Department of Finance presents FY2025 ACFR: $64.3 billion net position, OPEB funding rises; auditors give unmodified opinion

Department of Finance and Administration officials presented the state's fiscal year 2025 Annual Comprehensive Financial Report (ACFR) to the Senate Finance, Ways and Means Committee on Jan. 20 and said independent auditors issued an unmodified (clean) opinion.

"The 2025 ACFR received an unmodified opinion from the state's independent auditors," Michelle Earhart Hernandez, chief of accounts for the state of Tennessee, said as she opened the presentation. She described the ACFR as the state's most comprehensive financial document, providing an independently audited picture of the state's financial position, operating results and long-term obligations.

Tuan Lee, director of financial oversight, told the committee Tennessee's net position at June 2025 "totaled $64,300,000,000," an increase of $2,500,000,000 (3.7%) from the prior year. Lee cautioned, however, that after roughly 2.7% inflation in FY25 the nominal increase translates to little or no real gain in purchasing power.

Lee also broke the net position into components, saying roughly $36,500,000,000 is invested in capital assets, $4,400,000,000 is restricted for specific purposes, and about $23,500,000,000 is categorized as unrestricted net position. He warned that "unrestricted net position is not the same as available cash" and cannot be freely spent without policy or operational consequences; presenters said that unrestricted balances roughly equal five to six months of current spending but are not a cash reserve.

On retiree health obligations, Ike Boone described other post-employment benefit (OPEB) reporting and said this was the first year the state reported certain OPEB assets. Presenters provided plan figures and liabilities, including reported liabilities for K'12 retirees totaling $568,600,000 and other plan-specific amounts discussed in the slides.

The presentation also summarized debt trends: general obligation bonds and commercial paper declined by $207,100,000 during the year (the state did not issue any bonds in the past year), other long-term debt rose by $105,200,000, and total debt on the disclosed schedule decreased by $101,900,000. Presenters said the debt-to-personal-income ratio declined to 0.43 percent.

A senator asked whether bonds had been issued; presenters replied no bonds were issued during the fiscal year but noted the legislature had authorized bond sales in recent years (authorizations can exist without sale). Another senator asked for peer-state comparisons on debt ratios; Tuan Lee said he would look into obtaining comparative data.

Officials told the committee GASB Statements 101 and 102 were implemented in FY25. Implementation of GASB 101 (compensated-absences guidance) added an estimate for sick-leave liabilities and produced a prior-period adjustment of $361,100,000; current-year compensated-absences totaled $907,200,000 (segmented into annual leave, comp leave and sick leave in the slides). Presenters said implementation of GASB 102 (risk-disclosure requirements) did not change current-year disclosures.

The presenters noted Tennessee has received the Government Finance Officers Association's certificate of achievement for excellence in financial reporting for 45 years and said they expect the 2025 ACFR to earn the award as well. Michelle Earhart directed members to the Department of Finance and Administration Division of Accounts website to find the 2025 ACFR and prior years.

The committee returned to session and adjourned.