FOR IMMEDIATE RELEASE Contact: Amanda Smith (714) 662-6050
Tuesday, January 10, 2017 Amanda.Smith@sen.ca.gov
Senator Moorlach Responds to Governor’s 2017-18 Budget Proposal
California Families Deserve Better Fiscal Leadership
SACRAMENTO – Senator John Moorlach (R-Costa Mesa) released the following statement today regarding Governor Jerry Brown’s 2017-18 state budget proposal:
“I appreciate that the Governor continues to watch our state’s spending. I concur that even a mild recession will jeopardize the ability to balance the budget. However, California’s unfunded debts and deferred maintenance costs are growing. And the majority party is not addressing them. Where are the budget increases to address the state’s roads? Where is the leadership to address retiree pension and health care costs? Where is the fiscal discipline?
“We are on the cusp of a financial crisis and Sacramento cannot rely on tax and fee increases to address them, like the $10 vehicle registration fee increase of last year (which is a ‘pension tax’). California families deserve better.
“California already has the nation’s highest income, sales and second highest gas taxes. Our state spends three times the national average on maintenance per mile of roadway, yet our roads rank among the nation’s worst. When will the Governor actually make fixing roads a budget priority?
“The Governor must also be careful not to jeopardize federal funding for our counties and cities. California must plan for the future, work constructively with our federal partners in Washington, and prioritize strong leadership to address California’s more than $260 billion in unfunded liabilities and $80 billion in deferred road repairs.”
Senator Moorlach’s Notes on Analyzing the Governor’s Coming 2017-18 Budget Proposal
1. California’s Net Financial Position
- California’s “net” unrestricted financial position is a $169 billion deficit ($4,375 per person) according to the most recent Comprehensive Annual Financial Report (CAFR). This figure should be positive for healthy organizations. It is derived by tallying the state government’s assets (monetary funds, investments, buildings, roadways, bridges, parks, etc.) and subtracting its obligations. The last positive position California had was during Governor Pete Wilson’s final term where the state had $1.5 billion in unrestricted net assets.
- California is now ranked the worst state, below Illinois, whose net position is a negative $143 billion, or $11,174 per person. Illinois’ finances are so bad, they’re telling lottery winners that they may have to delay their payments. Deferred maintenance for the state’s roads and highways is some $59 billion.
2. Estimates of California Unfunded Pension Liabilities
- CalPERS: $114.5 billion
- CalSTRS: $76.2 billion
- UC Pensions (UCR) : $12.1 billion
*NOTE: For the 2015/16 fiscal year, CalPERS planned for a 7.5% rate of return, but only managed to achieve a 0.6% rate of return. Seven percent of a $400 billion liability means a shortfall of $28 billion (some 20% of Governor Brown’s general fund budget.
3. Current Unfunded Retiree Medical Liability
- California has the nation’s highest unfunded retiree medical liability at $74.1 to $80 billion.
4. California’s Transportation Infrastructure
- California’s 57 cent/gallon gas taxes are the nation’s 4th highest. When cap and trade taxes are added, California has the nation’s second highest taxes behind Pennsylvania.
- California spends 3 times the national average on maintenance per mile of roadway, yet California’s roads rate among the nation’s worst in pavement condition and congestion.
- In the 6 years following the Great Recession, California’s gas tax revenue grew by $1.75 billion, while road spending remained stagnant (Board of Equalization Data).
5. California’s Business & Economic Competitiveness
- California has the nation’s highest personal income taxes. California also has the highest corporate tax in the Western United States. According to the Tax Foundation’s 2016 Facts and Figures, California is ranked 48th overall.
- The Governor raised the minimum wage last year to $15 per hour. His own estimates show that it will cost the budget $4 billion per year in additional personnel costs.
- For the 12th year in a row, California was named the worst state for business in a survey of 500 CEOs by Chief Executive Magazine.
6. Pension Crisis is the Elephant in the Room
- Late last year, CalPERS cut pension benefits for the first time (City of Loyalton).
- Expanding pension costs are being filled by hidden taxes and fees.
- Lackluster investment returns are forcing CalPERS to re-evaluate the validity of their assumptions and admit investments alone may not be enough to cover pension costs.
- While many of the other states have pension problems, California is at crisis level.
About Senator John Moorlach (R-Costa Mesa):
State Senator John Moorlach represents the 37th district of California, is a trained Certified Financial Planner and is the only trained CPA in the California State Senate. He gained national attention 20 years ago when he was appointed Orange County Treasurer-Tax Collector and helped the County recover from its bankruptcy filing – at the time the largest municipal bankruptcy in U.S. History. Follow him on Facebook and Twitter @SenatorMoorlach.