by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Brown has received such praise in connection with the California budget process this year, and the ruling Democrats’ self-proclaimed budget balancing. The real score in California, however, demonstrates that the budget is not really balanced and there is nothing but trouble ahead.
First, to use Jerry Brown’s own words, California has a “wall of debt,” which doesn’t include unfunded pension and medical liability – and that wall of debt is NOT included in the budget. The total amount of that debt is somewhere in the $27 billion range and includes over $10 billion owed to the federal government. That money was used to fund California’s Unemployment Insurance Fund, and California seems to have no plan to pay it back – a sort of “reverse” unfunded mandate, if you will.
The fact that California began borrowing that money in 2009 demonstrates the fallacy of the prior claims of balanced budgets. The fact that it is kept off budget, like the other debt mentioned above, demonstrates the fallacy of the 2013-14 budget.
Of course, California has far greater debts than that. One study showed that California governments are over $1 trillion in debt. Most of that is in the form of unfunded pension and medical liabilities owed to state employees. California’s Legislative Analyst told Brown and the Democrat-run legislature to increase the contributions to the state’s teacher’s pension fund by a paltry $4.5 billion to address its announced $73 billion short fall.
The new budget, which includes a call for an increase in spending of 26.2% over the next four years, ignores the Legislative Analyst’s advice. Keep in mind that the main public employee retirement fund is said to be underfunded by $329 billion and that the unfunded medical benefit deficit is said to be $64 billion in the red. The latter figure, according to Brown, is expected to grow 59% in the next four years.
If you ignore all that, then California has close to a balanced budget. I say “close” because, in fact, the so-called balanced budget steals (sorry – “borrows”) $500 million from the State’s cap-and-trade environmental emission reduction program. Brown’s budget does that even with the recently passed, retroactive tax increase that produced higher-than-expected revenues.
Add it up and you find that the budget really isn’t balanced and Brown hasn’t really made any “tough choices.”