Capitol Alert

California had nation’s 11th highest state debt burden in 2013

As a proportion of personal income, California had the nation’s 11th highest long-term state debt in 2013, a new report by the Pew Charitable Trusts says.

However, Pew’s three-year-old calculations, like other state-to-state comparisons, suffer from being based on the latest available official data, which are several years old.

The state’s debt could be relatively higher today, depending on how its unfunded pension liabilities are measured, or relatively lower, because personal income has been growing.

As of 2013, Pew says, California’s long-term debt for unfunded pension and health care benefits to state employees and conventional borrowing, mostly via bonds, was $344.7 billion, or 18.6 percent of $1.85 trillion in personal income.

That was 11th highest among the states, which ranged 52.9 percent of income in Alaska to 1.1 percent in South Dakota. Rival Texas had one of the nation’s lowest relative debt loads, just half of California’s.

As in most states, California’s pension debt, pegged at $170 billion or 9.2 percent of personal income, was its largest chunk. Unfunded retiree health care was $80.2 billion or 4.3 percent, and regular debt was $94.5 billion or 5.1 percent.

The state’s pension debt number, however, comes from the California Public Employees Retirement System and other state pension funds and is based on their official assumptions of future trust fund earnings, around 7.5 percent.

Critics say that assumption is unrealistically high, and lowering it to some other, more reliable measure, such as the U.S. Treasury note rate, would sharply increase the debt. Using that rate, according to a recent Stanford University study, could triple the state’s unfunded pension obligation to about $500 billion.

Whatever the state’s current debts may be, they would also be calculated against personal income that has increased sharply since 2013. Gov. Jerry Brown’s latest state budget estimates that personal income will be $2.2 trillion this year, up 17.5 percent since 2013.

Updated data would affect Californians’ proportionate debt load, but it probably would remain among the nation’s highest.

Brown has been a debt hawk, aggressively paying off what he called a “wall of debt” that the state incurred during the Great Recession.

Brown has also sponsored a modest pension reform plan, negotiated union contracts that require more employee contributions for retiree health care and is proposing to set aside $240 million this year toward future health care obligations.