Bond debt will consume a substantially larger share of the state’s limited revenues over the next few years, according to two longtime budget watchers who testified before the Assembly Budget Committee this afternoon. State Treasurer Bill Lockyer reported that California could spend more than $10 billion on debt service in 2012-13 – about 11 percent of projected General Fund revenues, crowding out funding available for programs and services. “Debt service is cannibalizing your program support,” Lockyer said.
Legislative Analyst Mac Taylor agreed that debt service is likely to rise significantly in coming years, and recommended that the Legislature create a Joint Committee on Infrastructure to help ensure better planning. Although Taylor argued there is no “right” level of debt service, he noted that more debt means a bigger “hit on the budget” – the state pays $70 million in debt service for every $1 billion in bonds sold. Assembly Budget Committee Chair Noreen Evans, concerned about that hit on the budget, called debt service “the Pac Man that is eating up” the state budget and pledged to keep this issue front and center during 2010.
— Scott Graves