State of New Jersey Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 Philip D. Murphy Governor Sheila Y. Oliver Lieutenant Governor Elizabeth Maher Muoio State Treasurer David Ridolfino Acting Director Office of Management and Budget Michael A. Griffin Associate Director Financial Management Lynn Azarchi Deputy Director Office of Management and Budget Jeffrey C. DeCicco Assistant Director Financial Reporting This document is available via the internet nj.gov/treasury/omb/cafr.shtml. (This page left intentionally blank) This document is available via the internet nj.gov/treasury/omb/cafr.shtml. STATE OF NEW JERSEY COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2019 TABLE OF CONTENTS INTRODUCTION Page Letter of Transmittal ………………………………………………………………………………………………………………………………… 1 Certificate of Achievement ………………………………………………………………………………………………………………………. 9 FINANCIAL SECTION Independent Auditor’s Report …………………………………………………………………………………………………………………… 13 Management’s Discussion and Analysis …………………………………………………………………………………………………….. 19 Basic Financial Statements Government-wide Financial Statements Statement of Net Position …………………….…………………………………………………………..…… 32 Statement of Activities …………………………………………………………………………………………………………………….. 34 Governmental Funds Financial Statements Balance Sheet ………………………………………………………………………………………………………………………………….. 36 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ……………………. 37 Statement of Revenues, Expenditures, and Changes in Fund Balances……………………………………………………. 38 Reconciliation of the Changes in Fund Balances of Governmental Funds to the Statement of Activities…… 39 Proprietary Funds Financial Statements Statement of Net Position …………………………………………………………………………………………………………………. 40 Statement of Revenues, Expenses, and Changes in Net Position ………………………………………………………….. Statement of Cash Flows ………………………………………………………………………………………………………………….. Fiduciary Funds Financial Statements 41 42 Statement of Fiduciary Net Position …………………………………………………………………………………………………… 44 Statement of Changes in Fiduciary Net Position ………………………………………………………………………………….. 46 Component Units Financial Statements Statement of Net Position………………………………………………………………………………………………………………….. Statement of Activities …………………………………………………………………………………………………………………….. 48 50 Notes to the Financial Statements Index …………………………………………………………………………………………………….. 54 Notes to the Financial Statements ……………………………………………………………………………………………………………… 55 Required Supplementary Information Required Supplementary Information Index……………………………………………………………………………………………….. 127 Required Supplementary Information Schedules…………………………………………………………………………………………. 128 Combining Financial Statements and Schedules Governmental Funds – Major Fund – General Fund Balance Sheet………………………………………………………………………………………………………………………………….. 158 Schedule of Revenues, Expenditures, and Changes in Fund Balances…………………………………………………….. 174 Governmental Funds – Non-Major Funds Balance Sheet – By Fund Type ………………………………………………………………………………………………………… 191 Statement of Revenues, Expenditures, and Changes in Fund Balances – By Fund Type……………………………. Special Revenue Funds – Non-Major Funds 192 Balance Sheet………………………………………………………………………………………………………………………………….. 194 Schedule of Revenues, Expenditures, and Changes in Fund Balances…………………………………………………….. 212 Combining Financial Statements and Schedules (Continued) Capital Projects Funds Balance Sheet ………………………………………………………………………………………………………………………………….. Statement of Revenues, Expenditures, and Changes in Fund Balances……………………………………………………. Fiduciary Funds Agency Funds Statement of Fiduciary Net Position …………………………………………………………………………………………………… Page 232 236 240 Statement of Changes in Assets and Liabilities ……………………………………………………………………………………. Pension and Other Employee Benefits Trust Funds 246 Statement of Fiduciary Net Position …………………………………………………………………………………………………… Statement of Changes in Fiduciary Net Position ………………………………………………………………………………….. 254 258 Private Purpose Trust Funds Statement of Fiduciary Net Position …………………………………………………………………………………………………… 262 Statement of Changes in Fiduciary Net Position ………………………………………………………………………………….. Component Units Statement of Net Position – Non-Major Component Units ……………………………………………………………………. 264 Statement of Activities – Non-Major Component Units ……………………………………………………………………….. Authorities 267 Statement of Net Position …………………………………………………………………………………………………………… Statement of Activities ……………………………………………………………………………………………………………….. 268 272 Colleges and Universities Statement of Net Position ……………………………………………………………………………………………………………. 276 Statement of Activities ……………………………………………………………………………………………………………….. Description of Funds ……………………………………………………………………………………………………………………………….. 280 283 266 Other Information Capital Assets Schedule of Changes in Gross Capital Assets by Function ……………………………………………………………………. Schedule of Gross Capital Assets by Function …………………………………………………………………………………….. 307 308 Schedule of Changes in Accumulated Depreciation by Function …………………………………………………………… Schedule of Accumulated Depreciation by Function ……………………………………………………………………………. 