CA debt much larger than reported

May 29, 2012

By Katy Grimes

Reports of California’s debt usually just include the $17 billion budget deficit. But California also owes the federal government $14 billion, and public schools $10 billion.

While California sputters under  the massive debt, legislators continue to take up ridiculous bills and resolutions, and ignore bills which would begin necessary reforms.

Last week the Assembly voted to adopt Assembly Resolution 99 recognizing September 2012 as National Coupon Month. ACR 99 by Assemblyman Felipe Fuentes, D-Sylmar, “would acknowledge the value of coupons in achieving significant savings for California consumers.”

Legislative time has actually been spent on this baffling resolution. The Assembly Rules Committee, notorious for killing Republican bills by refusing to act on them, had a committee staff member prepare an analysis of ACR 99, and committee members voted 6-4 to pass the Resolution.

It is now in the hands of the Senate Rules Committee where it will undoubtedly go through a similar process.

While this trivial resolution sailed through the Assembly, many good-government Republican bills sit stuck in the Rules Committee, or are unceremoniously killed once they make it to the Assembly Appropriations Committee, led by Fuentes.

Good bill

Assemblyman Brian Nestande, R-Palm Desert, has re-introduced ACA 13, a constitutional amendment to give the State Controller the authority to approve the budget. “California has a natural collusion between the Governor and the Legislature,” said Nestande. “This would be like having an independent third party approve the budget, but it’s the State Controller.”

ACA 13 would prohibit the Legislature from sending to the Governor a Budget Bill in which General Fund appropriations exceeded General Fund revenues as determined by the Controller.

Nestande said he originally introduced ACA 13 in 2009, to prevent legislators from passing an unbalanced budget each year just so they can collect their full paychecks. “This measure would require the controller to review estimated revenues and expenditures, and certify that a budget passed by the Legislature is balanced before it can be signed by the governor,” Nestande said.

Nestande said that having the controller certify that the budget is balanced would force the Legislature to produce a legitimate budget, and not just call it balanced.

Interestingly, Texas has done this successfully since 1942.

Nestande said brought this system up again during session last year, but Controller John Chiang shot the idea down saying it would require more staff.

Ironically, last year the Legislature sent the governor its budget $1.85 billion out of balance. It was Chiang who pointed this out and the governor vetoed it.

Good bill stuck in committee

Nestande’s bill would also prohibit either house of the Legislature from adjourning for a recess after sending a budget to the Governor, until the Controller has provided the certification.

But ACA 13 sits in the Assembly Budget Committee with no hearing scheduled. It is highly unlikely that ACA 13 will ever see the light of day.

Nestande said that when voters passed Proposition 25 only two years ago, they thought they were voting on a measure which would require lawmakers to pass an on-time, honest budget by June 15 every year, as a condition of receiving their salaries.

But a recent Superior Court decision stated that Prop 25 actually only said that a majority of legislators could decide whether the budget they passed was balanced, in order to continue to receive their paychecks, even if that budget was bogus.

Included in Prop 25 was the “no budget, no pay” provision, added in by Democrats to convince voters to approve giving the majority party complete control over the budget process. But this sneaky provision had no teeth. There was no enforcement mechanism in Prop 25 to hold legislators accountable if they passed a phony budget, and is why the Superior Court ruled the way it did.

Nestande said that ACA 13 would provide the budget process voters thought they were approving.

California has a $17 billion deficit, owes the federal government $14 billion, and owes the California public school system $10 billion.

ACA 13 would also stop the Legislature from deferring education funding to California’s schools.

Proposition 98 was passed in 1988 requiring a minimum of 40 percent of California’s general fund spending to be spent on education. In 2001, California lawmakers started shorting education funding in order to “balance” the state budget. But the money has to be paid back, and has quickly added up to $10 billion.

ACA 13 will force the Legislature and Governor to account for state funding shortfalls honestly, so that school officials will have a better picture of the actual level of funding their schools will be receiving. Nestande said that if cuts are made to education, it should be done openly and not masked by accounting mechanisms.


