California pays off $14 billion in costly debt

California pays off $14 billion in costly debt

California on Wednesday paid the final installment of its $14.2 billion costly loan that it had taken more than a decade ago to plug its budget deficit.

By clearing the loan, the Golden State successfully closed an ugly and painful chapter in its financial history. But, it eventually cost state taxpayers nearly $5 billion in interest and fees.

California closed an ugly chapter in its financial history on Wednesday by making its final payment on $14.2 billion in costly borrowing that plugged a budget deficit 11 years ago but eventually cost taxpayers about $5 billion in interest and fees.

In a joint statement, California State Treasurer John Chiang and Director of Finance Michael Cohen announced that the final payment of around $929 million had been made toward the Economic Recovery Bonds.

The huge debt was approved by state voters in 2004, after then-Governor Arnold Schwarzenegger led a bipartisan campaign to promote it.

Speaking of political leaders' decision to promote the borrowing, Chiang said, "They failed to make the difficult decisions possible. ... It was just the political will at that juncture. Wall Street should not be the budget reserve of the state of California. It's costly, it makes no sense."

Schwarzenegger had pitched the costly borrowing measure as a way to avoid cuts in public services and increase in taxes. At the time, the state had the lowest credit rating among all fifty states in the country.

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