022,644 4,691,460 Total liabilities, deferred inflows of resources, and net position.............................. $ 1,557,011 $ 6,936,460 302 Nonmajor Component Units District Other Agricultural Component Associations Units Total $ 16,712 $ 715,432 $ 880,010 8,190 2,108 178,030 1,195 24 1,219 — — 13,315 458 — 3,029 2,550 5,099 187,144 3,180 39,261 190,823 32,285 761,924 1,453,570 7,520 — 13,755 — — 6,680 11,354 — 11,565 — — 116,600 — 21 211,192 — 379 3,555 35,751 428,505 897,087 37,260 68,478 192,904 55,083 70,185 252,073 19,405 — 19,405 27,416 16,683 711,795 193,789 584,251 2,436,611 226,074 1,346,175 3,890,181 30,337 40,769 532,541 256,411 1,386,944 4,422,722 272,120 76,574 745,266 — 26,512 1,856,630 — 18,763 18,763 — (1,095) 1,456,779 — — 1,018,543 22,503 — 26,497 22,503 17,668 2,520,582 65,708 (9,728) 1,062,983 360,331 111,026 6,185,461 $ 616,742 $ 1,497,970 $ 10,608,183 (concluded) 303 State of California Annual Comprehensive Financial Report Combining Statement of Activities Nonmajor Component Units Year Ended June 30, 2023 (amounts in thousands) California State University Financing Auxiliary Authorities Organizations OPERATING EXPENSES Personal services....................................................................................................................... $ 2,578 $ 433,617 Scholarships and fellowships.................................................................................................... — 98,231 Supplies..................................................................................................................................... — — Services and charges................................................................................................................. 12,122 1,423,490 Depreciation.............................................................................................................................. — 76,614 Interest expense and fiscal charges........................................................................................... 8,956 20,229 Other.......................................................................................................................................... — 83,916 Total operating expenses...................................................................................................... 23,656 2,136,097 PROGRAM REVENUES Charges for services.................................................................................................................. 3,144 483,661 Operating grants and contributions........................................................................................... 379,418 778,135 Capital grants and contributions................................................................................................ — 43,192 Total program revenues....................................................................................................... 382,562 1,304,988 Net revenues (expenses)....................................................................................................... 358,906 (831,109) GENERAL REVENUES Investment and interest income (loss)....................................................................................... 31,244 275,586 Other.......................................................................................................................................... 2,410 929,260 Total general revenues.......................................................................................................... 33,654 1,204,846 Change in net position.......................................................................................................... 392,560 373,737 Net position – beginning............................................................................................................. 630,084 4,317,723 * Net position – ending.................................................................................................................. $ 1,022,644 $ 4,691,460 * Restated 304 Nonmajor Component Units District Other Agricultural Component Associations Units Total $ 47,268 $ 48,293 $ 531,756 — 6,362 104,593 — 21,745 21,745 126,128 31,184 1,592,924 20,502 4,823 101,939 1,845 20,491 51,521 287 9,784 93,987 196,030 142,682 2,498,465 291,358 78,833 856,996 — 118,773 1,276,326 — 434 43,626 291,358 198,040 2,176,948 95,328 55,358 (321,517) 362 21,938 329,130 9,008 17,968 958,646 9,370 39,906 1,287,776 104,698 95,264 966,259 255,633 15,762 5,219,202 $ 360,331 $ 111,026 $ 6,185,461 305 State of California Annual Comprehensive Financial Report This page intentionally left blank 306 Statistical Section 307 State of California Annual Comprehensive Financial Report This page intentionally left blank 308 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. 309 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) 20142 2015 3 2016 2017 Governmental activities Net investment in capital assets.................................... $ 94,001,659 $ 100,694,652 $ 104,596,917 $ 107,042,274 Restricted – Expendable............................................... 24,950,740 26,632,502 29,060,971 33,832,232 Unrestricted 1................................................................ (116,948,128) (169,744,967) (168,542,861) (169,499,683) Total governmental activities net position (deficit)..... $ 2,004,271 $ (42,417,813) $ (34,884,973) $ (28,625,177) Business-type activities Net investment in capital assets.................................... $ 2,065,550 $ 2,278,252 $ 2,520,621 $ 2,295,270 Restricted – Nonexpendable......................................... 16,219 13,448 8,653 1,746 Restricted – Expendable............................................... 4,897,314 4,523,496 5,750,634 6,307,218 Unrestricted................................................................... (1,661,692) (5,360,817) (3,707,406) (1,321,132) Total business-type activities net position (deficit)...... $ 5,317,391 $ 1,454,379 $ 4,572,502 $ 7,283,102 Primary government Net investment in capital assets.................................... $ 96,067,209 $ 102,972,904 $ 107,117,538 $ 109,337,544 Restricted – Nonexpendable......................................... 16,219 13,448 8,653 1,746 Restricted – Expendable............................................... 29,848,054 31,155,998 34,811,605 40,139,450 Unrestricted................................................................... (118,609,820) (175,105,784) (172,250,267) (170,820,815) Total primary government net position (deficit)......... $ 7,321,662 $ (40,963,434) $ (30,312,471) $ (21,342,075) 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. 310 Statistical Section 20184 2019 2020 2021 2022 2023 $ 109,614,321 $ 112,279,950 $ 116,773,259 $ 120,745,220 $ 125,862,983 $ 131,322,297 35,053,202 41,371,805 46,670,678 46,362,528 60,482,461 66,645,014 (213,316,033) (208,377,265) (207,968,523) (174,427,918) (221,863,616) (218,243,729) $ (68,648,510) $ (54,725,510) $ (44,524,586) $ (7,320,170) $ (35,518,172) $ (20,276,418) $ 2,469,723 $ 2,534,257 $ 2,907,066 $ 2,677,917 $ 3,340,905 $ 3,538,034 1,708 1,693 1,677 1,663 1,641 1,595 12,083,737 12,945,567 7,722,116 7,651,874 10,639,641 9,900,307 (16,464,573) (16,718,860) (20,948,611) (52,668,204) (33,212,073) (31,107,513) $ (1,909,405) $ (1,237,343) $ (10,317,752) $ (42,336,750) $ (19,229,886) $ (17,667,577) $ 112,084,044 $ 114,814,207 $ 119,680,325 $ 123,423,137 $ 129,203,888 $ 134,860,331 1,708 1,693 1,677 1,663 1,641 1,595 47,136,939 54,317,372 54,392,794 54,014,402 71,122,102 76,545,321 (229,780,606) (225,096,125) (228,917,134) (227,096,122) (255,075,689) (249,351,242) $ (70,557,915) $ (55,962,853) $ (54,842,338) $ (49,656,920) $ (54,748,058) $ (37,943,995) 311 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) 20144 2015 2016 2017 Governmental activities Expenses General government .................................................. $ 14,292,179 $ 15,804,281 $ 16,686,037 $ 17,400,482 Education................................................................... 54,719,677 59,521,018 65,467,497 67,377,805 Health and human services........................................ 105,037,102 122,063,805 127,543,288 135,090,171 Natural resources and environmental protection....... 5,854,685 6,419,591 6,988,442 7,342,079 Business, consumer services, and housing................ 589,715 903,782 814,676 1,163,511 Transportation............................................................ 13,427,229 12,897,591 12,120,820 12,947,296 Corrections and rehabilitation................................... 11,234,705 11,483,573 11,875,294 13,086,499 Interest on long-term debt.......................................... 4,699,265 4,880,625 4,231,581 4,191,283 Total expenses....................................................... 209,854,557 233,974,266 245,727,635 258,599,126 Program revenues Charges for services: General government .............................................. 5,994,608 6,502,363 6,525,736 5,825,533 Education................................................................ 67,165 53,498 66,298 74,548 Health and human services..................................... 7,961,897 8,259,696 10,630,859 11,638,503 Natural resources and environmental protection.... 3,403,524 4,546,413 4,823,861 3,998,751 Business, consumer services, and housing............. 586,055 626,960 823,189 844,445 Transportation......................................................... 4,247,258 4,382,901 4,532,300 4,611,244 Corrections and rehabilitation................................ 13,645 18,557 19,411 17,988 Operating grants/contributions.................................. 69,861,130 84,896,237 86,628,827 89,497,290 Capital grants/contributions....................................... 1,515,890 1,319,430 1,480,351 3,027,780 Total program revenues....................................... 93,651,172 110,606,055 115,530,832 119,536,082 Total governmental activities net program expenses (116,203,385) (123,368,211) (130,196,803) (139,063,044) General revenues and other changes in net position General revenues: Personal income taxes .............................................. 68,793,292 78,098,865 80,303,076 85,712,013 Sales and use taxes.................................................... 36,477,724 38,224,080 39,121,061 38,726,332 Corporation taxes....................................................... 