California's borrowing from special fund accounts has reached nearly $4.3 billion, more than five times the amount from June 2008, according to a semi-annual report issued today by the Department of Finance.
Since the depths of the recession, state leaders have relied heavily on borrowing from special fund accounts that generate money from user fees and regulated industries, among the many patchwork solutions to avoid deeper program cuts in the general fund budget.
Special fund accounts have drawn greater scrutiny in the past two weeks after the Resources Agency revealed that the Department of Parks and Recreation had hidden nearly $54 million in two such funds for more than a decade. The Department of Finance is auditing 560 special fund accounts to determine whether other money has been inappropriately shielded from view and expects to issue a report later this week.
The $4.3 billion in special borrowing includes $713 million in new loans contained in the budget Gov. Jerry Brown signed in June. Among them: $313 million in disability insurance funds to pay interest to the federal government as the state faces a roughly $10 billion deficit in its unemployment fund, as well as $100 million from a new account containing money from the multistate settlement with mortgage lenders.
Just four years ago, the state had borrowed $749 million from its special fund accounts.
"That reflects the fact there were additional solutions needed as the recession caused revenues to drop dramatically," Finance spokesman H.D. Palmer said today.
Some of the loans will be retired by a certain date, while the state can delay repayment to other funds until the programs for which they were intended need the money. Critics have argued for years that special funds with excess dollars should return the money to fee payers and regulated companies instead of using them to balance the general fund budget.
The Finance letter also showed that Brown's tax initiative will not be enough to wipe out California's $34 billion "wall of debt."
The Democratic governor introduced the wall of debt concept last year to encompass the various forms of borrowing that California incurred largely since the recession, ranging from special fund loans to accounting maneuvers. He called on lawmakers and voters last year to eliminate the debt by approving tax hikes.
The Finance report says the wall of debt stands at $34.2 billion today and would drop down to $8.9 billion at the end of 2015-16 - if Brown's tax hikes pass in November. Though a fraction of today's total, the 2015-16 projection falls short of Brown's hope to eliminate budget-based borrowing in four years.
The wall of debt includes $10.4 billion in delayed payments to school districts, $6.3 billion in paying down deficit bonds from 2004 and the $4.3 billion in loans from special funds. It also includes the cost of accounting maneuvers like delaying state worker paychecks one day in 2009, the reversal of which would cost $759 million.