The state must tackle its debts

By John Moorlach | The Legislative Analyst’s Office recently announced that it is forecasting a $2.8 billion budget surplus for the state of California next year.

As the SNL Church Lady would say, “Isn’t that special?”

But, it’s not special. I believe the report’s conclusions are deficient, as many fiscal concerns are being smoothed over, rather than being highlighted. The LAO takes an auto-pilot approach in its assumptions. This is understandable, but it screams for a leadership decision to make a major course change. Sacramento needs to re-evaluate the priorities for its most obvious obligations.

Why do I say this? Because California has the largest unrestricted net deficit of any of the 50 states. It’s nearly $170 billion – and growing. And this number does not take into account other significant unfunded liabilities. So, a $2.8 billion budget surplus may be special, but it is illusory.

With this in mind, let’s ask Gov. Brown to use this supposed surplus for the real fiscal demands facing our children and grandchildren, and not toward more new programs. With budget season around the corner, there are allocations he must consider.

We’re told that deferred maintenance for the state’s roads and highways is some $59 billion. Let’s start saving up. Why does California not set funds aside for future repairs and improvements? Instead, Sacramento screams for a new tax after things have fallen apart. If it set funds aside in a methodical manner for these costs over the next 30 years, the annual budgeted amount would be $2 billion.

The state is only making the minimum required annual contribution into its retirement plans. Yet, CalPERS alone has fallen behind nearly $50 billion in the last two years on its meager investment returns. While CalPERS has a long-term plan to reduce its expected rate of return assumption, perhaps it’s time to accelerate the annual contributions to pay down the unfunded liabilities. If a 10 percent increase was added to the annual contribution, it would require another $800 million out of the budget.

Read the entire commentary . . .


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