California's debt burden soars to nearly 8 percent
By Kevin Yamamura The Sacramento Bee
Published: Saturday, Oct. 1, 2011 - 12:00 am | Page 3A
Copyright 2011 The Sacramento Bee. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
California will devote nearly 8 percent of its general fund budget to paying off debt this fiscal year, more than twice the share of eight years ago, according to a new report from Treasurer Bill Lockyer.
The state has long borrowed for massive public works projects intended to last across generations.
But state leaders and voters went on a notable binge during flush economic times in the past decade.
They approved bonds for parks, flood protection, classrooms, children's hospitals, stem cell research and high-speed rail. They borrowed in 2004 to bridge a budget deficit from the last recession.
As new bills stacked up, the state entered a historic economic downturn and revenues fell sharply over the past three years.
The combination of higher bond payments and declining tax revenues has driven the debt burden to 7.8 percent of the general fund budget. Lockyer also blames a drop in tax rates this summer, after the expiration of 2009 temporary tax hikes.
The rate is more than double the 3.4 percent California devoted to debt in 2003-04.
California also faces a higher debt burden compared with other states. It owes $2,542 per person, compared with the national median of $1,066.
Lockyer's report warns that if borrowing continues to rise, "That growth will come at the expense of other vital public services. Those services already are under severe strain."
Gov. Jerry Brown and lawmakers do not have to issue all of the bonds authorized by voters. Of the $9.95 billion in high-speed rail bonds available, for instance, the state has yet to borrow $9.5 billion.
Lockyer outlined three possible paths for lawmakers and the governor: no additional borrowing; issuing the remaining $49 billion in bonds that voters have approved; or pursuing a $238.6 billion public works borrowing plan championed by former Gov. Arnold Schwarzenegger.
The first plan would drop the state's debt service ratio to 4.1 percent in 2020-21; the second to 6.8 percent; and the last to 7.7 percent.
Legislative Analyst Mac Taylor said he doesn't suggest any particular rule-of-thumb ratio for responsible budgeting. He said borrowing for new state assets may be worthy, as long as state leaders recognize the trade-offs involved.
"It's not inappropriate by any means because the state typically uses bond funds for these long-lived assets the same way you and I would pay for a mortgage," Taylor said.
"But committing to these bonds are unlike other operating commitments because you're completely locked in."
The state has long borrowed for massive public works projects intended to last across generations.
But state leaders and voters went on a notable binge during flush economic times in the past decade.
They approved bonds for parks, flood protection, classrooms, children's hospitals, stem cell research and high-speed rail. They borrowed in 2004 to bridge a budget deficit from the last recession.
As new bills stacked up, the state entered a historic economic downturn and revenues fell sharply over the past three years.
The combination of higher bond payments and declining tax revenues has driven the debt burden to 7.8 percent of the general fund budget. Lockyer also blames a drop in tax rates this summer, after the expiration of 2009 temporary tax hikes.
The rate is more than double the 3.4 percent California devoted to debt in 2003-04.
California also faces a higher debt burden compared with other states. It owes $2,542 per person, compared with the national median of $1,066.
Lockyer's report warns that if borrowing continues to rise, "That growth will come at the expense of other vital public services. Those services already are under severe strain."
Gov. Jerry Brown and lawmakers do not have to issue all of the bonds authorized by voters. Of the $9.95 billion in high-speed rail bonds available, for instance, the state has yet to borrow $9.5 billion.
Lockyer outlined three possible paths for lawmakers and the governor: no additional borrowing; issuing the remaining $49 billion in bonds that voters have approved; or pursuing a $238.6 billion public works borrowing plan championed by former Gov. Arnold Schwarzenegger.
The first plan would drop the state's debt service ratio to 4.1 percent in 2020-21; the second to 6.8 percent; and the last to 7.7 percent.
Legislative Analyst Mac Taylor said he doesn't suggest any particular rule-of-thumb ratio for responsible budgeting. He said borrowing for new state assets may be worthy, as long as state leaders recognize the trade-offs involved.
"It's not inappropriate by any means because the state typically uses bond funds for these long-lived assets the same way you and I would pay for a mortgage," Taylor said.
"But committing to these bonds are unlike other operating commitments because you're completely locked in."
No comments:
Post a Comment