What on earth is the CAFR?
“The Comprehensive Annual Financial Report,” John McClain with the Division of Administration explained recently, while giving freshman legislators a brief lesson in state finances.
“The goal of the CAFR is to provide data on the state’s financial health, as a whole,” McClain said, while going over the salient points of Louisiana’s CAFR for 2015. While the 217-page report seems complicated at first glance, he says it’s really designed to answer one simple question:
“How well can our current resources cover the claims on those resources.”
McClain explained the CAFR looks at the state finances two different ways. The first is by analyzing governmental funds.
“You know, more liquid items – cash, investments, receivables, and those types of things,” he said.
For FY 2015, which ended June 30, the state had a spending deficit of $117.1 million, which was subsequently resolved in November.
The report also looks at the state’s total net worth, referred to as the “government-wide financial statement”.
“At the government-wide level, it’s really all of your economic resources, and then the claims on those resources,” McClain said.
That part of the report says state-owned property—land, buildings, machinery, etc., is valued at 30-billion dollars, while the state’s long-term outstanding debt exceeds 24-billion dollars, leaving Louisiana with a net worth of just under $6-billion. The state’s net worth decreased by 21-percent from the previous year.
“CAFR is one of the main sources of information that rating agencies and underwriters use when setting credit ratings or choosing whether to invest in Louisiana’s bonds,” McClain told the lawmakers.
And with the state’s finances subsequently changing for the worse with revenues declining, Louisiana’s borrowing ability may soon be reduced.