California Debt

By Jessica Calefati
jcalefati@bayareanewsgroup.com
Posted: 01/26/2014 04:58:18 PM PST
Updated: 01/26/2014 05:08:27 PM PST

SACRAMENTO — Gov. Jerry Brown’s image as a responsible, penny-pinching steward of California’s finances has been cemented in recent weeks because of his renewed call to pay off California’s “wall of debt.

That’s a term Brown coined when he took office to describe the tens of billions of dollars California owed to public schools and special funds whose coffers were raided to help balance budgets in the past.

But look behind that $24.9 billion wall and you’ll see a $330 billion skyline of other liabilities threatening the state’s financial health. It includes $80 billion needed to cover teachers’ pensions and $64 billion to pay for state workers’ health care in retirement — two particularly troublesome liabilities because the state isn’t even making the minimum payments on them.

As a result — similar to the debt of a homeowner who fails to make regular mortgage payments — California’s liabilities keep growing. For example, the money needed to fully fund the California State Teachers’ Retirement System balloons by $22 million a day, or about $8 billion a year, financial analysts estimate.

“This is an enormous financial problem that no one is willing to stand up and take care of,” said Joe Nation, a public policy professor at Stanford University.

The governor acknowledged California’s unfunded liability burden Wednesday in his State of the State address, calling it “enormous and ever-growing.” In his proposed budget, he specifically calls for negotiations to resolve the teacher pension issue. But he includes no money for the upcoming fiscal year to pay down that liability.

“We can’t make a snap judgment on this,” said H.D. Palmer, spokesman for the state Department of Finance. “The prudent approach is coming up with a long-term plan that’s bought into by all stakeholders, and that will take time.”

Those stakeholders include the Legislature, school districts, CalSTRS and the teachers, whose unions Brown is expected to rely on for campaign donations and community outreach when, as is expected, he runs for reelection this fall.

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