Were California’s state government a business, it would be a candidate for insolvency with a negative net worth of $127.2 billion, according to an annual financial report issued by State Auditor Elaine Howle and the Bureau of State Audits.

The report, which covers the fiscal year ending June 30, 2012, says that the state’s negative status — all of its assets minus all of its liabilities — increased that year, largely because it spent more than it received in revenue.

During the 2011-12 fiscal year, the state’s general fund spent $1.7 billion more than it received in revenues and wound up with an accumulated deficit of just under $23 billion from several years of red ink. Gov. Jerry Brown has referred to that and other budget gaps, mostly money owed to schools, as a “wall of debt” totaling more than $30 billion.

Last November, voters passed an increase in sales and income taxes that Brown says will balance the state’s operating budget and allow the debt wall to be gradually dismantled.

About half of the $127.2 billion in accumulated red ink came from the state’s issuing general obligation bonds and then giving the money to local governments and school districts for public works projects, the auditor pointed out. The assets built with the bonds remain on local balance sheets while the bonded debt accrues to the state.

The remainder, however, is all on the state’s ticket. “Expenses that exceeded revenues and increased long-term obligations resulted in an 81.4 percent decrease in the total net assets for governmental and business-type activities from the 20-10-11 fiscal year,” said the report.

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