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Governor Brown's State of the State

January 22, 2016

Yesterday I listened to Governor Jerry Brown’s State of the State with an ear out for the true financial state of California. I would like to highlight three terms the Governor used.

A “temporary surplus”

First I must explain what elected officials and politicians mean when they say “surplus.” This year, the state is projected to receive more cash than it expects to spend. Governor Brown used the term “temporary” because he does not believe the state can expect to run a "surplus" over a number of years.

A “rainy day fund”

The Governor mentioned he planned to put $2 billion of the surplus into the state’s rainy day fund for unexpected costs when California’s economy has a downturn. This can be looked at like your savings account. You can easily increase your savings account balance. You can just not paying your bills and putting some of your expenses on your credit card. The Governor will increase the state's rainy day fund by not paying the states bills and increasing the state's unfunded retirees' healthcare "credit card."

Obligations

I praise Governor Brown for mentioning the state’s obligations that must be paid back. Unfortunately the use of the terms surplus and rainy day fund dilute the importance and magnitude of these obligations.

a. Yes, the state has $94 billion in assets available to pay its bills, but California has a huge debt cloud hovering over the state. The state’s outstanding bills are $328 billion, including its promised, but unfunded pension and retirees’ health care benefits.

b. The Governor’s hyperbole is akin to your fiancé bragging about having $94,000 in the bank, but after you get married you are horrified to discover $328,000 in credit card debt.

The Governor should be upfront about the financial state of the state, instead of patting himself on the back for increasing the state's savings account while not paying the state's bills and increase the state's retirement debt. Otherwise taxpayers will be horrified when they have to pay increased taxes to cover bills Governor Brown should be paying now and previous elected officials should have paid.

 
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