California faces $340 billion in debts, or more than $8,500 for each of its 38 million residents, the nonpartisan Legislative Analyst's Office said Wednesday in recommending that the state set priorities for paying down its key long-term liabilities. The state should first address the $73.7 billion shortfall in the teachers' retirement system, a debt that could cost the state, teachers and school districts a combined $5 billion a year to resolve over 30 years. Without changes, the system serving 868,000 members is projected to run out of money by 2046.