California Governments Take In $828 Billion—But Still Owe $1.37 Trillion, New CPC Study Finds
Dear John,
A new study released by California Policy Center reveals that California’s state and local governments collected a whopping $828 billion in revenue during fiscal year 2024 — consuming 20.6% of the state’s entire Gross Domestic Product (GDP) — yet still owe long-term debt totaling $1.37 trillion. Much of that debt consists of payments on government employee retirement benefits promised years ago, leaving many communities short on funds for basic services today.
The California Government Revenue and Debt Study: How Much State and Local Governments Collect and What They Owe shows that most of this debt is not tied to traditional infrastructure borrowing, such as bonds for schools or transportation. Instead, it reflects unfunded commitments to government employees, including pensions, retiree health care benefits, and accrued sick and vacation pay. These obligations now make up the largest portion of long-term public debt in California — 34.1% of state GDP — and most of them originated in budget-breaking labor agreements pushed by government unions.
“When retirement costs rise faster than tax revenue, the math eventually catches up,” said study author Marc Joffe, a visiting fellow with California Policy Center. “That’s when communities start losing services today to pay for bad decisions made years ago.”
The result? Taxpayers suffer the consequences through service reductions like public safety cuts and deferred road and infrastructure maintenance — or are asked to approve new or higher taxes to cover the shortfall.
The report notes that while some agencies maintain manageable debt levels, others are carrying liabilities far beyond what they generate annually. For example:
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Sacramento Metropolitan Fire Department – owes more than 2.5 times its annual revenue
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San Luis Obispo County – owes nearly twice its yearly revenue
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Los Angeles County – carries over $56 billion in long-term liabilities
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City of Hayward – has more retirees collecting benefits than active employees paying in
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City of San Gabriel – owes more than two times its annual revenue
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City of Bell Gardens – owes about double its entire revenue in long-term obligations
In these and other California entities, revenue growth is not keeping up with costs tied to agreements made in past labor negotiations with government unions. In many cases, these costs rise automatically each year, independent of economic conditions or current-year budgeting decisions.
“Union demands for richer retirement packages are pushing local governments over the edge,” Joffe said. “When officials commit to those benefits without paying for them upfront, taxpayers end up paying that bill for decades, leaving less money for the services people rely on right now.”
To uncover the study’s findings, Joffe and his team had to pore through hundreds of voluminous financial reports and government websites. Because problems can’t be managed if they can’t be measured, the study recommends more transparency and faster financial reporting by government entities. This way taxpayers and local leaders can clearly see which agencies are managing costs effectively and which are at risk of financial distress.
The study calls for modernized financial reporting, including standardized machine-readable statements instead of static PDF documents, stronger consequences for late audit filings, and centralizing local government financial data in one statewide system so information is accessible in real time.
The report also suggests that policymakers take a closer look at how tax dollars are divided among state, county, city, and special-district budgets, so that instead of asking taxpayers to shoulder more taxes or bond debt, existing money can be steered toward the services communities need now.
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