Is Gray Davis Looting California Retirement Funds?

California State Assembly Republican Caucus ^ | August 18, 2002 | the calpowercrisis gang

[snopercod]

Bonds and the Budget
AN OVERVIEW OF THE ADMINISTRATION'S BORROWING PROPOSALS

The 2002-03 Governor's Budget reflects 11 separate borrowing proposals, including one that is already on the March 2002 Ballot (Proposition 40, Clean Water Bonds). As shown in Table 1, eight of these borrowing proposals are intended to provide resources for the budget in 2002-03, while the other four address ongoing infrastructure or energy crisis issues. The total amount of the borrowing proposals is approximately $58 billion, although not all of this amount would be borrowed during 2002-03.

For each of the borrowing proposals, the table shows three figures. First, the table identifies the nominal amount of the borrowing that is proposed by the administration. Second, the annual cost of paying for the borrowing is identified. These amounts reflect the yearly cost associated with paying off the principal and interest on a bond. Because bonds are typically sold over time, this annual cost figure represents the approximate payment, including interest, once all of the bonds are sold. In the case of the short-term loans, the figure represents the expected cost of the repayment including interest. Most of these loans are to be repaid in 2003-04, although the repayment date for some was not specified. Finally, the table identifies the total cost of the borrowing over time, including interest expenses. Thus, in the case of the K-12/Higher Education Bonds, the Administration proposes a total authorization of $30 billion over three election cycles. These bonds will require an annual payment of about $2.4 billion once all of the bonds have been sold, and the state will pay out a total of $53 billion over the life of the bonds.

In the aggregate, the $58 Billion worth of borrowing reflected in the budget will result in total costs of $108 billion over the 30-year life of the borrowings. If all of the transactions are in fact concluded, the state could face much higher costs for debt service, peaking at about $5 billion (all funds) annually in 2006-07. In every year after the budget year, these additional costs are significant and make the state's long-term structural budget deficit worse. The Legislative Analyst's most recent estimates indicate that the General Fund's structural budget deficit is about $4 billion for the 2003-04 fiscal year. These borrowings could add almost $2 billion in General Fund costs to that 2003-04 deficit.

	Amount	Annual Cost1	Total Cost
Bonds:
K-12/Higher Ed GO Bonds	$30 Billion	$2.4 Billion	$53 Billion
Proposition 40 – Clean Water GO Bonds	$2.6 Billion	$200 Million	$4.6 Billion
Housing GO Bonds	$2 Billion	$160 Million	$3.2 Billion
Economic Stimulus lease-revenue bonds	$678 Million	$68 Million	$1.2 Billion
UC & Other Projects Lease-Revenue Bonds	$371 Million	$37 Million	$571 Million
Tobacco Settlement revenue bonds	$2.4 Billion	$192 Million	$4.2 Billion
Electrical Energy Revenue Bonds	$14 Billion	$1.1 Billion	$30 Billion
Revenue Anticipation Notes	$2.5 Billion	$100 Million	$100 Million
Other Borrowing:
PERS Loan	$1.029 Billion	$231 Million	$7 Billion
STRS Loan	$950	$114 Million	$3.4 Billion
TCRP Loan	$672 Million	$40 Million	$712 Million
Other Special Fund loans	$579 Million	$35 Million	$614 Million
	$58 Billion	NMF	$108 Billion

¹Represents initial annual cost following completion of bond sales.

[CurlyDave]

Sorry but which unions are the backbone of the Califroni (or national) Democratic Party? Public employee unions and teachers. Lie down with dogs and you get fleas...

My wife is a Professor in the State University system.

1. The bottom line is that no matter how much one dislikes the union one must pay union dues.

2. She has to participate in the PERS system, which is actually a pretty good system.

3. She does not willingly "lie down with dogs." In fact she does a lot to support the conservative cause. Some of her classes cover public policy as it relates to welfare & children. She uses materials from the CATO Institute to show students the truth of these issues.

[Kozak]

This was not meant as a personal insult to your wife. Nevertheless, the fact that the unions which are the greatest source of financial, and political capital for the Democrats getting hosed to bail out the incompetance of their commisars is choice. Perhaps the rank and file will finally get a clue as to just how destructive a force they have become in driving the state on the road to serfdom.

[A CA Guy]

So where is the commercial on this from the CA Republican Party 24-7 until election day?

Use it or expect to lose it you spineless wonders!

[snopercod]

Anybody have a financial calculator to play with those PERS numbers? We know the present value and future value, so it would be simple to assume some things and come up with some hypothetical numbers.

[Robert357]

Yes, I do have such a calculator, but their are too many variables......loan period (in years), effective interest rate, amount of diferred interest or prinicpal payments, etc.

To really know what is going on, one would have to look at the form of the borrowing, which should be available to PERS employees (one would think?)

[snopercod]

A REAL engineer could figure it out! <R,D,&G>

I couldn't resist. How about assuming 30 years, compounded monthly. Or conversly, assume 4% interest rate compounded monthly, and solve for the number of periods.

Try annually if monthly doesn't work.

[NormsRevenge]

This system is so great for doing cooperative work!

I just want Davis out of there!

BUMP