Truth in Accounting believes the California wildfires are a horrific tragedy that highlights the real-life impact of public policy. As a nonpartisan organization, we look at the numbers. But as people, we see the human toll, and our hearts go out to the people's suffering.
While the fires are a tragic reminder of nature’s unpredictability, they highlight the importance of long-term planning and financial resilience. A state’s ability to manage its finances effectively can be critical in disaster preparedness and response. Unfortunately, California’s financial struggles, including a staggering $260.3 billion in unfunded liabilities, have hindered its ability to prepare adequately for emergencies.
From a financial perspective, Truth in Accounting offers valuable lessons that can guide us moving forward. It’s essential to address the serious challenges many states face in managing their finances, as these issues go beyond abstract policy—they affect people’s lives.
These challenges present an opportunity. The state can build stronger fiscal foundations by addressing its flawed financial reporting standards. Transparent budgeting practices, setting aside funds for future emergencies, and reducing its long-term liabilities will help California navigate future disasters and ensure it is better prepared for whatever comes next.
As we assess the ongoing disaster, it will become clear that better fiscal management guided by timely and accurate reporting is essential for human flourishing.
The first step is to have informed voters. Sadly, Californians were left uninformed about the state’s finances.
California has been late in releasing its annual comprehensive financial report [ACFR] for the fifth straight year. The 2023 ACFR was issued 523 days after the fiscal year-end on Dec. 13, 2024. These delays are not merely administrative oversights—they reflect a more significant problem: a lack of accountability and foresight in how the state prepares for its future. While millions of Californians continue to suffer from the physical and emotional toll of the wildfires, it's essential to recognize that the state’s long-standing fiscal challenges can exacerbate the impact of such crises.
According to our most recent data from the fiscal year 2022, California faced a Taxpayer Burden of $17,400. This "D" grade—assigned due to the state's inability to cover its bills—was driven by an estimated $260.3 billion in unfunded liabilities, the largest amount of debt of any state, primarily from pensions and other employee retirement obligations. At that time, California had set aside just 82 cents for every dollar of promised pension benefits and only five cents for every dollar of promised retiree health care benefits.
In May 2022, Governor Gavin Newsom announced a $97.5 billion budget surplus. However, a deeper look at the state's financial report, issued in February 2022, revealed an alarming $252 billion in unfunded liabilities, primarily from pension and healthcare obligations. This lack of honesty in the budget process is based on flawed accounting standards.
On a bright note, the pension fund for the brave firefighters of Los Angeles is well funded.
While it is impossible to predict the precise financial impact of the wildfires, their destructive force will only exacerbate the state's fiscal challenges. The fires demand immediate resources for disaster response and recovery and underscore the pressing need for long-term investment in infrastructure, including wildfire prevention and management. However, despite promises made to voters and millions of dollars earmarked since 2014 to build new water reservoirs to help manage California’s water supply in drought-prone years, none have been built. This failure is a painful example of how funds are allocated but not delivered upon, leaving the state ill-prepared when catastrophe strikes.
California’s recent economic data paints a mixed picture. While stock market returns may have boosted the value of retirement systems’ investments on paper, inflationary pressures have driven up costs. Despite previously high employment figures, recent reports indicate a slowdown in job growth. As the state grapples with these complex economic dynamics, the lack of transparent, up-to-date financial reporting only exacerbates uncertainty and hampers effective decision-making.
The voters, the ultimate stakeholders in California’s financial health, remain uninformed about the full scope of the state’s liabilities, which can understandably erode trust in the government.
The wildfires have made one thing clear: policy and financial decisions made years ago directly affect people’s lives today. The failure to build essential infrastructure, the delayed funding for wildfire prevention and mitigation, and the mounting pension liabilities all add to a dangerous fiscal environment that leaves the state vulnerable to unforeseen crises. In these moments of crisis, the need for transparency in government financial reporting becomes more urgent than ever. If Californians had access to up-to-date and accurate financial information, they would be better equipped to hold elected officials accountable for how funds are spent—and ensure that money is being used effectively to address the real, pressing challenges facing the state.
At Truth in Accounting, we believe that government transparency is not a luxury but a necessity. The taxpayers deserve to know where their money is going and how their government is preparing—or failing to prepare—for the challenges of tomorrow. California’s delayed financial reports and failure to meet its fiscal obligations, especially concerning pensions and infrastructure, are warning signs that must not be ignored. By ensuring that the state adopts better financial reporting practices and addresses its unfunded liabilities, we can help secure a future where Californians are less vulnerable to the disasters that seem to become more frequent each year.
The wildfires are a real-life example of the consequences of policy and fiscal decisions. They are a painful reminder that government finance tracking, accountability, and transparency are not just abstract principles but matters of urgent concern that impact people's lives. As California continues to face these complex challenges, voters deserve nothing less than a complete, clear picture of their state’s finances—so they can make informed decisions that protect both their future and their safety.