California bond debt is soaring, report says
SACRAMENTO, Calif. (KABC) -- California has been on a borrowing binge over the last decade. From road projects to the high-speed rail system to stem cell research, all has been financed courtesy of taxpayers at a premium through bonds.
For every dollar borrowed, it takes $2 to pay back with interest.
"Unfortunately, the debt is a good way for today's politicians to pay for things on the backs of tomorrow's taxpayers," said Jon Coupal of the Howard Jarvis Taxpayers Association.
A new report from the California State Treasurer's Office shows that just a decade ago, bond debt was just over 3.5 percent of the state's general fund, costing every Californian about $800 a year to pay it off.
Next year, it's estimated to jump to nearly 9 percent and with every taxpayer three times more.
The big spike includes $42 billion in bond monies, half of it to transportation projects, which voters approved in 2006 before the Great Recession hit.
The Treasurer's Office has been warning state leaders debt could reach more than 10 percent of the general fund. Wall Street likes it generally around 5 percent.
"Every dollar you pay in principal and interest on bonds is $1 you can't spend on schools, public safety, environmental protection, social services, the whole gamut of critical services," said Tom Dresslar of the Treasurer's Office.
Gov. Jerry Brown actually slowed the bonding spending down when he took office.
Bond supporters point out, though, that California needs to invest in infrastructure to keep the economy vibrant.v
"It's understandable that people would be concerned," said Hilda Martinez of the California Alliance for Jobs. "What they need to remember is that not all debt is bad debt. There is some good debt that is necessary to keep our economy going and keep people employed."
However, the off-the-books debt indicate California is in bigger trouble. The State Budget Crisis Task Force points out there's more liability that doesn't get counted. That includes government retiree pension and healthcare costs and the billions more lawmakers raided from public schools and universities that will eventually have to be paid back.
The Brown administration says it's fully aware of the wall of debt. Internal budget borrowing is accounted for in the current state budget and newly enacted pension reform will eventually save the state $55 billion over 30 years.
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