To conclude that the state is bankrupt is to suggest that the state is unable to pay its debtors even after selling all its assets and giving up all its income. That is simply not true. The reality is that the state is choosing to spend more than it takes in, which is a policy choice that needs to change, but those who believe bankruptcy would make Sacramento face reality would not like the result.
In the past I have been loose with the word ‘bankrupt,’ but even if some court could have bankruptcy jurisdiction the state would still not be insolvent to file for relief. To be insolvent is to have debts greater than assets. Our debts are roughly $131 billion in General Obligation Bonds (issued and eligible) and leasing arrangements, plus around $500 billion in present and future pension and health liabilities, for a total of around $630 billion. On the asset side, the PERS account (underfunded but still substantial), plus all state property – the buildings, state parks, beaches, oil leases etc and other investments – is greater than $635 billion. As far as debt service, according to the Treasurer’s 2009 report, our annual total debt service is around $7.3 billion, a debt service ratio of about 6.7%. According to the State Treasurer, this ratio will peak at over 10% by 2015 absent new bonds. This is not a healthy level of debt, but since our annual income even in these tough times is $80-some billion, it is not bankruptcy level.
http://www.treasurer.ca.gov/publications/2009dar.pdf
A better diagnosis is that the state is addicted to spending and needs to admit that it has a problem. The state must close or slash programs to live within its income. Clearly there would be lots of disruption and angst. Nevertheless it is the responsible choice.
Given the history of Federal judges telling the state to spend more money it is highly ironic that some folks are suggesting bankruptcy as a solution because then a Federal judge would decide how the state would spend its income.
March 1st, 2010 at 12:00 am
BK is a reasonable option….the legislator loons in Sacramento take union and special interest money to fund their elections. They vote for wild spending to pay back the special interests and unions time and time again.
Who loses….you do….we need a objective party to take a whack at fixing California….The governor fibs regularily to you, the legislature laughs at you, the unions defy you, the lobbyists loathe you, the political class cries wolf and you cringe in fear donating your kid’s milk money in hopes politicans can bring better times…..
If you think Brown, Whitman or Poizner have the guts or conviction to preserve our economic and political liberties or cut spending…your ready for assisted living!!!.
Consider BK….and stop making boogie men of judges….at some point someone has to come through for the electorate!!!
This is America….love it and never give up on it.