BOND DEBT SERVICE AND STATE CONSTITUTION

In California State government, general obligation debt service is constitutionally designated a higher priority than any other general fund liability after education. However, it has not been tested in the Federal Courts. In fact, in every RAN, RAW and GO Bond Official statement, the state lays out the priorities using the ear marked criteria of debt service second only to education. That being said, in the 19990’s the federal courts in ordering payments in the absence of a budget have held that federal law is supreme and takes precedence over State law. Accordingly, even though the Attorney General, State Controller and State Treasurer all treat Cal. Const. art. XVI, s1 as a designation higher than all else besides education, it is possible the Feds could come in and find differently as to whether the federally required payments leap to the head of the line pushing education and debt service down a couple of notches. This has never been tested so it is unknown case law.

However, the state constitution and statues are quite clear on this point: education funding first, then general obligations (bonds, rans, raws, etc.) then all other GF liabilities.