311 312 Accumulated Depreciation as a Percentage of Capital Assets by Category …………………………………………….. Accumulated Depreciation as a Percentage of Capital Assets by Function ……………………………………………… 314 314 Long-Term Obligations Schedule of Long-Term Obligations ………………………………………………………………………………………………….. Budgetary Schedules 316 Budgetary Comparison Schedule – Non-Major Governmental Funds……………………………………………………… Budgetary Comparison Schedule – Budget-to-GAAP Reconciliation-Non-Major Funds…………………………… Schedule of Anticipated Revenue ………………………………………………………………………………………………………. Schedule of Appropriated Revenue ……………………………………………………………………………………………………. 318 322 324 333 Schedule of Appropriations and Expenditures …………………………………………………………………………………….. 334 STATISTICAL SECTION Statistical Section Index …………………………………………………………………………………………………………………………… 355 Statistical Section Schedules……………………………………………………………………………………………………………………… 356 PHILIP D. MURPHY Governor SHEILA Y. OLIVER Lt. Governor DEPARTMENT OF THE TREASURY OFFICE OF MANAGEMENT AND BUDGET P.O. BOX 221 TRENTON, NJ 08625-0221 ELIZABETH MAHER MUOIO State Treasurer DAVID RIDOLFINO Acting Director Telephone (609) 292-6746 / Facsimile (609) 633-8179 March 30, 2020 Governor Philip D. Murphy Members of the State Legislature New Jersey Citizens In accordance with the provisions of N.J.S.A.52:27B-46, it is our pleasure to transmit to you the State of New Jersey’s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2019. The Department of the Treasury’s Office of Management and Budget prepared this report. The Department of the Treasury and the Office of Management and Budget are responsible for the accuracy, completeness, and fairness of all data presented, including all disclosures. This CAFR presents the financial position and operating results of the State under generally accepted accounting principles (GAAP) applicable to state and local governments, as established by the Governmental Accounting Standards Board (GASB). The State also participates in the Government Finance Officers Association (GFOA) of the United States and Canada’s Certificate of Achievement for Excellence in Financial Reporting review program. The State operates in accordance with the standards provided in GASB Statements No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments, and No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities. In addition to providing traditional fund financial statements, the objective of this reporting model is to provide a single, unified, transparent picture of the State’s fiscal health; thus, this CAFR clearly displays all of the State’s revenues, costs, assets, and liabilities. This report also includes a Management’s Discussion and Analysis section, which provides users with an objective and easy-to-read analysis of New Jersey’s financial performance for the fiscal year ended June 30, 2019. We are confident that the data is accurate in all material respects and presented in a manner designed to set forth fairly the financial position and results of the State’s operations, as measured by the fiscal activity of its various funds, and includes all disclosures necessary to enable the reader to gain a reasonable understanding of the State’s financial affairs. NEW JERSEY GOVERNMENT The State of New Jersey was one of the original 13 colonies and was the third state to ratify the United States Constitution in 1787. The original State Constitution was adopted on July 2, 1776 and was subsequently superseded by the State Constitution of 1844. A new State Constitution was prepared by a constitutional convention in 1947 and was ratified by voters of the State in the General Election held November 4, 1947. The State Constitution divides the powers of government between three co-equal independent branches: Legislative, Executive, and Judicial. Legislative Branch Senate Judicial Branch Executive Branch Governor Assembly Supreme Court Superior Court Tax Court Lt. Governor Departments Agriculture Banking and Insurance Corrections Human Services State Education Labor and Workforce Development Transportation Treasury Children and Families Environmental Protection Law and Public Safety Community Affairs Health Military and Veterans’ Affairs Legislative: The State’s bicameral Legislative Branch, which consists of a total of 120 members from 40 legislative districts with elections held in odd-numbered years, meets in annual sessions in Trenton, the State’s capital. The 40 members of the State Senate are elected to terms of four years, except for the election following a decennial census, in which case the term is for two years. The 80 members of the General Assembly are elected to terms of two years. Neither State Senators nor Assembly Members are subject to term limits. The Office of Legislative Services (OLS) is a nonpartisan agency that provides legislators with legal, fiscal, research, information, and administrative services. Key OLS positions include an executive director, a legislative counsel, the State Auditor, a legislative budget and finance officer, a director of central staff, a director of data management, and a director of administration. Executive: The Office of the Chief Executive, which oversees the entire Executive Branch, consists of the Governor, the Lieutenant Governor, Cabinet-level department heads, and staff who are responsible for carrying out the Governor’s constitutional powers and