04/24/2024

California’s State and Local Liabilities Total $1.5 Trillion

We estimate that California’s total state and local government debt as of 6/30/2017 totaled just over $1.5 trillion. That total includes all outstanding bonds, loans, and other long-term liabilities, along with the officially reported unfunded liability for other post-employment benefits (primarily retiree healthcare), as well as unfunded pension liabilities.

Our findings may appear to contradict reports of state surpluses. The state’s spare cash and rainy day funds pale before the mountain of long-term liabilities California governments at all levels have accumulated. Moreover, if the stock market continues to drop, personal income tax and capital gains tax revenue will decline precipitously, wiping out these surpluses.

Our analysis increased the amount of estimated unfunded pension liabilities by $530 billion, to a total of $846 billion, by using a more appropriate discount rate. This is more than twice the official estimate of $316 billion. As will be explained, we have high confidence in this greater total. But even using only the officially reported estimates, California’s state and local governments are about $1.0 trillion in debt.

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