What, one might ask, is the appropriate metaphor for California's convoluted budgetary situation?
Would be it be Enron, which cooked its books to fool investors and lenders? Perhaps a Third World country whose rulers run up a mountain of debt while squandering revenues? Or both?
Whatever it may be, years of irresponsibility by politicians and voters alike have left California with ongoing spending obligations that are nearly 50 percent higher than its ongoing revenues – roughly $110 billion a year in the former and $75 billion in the latter – and debts that would be daunting even were the economy to improve dramatically.
Gov. Arnold Schwarzenegger and legislators have narrowed the structural budget gap in the short run with temporary taxes, temporary spending cuts, up-front and backdoor loans, projected asset sales, bookkeeping tricks and raids on local governments, but will probably see major deficits appear again soon.
The debts – many billions borrowed to keep the state afloat, spending deferrals that must be honored later, bonds issued to finance public works, and unfunded liabilities in public worker pensions and health care – are continuing to pile up.
The Legislature's budget analyst, Mac Taylor, has gathered the various debts into one document at the request of Fresno Assemblyman Juan Arambula, who left the Democratic Party this year as a protest against what he saw as mounting fiscal irresponsibility. And it is, or should be, a frightening compilation.
Taylor estimates that California has more than $200 billion in "liabilities that will affect the state's financial health," broken down this way:
• About $35 billion in "budget-related liabilities," including payroll deferrals, school aid deferrals and borrowing from special funds and banks;
• About $69 billion in traditional bond debt for public works that must be repaid from the state's deficit-ridden general fund;
• Something in excess of $100 billion in unfunded liabilities for public employees' pensions and post-employment health care, roughly $50 billion for each.
"While certain liabilities are difficult to quantify precisely," Taylor told Arambula, "it appears the state has over $200 billion of short-term, longer-term, and retirement-related liabilities to retire in future years. These liabilities will continue to put pressure on the state's finances for years to come."
Taylor's debt numbers are one of the reasons he tells the Legislature that even were the economy to recover, California faces many years of gaps between income and outgo. Indeed, the situation could worsen in a couple of years as the temporary taxes expire and the temporary spending deferrals and debts come due.
And it means that regardless of what Schwarzenegger and lawmakers do in the months ahead to keep the state financially afloat, the next governor, whoever he or she may be, will have a governorship dominated by the state's fiscal calamity.
Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.
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