9,102,128 10,720,647 9,213,173 11,128,198 Motor vehicle excise taxes 1 ..................................... 5,777,167 5,393,994 5,028,589 4,878,953 Insurance taxes ......................................................... 3,359,043 3,926,319 4,203,885 2,719,489 Managed care organization enrollment tax 2............. — — — 2,282,313 Other taxes 1............................................................... 2,302,231 2,235,498 2,158,874 2,574,456 Investment and interest ............................................. 80,969 58,016 131,615 149,135 Escheat ...................................................................... 487,937 400,807 304,960 325,755 Gain (loss) on early extinguishment of debt 3.............. (54,537) — 40,516 30,986 Transfers....................................................................... (2,296,010) (2,554,970) (2,800,101) (3,083,437) Total general revenues and other changes in net position ..................... 124,029,944 136,503,256 137,705,648 145,444,193 Total governmental activities change in net position $ 7,826,559 $ 13,135,045 $ 7,508,845 $ 6,381,149 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. 6 In fiscal year 2023, Electric Power was reclassified from a major to a nonmajor enterprise fund. 312 Statistical Section 20185 2019 2020 2021 2022 2023 $ 18,378,216 $ 17,900,629 $ 23,489,012 $ 30,604,918 $ 38,760,471 $ 24,946,231 70,280,444 75,643,779 75,803,990 101,569,505 108,450,558 100,496,652 137,828,737 144,936,676 192,576,208 311,925,505 216,232,017 219,032,287 8,304,162 9,774,290 10,110,777 9,923,185 12,502,619 13,314,762 1,258,104 2,133,480 2,603,823 2,946,561 7,364,028 5,641,942 14,259,461 17,022,071 18,424,746 18,119,697 15,792,836 19,100,099 14,921,295 15,153,502 16,861,994 14,185,645 16,526,318 18,204,561 4,154,485 3,995,597 3,841,351 3,505,827 3,508,229 3,705,403 269,384,904 286,560,024 343,711,901 492,780,843 419,137,076 404,441,937 5,726,900 5,755,165 5,847,276 6,583,975 6,167,925 6,992,729 37,147 78,445 49,780 69,727 65,810 111,947 12,968,379 13,874,296 13,836,881 12,664,071 11,402,121 14,195,544 6,319,879 6,644,917 5,551,029 6,592,526 8,422,029 8,488,546 957,885 1,206,126 1,378,181 1,697,687 1,671,025 1,561,023 6,053,140 7,093,122 7,244,317 7,731,094 8,479,493 8,346,084 39,887 10,993 14,753 15,776 13,563 11,403 87,812,627 94,501,862 143,670,642 268,258,265 170,662,661 147,291,889 1,882,595 1,561,483 2,107,963 1,847,263 1,895,160 1,847,186 121,798,439 130,726,409 179,700,822 305,460,384 208,779,787 188,846,351 (147,586,465) (155,833,615) (164,011,079) (187,320,459) (210,357,289) (215,595,586) 94,460,551 100,657,551 108,308,455 132,042,516 126,058,884 114,593,854 39,784,494 41,006,121 40,703,239 45,905,984 52,328,196 53,471,988 12,608,756 14,625,724 13,180,402 32,108,028 35,850,573 36,685,982 6,680,858 7,632,365 7,876,545 7,942,519 8,453,232 8,654,176 2,754,056 2,734,068 3,161,634 3,156,992 3,516,612 3,720,620 2,397,531 2,562,919 1,031,357 2,318,011 2,584,077 3,478,815 3,573,848 3,790,987 3,789,610 3,827,360 4,402,939 3,667,941 297,782 706,637 690,169 140,329 788,612 2,596,512 378,180 447,401 614,394 640,226 660,143 876,112 — — — — 11,576 22,783 (4,339,995) (3,930,906) (5,963,068) (3,851,666) (5,465,790) (6,047,026) 158,596,061 170,232,867 173,392,737 224,230,299 229,189,054 221,721,757 $ 11,009,596 $ 14,399,252 $ 9,381,658 $ 36,909,840 $ 18,831,765 $ 6,126,171 (continued) 313 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) 2014 2015 2016 2017 Business-type activities Expenses Electric Power 6.............................................................. $ 835,000 $ 799,000 $ 728,000 $ 945,000 Water Resources ............................................................ 983,048 1,019,378 1,086,650 1,223,340 Public Buildings Construction 4..................................... — — — — State Lottery................................................................... 5,078,935 5,560,299 6,315,957 6,271,875 Unemployment Programs .............................................. 13,673,403 11,390,227 11,458,966 11,907,623 California State University 3........................................... 6,544,936 6,847,789 7,199,277 8,001,396 High Technology Education........................................... 847 — — — State Water Pollution Control Revolving....................... 5,072 9,082 11,814 17,112 Safe Drinking Water State Revolving 5.......................... — — — — Housing Loan ................................................................ 57,206 58,280 55,627 62,885 Other enterprise programs.............................................. 79,641 77,475 84,188 75,397 Total expenses............................................................ 27,258,088 25,761,530 26,940,479 28,504,628 Program revenues Charges for services: Electric Power 6........................................................... 835,000 799,000 728,000 945,000 Water Resources.......................................................... 983,048 1,019,378 1,086,650 1,223,340 Public Buildings Construction 4.................................. — — — — State Lottery ............................................................... 5,077,976 5,553,418 6,367,902 6,213,074 Unemployment Programs ........................................... 15,167,258 13,402,902 13,866,028 14,437,094 California State University 3....................................... 3,014,030 3,113,988 3,172,154 3,224,919 High Technology Education........................................ 424 — — — State Water Pollution Control Revolving ................... 62,985 65,959 70,245 75,912 Safe Drinking Water State Revolving 5....................... — — — — Housing Loan ............................................................. 65,247 57,742 53,617 52,842 Other enterprise programs........................................... 77,671 78,625 82,029 93,177 Operating grants/contributions ...................................... 1,491,559 1,666,292 1,764,962 1,805,406 Capital grants/contributions........................................... 80,903 107,746 66,914 61,027 Total program revenues............................................ 26,856,101 25,865,050 27,258,501 28,131,791 Total business-type activities net program revenues (expenses) ....................... (401,987) 103,520 318,022 (372,837) Other changes in net position Gain (loss) on early extinguishment of debt 2................ (26,913) — — — Transfers......................................................................... 2,296,010 2,554,970 2,800,101 3,083,437 Total business-type activities change in net position...... 1,867,110 2,658,490 3,118,123 2,710,600 Total primary government change in net position ........ $ 9,693,669 $ 15,793,535 $ 10,626,968 $ 9,091,749 314 Statistical Section 20185 2019 2020 2021 2022 20236 $ 952,000 $ 913,000 $ 905,115 $ 290,411 $ 36,239 $ — 1,221,866 1,199,823 1,184,458 1,157,325 1,233,036 1,460,049 — — — — — — 7,006,591 7,435,755 6,665,062 8,452,743 8,885,370 9,291,352 12,133,531 13,229,332 23,622,023 55,737,215 14,965,703 15,533,539 9,806,114 9,779,084 10,592,814 10,391,177 10,778,052 10,877,952 — — — — — — 32,335 49,860 45,288 41,466 35,334 46,948 21,994 19,371 25,007 23,570 24,608 28,052 57,088 54,402 53,656 54,540 45,316 50,682 96,078 109,113 148,450 88,903 165,655 152,586 31,327,597 32,789,740 43,241,873 76,237,350 36,169,313 37,441,160 952,000 913,000 903,000 406,588 124,467 — 1,221,866 1,172,134 1,155,001 1,125,002 1,295,670 1,531,195 — — — — — — 6,975,168 7,473,452 6,735,321 8,395,767 8,785,557 9,250,527 15,594,045 14,039,030 12,564,665 23,903,289 16,288,566 15,303,547 3,387,420 3,529,083 3,323,307 3,236,482 3,199,357 3,977,056 — — — — — — 86,789 95,703 87,110 73,790 69,695 83,654 22,675 25,762 29,717 26,457 27,377 30,890 52,735 60,002 61,990 51,953 45,820 53,383 86,911 106,687 105,874 107,929 130,837 136,636 2,132,665 2,125,362 2,593,383 3,103,175 4,010,488 2,797,050 — — — — — — 30,512,274 29,540,215 27,559,368 40,430,432 33,977,834 33,163,938 (815,323) (3,249,525) (15,682,505) (35,806,918) (2,191,479) (4,277,222) — — — — — — 4,339,995 3,930,906 5,963,068 3,851,666 5,465,790 6,047,026 3,524,672 681,381 (9,719,437) (31,955,252) 3,274,311 1,769,804 $ 14,534,268 $ 15,080,633 $ (337,779) $ 4,954,588 $ 22,106,076 $ 7,895,975 (concluded) 315 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) 2014 2015 2016 2017 General Fund Reserved ....................................................................... $ — $ — $ — $ — Unreserved .................................................................... — — — — Nonspendable ............................................................... 128,609 53,431 75,939 103,903 Restricted....................................................................... 394,246 2,266,635 4,044,911 7,429,825 Committed..................................................................... 125,120 102,793 68,102 180,755 Assigned........................................................................ — — — — Unassigned..................................................................... (8,092,571) (4,651,491) (3,827,224) (1,904,097) Total General Fund......................................................... $ (7,444,596) $ (2,228,632) $ 361,728 $ 5,810,386 All other governmental funds Reserved........................................................................ $ — $ — $ — $ — Unreserved, reported in: Special revenue funds................................................ — — — — Capital projects funds................................................ — — — — Nonspendable................................................................ 27,260 5,620 11,188 20,172 Restricted....................................................................... 24,269,093 24,224,167 24,885,166 26,233,389 Committed .................................................................... 2,914,747 4,090,563 5,652,478 5,847,879 Assigned........................................................................ 