Four years ago, state Treasurer Bill Lockyer projected that servicing California's bonded indebtedness would approach 10 percent of the state's general fund revenues by 2014 and suggested that the state needed a master plan to prioritize its borrowing.
Since then, Lockyer says in his latest "debt affordability report," improving state finances, lower interest rates and tight management of new borrowing have reduced debt service to under 8 percent.
"In the market," Lockyer said, "the state's general obligation bonds have become more competitive with higher-rated bonds, and investors have reduced the interest-rate premium they demand to buy our bonds.
"At the same time, the state refinanced billions of dollars of bonds at lower interest rates and reduced taxpayers' debt service payments by hundreds of millions of dollars. In part because of these steps, debt service now consumes less of the state budget. The 2009 DAR projected debt service payments would equal 9.8 percent of general fund revenues in 2013-14. This report estimates that ratio will be 7.7 percent."
As of June 30, the state had $86.28 billion in general obligation and lease-revenue bonds supported by the general fund outstanding, plus another $36.54 billion authorized by the Legislature and/or voters but not yet issued.
In relative terms, California is a high-debt state, the report reveals. Among the 10 most populous states, California ranks second only to New York in debt compared to personal income (5.8 percent), debt per capita ($2,565) and debt compared to total economic output (4.98 percent). Texas is the lowest-debt state among the 10.
The state plans to issue $12.5 billion in new general obligation and lease-revenue bonds during the 2013-14 and 2014-15 fiscal years, including some of the $9.95 billion in bonds authorized for a bullet train system. Gov. Jerry Brown and legislators are also trying to write a new water bond issue for the 2014 ballot to replace an $11.1 billion measure now scheduled for a vote. The new water bond, if successful, is likely to be much smaller.
PHOTO: State Treasurer Bill Lockyer speaks at the Sacramento Press Club luncheon on June 21, 2012. The Sacramento Bee/Randy Pench.