Write a comment
  1. Beelzebub
    Beelzebub 29 May, 2012, 10:16

    Here is some great information from a blogger who says that the State of California is hiding ALOT ($577B) of cash assets that are OFF THE PUBLIC BALANCE SHEET in ‘non-governmental accounts'(so to speak) and that the State is MUCH richer than it claims to be. He says Gov Clown knows about these extra funds and is lying about it – to politically extort the voters to approve the tax measure on the November ballot.

    The government (both State and Federal) are superb manipulators and deceivers who excel in keeping the public in the dark. This is proof positive that they do not work for us – On the contrary they work against us.

    It would be good for CWD to investigate these claims and do a separate blog. It should be easy to verify.

    Reply this comment
  2. Wayne Lusvardi
    Wayne Lusvardi 29 May, 2012, 10:51

    One needs to be very careful in interpreting data from California Certified Annual Financial Report (CAFR)

    On page 48 of the 2011 CAFR it shows huge assets in the Fiduciary Fund but also huge liabilities – mainly in pension funds. It shows for example $409,623,766,000 (that’s $409.6 billion) in net assets in the Pension Trust – but the crucial question is is this sufficient to meet future pension obligations? The CAFR can not tell you that.

    It also shows $2,398,872,000 ($2.398 billion) in the Local Agency Investment Trust – that fund is where cities and counties park their budget reserves monies. It is not available to fix the state budget. It is available in case of emergency to cities and counties because it is their money.

    It does show that as of 2011 the State had $4,625,181,000 ($4.6 billion) parked in cash and pooled investments. But that would have been “on budget” – not “off budget.”

    The total number of $577 billion is meaningless unless liabilities are also included.

    If you know a good accountant ask them to take a look at it for you and interpret it.


    Thank you Ms. Grimes for yet another revealing report.

    Reply this comment
  3. Beelzebub
    Beelzebub 29 May, 2012, 11:01

    “It also shows $2,398,872,000 ($2.398 billion) in the Local Agency Investment Trust – that fund is where cities and counties park their budget reserves monies. It is not available to fix the state budget. It is available in case of emergency to cities and counties because it is their money”

    What the hell does it matter what it is intended for, Wayne??? You should know better than that.

    Did you hear that $3M has been raided from the 911 California license fee to be used to cover deficit problems??? That money was supposed to be intended to compensate victims of 911. Read this:

    You know darned well that this State has an AWFUL reputation for stealing money from one so-called ‘sacrosanct fund’ to fill financial holes in the general or other funds. Sactown gets called out on that crap all the time.

    Are you an accountant, Wayne??? Have you examined the CAFR with a fine toothed comb or had an honest accountant familiar with government gimmick accounting tactics do the same??

    Or do you just believe whatever you’re told???

    Reply this comment
  4. Beelzebub
    Beelzebub 29 May, 2012, 11:27

    My point is that it is VERY possible that Gov Clown is catastrophizing to scare people into voting for his tax measure – even knowing that the State has EXTRA FUNDS HELD OFF THE PUBLIC BALANCE SHEETS that could more than cover the deficit amount. The tricks and games these scoundrels use – ESPECIALLY WHEN IT COMES TO GOVERNMENT FINANCIAL ACCOUNTING – is overwhelming and one would have to be a fraud detection accountant to find it.

    Reply this comment
  5. rockinlinus
    rockinlinus 29 May, 2012, 13:24

    Maybe the legislature ids hoping our kids can keep using coupons when it comes to education funding.

    1. Pay the $10 billion owed 2. Raise our per pupil spending to be something better than 47th, like say, funding CA students at the national average 3. Then come talk to me

    Reply this comment
  6. Hondo
    Hondo 29 May, 2012, 18:02

    There is no ‘mystery’ money. It’s all gone. There is no more money left to steal. There is only a massive wall of debt. Of course the 17bil number is a lie. Just like the country’s 17 trillion dollar number is a lie. It doesn’t take in consideration the future obligations of SSI OR medicare. The problem is that Kalifornia can’t print money.