18,857 16,767 14,622 12,033 Unassigned..................................................................... (20,145) (6,456) (1,037) (15,152) Total all other governmental funds............................... $ 27,209,812 $ 28,330,661 $ 30,562,417 $ 32,098,321 316 Statistical Section 2018 2019 2020 2021 2022 2023 $ — $ — $ — $ — $ — $ — — — — — — — 559,644 1,180,575 2,129,227 2,878,611 2,958,319 3,950,919 9,807,729 14,834,597 16,709,782 12,928,039 23,251,079 24,830,454 171,020 1,787,142 2,965,662 668,351 4,024,689 4,210,891 — — 3,080,372 4,938,117 7,290,655 20,714,283 1,648,511 765,568 3,616,557 52,731,990 36,522,416 10,297,141 $ 12,186,904 $ 18,567,882 $ 28,501,600 $ 74,145,108 $ 74,047,158 $ 64,003,688 $ — $ — $ — $ — $ — $ — — — — — — — — — — — — — 69,868 12,760 13,702 10,238 39,130 95,021 25,051,548 26,329,109 29,796,900 33,282,001 37,132,326 41,637,363 7,897,362 9,994,978 10,066,141 10,160,675 12,949,069 16,158,684 26,346 19,247 49,868 45,543 63,457 77,937 — — (2,474,960) (8,822,239) (55,655,634) (46,430,334) $ 33,045,124 $ 36,356,094 $ 37,451,651 $ 34,676,218 $ (5,471,652) $ 11,538,671 317 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) 2014 2015 2016 2017 Revenues Personal income taxes ........................................................... $ 68,771,667 $ 78,245,616 $ 79,934,285 $ 85,737,905 Sales and use taxes ................................................................ 36,409,311 38,389,972 39,136,040 38,741,715 Corporation taxes ................................................................... 9,242,454 10,780,647 9,214,173 11,125,198 Motor vehicle excise taxes 1................................................... 5,777,167 5,393,994 5,028,589 4,878,953 Insurance taxes....................................................................... 3,359,043 3,926,319 4,203,885 2,719,489 Managed care organization enrollment tax 2.......................... — — — 2,282,313 Other taxes 1............................................................................ 2,297,025 2,312,875 2,185,690 2,565,928 Intergovernmental................................................................... 73,000,600 87,740,667 91,069,753 95,709,784 Licenses and permits.............................................................. 6,957,117 7,270,994 7,612,551 8,113,542 Charges for services................................................................ 769,302 849,895 870,142 860,241 Fees and penalties .................................................................. 9,757,476 10,510,727 11,882,699 11,571,934 Investment and interest........................................................... 137,754 119,690 232,285 318,502 Escheat.................................................................................... 488,945 406,899 305,394 327,614 Other....................................................................................... 2,903,335 3,975,144 4,049,789 2,934,157 Total revenues.................................................................... 219,871,196 249,923,439 255,725,275 267,887,275 Expenditures General government .............................................................. 14,778,214 16,202,395 16,715,892 17,250,720 Education................................................................................ 53,309,436 62,952,621 65,213,542 67,224,796 Health and human services..................................................... 104,781,494 122,259,036 127,201,314 134,372,094 Natural resources and environmental protection.................... 5,508,860 6,006,446 6,278,363 6,712,838 Business, consumer services, and housing............................. 621,037 670,774 1,130,213 1,103,694 Transportation ........................................................................ 15,721,532 15,137,217 14,814,829 15,007,639 Corrections and rehabilitation................................................ 10,395,234 11,182,926 11,450,980 12,276,391 Capital outlay.......................................................................... 1,909,010 1,019,335 1,492,442 1,238,700 Debt service: Bond and commercial paper retirement............................... 7,002,941 8,482,380 6,929,866 9,364,550 Interest and fiscal charges ................................................... 4,321,040 4,473,799 4,057,907 3,986,270 Total expenditures............................................................. 218,348,798 248,386,929 255,285,348 268,537,692 Excess (deficiency) of revenues over (under) expenditures... 1,522,398 1,536,510 439,927 (650,417) Other financing sources (uses) General obligation bonds and commercial paper issued........ 5,082,305 4,343,165 4,074,980 4,325,075 Revenue bonds issued............................................................. — — — — Refunding/remarketing debt issued........................................ 2,077,330 5,086,100 5,220,320 7,074,225 Payment to refund/remarket long-term debt........................... (328,024) (3,865,093) (4,378,328) (3,038,281) Premium on bonds issued....................................................... 505,026 1,116,811 1,037,920 1,309,254 Capital leases ......................................................................... 1,486,204 625,282 1,148,774 988,680 Transfers in............................................................................. 4,041,250 5,344,134 4,385,123 4,586,199 Transfers out........................................................................... (6,304,047) (7,934,754) (7,130,142) (7,551,627) Total other financing sources............................................ 6,560,044 4,715,645 4,358,647 7,693,525 Total change in fund balance.................................................. $ 8,082,442 $ 6,252,155 $ 4,798,574 $ 7,043,108 Debt service as a percentage of noncapital expenditures ......... 5.2 % 5.2 % 4.3 % 5.0 % 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. 318 Statistical Section 2018 2019 2020 2021 2022 2023 $ 94,484,443 $ 96,801,076 $ 111,831,167 $ 132,095,124 $ 125,914,865 $ 114,439,619 39,777,069 41,085,626 40,709,462 45,906,755 52,317,376 53,469,731 12,597,928 14,038,348 13,722,735 32,122,361 35,824,715 36,662,999 6,680,858 7,632,365 7,876,545 7,942,519 8,453,232 8,654,176 2,754,056 2,734,068 3,161,634 3,156,993 3,516,612 3,720,620 2,397,531 2,562,919 1,031,357 2,318,011 2,584,077 3,478,815 3,548,182 3,688,531 3,862,045 4,007,125 4,421,355 3,690,842 92,904,469 99,867,750 148,951,650 272,691,880 175,107,421 151,498,528 8,761,620 9,186,945 9,256,454 9,999,107 10,126,549 10,733,076 975,314 956,032 972,805 1,025,167 1,028,747 1,127,528 13,548,471 14,187,698 14,322,983 15,062,529 15,461,639 15,955,991 607,418 1,321,143 1,328,956 626,478 643,594 3,610,075 382,793 448,756 615,720 644,248 661,698 915,711 5,318,739 5,594,587 4,595,386 6,802,576 7,862,830 8,378,244 284,738,891 300,105,844 362,238,899 534,400,873 443,924,710 416,335,955 18,978,389 19,263,146 27,393,107 29,908,484 44,249,597 29,427,864 69,902,627 75,071,188 76,347,719 99,964,095 111,764,166 101,582,047 138,018,275 144,543,589 191,819,998 311,093,756 216,174,091 219,002,631 7,987,878 9,069,777 9,244,813 8,862,649 12,175,743 13,125,620 1,189,365 2,013,409 2,457,248 2,824,462 7,637,467 5,644,310 17,169,040 17,893,338 20,025,848 19,623,756 19,491,005 22,118,228 14,665,524 14,055,766 14,680,705 12,598,851 15,689,740 17,279,129 612,769 287,487 401,066 886,020 682,904 905,327 8,598,856 10,444,825 10,276,581 9,594,575 13,402,490 10,243,562 3,961,704 3,971,353 3,856,390 3,650,153 4,126,022 3,756,623 281,084,427 296,613,878 356,503,475 499,006,801 445,393,225 423,085,341 3,654,464 3,491,966 5,735,424 35,394,072 (1,468,515) (6,749,386) 5,283,365 3,626,765 5,085,590 5,051,305 4,552,690 6,822,625 — — 500,000 450,000 1,050,000 — 6,681,855 5,683,865 4,384,895 3,657,445 10,011,411 3,701,890 (3,726,204) (411,340) — (428,395) (2,935,087) (37,408) 1,036,320 1,003,337 1,217,615 1,218,766 1,229,185 679,529 405,930 50,506 24,082 439,180 143,759 370,731 4,266,596 4,414,250 5,776,094 6,408,853 7,121,202 8,372,233 (8,555,594) (8,298,095) (11,731,486) (10,249,393) (12,547,219) (14,485,271) 5,392,268 6,069,288 5,256,790 6,547,761 8,625,941 5,424,329 $ 9,046,732 $ 9,561,254 $ 10,992,214 $ 41,941,833 $ 7,157,426 $ (1,325,057) 4.5 % 4.9 % 4.0 % 2.7 % 3.9 % 3.3 % 319 State of California Annual Comprehensive Financial Report This page intentionally left blank 320 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 321 State of California Annual Comprehensive Financial Report Schedule of Revenue Base For the Past Ten Calendar Years (amounts in thousands) 2013 2014 2015 2016 Personal Income by Industry (items restated as footnoted) 1 Farm earnings...................................................... $ 20,545,796 $ 22,609,066 $ 21,222,250 $ 18,646,282 Forestry, fishing, and other natural resources..... 7,873,988 8,303,175 9,216,947 9,898,303 Mining................................................................. 6,503,958 6,712,256 4,963,527 3,753,851 Construction and utilities.................................... 74,439,881 79,692,915 88,130,646 93,511,037 Manufacturing..................................................... 126,037,578 133,035,011 139,414,534 145,528,697 Wholesale trade................................................... 61,468,734 65,805,068 70,215,535 70,149,369 Retail trade.......................................................... 78,268,977 81,107,100 84,898,965 84,819,197 Transportation and warehousing......................... 39,503,640 42,142,663 45,945,185 49,332,199 Information, finance, and insurance.................... 156,649,296 159,848,610 174,617,028 190,140,120 Real estate and rental and leasing....................... 52,035,567 49,055,596 51,762,077 54,244,467 Services............................................................... 482,396,884 516,952,464 552,135,538 574,579,377 Federal, civilian................................................... 25,771,225 26,450,856 27,477,720 28,337,175 Military............................................................... 15,354,084 15,071,769 14,952,018 16,333,621 State and local government................................. 190,360,140 200,331,079 212,528,644 223,593,750 Other 2................................................................. 474,413,668 517,464,525 566,525,160 593,930,254 Total personal income.......................................... $ 1,811,623,416 $ 1,924,582,153 $ 2,064,005,774 $ 2,156,797,699 Average effective rate 3.......................................... 6.1 % 5.6 % 6.1 % 6.0 % 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. 