SACRAMENTO (AP) – California faces $340 billion in debts, or more than $8,500 for each of its 38 million residents, the nonpartisan Legislative Analyst’s Office said Wednesday in recommending that the state set priorities for paying down its key long-term liabilities.

The state should first address the $73.7 billion shortfall in the teachers’ retirement system, a debt that could cost the state, teachers and school districts a combined $5 billion a year to resolve over 30 years. Without changes, the system serving 868,000 members is projected to run out of money by 2046.

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Paying down the $64.6 billion shortfall in health benefits for 277,000 retired state employees and their dependents should come next. That could cost the state $1.8 billion a year over 30 years, the analyst said, but getting started sooner would dramatically reduce costs over the long run.

The report comes a month before the state’s budget is due and feeds legislative debates over whether the state should spend or save its budget surplus and how to create a rainy day fund that would go before voters in November for their approval. It was released a week before Gov. Jerry Brown unveils his revised budget recommendations.

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“I think it underscores what the governor has said for quite some time, which is that we have significant liabilities that we need to address,” said H.D. Palmer, a spokesman for the state Department of Finance.

 

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