Bill would require California issuers to use XBRL
A California bill would require its governments and agencies to provide financial documents to the State Controller’s Office in a more readily searchable format than the PDF.
State Sen. John Moorlach, R-Costa Mesa, sponsored Senate Bill 598, the Open Financial Statement Act, with the aim of making state and local government financial data more accessible.
The bill would require that the state, counties, cities, school districts, special districts and pension funds submit financial statements in Extensible Business Reporting Language.
The machine-readable computer language, known as XBRL, would standardize issuers’ financial documents making it easier to compare data and add transparency, said Marc Joffe, a senior policy analyst with the Reason Foundation, a libertarian think tank.
The concept, contemplated on the federal level, has received mixed reviews from municipal market participants, some of whom say the changeover would be onerous and costly.
“It is disappointing to me that people in the bond markets not only don’t consider it a priority, but that some are actually opposed,” Joffe said.
The only way to compare data in the less interactive PDFs is to manually type information into a speadsheet. XBRL would enable researchers to easily populate a page with information to make comparisons for statistical analysis.
“I would like to see the data become available at a lower price, so that more people can access it, rather than relying on a small number of experts,” Joffe said.
Currently, research firms pay people to manually enter the data from comprehensive annual financial reports to create datasets and then charge people for the information, he said.
The Securities and Exchange Commission has required private companies to use XBRL for filings on the EDGAR system for about 10 years, but it doesn’t have the authority to require the municipal market to use the 15-year-old technology.
Since he was elected to the state Senate in 2015, Moorlach has been producing reports on the state’s 944 school districts and 482 cities using financial information culled from comprehensive annual reports to rank them based on fiscal soundness.
“It goes back to the basic management principle: if you can’t measure it, you can’t manage it,” Moorlach said.
He pointed to three school districts in the state that are struggling financially: Los Angeles Unified School District, Sacramento City Unified School District and Oakland Unified School District. If financial information were easier to analyze and more readily available, problems could be solved before they get to the point that the state’s Fiscal Crisis & Management Assistance Team has to be called in, he said.
Florida approved similar legislation last year, but it doesn’t include the state and public pension funds in the mix, Joffe said.
“In California, you have this really crazy system where the city has to send in the CAFR and enter financial data for the controller’s office,” Joffe said. “The data isn’t necessarily the same, so it makes it hard to compare.”
Controller Betty Yee includes the unaudited data in her “By the Numbers” report.
“The two sets of reports overlap and the need to prepare both creates extra work for local government finance teams,” Joffe said.