FOR IMMEDIATE RELEASE
Sacramento, California, April 30, 2013
A new study published by the California Policy Center estimates the total state and local government debt in California between $848 billion and $1.1 trillion. The study, authored by CPPC researchers Bill Fletcher and Ed Ring, is the result of extensive interviews with state employees and analysis of reports from dozens of state and local agencies. It provides a comprehensive tabulation of the many sources of debt incurred by cities, counties, special districts, redevelopment agencies, school districts, and the state, as well as the unfunded liabilities for retiree pensions and health care.
“Nobody in California government wants to officially admit that taxpayers are now on the hook for over $1.0 trillion in state and local government debt,” said Mark Bucher, president of the California Policy Center. “This study should be an eye-opener. A trillion dollars of debt equates to over $80,000 for every Californian household.”
This study is part of an ongoing CPPC project to provide a more transparent view of California’s state and local government finances. Co-Author Bill Fletcher said, “It’s important to look at California’s state and local government ‘balance sheet’ to answer how much do we owe. Government debts are deferred taxes. We need to ask some important questions such as are our debts growing faster than the state’s economy that has to support the debt? Are we passing on today’s expenses to future taxpayers through borrowing? When and how does it end?”
The study compiles information on California’s state and local government debt, relying primarily on official reports prepared by the State Controller and State Treasurer. When, along with the $27.8 billion “Wall of Debt,” long-term debt incurred by California’s state, county, and city governments, along with school districts, redevelopment agencies and special districts are totaled, the outstanding balance is $383.0 billion. The officially recognized unfunded liability for California’s public employee retirement benefits – pensions and retirement health care – adds another $265.1 billion. Applying a potentially more realistic 5.5% discount rate to calculate the unfunded pension liability adds an additional $200.3 billion. All of these outstanding debts combined total $848.4 billion. The study also shows that by extrapolating from available data that is either outdated or incomplete, and using a 4.5% discount rate to calculate the unfunded pension liability, the estimated total debt soars to over $1.1 trillion.
The conclusion of this study is (1) the outstanding debt owed by California’s state and local governments, using responsible actuarial assumptions, is almost certainly in excess of $1.0 trillion, and (2) it is surprising that none of our government institutions in California can themselves provide an authoritative estimate of total state and local government debt, updated annually and available to the public.
To read the entire study, click on “Calculating California’s Total State and Local Government Debt.”
* * *
The California Policy Center is a non-partisan public policy think tank that aspires to provide information that will elevate and enlighten the public dialogue on vital issues facing Californians, with the goal of helping to foster constructive progress towards more equitable and sustainable management of California’s public institutions. Learn more at www.CaliforniaPolicyCenter.org.