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A surplus of $1 billion means nothing for California's $100+ billion in debt and unfunded liabilities. We would need a billion surplus every year for hundreds o

A surplus of $1 billion means nothing for California's $100+ billion in debt and unfunded liabilities. We would need a billion surplus every year for hundreds of years. http://www.nytimes.com/2012/09/21/us/california-debt-higher-than-earlier-estimates.html http://www.nytimes.com/2012/09/21/us/california-debt-higher-... http://www.usgovernmentspending.com/california_state_spending.html http://www.usgovernmentspending.com/california_state_spendin...

jfoutz 14y ago
Well, I don't know California's interest rate on those loans, but if it's lower than inflation, you'll inevitably win. Also, if the economy keeps growing, 100 billion in a hundred years will be a lot easier to come up with than it is today. Think of Dr Evil asking for 1 million dollars. edit Just looked it up. Just shy of a 2 trillion dollar Gross State Product? 100 billion is a big number, but 5% debt is not that bad. (the state) Going into debt during the good times is stupid, going into debt in recession is probably smart.
- ekianjo 14y ago
  The Gross State Product does NOT belong to the State, though.
- adventured 14y ago
  Not to mention that debt interest is taking up twice as much of the general fund as a decade ago. "California's current debt burden is 7.8 percent of the state's general fund budget of $88.5 billion for the current fiscal year that ends in June 2012. That 7.8 percent is more than double the 3.4 percent of fiscal 2003-04." http://www.ocregister.com/articles/debt-320389-interest-state.html http://www.ocregister.com/articles/debt-320389-interest-stat...
  - muzz 14y ago
    Yes indeed California racked up a lot of debt from 2003 to 2012. However, with the decreasing shortfalls and expected balanced budgets that debt is no longer increasing and with the projected surpluses it can be paid down. The debt is a legacy of the past. Great strides have been made in the past few years to get the state's fiscal situation in order.
- NoPiece 14y ago
  It isn't the debt by itself that is the problem, it is the debt plus the unfunded liabilities. The pension liability alone is estimated at an additional $500 billion. Plus there is the debt and financial problems of the various cities and counties.
  - rprasad 14y ago
    The unfunded liability will last out most another 50 years (when the last of the employees covered by these generous pensions dies). New employees receive far less favorable pensions: either significant reduced defined-benefit pensions, or a switch to defined-contribution pensions. New employees are also subject to higher retirement eligiblity raises and cannot apply as much (if any) vacation time or unused sick days toward increasing their pension-base salary.
anigbrowl 14y ago
That's a surplus after all the debt service payments (ie bond interest), and unfunded liabilities aren't all due immediately. Some are unfunded because they're pay-as-you-go, and so they don't need to be fully funded in the present. Suppose you have an income, a year's worth of savings in the bank, and a mortgage with 20 years left on the term. You don't lie awake at night worrying about 19 years' worth of unfunded liability, even though you don't currently have the money to pay it off. In fact, right now is a good time to have debt or even issue more because interest rates are at historic lows.

jfoutz 14y ago

Well, I don't know California's interest rate on those loans, but if it's lower than inflation, you'll inevitably win. Also, if the economy keeps growing, 100 billion in a hundred years will be a lot easier to come up with than it is today. Think of Dr Evil asking for 1 million dollars. edit Just looked it up. Just shy of a 2 trillion dollar Gross State Product? 100 billion is a big number, but 5% debt is not that bad. (the state) Going into debt during the good times is stupid, going into debt in recession is probably smart.

ekianjo 14y ago
The Gross State Product does NOT belong to the State, though.
adventured 14y ago
Not to mention that debt interest is taking up twice as much of the general fund as a decade ago. "California's current debt burden is 7.8 percent of the state's general fund budget of $88.5 billion for the current fiscal year that ends in June 2012. That 7.8 percent is more than double the 3.4 percent of fiscal 2003-04." http://www.ocregister.com/articles/debt-320389-interest-state.html http://www.ocregister.com/articles/debt-320389-interest-stat...
- muzz 14y ago
  Yes indeed California racked up a lot of debt from 2003 to 2012. However, with the decreasing shortfalls and expected balanced budgets that debt is no longer increasing and with the projected surpluses it can be paid down. The debt is a legacy of the past. Great strides have been made in the past few years to get the state's fiscal situation in order.
NoPiece 14y ago
It isn't the debt by itself that is the problem, it is the debt plus the unfunded liabilities. The pension liability alone is estimated at an additional $500 billion. Plus there is the debt and financial problems of the various cities and counties.
- rprasad 14y ago
  The unfunded liability will last out most another 50 years (when the last of the employees covered by these generous pensions dies). New employees receive far less favorable pensions: either significant reduced defined-benefit pensions, or a switch to defined-contribution pensions. New employees are also subject to higher retirement eligiblity raises and cannot apply as much (if any) vacation time or unused sick days toward increasing their pension-base salary.

anigbrowl 14y ago

That's a surplus after all the debt service payments (ie bond interest), and unfunded liabilities aren't all due immediately. Some are unfunded because they're pay-as-you-go, and so they don't need to be fully funded in the present. Suppose you have an income, a year's worth of savings in the bank, and a mortgage with 20 years left on the term. You don't lie awake at night worrying about 19 years' worth of unfunded liability, even though you don't currently have the money to pay it off. In fact, right now is a good time to have debt or even issue more because interest rates are at historic lows.