322 Statistical Section 2017 2018 2019 2020 2021 2022 $ 20,041,415 $ 15,669,285 $ 15,978,888 $ 17,315,815 $ 15,575,403 $ 16,004,335 10,176,211 10,765,747 11,261,626 12,690,920 12,409,090 12,925,476 3,216,216 3,717,373 3,427,775 2,839,729 2,644,161 3,050,869 102,974,465 112,396,379 120,240,852 117,965,220 122,073,288 128,386,931 153,661,389 159,126,826 161,854,115 172,313,755 187,218,373 194,388,210 73,535,459 71,639,917 72,727,682 73,620,933 76,454,399 82,264,226 87,143,887 90,173,648 92,171,144 93,632,170 103,125,834 107,785,050 53,670,285 60,511,132 69,759,793 68,916,210 82,190,820 87,291,248 206,955,669 218,388,275 229,828,550 252,396,092 293,219,543 284,043,606 55,830,864 60,774,043 69,549,333 72,006,102 77,184,395 71,136,357 604,183,727 640,289,889 680,264,303 678,958,934 760,246,498 812,720,468 29,073,247 30,340,685 31,010,832 32,936,947 33,470,612 34,627,542 16,101,002 15,238,777 15,611,106 16,600,127 17,841,972 17,727,105 230,997,705 237,580,482 245,796,913 255,052,712 263,859,389 269,916,478 612,061,700 643,820,394 677,994,115 858,162,187 919,383,466 838,104,995 $ 2,259,623,241 $ 2,370,432,852 $ 2,497,477,027 $ 2,725,407,853 $ 2,966,897,243 $ 2,960,372,896 5.9 % 6.1 % 6.0 % 6.5 % 6.5 % 6.0 % (continued) 323 State of California Annual Comprehensive Financial Report Schedule of Revenue Base (continued) For the Past Ten Calendar Years (amounts in thousands) 2013 2014 2015 2016 Taxable Sales by Industry Retail and Food Services: Motor vehicle and parts dealers................................. $ 67,986,436 $ 73,232,242 $ 80,346,595 $ 84,225,652 Furniture and home furnishings stores...................... 10,645,523 11,408,837 12,169,888 12,790,041 Electronics and appliance stores................................ 14,765,485 15,148,893 16,349,542 17,120,030 Building materials, garden equipment, and supplies. 29,680,053 31,299,110 33,601,538 35,238,333 Food and beverage..................................................... 25,289,203 26,298,414 27,134,034 27,678,056 Health and personal care stores................................. 11,294,049 11,640,870 12,364,559 13,163,569 Gasoline stations........................................................ 56,860,585 55,733,384 48,203,175 43,273,182 Clothing and clothing accessories stores................... 34,918,036 36,822,241 38,438,074 39,698,156 Sporting goods, hobby, book, and music stores........ 11,113,831 11,056,024 11,341,328 11,441,556 General merchandise stores....................................... 51,431,094 52,013,855 53,119,200 53,032,357 Miscellaneous store retailers..................................... 18,382,224 19,024,905 19,852,685 19,617,820 Nonstore retailers....................................................... 7,296,839 8,292,788 9,531,606 11,717,407 Food services and drinking places............................. 62,776,360 67,864,614 73,889,708 78,494,623 All other outlets............................................................ 184,399,899 195,985,698 202,290,022 206,365,477 Total taxable sales......................................................... $ 586,839,617 $ 615,821,875 $ 638,631,954 $ 653,856,259 Direct sales tax rate 1....................................................... 6.50 % 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. 324 Statistical Section 2017 2018 2019 2020 2021 2022 $ 86,983,280 $ 89,696,669 $ 88,526,876 $ 87,847,344 $ 106,686,238 $ 108,863,945 13,035,340 13,578,685 13,427,029 13,626,241 16,375,319 16,004,779 17,170,671 17,520,474 16,999,111 16,926,013 19,232,973 18,833,052 37,504,347 39,469,798 40,313,948 45,966,216 50,775,894 51,775,096 28,799,044 29,697,424 30,216,432 32,042,780 33,308,785 34,725,455 13,669,415 14,384,602 15,160,891 15,622,747 17,397,455 17,653,263 47,434,923 54,302,232 54,141,178 38,345,721 56,231,375 71,264,403 40,206,581 42,233,560 43,130,842 32,500,749 47,599,716 49,393,086 10,900,749 10,467,200 10,407,608 10,110,131 11,776,823 11,389,486 54,684,182 56,416,293 58,066,003 57,003,022 66,201,633 69,575,648 19,719,301 20,503,078 20,952,870 20,863,193 24,996,467 26,319,225 13,599,808 15,663,789 20,276,518 53,383,005 60,520,452 64,329,865 82,355,474 85,226,197 89,403,960 63,665,386 87,700,329 102,862,887 211,760,378 217,675,199 231,733,635 218,853,973 263,908,719 308,785,176 $ 677,823,493 $ 706,835,200 $ 732,756,901 $ 706,756,521 $ 862,712,178 $ 951,775,366 6.00 % 6.00 % 3 6.00 % 6.00 % 6.00 % 6.00 % (concluded) 325 State of California Annual Comprehensive Financial Report Schedule of Revenue Payers by Income Level/Industry For Calendar Years 2014 and 2022 Personal Income Tax Filers and Liability by Income Level 1 2014 Number Percent Tax Percent of Filers of Total Liability 2 of Total Under $ 50,000 ....................................... 9,618,850 60.6 % $ 1,426,734 2.2 % 50,000 to 99,999 ....................................... 3,344,856 21.1 5,754,882 8.8 100,000 to 149,999 ....................................... 1,344,009 8.5 6,527,053 10.0 150,000 to 199,999 ....................................... 636,171 4.0 5,566,060 8.5 200,000 to 299,999 ....................................... 473,588 3.0 6,834,617 10.4 300,000 to 399,999 ....................................... 170,913 1.1 4,015,092 6.1 400,000 to 499,999 ....................................... 81,703 0.5 2,706,437 4.1 500,000 to 599,999 ....................................... 46,780 0.3 1,985,825 3.0 600,000 to 699,999 ....................................... 28,648 0.2 1,497,823 2.3 700,000 to 799,999 ....................................... 19,264 0.1 1,219,536 1.9 800,000 to 899,999 ....................................... 14,760 0.1 1,090,658 1.7 900,000 to 999,999 ....................................... 10,783 0.1 914,837 1.4 1,000,000 to 1,999,999 ....................................... 41,086 0.3 5,517,828 8.4 2,000,000 to 2,999,999 ....................................... 10,160 0.1 2,673,193 4.1 3,000,000 to 3,999,999 ....................................... 4,489 — 1,749,934 2.7 4,000,000 to 4,999,999 ....................................... 2,531 — 1,296,972 2.0 $ 5,000,000 and over.................................................... 7,429 — 14,681,417 22.4 Total................................................................................ 15,856,020 100.0 % $ 65,458,898 100.0 % 2022 Number Percent Tax Percent of Filers of Total Liability 2 of Total Under $ 50,000 ....................................... 8,650,724 49.5 % $ 1,245,811 1.3 % 50,000 to 99,999 ....................................... 4,188,376 24.0 6,349,726 6.5 100,000 to 149,999 ....................................... 1,842,623 10.5 7,992,032 8.2 150,000 to 199,999 ....................................... 957,226 5.5 7,609,491 7.8 200,000 to 299,999 ....................................... 863,454 4.9 11,663,811 11.9 300,000 to 399,999 ....................................... 363,932 2.1 7,935,304 8.1 400,000 to 499,999 ....................................... 187,236 1.1 5,599,601 5.7 500,000 to 599,999 ....................................... 111,779 0.6 4,319,380 4.4 600,000 to 699,999 ....................................... 71,353 0.4 3,338,463 3.4 700,000 to 799,999 ....................................... 49,023 0.3 2,711,829 2.8 800,000 to 899,999 ....................................... 33,943 0.3 2,163,321 2.2 900,000 to 999,999 ....................................... 25,250 0.1 1,833,284 1.9 1,000,000 to 1,999,999 ....................................... 84,919 0.5 9,186,741 9.4 2,000,000 to 2,999,999 ....................................... 19,144 0.1 3,956,852 4.1 3,000,000 to 3,999,999 ....................................... 8,243 — 2,490,345 2.6 4,000,000 to 4,999,999 ....................................... 4,518 — 1,751,342 1.8 $ 5,000,000 and over.................................................... 13,314 0.1 17,435,423 17.9 Total ............................................................................... 17,475,057 100.0 % $ 97,582,756 100.0 % 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. 326 Statistical Section For Calendar Years 2013 and 2022 Sales Tax Permits and Tax Liability by Industry 2013 Number Percent Tax Percent of Permits of Total Liability 1 of Total Retail and Food Services: Motor vehicle and parts dealers...................................... 32,324 3.3 % $ 67,986,436 11.6 % Furniture and home furnishings stores............................ 17,102 1.7 10,645,523 1.8 Electronics and appliance stores..................................... 21,062 2.2 14,765,485 2.5 Building materials, garden equipment, and supplies...... 16,323 1.7 29,680,053 5.1 Food and beverage.......................................................... 31,132 3.2 25,289,203 4.3 Health and personal care stores....................................... 22,589 2.3 11,294,049 1.9 Gasoline stations............................................................. 9,798 1.0 56,860,585 9.7 Clothing and clothing accessories stores........................ 62,164 6.3 34,918,036 6.0 Sporting goods, hobby, book, and music stores.............. 26,732 2.7 11,113,831 1.9 General merchandise stores............................................ 15,031 1.5 51,431,094 8.8 Miscellaneous store retailers........................................... 112,346 11.4 18,382,224 3.1 Nonstore retailers............................................................ 202,082 20.6 7,296,839 1.2 Food services and drinking places.................................. 96,594 9.8 62,776,360 10.7 All other outlets.................................................................. 316,477 32.3 184,399,899 31.4 Total.................................................................................. 981,756 100.0 % $ 586,839,617 100.0 % 2022 Number Percent Tax Percent of Permits of Total Liability 1 of Total Retail and Food Services: Motor vehicle and parts dealers...................................... 33,530 2.5 % $ 108,863,945 11.4 % Furniture and home furnishings stores............................ 17,365 1.3 16,004,779 1.7 Electronics and appliance stores..................................... 19,130 1.4 18,833,052 2.0 Building materials, garden equipment, and supplies...... 16,227 1.2 51,775,096 5.4 Food and beverage.......................................................... 35,310 2.6 34,725,455 3.6 Health and personal care stores....................................... 46,793 3.5 17,653,263 1.9 Gasoline stations............................................................. 11,204 0.8 71,264,403 7.5 Clothing and clothing accessories stores........................ 122,678 9.2 49,393,086 5.2 Sporting goods, hobby, book, and music stores.............. 31,553 2.3 11,389,486 1.2 General merchandise stores............................................ 