Dan Walters: California's 'wall of debt' is really a mountain

Gov. Jerry Brown's new budget says that the state's shaky finances are "exacerbated by an unprecedented level of debts, deferrals and budgetary obligations," which he describes as "a wall of debt."

However, California's debt, much of it run up over the last decade, is more like a mountain, at least a Mount Whitney and perhaps a Mount Everest.

Brown's budget cites the $33 billion in on- and off-the-books debt run up in recent years to cover the state's operational shortfalls – notwithstanding various constitutional prohibitions on deficit spending. It also cites constitutional obligations to restore school financing and mounting payments for the state's formal bonded indebtedness that will double to $6 billion a year by 2014.

But those numbers, as large as they may appear, are only the foothills of the debt mountain that state and local governments have amassed in recent years.

Take, for example, those formal bonds.

California voters have approved nearly $130 billion in active general obligation bonds, of which $73 billion are still outstanding and $33 billion remain unissued, according to the state treasurer's office, and even if no more are sold, it will cost the state nearly $135 billion to repay them over the next 30 years.

Other bond issues that lack dedicated revenues and therefore must be repaid from the state treasury will cost another $20 billion.

Local redevelopment agencies may have been abolished, but they've run up more than $100 billion in debt that must be repaid, mostly from property taxes that otherwise would finance local services. With interest, it may be $200 billion. And local governments and school districts have many billions more in non-redevelopment debt.

The state owes the federal government $10 billion in loans to prop up the Unemployment Insurance Fund.

But all of those pale next to the "unfunded liabilities" of state and local pension funds and obligations for retiree health care.

Brown's budget pegs the state's pension debt at $45.2 billion and retiree health care at $59.9 billion, but independent estimates of the pension gap have ranged as high as a half-trillion dollars, depending on assumption of future investment earnings.

In all, state and local governments may be a trillion dollars in debt, equal to half of California's annual economic output.

Brown says he wants to reduce state debt. "That's one thing I'm really committed to," he said last week, adding, "We see what's going on in Europe. We see the pathetic situation in Greece."

That sounds good, but Brown still hasn't acknowledged the full extent of California's debt, and he's also committed to issuing more than $9 billion in bonds to finance a fanciful bullet train system and billions more for water development.