California is about to get a welcome and unexpected windfall – enough new tax revenue to have $19 billion in reserve even after paying for the anticipated growth in all current programs and increases in the cost of living. This estimate from the Legislative Analyst’s office raises the question: what to do with this money? How can we put it to its greatest use?

Much of this revenue boost, about $11 billion, is required to go into a rainy day reserve account, a prudent policy given California’s history of boom and bust economic cycles.

As for the remaining $7.5 billion, we could make a real difference for future generations if we put a chunk of the proceeds into paying down an alarming burden looming on the horizon: our growing public employee pension debt.

This would be like using part of a year-end salary bonus to pay down your credit card debt before the monthly payments on the account get out of control.

Taking this step would be wise for two reasons.

First, it would simply help us catch up with promises already made to retirees and current employees. CalPERS today has on hand less than 70 percent of the money it needs to pay these benefits – and that assumes the system’s investments continue to grow an average of 7 percent per year.  CalPERS estimates that the state’s annual payment to the pension fund will rise from about $6 billion this year to $9 billion by 2023. An extra payment now would reduce that growth later.

Second, any money used to pay down pension debt serves as an extra budget reserve, because that is money that won’t be committed to new or expanded programs that might not be sustainable in an economic downturn.

If the economy does slow next year, we will be happy that we have not incurred additional ongoing obligations. And if the economy continues to grow and produce extra tax revenue, we can always make another payment to the pension fund or use the new money for another purpose.

Earlier this year, Gov. Jerry Brown and the Legislature decided to borrow $6 billion from the state’s short-term checking account to make an extra payment to CalPERS to boost the system’s assets.  At the time, the governor promised that this pre-payment would reduce the state’s unfunded obligation to the pension system by an estimated $11 billion.

I was not convinced that it made sense for the state to borrow money in an attempt to reduce the size of its unfunded pension debt. However, it would clearly be smart to use some of these unexpected surpluses to pay down those liabilities.

Doing so would be good for state employees, good for the taxpayers and good for the state’s bottom line.