28,601 2.1 69,575,648 7.3 Miscellaneous store retailers........................................... 164,250 12.2 26,319,225 2.8 Nonstore retailers............................................................ 103,540 7.7 64,329,865 6.8 Food services and drinking places.................................. 128,407 9.6 102,862,887 10.8 All other outlets.................................................................. 585,267 43.6 308,785,176 32.4 Total.................................................................................. 1,343,855 100.0 % $ 951,775,366 100.0 % Source: California Department of Tax and Fee Administration (CDTFA) 1 Calculated by multiplying the taxable sales by industry shown on pages 324 and 325 by the direct sales tax rate. Amounts are in thousands. 327 State of California Annual Comprehensive Financial Report Schedule of Personal Income Tax Rates For Calendar Years 2013-2022 Married Filing Jointly and Surviving Spouse 2013 2014 2015 2016 Tax Rate 1 Income Level Income Level Income Level Income Level 1.0 Up to $15,164 Up to $15,498 Up to $15,700 Up to $16,030 2.0 15,165 – 35,952 15,499 – 36,742 15,701 – 37,220 16,031 – 38,002 4.0 35,953 – 56,742 36,743 – 57,990 37,221 – 58,744 38,003 – 59,978 6.0 56,743 – 78,768 57,991 – 80,500 58,745 – 81,546 59,979 – 83,258 8.0 78,769 – 99,548 80,501 – 101,738 81,547 – 103,060 83,259 – 105,224 9.3 99,549 – 508,500 101,739 – 519,688 103,061 – 526,444 105,225 – 537,500 10.3 508,501 – 610,200 519,689 – 623,624 526,445 – 631,732 537,501 – 644,998 11.3 610,201 – 1,000,000 623,625 – 1,000,000 631,733 – 1,000,000 644,999 – 1,000,000 12.3 1,000,001 – 1,017,000 1,000,001 – 1,039,374 1,000,001 – 1,052,886 1,000,001 – 1,074,996 13.3 $1,017,001 and over $1,039,375 and over $1,052,887 and over $1,074,997 and over Single and Married Filing Separately 2013 2014 2015 2016 Tax Rate 1 Income Level Income Level Income Level Income Level 1.0 Up to $7,582 Up to $7,749 Up to $7,850 Up to $8,015 2.0 7,583 – 17,976 7,750 – 18,371 7,851 – 18,610 8,016 – 19,001 4.0 17,977 – 28,371 18,372 – 28,995 18,611 – 29,372 19,002 – 29,989 6.0 28,372 – 39,384 28,996 – 40,250 29,373 – 40,773 29.990 – 41,629 8.0 39,385 – 49,774 40,251 – 50,869 40,774 – 51,530 41,630 – 52,612 9.3 49,775 – 254,250 50,870 – 259,844 51,531 – 263,222 52,613 – 268,750 10.3 254,251 – 305,100 259,845 – 311,812 263,223 – 315,866 268,751 – 322,499 11.3 305,101 – 508,500 311,813 – 519,687 315,867 – 526,443 322,500 – 537,498 12.3 508,501 – 1,000,000 519,688 – 1,000,000 526,444 – 1,000,000 537,499 – 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 2013 2014 2015 2016 Tax Rate 1 Income Level Income Level Income Level Income Level 1.0 Up to $15,174 Up to $15,508 Up to $15,710 Up to $16,040 2.0 15,175 – 35,952 15,509 – 36,743 15,711 – 37,221 16,041 – 38,003 4.0 35,953 – 46,346 36,744 – 47,366 37,222 – 47,982 38,004 – 48,990 6.0 46,347 – 57,359 47,367 – 58,621 47,983 – 59,383 48,991 – 60,630 8.0 57,360 – 67,751 58,622 – 69,242 59,384 – 70,142 60,631 – 71,615 9.3 67,752 – 345,780 69,243 – 353,387 70,143 – 357,981 71,616 – 365,499 10.3 345,781 – 414,936 353,388 – 424,065 357,982 – 429,578 365,500 – 438,599 11.3 414,937 – 691,560 424,066 – 706,774 429,579 – 715,962 438,600 – 730,997 12.3 691,561 – 1,000,000 706,775 – 1,000,000 715,963 – 1,000,000 730,998 – 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) 2013 2014 2015 2016 Personal income tax revenue 1 ................................ $ 66,220,132 $ 67,584,256 $ 76,879,115 $ 78,510,777 Adjusted gross income 2.......................................... $ 1,091,080,300 $ 1,216,002,700 $ 1,265,341,200 $ 1,318,362,700 Average effective rate 3........................................... 6.1 % 5.6 % 6.1 % 6.0 % 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. 328 Statistical Section Married Filing Jointly and Surviving Spouse 2017 2018 2019 2020 2021 2022 Income Level Income Level Income Level Income Level Income Level Income Level Up to $16,446 Up to $17,088 Up to $17,618 Up to $17,864 Up to $18,650 Up to $20,198 16,447 – 38,990 17,089 – 40,510 17,619 – 41,766 17,865 – 42,350 18,651 – 44,214 20,199 – 47,884 38,991 – 61,538 40,511 – 63,938 41,767 – 65,920 42,351 – 66,842 44,215 – 69,784 47,885 – 75,576 61,539 – 85,422 63,939 – 88,754 65,921 – 91,506 66,843 – 92,788 69,785 – 96,870 75,577 – 104,910 85,423 – 107,960 88,755 – 112,170 91,507 – 115,648 92,789 – 117,268 96,871 – 122,428 104,911 – 132,590 107,961 – 551,476 112,171 – 572,984 115,649 – 590,746 117,269 – 599,016 122,429 – 625,372 132,591 – 677,278 551,477 – 661,768 572,985 – 687,576 590,747 – 708,890 599,017 – 718,814 625,373 – 750,442 677,279 – 812,728 661,769 – 1,000,000 687,577 – 1,000,000 708,891 – 1,000,000 718,815 – 1,000,000 750,443 – 1,000,000 812,729 – 1,000,000 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 1,000,001 to 1,354,550 $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 1,354,551 and over Single and Married Filing Separately 2017 2018 2019 2020 2021 2022 Income Level Income Level Income Level Income Level Income Level Income Level Up to $8,223 Up to $8,544 Up to $8,809 Up to $8,932 Up to $9,325 Up to $10,099 8,224 – 19,495 8,545 – 20,255 8,810– 20,883 8,933 – 21,175 9,326 - 22,107 10,099 - 23,942 19,496 – 30,769 20,256 – 31,969 20,884 – 32,960 21,176 – 33,421 22,108 - 34,892 23,943 -37,788 30,770 – 42,711 31,970 – 44,377 32,961 – 45,753 33,422 – 46,394 34,893 - 48,435 37,789 - 52,455 42,712 – 53,980 44,378 – 56,085 45,754 – 57,824 46,395 – 58,634 48,436 - 61,214 52,456 - 66,295 53,981 – 275,738 56,086 – 286,492 57,825 – 295,373 58,635 – 295,508 61,215- 312,686 66,296- 338,639 275,739 – 330,884 286,493 – 343,788 295,374 – 354,445 295,509 – 359,407 312,687 - 375,221 338,640 - 406,364 330,885 – 551,473 343,789 – 572,980 354,446 – 590,742 359,408 – 599,012 375,222 - 625,369 406,365 -677,275 551,474 – 1,000,000 572,981 – 1,000,000 590,743 – 1,000,000 599,013 – 1,000,000 625,370 - 1,000,000 677,276- 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 2017 2018 2019 2020 2021 2022 Income Level Income Level Income Level Income Level Income Level Income Level Up to $16,457 Up to $17,099 Up to $17,629 Up to $17,876 Up to $18,663 Up to $20,212 16,458 – 38,991 17,099 – 40,512 17,630 – 41,768 17,877 – 42,353 18,664 – 44,217 20,213 – 47,887 38,992 – 50,264 40,512 – 52,224 41,769 – 53,843 42,354 – 54,597 44,218 – 56,999 47,888 – 61,730 50,265 – 62,206 52,224 –64,632 53,844 – 66,636 54,598 – 67,569 57,000 – 70,542 61,731 – 76,397 62,207 – 73,477 64,632 – 76,343 66,637 – 78,710 67,570 – 79,812 70,543 – 83,324 76,398 – 90,240 73,478 – 375,002 76,343 – 389,627 78,711 – 401,705 79,813 – 407,329 83,325 – 425,251 90,241 – 460,547 375,003 – 450,003 389,627 – 467,553 401,706 – 482,047 407,330 – 488,796 425,252 – 510,303 460,548 – 552,658 450,004 – 750,003 467,553 – 779,253 482,048 – 803,410 488,797 – 814,658 510,304 – 850,503 552,659 – 921,095 750,004 – 1,000,000 779,253 – 1,000,000 803,411 – 1,000,000 814,659 – 1,000,000 850,504 – 1,000,000 921,096 – 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 2017 2018 2019 2020 2021 2022 $ 84,253,851 $ 92,808,996 $ 95,026,913 $ 110,352,220 $ 129,514,535 $ 112,736,701 $ 1,430,332,000 $ 1,531,670,000 $ 1,596,322,000 $ 1,693,751,000 $ 1,991,347,000 $ 1,883,047,000 5.9 % 6.1 % 6.0 % 6.5 % 6.5 % 6.0 % 329 State of California Annual Comprehensive Financial Report This page intentionally left blank 330 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. 331 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) 2014 2015 2016 2017 Governmental activities General obligation bonds 1............................................. $ 83,276,347 $ 80,509,802 $ 79,043,295 $ 79,503,871 Revenue bonds 2............................................................. 18,917,443 18,409,971 17,210,499 16,879,900 Certificates of participation and commercial paper 3..... 598,094 493,770 771,215 1,158,080 Capital lease obligations 4, 7............................................ 260,088 274,760 370,182 416,468 Lease Liability ............................................................... — — — — Subscription Liability..................................................... — — — — Total governmental activities......................................... 103,051,972 99,688,303 97,395,191 97,958,319 Business-type activities General obligation bonds 1............................................. 674,394 650,133 794,369 703,754 Revenue bonds 2............................................................. 12,991,827 12,670,619 13,928,374 14,955,858 Commercial paper........................................................... 204,647 237,186 47,416 147,765 Capital lease obligations7................................................ 1,250,274 1,210,409 389,385 353,453 Lease Liability................................................................ — — — — Subscription Liability..................................................... — — — — Total business-type activities.......................................... 15,121,142 14,768,347 15,159,544 16,160,830 Total primary government............................................. $ 118,173,114 $ 114,456,650 $ 112,554,735 $ 114,119,149 Debt as a percentage of personal income 5........................ 6.3 % 5.7 % 5.2 % 5.0 % Amount of debt per capita 6............................................... $ 3,089 $ 2,965 $ 2,892 $ 2,914 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 342 and 343 for the prior calendar year. 6 Amount calculated using population data shown on pages 342 and 343 for the prior calendar year. 7 Due to implementation of GASB 87, capital lease obligations are no longer reported. 332 Statistical Section 2018 2019 2020 2021 2022 2023 $ 79,663,028 $ 78,772,850 $ 78,883,746 $ 78,481,408 $ 77,346,130 $ 78,693,097 16,364,255 15,711,660 15,905,264 15,998,239 17,157,391 16,097,912 859,695 1,032,760 1,108,720 1,176,235 1,448,725 1,327,110 481,261 434,876 393,089 359,812 — — — — — — 2,659,291 2,513,875 — — — — 160,866 136,463 97,368,239 95,952,146 96,290,819 96,015,694 98,772,403 98,768,457 694,100 850,762 788,052 598,384 536,352 675,362 14,319,372 14,521,460 14,277,362 14,806,645 14,421,501 14,605,513 749,877 799,643 1,049,226 401,219 323,313 401,804 309,928 315,322 357,072 336,081 — — — — — — 332,851 358,448 — — — — 95,145 66,804 16,073,277 16,487,187 16,471,712 16,142,329 15,709,162 16,107,931 $ 113,441,516 $ 112,439,333 $ 112,762,531 $ 112,158,023 $ 114,481,565 $ 114,876,388 4.8 % 4.5 % 4.3 % 4.1 % 3.8 % 3.8 % $ 2,882 $ 2,849 $ 2,859 $ 2,839 $ 2,925 $ 2,935 333 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) 2014 2015 2016 2017 Net general bonded debt General obligation bonds 1.............................................. $ 79,368,794 $ 80,215,650 $ 79,837,664 $ 79,503,871 Economic Recovery bonds............................................. 