10:00 PM PST on Wednesday, December 16, 2009

The Press-Enterprise

The enormous costs of California’s debt require legislators to resist thoughtless borrowing and reckless budgeting. The state does not have an unlimited capacity to borrow money for public projects, so the Legislature needs to set careful priorities for future bonds. And legislators could cut the costs of borrowing by truly balancing the state’s budget.

State Treasurer Bill Lockyer and Legislative Analyst Mac Taylor this week offered the Assembly a grim picture of the state’s debt load. California has borrowed prodigiously in recent years, but the cost of repaying that money is taking a growing chunk of the state’s deficit-plagued general fund. The state’s debt service costs, for example, have grown by 143 percent since 1999-00, while revenue has increased by 22 percent in that time.

California will pay $6 billion in debt service in the current fiscal year, or nearly 7 percent of the state’s general fund. And that expense is only for part of the bonds voters and legislators have approved: California has $83.5 billion in outstanding debt, including $64 billion in general obligation bonds. But the state has $47.5 billion in already authorized bonds that it has yet to sell, too.

The treasurer and analyst expect that debt payments will consume 10 percent of state general fund revenue within four or five years. If voters approve the $11.1 billion water bond legislators passed last month, the state’s debt service will reach a peak of $10.45 billion annually in 2020.

For comparison, $10 billion is more than the state will spend on prisons or higher education this year. Every dollar that goes to pay off borrowing is money the state cannot use for education, health programs, corrections or other public services — at a time when the state faces years of annual deficits in the $20 billion range.

Those numbers should shock state officials into better planning for future borrowing. California has huge demands for public infrastructure, and the state’s response has often been driven by political expedience rather than organized planning. Legislators also need to avoid packing future bonds with the kind of pork projects that inflated the new water bond.

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