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California's Billion Dollar Problem

A recent article by Teri Sforza in the Orange County Register laid out the issue of the State of California owing over 8 billion dollars to the federal government for a loan to cover the state’s unemployment benefits. While the state General Fund has been paying the interest on these loans, employers will be repaying the balance over the next few years. This 8 billion dollars is just a drop in the bucket when you start to look at the total amount the state owes in liabilities. Earlier this year the total amount of our unfunded liability hole was $340 billion. That’s billion with a B.


Retirement benefits make up over $200 billion of the liability and include pension and retiree health benefits for state employees as well as teachers and school administrators. CalSTRS, the pension program that covers teachers, administrators, and their beneficiaries is one of the biggest problems, and has not been appropriately funded for most of its 101-year history according to the California Legislative Analyst’s Office (LAO).


The State has over $85 billion outstanding in general obligation and lease revenue bonds and another $30 billion in bonds that have been authorized by voters but not yet issued. And deferred maintenance costs to our state’s infrastructure system are at almost $65 billion.

There is close to $40 billion of budget obligations that are a result of budget gimmicks or required obligations just not being paid.


According to the LAO, the total amount of unfunded liabilities is almost two-and-a-half times the amount of state General Fund and special fund spending in 2013-14, or just over $8,500 for every Californian.


Governor Brown is taking a serious approach to try and tackle what he calls the “Wall of Debt”, but any budget he signs in 2015 should not include an increase in spending until these liabilities are drastically lowered. California taxpayers need to be vigilant in making sure Sacramento understands that paying down these liabilities needs to happen without extending the self-inflicted tax increases of Proposition 30.


By Carolyn Cavecche, President & CEO of Orange County Taxpayers Association

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