Debt Issue

How Big is California’s DEBT PROBLEM?

Today, California has $120 BILLION in authorized bond debt and $328 BILLION in unfunded pension and healthcare liabilities, which together means that Californians (and tomorrow’s taxpayers) owe $448 BILLION!

Put into perspective, if you divide $448 BILLION by California’s 38 million residents, that equals $11,800 in debt per Californian or $47,200 per family of four, and the total will keep growing until ordinary citizens like you demand change!

Here are the Facts

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In 1974, California voters tried to control runaway state spending by passing Proposition 13, which, among other things, required two-thirds legislative approval for all future tax increases.

Still, over the past 20 years, California state government spending has grown faster than tax revenues, nearly TRIPLING from $55 BILLION to $156 BILLION!

In 2014 alone, the state spent $6 BILLION more than it received in tax revenues.

Wait! How can Sacramento keep outspending its tax revenues by BILLIONS of dollars year after year? The answer is that professional politicians (Liars) have figured out how to get around Prop. 13 spending limits by borrowing money from tomorrow’s taxpayers (our children) and spending it today.

The Two Schemes

1 “Bait and Switch” Borrowing

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Thanks to Prop. 13, Sacramento politicians can’t increase taxes without approval by two-thirds of both legislative houses. Currently, it takes only a simple majority of voters to approve a State Bond Initiative, which gives the state permission to borrow money.

As a result, politicians have repeatedly used “Bait and Switch” borrowing tactics to trick voters into approving bond initiatives, which increased authorized state debt by 500 percent, from $20 BILLION in 1994 to $120 BILLION2 in 20 years.

In “Bait and Switch” borrowing, politicians place a bond initiative on the ballot that appears to support highly popular causes, which most Californians care deeply about (like “clean water” or “highway repair”). That’s the “Bait.”

While taxpayers think they are paying for one thing, fine print hidden within the initiative actually authorizes most of the BILLIONS in bond funds to be spent on dozens of other unrelated projects/agencies. That’s the “Switch.”

Example #1: 2006 “Water Bond” (Prop. 84)

BAIT: Politicians sold Prop. 84 to voters as the “Water Bond.”
SWITCH: Prop. 84 raised $5.4 BILLION in funds. But less than half of bond funds actually went to water agencies. Instead, hidden fine print within the initiative authorized $3 BILLION in unrelated “internal/external pork” spending.

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Example #2: 2006 “Highway Bond” (Prop. 1B)

BAIT: Politicians sold Prop. 1B to voters as the “Highway Bond.”
SWITCH: Prop. 1B raised $19.9 BILLION in funds. But less than half actually went to repairing or building state highways. Instead, hidden fine print within the initiative authorized $8.3 BILLION in unrelated state grants!

In both examples, money was borrowed for one stated purpose, but spent on something else. That’s lying. That is why we call our campaign Liar, Liar!

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2 Withholding Pension/Healthcare Contributions

Another way Sacramento continues to outspend tax revenues is by not paying its share into public employee pension and healthcare funds.

In the 1980s and 90s, the state under Governors Brown and Davis increased state employee pensions to 60 and then 90 percent of employees’ final salaries. But instead of putting aside those retirement fund dollars in the year they were earned, state politicians pretend that money does not already belong to the public employees who earned it. Similarly, Sacramento has also left public employee healthcare liabilities underfunded.

For example, Sacramento’s budget simply “left out” $6 BILLION of expense to fund the state’s 2014–15 obligations to the Retired State Employees Health Benefits Fund ($3 BILLION) and STRS, the California State Teachers’ Retirement System ($3 BILLION).

How can they get away with this? Through an accounting loophole. While the state has four times more employees than the average Fortune 500 company, it still follows the simplistic “cash in, cash out” bookkeeping rules used by the smallest mom-and-pop businesses.

And in “cash in, cash out” accounting, an invoice or bill for completed work is not technically considered an expense until after it is paid.

By not operating the state budget on an accrual basis, the state (and future taxpayers) now owe public employee pension and healthcare funds $328 BILLION.

Not recording and paying into public employee pension/healthcare funds when they are EARNED and OWED is LYING.

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