4,581,745 944,285 — — Less: restricted debt service fund................................. 318,171 818,321 — — Net Economic Recovery bonds 2 .................................... 4,263,574 125,964 — — Net general bonded debt.................................................. $ 83,632,368 $ 80,341,614 $ 79,837,664 $ 79,503,871 Net general bonded debt as a percentage of personal income 3............................................................. 4.4 % 4.0 % 3.7 % 3.5 % Amount of net general bonded debt per capita 4................ $ 2,186 $ 2,082 $ 2,051 $ 2,030 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 342 and 343 for the prior calendar year. 4 Amount calculated using population data shown on pages 342 and 343 for the prior calendar year. 334 Statistical Section 2018 2019 2020 2021 2022 2023 $ 80,357,128 $ 79,623,612 $ 79,671,798 $ 79,079,792 $ 77,882,481 $ 79,368,459 — — — — — — — — — — — — — — — — — — $ 80,357,128 $ 79,623,612 $ 79,671,798 $ 79,079,792 $ 77,882,481 $ 79,368,459 3.4 % 3.2 % 3.0 % 2.9 % 2.6 % 2.6 % $ 2,042 $ 2,018 $ 2,020 $ 2,002 $ 1,990 $ 2,033 335 State of California Annual Comprehensive Financial Report Schedule of General Obligation Bonds Outstanding June 30, 2023 (amounts in thousands) Governmental activity California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection........................................ $ 1,521,500 California Drought, Water, Parks, Climate, Coastal Protection, and Out Door Access For All............................ 983,285 California Library Construction and Renovation................................................................................................... 194,100 California Park and Recreational Facilities............................................................................................................ 2,350 California Parklands................................................................................................................................................ 100 California Safe Drinking Water.............................................................................................................................. 16,850 California Stem Cell Research and Cures............................................................................................................... 1,346,285 California Wildlife, Coastal, and Park Land Conservation.................................................................................... 26,040 Children’s Hospital................................................................................................................................................. 1,423,210 Class-Size Reduction Public Education Facilities.................................................................................................. 3,233,970 Clean Air and Transportation Improvement........................................................................................................... 241,990 Clean Water............................................................................................................................................................ 350 Clean Water and Water Conservation..................................................................................................................... 1,150 Clean Water and Water Reclamation...................................................................................................................... 3,625 County Correctional Facility Capital Expenditure and Youth Facility.................................................................. 9,760 Disaster Preparedness and Flood Prevention.......................................................................................................... 2,783,095 Earthquake Safety and Public Buildings Rehabilitation......................................................................................... 2,865 Fish and Wildlife Habitat Enhancement................................................................................................................. 2,245 Higher Education Facilities..................................................................................................................................... 72,500 Highway Safety, Traffic Reduction, Air Quality, and Port Security...................................................................... 13,589,570 Housing and Emergency Shelter............................................................................................................................. 918,070 Kindergarten-University Public Education Facilities............................................................................................. 28,502,485 New Prison Construction........................................................................................................................................ 3,430 Public Education Facilities..................................................................................................................................... 575,870 Safe, Clean, Reliable Water Supply........................................................................................................................ 310,995 Safe Drinking Water, Clean Water, Watershed Protection, and Flood Protection................................................. 984,855 Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection........................... 3,167,690 Safe Neighborhood Parks, Clean Water, Clean Air, and Coastal Protection......................................................... 920,760 Safe, Reliable High-Speed Passenger Train........................................................................................................... 4,105,360 School Building and Earthquake............................................................................................................................ 3,990 School Facilities...................................................................................................................................................... 112,745 Seismic Retrofit...................................................................................................................................................... 610,295 State, Urban, and Coastal Park............................................................................................................................... 840 Veterans and Affordable Housing ......................................................................................................................... 391,635 Veterans Homes...................................................................................................................................................... 29,455 Veterans Housing and Homeless Prevention.......................................................................................................... 209,010 Voting Modernization ............................................................................................................................................ 44,420 Water Conservation................................................................................................................................................ 5,605 Water Conservation and Water Quality.................................................................................................................. 6,900 Water Quality, Supply, and Infrastructure Improvement....................................................................................... 2,126,545 Water Security, Clean Drinking Water, Coastal and Beach Protection.................................................................. 2,180,280 Total governmental activity............................................................................................................................... 70,666,075 Business-type activity California Water Resources Development.............................................................................................................. 120 Veterans’ Farm and Home Purchase....................................................................................................................... 662,665 Total business-type activity................................................................................................................................ 662,785 Total outstanding general obligation bonds................................................................................................. 71,328,860 Unamortized bond premiums/discounts ..................................................................................................................... 8,039,599 * Total general obligation bonds payable.............................................................................................................. $ 79,368,459 Source: California State Treasurer’s Office, except for SCO calculated amount denoted by * 336 Statistical Section This page intentionally left blank 337 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 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 2017 52,117 30,926 21,191 131,010 11,368 142,378 0.15 2016 52,480 25,943 26,537 14,000 10,380 24,380 1.09 2017 59,743 20,248 39,495 6,435 11,401 17,836 2.21 2018 61,588 15,463 46,125 17,980 11,392 29,372 1.57 2019 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 2023 53,383 18,358 35,025 25,145 11,130 36,275 0.97 Water Resources 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 2023 1,531,195 908,463 622,732 217,147 8,051 225,198 2.77 Water Pollution 2014 $ 54,968 $ 1,739 $ 53,229 $ 13,000 $ 355 $ 13,355 3.99 Control 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 2023 71,514 2,265 69,249 92,820 39,140 131,960 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. 