SACRAMENTO — In 1991, the Legislature delayed a $168 million payment it owed to the state's largest pension fund by one day, into the next budget year — a simple shuffle to help balance the annual spending plan.
It never repaid the money, leaving the state one payment behind on what it owed to the California Public Employees' Retirement System for more than two decades and through three gubernatorial administrations, including that of former Gov. Arnold Schwarzenegger.
As the state kicked that debt forward through the years, the amount grew to more than $500 million. Each time the state uses such a cash shuffle to cover its deficit, it digs a deeper hole of debt for future budgets.
Gov. Jerry Brown says it's time to pay up. He wants to start reducing the state's debt and tens of billions more in accounting gimmicks, temporary loans and delayed payments. In all, the so-called "budgetary borrowing" equates to a $34.7 billion drag on the state.
That's only part of what Brown referred to earlier this week as California's "wall of debt" when he released his revised budget plan for the fiscal year that begins July 1.
California also must repay $81.1 billion in bonds already sold for public works projects such as road construction and levee improvements. An additional $48.2 billion in bonds have been authorized but not yet sold, including $10 billion approved by voters to finance high-speed rail and other transportation projects.
Not even included in the governor's debt total is an estimated $181 billion worth of unfunded pension obligations and retiree health costs owed for decades into the future.
"I don't want to continue the games and the gimmicks of the past," Brown said Monday as he made his case for eliminating $29 billion of that overhanging debt by 2015.
Bond debt in California has grown from $34 billion as of July 1, 2003, to roughly $90 billion on May 1, 2011, most of it to be repaid from the state's general fund. Voters next year are expected to consider authorizing another $11 billion in bonds for improvements to the state's water system.
The budget for the 2011-12 fiscal year, which begins July 1, includes an estimated $7 billion in debt service paid from the general fund for bonds to build roads and other capital projects, as well as another $1.2 billion for bonds that Schwarzenegger pushed to close the budget deficit during his first full year in office. That's more than 9 percent of the proposed $88.8 billion general fund, the state's main account for basic state services.
The total general fund spending for all those bonds is projected to rise to about $9.6 billion by 2012-13.
The Brown administration expects the state will take in $6.6 billion more than expected in tax revenue through June of 2012 and wants to extend a series of expiring tax increases. The extra income would help close the state's remaining budget deficit of roughly $10 billion and begin to pay down the debt.
Republicans say the additional tax revenue is reason enough not to extend the temporary increases in the sales, vehicle and personal income taxes. But Brown's administration is using the state's debt burden to make its point that they should be.