California's borrowing orgy

Californians' penchant for debt has reached new highs in the absolute tidal wave of borrowing that the state's officeholders and voters have undertaken, some above-board bonds, some for legitimate public purposes, and some to cover deficit spending.

The irony is that until a couple of decades ago, California had an almost pathological aversion to public debt and relied on pay-as-you-go approaches, even for public works projects. The state's once-matchless highway system was financed from fuel taxes, while its world-class system of colleges and universities was largely built with royalties from oil on state-owned tidelands. [snip]

As spending has continued to outstrip revenues, legislators turned to debt [aka: Bonds] to finance them, undercutting the facade of balanced budgets. Some of the debt was formal, such as the $15 billion bond issue Gov. Arnold Schwarzenegger pushed through in 2004 to refinance short-term operating debt. Some of it was clandestine, such as robbing the state teachers retirement system, knowing that the money grab would be declared illegal and have to be repaid later... [snip]

Servicing existing formal and informal loans now costs the state general fund more than $5 billion a year – and the beat goes on. California is building a debt mountain. Someday it will collapse. The only question is when.

READ MORE