CA’s Wall of Debt is as High and as Intractable as Ever

In May of 2011, Governor Brown declared that reducing the “wall of debt” would be his “top priority” if taxes were increased. “The wall of debt has to be brought down,” he told reporters.  That was the Governor’s justification to raise taxes.  Now the reason to raise taxes is to save education and public safety, which the Democrats have consistently cut in order to increase welfare spending the last two budgets.

Back to 2011, the wall of debt the Governor referred to was only the debt that the state owed on borrowed funds, also known as structural deficit.  However, this accounting did not touch California’s entire debt obligations in pension liabilities, pension healthcare costs, bonds, etc. as the chart below shows.

Total California Debt ($ billions)

Unfunded Pension Liability
$469.9
Unfunded OPEB
62.1
Structural Deficit
32.7
State Unemployment Insurance Fund
11.6
Outstanding GO & Revenue Debt
91.0
Bonds Authorized but Not Yet Sold
45.5
Less: Economic Recovery Bonds in Structural Deficit
6.3
TOTAL
$706.5

What has the Legislature done to address the Governor’s concerns on this “wall of debt”?  Nothing.  They have continued to add to the problem.   In fact, in 2010 a pension study by the Stanford institute for Economic Policy research (SIEPR) found that delaying pension reform costs California $3.4 million a day.  The Legislature’s inaction on this issue alone has at a minimum added over $2.5 billion to California’s debt since they rang the alarm.  In the midst of this enormous debt crisis Governor Brown and the Democrats made the absurd decision to pile on more debt by raiding the highway maintenance funds to fund the High Speed Rail to nowhere boondoggle.

Inaction on California’s debt is costing us dearly and our kids will pay.  They will pay today by receiving a substandard education from a system that Democrats have used as a piggy bank for other programs.  They will pay with their safety, as the Democrats release prisoners to increase welfare spending.  Their educations and safety are compromised in the near-term, but our children will literally pay tomorrow when they join the workforce and already “owe” the state for the mountain of debt.

In the waning days of the session there was evidence that Governor Brown tried to deal with real issues such as the debt and pension reform, only to be rebuked by his own Democrats in the Legislature.  But the Governor wielded more leverage in the final days of the session but probably it was not enough to thwart the will of his spend-happy, solution-adverse Legislative Democrats.   What the Democrats passed as “Pension Reform” is that in name only; it does not begin to address the real costs such as retiree healthcare costs.  They can tout it as a campaign issue, but it is an election year stunt, not real reform

The public is clearly incredulous about the passage of the High Speed Rail to nowhere boondoggle.  The High Speed Rail debacle added to the debt.  Democrats also raided dedicated highway maintenance fees to do it.

Though they may be insulated in Sacramento, and at their party Convention this week in North Carolina, Democrats will get an earful when they return to their districts and face the wrath of constituents.

(George Plescia is the President of Apex Consulting, Inc. Originally posted on Fox & Hounds.)