RESERVE FOR TAX STABILIZATION

In July 1984, the State Purposes Tax Stabilization Reserve Fund and the Local Assistance Tax Stabilization Reserve Fund were combined in a single Tax Stabilization Reserve Fund. This fund will receive any General Fund cash surpluses existing at year-end, up to a maximum contribution of 0.2 percent of total General Fund disbursements. The reserve fund balance cannot exceed two percent of General Fund disbursements for the fiscal year. Any General Fund surplus after the reserve contribution may be used for State tax reduction or may be carried over into the succeeding fiscal year.

Cash assets of the Tax Stabilization Reserve Fund are available on a cash flow basis to finance General Fund disbursements during the fiscal year, but must be reconstituted in cash by March 31 of the fiscal year.

COMMERCIAL PAPER

This program is currently dormant. During fiscal year 1985, the State instituted a commercial paper program for bond anticipation notes. The principal reason for issuing commercial paper (which consists of short-term promissory notes) is to take advantage of the lower interest rates, which are sometimes available on these investments. Commercial paper is treated identically to bond anticipation notes and is presented as a liability under the "Notes Payable" caption in the combined balance sheet.

DEFERRED COMPENSATION

The State offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457 (IRC Section 457). The plan, available to all State employees (and employees of participating public jurisdictions), permits participants to defer a portion of their salary until future years. The deferred compensation is not available until termination, retirement, death, or unforeseeable emergency.

Due to changes in Federal and State law, deferred compensation plan assets are now held in trust for the exclusive benefit of the participants. Because the State has no fiduciary responsibility for these assets, no further reporting is required.

PAYROLL ACCRUALS

Preparation of the State's financial statements requires that financial information related to payrolls be properly recorded. Payroll information is reported as an “accrued liability” in the balance sheet and is comprised of two components: an amount reclassified from vouchers payable and an amount caused by the timing of the reporting period end.

The liability date coding feature of the State’s accounting system and the two or three-week delay (lag) generates an amount that is posted to vouchers payable for certain bargaining units/agencies. Therefore, the amount of the lag payroll recorded as “vouchers payable” must be reclassified to “accrued liabilities”.

The payroll liability and related expenditure are accrued because payroll periods rarely coincide with reporting periods and must be split between two fiscal periods. The split payroll accrual is reported as an accrued liability and expenditure in the Governmental Funds.

Guide to Financial Operations

REV. 04/23/2019