Columnist Paul Krugman denies that “liberal big spending and overpaid public employees were bringing on collapse” in California, and he parrots governor Jerry Brown’s claim that the Golden State is on the comeback trail. Before joining the celebration, taxpayers might examine a new report from the Bureau of State Audits that pegs California’s net worth at negative $127.2 billion. As a news story on the report helpfully noted, the state has a negative net worth “largely because it spent more than it received in revenue.”

According to auditor’s report, in the fiscal year ending last June 30 the state’s general fund had “revenues and other financing sources that were approximately $3.1 billion less than expenditures and other financing uses.” Expenses for California’s governmental activities decreased, but “still exceeded revenues received resulting in a $8.0 billion decrease in governmental activities’ net assets.” California’s total net assets for government and business-type activities decreased by 81.4 percent. This was because of “expense that exceeded revenues and increased long-term obligations.” The state’s long-term obligations come to $167.9 billion, including $79.9 in general obligation bonds. Unfortunately “the budgetary basis statements used to report on the State’s budget do not reflect all liabilities.”

Those would be unfunded liabilities for state employees pensions and retiree health care costs. The Governmental Accounting Standards Board (GASB), whose mission is to “establish and improve standards of state and local governmental accounting and financial reporting,” wants states to include unfunded pension liabilities on their balance sheets. Had California’s auditor done so, according to news reports, that would add “several hundred billion dollars” to the state’s negative net worth.

So the auditor’s report actually understates the problem of California’s negative net worth. On the other hand, the report clarifies the reason for it: the state spends more than it takes in. Even so, California politicians plan to spend $68 billion on a bullet train, even though, as a GAO report notes, the federal government is unlikely to fill a funding gap of $38.7 billion.