California's financial mess continues

What’s it like to live in California these days? Remember the cliché of inmates running the asylum? It’s true here when it comes to our finances. According to a recent Wall Street Journal piece, merely paying the state's delinquent bills will require tens of billions in additional revenues if lawmakers don't undertake fiscal reforms.

Lawmakers have been borrowing and deferring debts for the past decade merely to close their annual deficits, and those bills will soon come due. The legislature has raided $4.3 billion from special funds and deferred $10 billion in constitutionally required payments to schools.

But, wait, there’s more (in the words of late-night salesmen). The state has also borrowed $10 billion from Uncle Sam to pay for jobless benefits and $313 million this year from the state disability insurance trust fund for debt service on those federal loans. Democrats have proposed replenishing the state's barren unemployment insurance trust fund by raising payroll taxes on employers. Expect that to happen now.

And the beat goes on . . . Then there's the more than $200 billion in unfunded liabilities the state has accrued for worker retirement benefits, which this year cost taxpayers $6.5 billion. The California State Teachers' Retirement System (I’m part of this) says it needs an additional $3.5 billion and $10 billion annually for the next 30 years to amortize its debt.

According to the article I read, the state has $73 billion in outstanding bonds for capital projects and $33 billion in voter-authorized bonds that the state hasn't sold in part because it can't afford higher debt payments. Unissued bonds include $9.5 billion for a bullet train, which will require $50 billion to $90 billion more to complete. Sacramento will also need more money to support an $11 billion bond to retrofit the state's water system, which is planned for the 2014 ballot.

Why is all of this important to residents of the state? With no GOP restraint, liberals can now raise taxes to pay for all this. They'll probably start by repealing Proposition 13's tax cap for commercial property. Democrats in the Assembly held hearings on the idea this spring. Then they'll try to make it easier for cities to raise taxes.

The greens want an oil severance tax. Other Democrats want to extend the sales tax to services, supposedly in return for a lower rate, but don't expect any "reform" to be revenue neutral. Look for huge union pay raises and higher pension benefits.

The Sacramento liberals believe they can tax and regulate the private economy endlessly without consequence. We shall see. I’m betting that there will come a day of reckoning. Let’s hope voters out here wake up (but I doubt it).