    Reply this comment
  7. CalWatchdog
    CalWatchdog Author 29 May, 2012, 20:16

    Because there is no more money, California residents and businesses are going to be taxed on carbon emissions. And, the businesses that can will pass along their costs. Expect everything to go up in cost – utilities, all food and groceries, services – everything we purchase. Forget inflation, which we are already experiencing, despite government denials. Living in California is about to skyrocket in costs.


    Reply this comment
  8. Beelzebub
    Beelzebub 29 May, 2012, 20:58

    That’s where you people and I differ.

    I think there is hidden money. And I think this is all a ruse to scare people into voting for the tax measures. The hidden money is being used to backstop the pension system. The rascals constantly play government accounting games to hide what they don’t want YOU, the public, to see.

    You think they are being transparent with our money??? Haven’t they lied to you enough yet to convince you otherwise??? Wake up.

    Reply this comment
  9. Beelzebub
    Beelzebub 29 May, 2012, 23:29

    See, you don’t give these corrupted governments enough credit. They will leave YOU high and dry, but they won’t screw themselves. I compare them to a henpecked husband who routinely turns his weekly earnings over to his brazen and domineering wife. After awhile he learns to figure out a way to withhold $25 or so for beer and cigarettes or whatever brings him pleasure. He cooks the books. Governments are MASTERS at cooking the books. There will ALWAYS be sufficient funds available to save themselves. Even if all hell breaks loose they will come up with the money to save the pensions and all those things their club members hold dear. The more I examine this situation the more I believe it. The keep a large stash on the side to service their needs while letting YOU twist in the wind. I believe my theory will become more evident to you as time marches on. Keep you eyes wide open.

    Reply this comment
  10. Craig Powell
    Craig Powell 30 May, 2012, 13:48

    Happy National Coupon Month! Great story.

    Reply this comment
  11. Debra
    Debra 31 May, 2012, 20:13

    I agree with Beetzebub. The CAFR’s have been around for more than 65 years and it is very suspicious that they have never been mentioned on mainstream media and our elected officials always point us toward the budget, or their spending plan. Of course, the state has a “savings account” where all the wealth of the government is tracked and that is in the CAFR reports.

    You can read a great explaination here:

    and here is another good one from Clint Richardson:

    THE GREAT PENSION FUND HOAX – Corporation Nation 2
    Watch the video:

    We might as well face it, the new world order is in charge and those we elect are just their puppets. The international banksters really run the finances of the world and I’m sure they have been dipping into the CAFRs over the years. The rest of the time they steal from the taxpayers by inflation, deflation, interest on the money they create, and booms and busts they also create.

    If the public had any idea how evil these bankers were, there would be a revolution before morning!

    Reply this comment
  12. From Clint Richardson
    From Clint Richardson 31 May, 2012, 21:35

    I contacted Clint Richardson who is an expert on CAFRs and is the “blogger” referred to by Beelzebub. Here is what he said:

    The main thing to understand is that these fund balances were what was in those funds on that particular day of the report.

    The “liabilities” are in general future liabilities that will be paid at some time in the future. They have nothing to due with and do not effect the balances as reported on this day.

    They do not tell you that future taxes and future assets will pay for those future liabilities, nor do they report these future assets on the CAFR. You don’t report future taxpayer money for 2012, so why report future liabilities for 2012? Answer: to creatively hide the wealth.

    The debt and any current and future liabilities can be paid off right now. End of story. No debate needed. It’s right there in black and white.

    You can post that for me if you want!


    Reply this comment
  13. glidercoach
    glidercoach 4 September, 2012, 10:13

    The Daily Show with Jon Stewart just reported that California is in the black with the federal government $.78 million… What’s the truth? At 2:36 into the clip.—the-road-to-jeb-bush-2016—the-best-f–king-news-team-ever-audits-america

    Reply this comment

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