The percentage of California’s budget spent paying bondholders will climb to its highest since at least 1977 even as the state borrows less, Treasurer Bill Lockyer said.
Debt service will increase to 7.8 percent of the general fund in the fiscal year that began July 1 from 7.1 percent last year, Lockyer said in his annual debt-affordability report released today. The portion was 2.36 percent in 1991 and 1.47 percent in 1977. California is the largest issuer of municipal debt in the U.S.
Lockyer and Governor Jerry Brown imposed a moratorium on selling bonds through the first eight months of this calendar year as they sought to erase a $26 billion deficit. The reason for the increase in the debt-service percentage is because, even though debt issues flattened, tax revenue declined by almost 7 percent, Lockyer said.
“The next 10 years will require sustained fiscal discipline and hard work,” Lockyer said in a statement. “With limited general-fund resources, we have to both heavily invest in infrastructure and adequately fund critical public services. Reducing the general fund’s infrastructure-financing burden should be in the mix of options for striking the right balance.”
The state will pay $6.9 billion in debt service from $88.5 billion in general fund revenue this year, compared with $6.8 billion of debt service from $94.8 billion in revenue last year, according to the report.
Lockyer sold $2.4 billion of general-obligation bonds Sept. 20 and plans to sell about $15 billion in total through June 2013. He sold $27 billion of long- and short-term bonds in calendar year 2010.