duties. Upon direct election by a plurality of the State’s voters, both the Governor and the Lieutenant Governor may serve two successive terms of four years. With the exception of the Secretary of Agriculture, who is chosen by the Board of Agriculture with the Governor’s approval, the New Jersey State Constitution grants the Governor the authority to appoint the entire cabinet as well as all Superior Court Judges and county prosecutors, subject to confirmation by the New Jersey Senate. Department heads remain in office until their successors are named and confirmed by the Senate; the only exceptions are the Attorney General and the Secretary of State, who are appointed to serve throughout the Governor’s entire term. Although the State Constitution permits a maximum of 20 departments, the State’s payroll consisted of approximately 54,809 employees in 15 departments as of January 2019. The Executive Branch also oversees the performance of 565 municipalities and 585 school districts, and the incarceration and rehabilitation of 16,673 prisoners. In addition to reliable transportation and protection for the State’s citizenry and environment, the Executive Branch provides social services for one out of every five New Jersey residents and one out of every three children. Judicial: New Jersey’s Supreme Court consists of a Chief Justice, who is the administrative head of all courts under the State’s jurisdiction, as well as six Associate Justices. In addition to Municipal and Tax Courts located throughout the State, there are Superior Courts, with a minimum of two Judges, in each of New Jersey’s 21 counties. After nomination by the Governor and subsequent confirmation by the State Senate, all Supreme Court Justices and Superior Court Judges serve initial terms of seven years. Should they be deemed eligible by both the Governor and the State Senate, Supreme Court Justices and Superior Court Judges acquire tenure with retirement at age 70 as mandated by the State Constitution. For purposes of judicial administration, the State is divided into 15 vicinages, each consisting of a single county or a combination of counties. The Administrative Office of the Courts provides support services. Approximately 7.4 million new cases were filed in New Jersey’s courts during Fiscal Year 2019, including 6.6 million in Municipal Court and 0.8 million in Superior Court. These cases address matters concerning civil, criminal, and family law. 2 COLLEGES AND UNIVERSITIES As of July 1, 2019, the higher education system in New Jersey includes four public research universities, seven State colleges and universities, 19 community colleges, 15 independent four-year colleges and universities, 12 proprietary institutions with degree-granting authority, 30 Talmudic institutions and theological seminaries, and one independent two-year religious college. In November 2012, New Jersey voters approved the $750 million “Building our Future Bond Act” (P.L. 2012, c.141), and in addition to this Act the State has authorized an additional issuance from four higher education funding programs in the aggregate amount of $925 million. These four programs are the Higher Education Capital Improvement Fund, the Higher Education Facilities Trust Fund, the Higher Education Technology Infrastructure Fund, and the Higher Education Equipment Leasing Fund. Of the $1,675 million authorized, $425.1 million remains unissued as of June 30, 2019. COMPONENT UNITS In accordance with the requirements of GASB Statement No. 14, The Financial Reporting Entity, and GASB Statement No. 61, The Financial Reporting Entity: Omnibus, an amendment of GASB Statement No. 14 and No. 34, this CAFR for fiscal year ended June 30, 2019, includes the accounts of 20 public authorities and 11 State public colleges and universities. Public authorities are legal, separate entities that are not operating departments of the State. Governing boards are vested with the power to independently manage and set policies for the organization. Each component unit is established for a specific purpose for the benefit of the State’s citizenry. GASB Statement No. 14 provides that the State’s financial statements should emphasize the primary government and permit financial statement users to distinguish between the primary government and its component units. As a result, the transmittal letter, Management’s Discussion and Analysis, and the financial statements focus on the primary government of the State and its activities, although information pertaining to the component units is presented. For additional information, please see Note 18 – Component Units. Executive Order No. 122, signed on July 23, 2004, was established to direct the Board of Directors for each State authority, commission, board, and council to create an Audit Committee whose members are to assist in the oversight of the financial reporting and audit processes of the entities. Each member of the Audit Committee is independent of the entity, with at least one member having a background in accounting or related financial expertise. The Audit Committee must assist the Board in retaining an independent auditor to conduct an audit. The auditor selection process must be based on public, competitive bidding princ