338 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 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 — — — — 2023 1,000 (1) 1,001 — 1,001 1,001 1.00 Public Buildings 2014 $ 431,890 $ 14,403 $ 417,487 $ 412,085 $ 439,888 $ 851,973 0.49 Construction 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 2023 383,331 3,936 379,395 1,294,870 307,543 1,602,413 0.24 High Technology 2014 $ 424 $ — $ 424 $ 24,771 $ 847 $ 25,618 0.02 Education 4 California State 2014 $ 4,505,589 $ 6,376,502 $ (1,870,913) $ 257,964 $ 173,424 $ 431,388 (4.34) University 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) 2023 6,622,233 9,990,465 (3,368,232) 603,600 339,531 943,131 (3.57) (continued) 339 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 2014 $ 53,157 $ — $ 53,157 $ 39,895 $ 29,882 $ 69,777 0.76 Authorities 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 2023 1,971 — 1,971 10,650 268 10,918 0.18 Golden State 2014 $ 355,918 $ — $ 355,918 $ 50,910 $ 325,884 $ 376,794 0.94 Tobacco 2015 414,992 394 414,598 133,900 292,173 426,073 0.97 Securitization 2016 365,300 586 364,714 70,535 299,935 370,470 0.98 Corporation 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 2023 476,351 1,191 475,160 644,351 55,867 700,218 0.68 Grant Anticipation 2014 $ 84,289 $ — $ 84,289 $ 74,400 $ 9,889 $ 84,289 1.00 Revenue 2015 84,289 — 84,289 78,090 6,199 84,289 1.00 Vehicles 4, 5 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) 340 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 341 State of California Annual Comprehensive Financial Report Schedule of Demographic and Economic Indicators For the Past Ten Calendar Years 2013 2014 2015 2016 Population (in thousands) 1 California......................................................................... 38,291 38,636 38,966 39,223 % Change...................................................................... 0.8% 0.9% 0.9% 0.7% United States................................................................... 316,735 319,270 321,829 324,368 % Change...................................................................... 0.8% 0.8% 0.8% 0.8% Total personal income (in millions) 1 California......................................................................... $ 1,840,885 $ 1,955,718 $ 2,097,050 $ 2,191,138 % Change...................................................................... 1.4% 6.2% 7.2% 4.5% United States................................................................... $ 14,063,283 $ 14,778,160 $ 15,467,113 $ 15,884,741 % Change...................................................................... 1.1% 5.1% 4.7% 2.7% Per capita personal income 1, 2 California......................................................................... $ 48,076 $ 50,619 $ 53,817 $ 55,863 % Change...................................................................... 0.6% 5.3% 6.3% 3.8% United States................................................................... $ 44,401 $ 46,287 $ 48,060 $ 48,971 % Change...................................................................... 0.4% 4.2% 3.8% 1.9% Labor force and employment (in thousands) California Civilian labor force....................................................... 18,573 18,941 18,996 19,099 Employed...................................................................... 17,044 17,600 17,894 18,141 Unemployed.................................................................. 1,530 1,341 1,102 957 Unemployment rate...................................................... 8.2% 7.1% 5.8% 5.0% United States unemployment rate................................... 7.4% 6.2% 5.3% 4.9% 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 August 2024. 1 Some prior years were updated based on more current information. 2 Calculated by dividing total personal income by population. 342 Statistical Section 2017 2018 2019 2020 2021 2022 39,424 39,536 39,548 39,502 39,143 39,041 0.5% 0.3% — -0.1% -0.9% -0.3% 326,623 328,542 330,233 331,527 332,049 333,271 0.7% 0.6% 0.5% 0.4% 0.2% 0.4% $ 2,295,049 $ 2,411,055 $ 2,537,951 $ 2,767,521 $ 3,013,677 $ 3,006,647 4.7% 5.1% 5.3% 9.0% 8.9% -0.2% $ 16,658,962 $ 17,514,402 $ 18,343,601 $ 19,609,985 $ 21,392,812 $ 21,820,248 4.9% 5.1% 4.7% 6.9% 9.1% 2.0% $ 58,214 $ 60,984 $ 64,174 $ 70,061 $ 76,991 $ 77,013 4.2% 4.8% 5.2% 9.2% 9.9% — $ 51,004 $ 53,309 $ 55,547 $ 59,151 $ 64,427 $ 65,473 4.2% 4.5% 4.2% 6.5% 8.9% 1.6% 19,319 19,534 18,743 18,920 19,234 19,240 18,515 18,740 16,104 17,367 18,445 18,326 804 794 2,640 1,553 789 914 4.2% 4.1% 14.1% 8.2% 4.1% 4.7% 4.4% 3.9% 3.7% 8.1% 5.3% 3.6% 343 State of California Annual Comprehensive Financial Report Schedule of Employment by Industry For Calendar Years 2013 and 2022 2013 2022 Percent Percent of Total State of Total State Employees Employment Employees Employment Industry Services ............................................................... 6,847,700 44.0 % 8,281,700 45.8 % Government Federal .............................................................. 185,400 1.2 185,900 1.0 Military ............................................................. 60,100 0.4 61,900 0.3 State and Local ................................................. 2,128,800 13.7 2,285,800 12.6 Retail trade .......................................................... 1,583,000 10.2 1,614,000 8.9 Manufacturing ..................................................... 1,264,400 8.1 1,338,300 7.4 Information, finance, and insurance .................... 978,100 6.3 1,150,800 6.4 Construction and utilities..................................... 697,100 4.5 974,800 5.4 Wholesale trade.................................................... 672,400 4.3 665,800 3.7 Transportation and warehousing ......................... 446,600 2.9 786,700 4.4 Farming ............................................................... 412,800 2.6 418,200 2.3 Real estate ........................................................... 259,300 1.6 305,500 1.7 Natural resources and mining ............................. 28,400 0.2 19,600 0.1 Total ....................................................................... 15,564,100 100.0 % 18,089,000 100.0 % Source: Labor Market Information Division, California Employment Development Department 344 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 345 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 2023 52,052 176,300 50,670 33,210 7,749 42,477 64,828 427,286 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. 346 Statistical Section This page intentionally left blank 347 State of California Annual Comprehensive Financial Report Schedule of Operating Indicators by Function For the Past Ten Fiscal Years 2014 2015 2016 2017 General Government State Lottery Total revenue 1........................................................ $ 5,035 $ 5,525 $ 6,276 $ 6,233 Allocation to Education Fund 1............................... $ 1,328 $ 1,364 $ 1,563 $ 1,499 Judicial Council of California Supreme Court 2, 9 Cases filed........................................................... 7,911 7,871 8,090 7,325 Cases disposed..................................................... 7,773 7,554 7,953 6,993 Courts of Appeal 9 Notices of appeal filed 3 Civil................................................................. 5,983 6,062 5,935 5,975 Criminal........................................................... 6,373 7,113 6,714 5,593 Juvenile............................................................ 2,857 3,036 3,025 3,029 Trial Courts 9 Total civil cases 4 Filings.............................................................. 1,264,983 1,145,892 1,148,205 1,198,076 Dispositions..................................................... 1,216,185 1,118,443 1,031,105 1,039,092 Department of Food and Agriculture Milk production (million lbs.) 5, 9............................ 42,339 40,897 40,469 39,798 Farm land (thousand acres) 5................................... 25,200 24,900 24,800 24,500 Education Public Colleges and Universities Fall enrollment 9 Community Colleges........................................... 1,664,174 1,674,652 1,674,798 1,681,195 California State University.................................. 460,200 474,571 478,638 484,297 University of California...................................... 252,263 257,438 270,112 278,996 K-12 Schools Fall enrollment 9 Public................................................................... 6,236,672 6,235,520 6,226,737 6,228,235 Private.................................................................. 511,286 503,295 500,543 490,966 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 2024. 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 2023 is projected. N/A = Not Available 348 Statistical Section 2018 2019 2020 2021 2022 2023 $ 6,966 $ 7,388 $ 6,622 $ 8,418 $ 8,853 $ 9,239 $ 1,665 $ 1,825 $ 1,437 $ 1,863 $ 2,020 $ 2,257 6,825 6,896 6,485 6,542 5,680 5,490 6,726 7,048 6,354 6,314 5,776 5,764 6,002 5,697 5,144 4,769 5,390 5,904 5,221 5,577 6,286 4,546 4,321 6,665 3,068 3,332 2,818 3,223 3,916 3,689 1,235,568 1,289,017 1,112,225 989,249 1,019,879 1,114,331 985,039 1,110,908 996,977 572,540 602,481 605,058 40,404 40,595 41,311 41,861 41,800 40,902 24,300 24,300 24,300 24,300 24,200 23,800 1,681,514 1,659,399 1,459,960 1,355,658 1,386,854 1,517,943 481,210 481,929 485,550 477,466 457,992 454,640 286,271 285,216 285,862 294,662 294,309 295,573 6,220,413 6,186,278 6,163,001 6,002,523 5,852,544 5,837,690 488,854 495,693 488,984 471,653 498,486 516,571 (continued) 349 State of California Annual Comprehensive Financial Report Schedule of Operating Indicators by Function (continued) For the Past Ten Fiscal Years 2014 2015 2016 2017 Health and Human Services Department of Public Health Vital statistics Live births 5, 10......................................................... 502,973 491,789 488,925 471,806 Department of Social Services Calfresh programs households (avg. per month)......... 2,004,016 2,102,031 2,130,583 2,032,818 Employment Development Department Number of employed 5, 6, 9.......................................... 15,992,500 16,474,300 16,905,700 17,249,500 Resources Department of Fish and Wildlife Sport fishing licenses sold 5, 9..................................... 2,491,578 2,485,400 2,508,490 2,502,863 Hunting licenses sold 5, 9............................................. 1,980,655 2,131,655 2,143,146 2,143,026 California Energy Commission Electrical energy generation plus net imports (gigawatt hours) 9......................... 