Governor Jerry Brown, joking about Donald Trump’s proposed wall at the border, said if Trump wins maybe we should build a wall around California. Well, there is a wall in California the governor himself labeled–the Wall of Debt—and it just got taller.
On Friday, state Controller Betty Yee released a report that for the first time contained liabilities for state employees’ retirement pension costs. The acknowledgement of that debt now required by the Governmental Accounting Standard Board (GASB) added more than $60 billion dollars to the balance sheet. According to the report, the state’s Wall of Debt now soars to $175 billion, more than half is unfunded employee-related, long- term liabilities, which now must be recognized when they occur.
The Wall of Debt will grow to an even greater height next year when public employee health care obligations must be added to the debt calculator according to GASB rules. Expectations are another $70-plus billion will be added to the debt.
Advocates for pension reform have pointed to this coming storm for some time. One wonders if they had not pulled the proposed pension reform initiative if this new debt declaration would have helped push the initiative to success.
Then again, by holding off and waiting for the health care costs numbers to be added next year, perhaps a 2018 reform initiative can better take advantage of those higher numbers.
The question is: how closely do voters follow this governmental numbers game?
The first test could come in November. Two ballot measures are directly and indirectly related to the debt numbers issued by the controller.
A $9 billion state school construction bond would add to the state’s general obligation bond statement. Currently, the controller notes that 38% of the $175 billion debt consists of bonded debt to build capital assets.
Meanwhile, a proposal to require a vote of the people on all revenue bond projects that exceed $2 billion is on the ballot. While the users of the infrastructure built by the revenue bonds and not the general taxpayers pay off revenue bonds, the issue of dramatically increased state debt, if it gains traction, could influence voters to support this initiative.