The Department of Finance anticipated issuing pension obligation bonds that would bring an estimated $525 million in revenue to the state over the 2007-08 fiscal year. However, prudent and truthful budgeting requires that that revenue be pushed off from this budget to the 2008-09 budget.

Because of pending court decisions, selling or budgeting for those bond proceeds would not be prudent.

The state proposed to issue pension obligation bonds, pursuant to the California Pension Restructuring Bond Act of 2004, in order to make future contributions to CalPERS. The payment of the debt service on the pension obligation bonds would be payable from the General Fund.

The Pension Obligation Bond Committee asked for a court determination that the bonds would not be in violation of the state's Constitutional debt limit, Since January, it has become clear that it is unlikely that there will be a final, unappealable decision on the validity of the bonds in time for the pension obligation bonds to offset the state's pension contributions in 2007-08.

Accordingly, the use of this funding option is being shifted from the 2007-08 fiscal year to the 2008-09 fiscal year.

The Committee will continue to pursue the court validation and the issuance of these bonds.