Fiscal Realities Facing California
California’s Net Financial Position
“net” unrestricted financial position is a $169 billion deficit ($4,375 per
person) according to the most recent Comprehensive
Annual Financial Report (CAFR). This figure should be positive for
healthy organizations. It is derived by tallying the state government’s assets
(monetary funds, investments, buildings, roadways, bridges, parks, etc.) and
subtracting its obligations. The last positive position California had was
during Governor Pete Wilson’s final term where the state had $1.5 billion in
unrestricted net assets. California is now ranked the worst state, below
Illinois, whose net position is a negative $143 billion,
or $11,174 per person.
Estimates of California Unfunded Pension Liabilities
For the 2015/16 fiscal year, CalPERS planned for a 7.5% rate of return, but only
managed to achieve a 0.6% rate of return. Seven percent of a $400
billion liability means a shortfall of $28 billion (some 20% of Governor
Brown’s general fund budget).
Current Unfunded Retiree Medical
California has the nation’s highest unfunded retiree medical liability at $74.1
to $80 billion.
California’s 57 cent/gallon gas taxes are the nation’s 4th
highest. When cap and
trade taxes are added, California has the nation’s second highest
taxes behind Pennsylvania.
California spends 3 times the national average
…. on maintenance
per mile of roadway, yet California’s roads rate among the nation’s worst in
pavement condition and congestion.
California’s Business & Economic
has the nation’s highest personal income taxes. California also has the highest
corporate tax in the Western United States. According to the Tax
Foundation’s 2016 Facts and Figures, California is ranked 48th
The Governor raised the minimum wage last year to $15 per hour. His own
estimates show that it will cost the budget $4 billion per
year in additional personnel costs.
For the 12th year in a row, California was named the worst state for business
in a survey of 500 CEOs by Chief Executive
Lackluster investment returns are forcing CalPERS to re-evaluate the
validity of their assumptions and admit investments alone may not be
enough to cover pension costs.
While many other states have pension problems, California is
at crisis level.