California financial woes continue despite the claim of a new budget
For the past several years California residents have been tortured with late state-budget resolutions filled with all kinds of promises, however, each and every time the financial problems were not solved and spending continued to spiral out of control. This time legislators say it’s different. This time the budget problems will be solved.
A new California Field Poll out this week sheds more darkness on an already hostile economic environment in the Golden State. Nearly all voters in California, 93 percent, describe the state’s economy as being very bad and only 26 percent of those voters think the financial outlook will improve in the coming year.
More than half, 52 percent, say their bank accounts have declined in the past year and only 30 percent of these Californians think economic situation will improve in the immediate future.
Another tidbit for voters to chew on is California is also home to the third largest unemployment rate, nearly 13 percent, is home of the city with the highest unemployment rate in the country, El Centro, more than 27 percent and despite the talks of a new budget, the $20 billion budget deficit has not been erased. The smoke and mirrors from Sacramento politicians are fooling no one.
California dreaming has Governor Arnold Schwarzenegger convincing lawmakers in Sacramento that the federal government will pony up $5 billion dollars (of course this money will come with an IOU from China), as well as new rosy economic outlook (Sacramento thinks they will pick-up more in tax revenue, $1.4 billion to be exact). The con game being played in Sacramento should make Californian’s angry, but somehow each election cycle voters reelect the same old suspects and this year doesn’t look anymore promising.
According to Stephen Franks of CA Political News- the Sacramento budget shenanigans are just beginning. The following are some examples of faulty bookkeeping.
– The federal government will give California $5 billion (they have to borrow the money from Washington DC and they have only promised $1.3 billion not $5 billion).
– Sacramento agreed to a $1.4 billion tax increase on businesses (this will definitely not create more jobs) the increase comes from holding back the 2009 approved-tax credits.
– The state says they will sell $1.4 billion worth of government buildings. (They tried this last year without success).
– The state is banking on increased tax revenue of $1.4 billion (Again very unlikely).
– Currently the state has $8 billion of past due bills (unfortunately the bank account only has $1 billion, according to State Controller John Chiang).
– Schwarzenegger asked for $12 billion to be cut from the budget (he only received $7.5 billion).
– California schools are borrowing money, and without a balanced budget, $7.6 billion in infrastructure projects will halt.
The governor’s spokesperson, Aaron McLear acknowledged the challenges and said “multiple years of multibillion-dollar deficits are going to require us to make very difficult decisions. That remains the case.”
It’s been reported that the six years of deficits totaling $140 billion can only lead to multiple years of higher deficits without massive spending cuts. And it looks like next year’s budget will start with at least a $9.5 billion deficit.
Reuters reported that IOUs are right around the corner for the state of California vendors if serious steps were not enacted by the middle of October.
“Last year, Chiang issued IOUs during a lengthy budget impasse to preserve cash for the state’s priority payments, which included payments to investors holding state debt. It was only the second time since the Great Depression that California resorted to the controversial financial tactic,” Reuters explained.
Nevertheless, early reports from lawmakers are not encouraging, and insiders in Sacramento say the entire budget process could fall apart during the Wednesday debate session in the state’s capital.
Let’s hope the “as California goes” euphemism doesn’t play out across the nation. The only certainty about California’s budget woes is the state has been unable to acquire money printing presses – that’s good news indeed.