296,147 295,878 290,797 292,115 Business, Consumer Services, and Housing Franchise Tax Board Personal Income Tax 5, 9 Number of tax returns filed...................................... 15,856,019 16,293,947 16,586,622 16,888,470 Taxable income 1..................................................... $ 1,057,520 $ 1,127,700 $ 1,159,688 $ 1,259,819 Total tax liability 1.................................................. $ 65,459 $ 70,677 $ 71,558 $ 79,999 Corporation Tax 5, 9 Number of tax returns filed..................................... 828,080 865,593 900,358 936,211 Income reported for taxation 1................................ $ 122,976 $ 140,534 $ 129,452 $ 127,290 Total tax liability 1.................................................. $ 8,593 $ 9,235 $ 9,276 $ 8,822 Transportation California Highway Patrol Total number of DUI arrests 5.................................... 75,871 65,016 63,210 58,894 Department of Motor Vehicles Motor vehicle registration 5, 9...................................... 32,980,355 34,346,325 34,721,195 35,391,347 License issued by age 5, 7, 9 Under age 18........................................................... 223,024 221,250 225,569 219,572 Between 18-80........................................................ 24,195,705 25,089,910 25,639,270 26,078,773 Over age 80.............................................................. 595,739 603,691 619,807 659,530 Department of Transportation Highway center-line miles – rural 5, 8, 9....................... 10,312 10,407 10,259 10,259 Highway center-line miles – urban 5, 8, 9..................... 4,788 4,686 4,833 4,833 Correctional Programs Department of Corrections and Rehabilitation Division of Adult Institutions Institution population at December 31 each year... 134,431 127,815 129,415 130,263 Division of Juvenile Justice Institution population at June 30 each year............. 675 681 690 638 350 Statistical Section 2018 2019 2020 2021 2022 2023 454,244 446,548 448,758 436,883 437,326 435,328 1,979,526 1,782,500 2,249,323 2,446,529 2,618,623 2,963,047 17,593,600 17,583,000 16,593,800 17,162,300 18,089,000 18,231,700 2,498,077 2,371,800 2,780,352 2,713,545 2,430,559 2,477,182 2,113,888 2,043,323 2,404,425 2,387,932 2,066,134 2,129,959 285,884 278,177 274,254 281,001 288,010 N/A 17,101,753 17,530,141 18,381,491 17,978,845 17,475,057 N/A $ 1,357,636 $ 1,412,083 $ 1,519,003 $ 1,842,709 $ 1,690,306 N/A $ 87,168 $ 90,071 $ 103,753 $ 125,851 $ 97,583 N/A 974,652 1,003,389 1,048,599 1,063,592 1,109,201 N/A $ 172,954 $ 191,621 $ 168,413 $ 264,189 $ 255,955 N/A $ 11,625 $ 13,861 $ 15,174 $ 27,754 $ 26,430 N/A 59,708 66,059 55,692 60,271 57,244 58,764 35,707,821 36,423,657 35,820,417 36,229,205 35,656,590 35,727,841 213,402 215,084 182,187 205,668 207,465 208,109 26,275,559 26,439,138 26,063,084 26,560,379 26,763,045 26,802,930 647,831 650,998 624,254 696,062 750,908 754,339 10,259 10,511 10,458 10,430 N/A N/A 4,833 4,547 4,564 4,597 N/A N/A 127,709 124,027 95,432 99,729 91,385 94,188 629 720 782 677 558 N/A (concluded) 351 State of California Annual Comprehensive Financial Report Schedule of Capital Asset Statistics by Function For the Past Ten Fiscal Years 2014 2015 2016 2017 General Government Department of Food and Agriculture Vehicles and mobile equipment ................................. 747 747 752 677 Square footage of structures (in thousands)................ 455 455 455 462 Department of Justice Vehicles and mobile equipment.................................. 520 520 484 511 Department of Military Vehicles and mobile equipment.................................. 211 211 217 218 Square footage of structures (in thousands)................. 4,019 3,977 3,965 3,954 Department of Veterans Affairs Veterans homes............................................................ 8 8 8 8 Vehicles and mobile equipment.................................. 285 285 235 280 Square footage of structures (in thousands)................ 2,543 2,541 2,541 2,552 Education California State University Vehicles and mobile equipment ................................. 4,555 4,619 4,945 4,838 Campuses..................................................................... 23 23 23 23 Square footage of structures (in thousands)................ 73,316 73,988 75,292 75,786 Health and Human Services Department of Developmental Services Vehicles and mobile equipment.................................. 424 571 640 559 Developmental centers................................................ 4 3 3 3 Square footage of structures (in thousands)................ 5,308 4,699 3,664 3,664 Department of State Hospitals Vehicles and mobile equipment.................................. 886 752 678 674 State hospitals.............................................................. 7 7 8 5 Square footage of structures (in thousands)................ 6,460 6,445 6,445 5,944 Source: California Department of General Services (DGS). Note: This schedule presents data available as of June 2023. 352 Statistical Section 2018 2019 2020 2021 2022 2023 823 633 780 752 672 672 384 384 384 394 394 394 509 495 485 549 536 536 261 221 241 212 212 212 3,770 3,268 3,254 3,253 3,217 3,191 8 8 8 8 8 8 292 247 276 279 278 278 2,552 2,536 2,541 2,541 2,541 2,524 5,216 5,246 5,397 5,447 5,434 5,467 23 23 23 23 23 23 76,227 76,969 78,447 79,572 80,271 81,973 616 600 490 418 392 392 3 2 2 2 2 2 3,595 3,578 2,321 2,321 2,321 2,321 728 820 969 900 973 973 5 5 5 5 5 5 5,944 6,425 6,433 6,478 6,485 6,485 (continued) 353 State of California Annual Comprehensive Financial Report Schedule of Capital Asset Statistics by Function (continued) For the Past Ten Fiscal Years 2014 2015 2016 2017 Resources Department of Fish and Wildlife Vehicles and mobile equipment................................... 2,954 2,954 3,104 3,126 Square footage of structures (in thousands)................ 1,311 1,311 1,297 1,322 Department of Forestry and Fire Protection Vehicles and mobile equipment.................................. 2,748 2,748 3,151 3,073 Square footage of structures (in thousands)................ 3,632 3,664 3,666 3,677 Department of Parks and Recreation Vehicles and mobile equipment................................... 3,489 3,489 3,538 3,542 State Parks................................................................... 279 280 280 280 Acres of state park land (in thousands)........................ 1,590 1,605 1,605 1,617 Square footage of structures (in thousands)................ 6,751 6,761 6,790 7,363 State Lands Commission Vehicles and mobile equipment.................................. 41 41 41 43 Acres of land (in thousands)........................................ 4,489 4,482 4,480 4,480 Business, Consumer Services, and Housing Department of Consumer Affairs Vehicles and mobile equipment.................................. 554 554 588 596 Department of General Services Vehicles and mobile equipment.................................. 5,053 5,053 4,697 4,476 Square footage of structures (in thousands)................ 19,367 19,448 19,311 19,487 Transportation California Highway Patrol Vehicles and mobile equipment.................................. 5,170 5,170 5,167 5,336 Square footage of structures (in thousands)................ 1,166 1,169 1,211 1,191 Department of Motor Vehicles Vehicles and mobile equipment................................ 295 295 287 276 Square footage of structures (in thousands).............. 1,845 1,786 1,780 1,777 Department of Transportation Vehicles and mobile equipment.................................. 11,596 11,596 11,776 11,585 Square footage of structures (in thousands)................ 7,960 7,965 7,968 7,960 Correctional Programs Department of Corrections and Rehabilitation Vehicles and mobile equipment.................................. 5,137 5,968 5,291 8,079 Prisons and juvenile facilities...................................... 37 39 39 40 Square footage of structures (in thousands)................ 40,726 40,590 40,485 42,198 354 Statistical Section 2018 2019 2020 2021 2022 2023 2,970 3,266 3,334 3,392 3,167 3,167 1,322 1,333 1,333 1,333 1,334 1,333 3,115 3,144 3,090 3,681 3,608 3,608 3,640 3,626 3,654 3,765 3,762 3,775 3,804 3,571 3,794 3,835 3,878 3,878 280 280 280 279 280 280 1,619 1,618 1,641 1,360 1,643 1,643 7,360 7,544 7,554 7,558 7,429 7,224 48 42 43 44 43 43 4,480 4,480 4,480 4,480 4,480 4,480 600 622 671 614 612 612 4,465 4,552 4,664 4,838 4,838 4,876 19,565 19,490 20,267 20,285 22,017 22,031 4,912 4,946 4,807 5,656 5,362 5,362 1,182 1,199 1,301 1,302 1,308 1,308 283 266 314 308 314 314 1,785 1,785 1,785 1,785 1,785 1,785 11,494 11,483 11,449 11,416 11,303 11,303 7,933 8,074 8,096 8,365 8,402 8,783 7,571 7,139 7,312 7,632 8,356 8,356 39 39 39 38 37 33 42,209 42,605 42,936 42,932 42,932 42,940 (concluded) 355 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 Chief Operating Officer Chief of Staff Chief Administrative Officer (acting) State Accounting and Reporting Division Ted Lambert Division Chief James Anderson, CPA Jay Singh Assistant Division Chief, Reporting Assistant Division Chief, Operations State Government Reporting Bureau Chiefs April Ramos, CPA Yi-Wen Tsai Managers May Lam Eli Paul, CPA Samprit Shergill, CPA Yumi Li Kao Saephan Janti Tam Supervisors Christopher Bradford Modupe Otusanya Cameron Quinn Devon Golez Marissa Parris (acting) Wendy Tram Will LeMarQuand Hao Phan Carrie Wylie Staff Kutaiba Al Badri Forrest Flanagan, CPA Harpreet Khinda Nia Mandlik, CPA Jessica Phan Jared Au Alex Formanyuk Dayne Lagazo Sally Masterson Randy Phan Mark Awad Alexander Francisco Samantha Lam Adnan Muhammad Moses Reginalds Nicole Caccam Luis Gonzalez Nangcua Lee Anh Nguyen Xiaoqing Sun Rahul Chaudhary Meredith Hatai Garcia Bing Leng Heather Nguyen Fatima Toure Janet Delorey Yolandalynn Green Daniel Lopez Elizabeth Ocaranza Tuyen Truong Aqel Elhady Mila Henwood,CPA Josey Lu Lijo Paul Tayyaba Zeeshan Financial Information Editor Special Thanks Systems and Technology Estelle Manticas Sarah Budean Mauricio Perez Technical Advisors Garin Casaleggio Justine Rulloda Andy Leung Rod Renteria Gabriel Flores Karla Uriarte Staff Nina Johnson Victoria Vasilenko Ross Boyer Sylvia Liu Shivam Patel Jing (Fiona) Zhou Megan Hang Thomas Wong Acknowledgments This page intentionally left blank MALIA M. COHEN California State Controller’s Office State Accounting and Reporting Division P.O. Box 942850/Sacramento, CA 94250/916.445.26360 www.sco.ca.gov