California’s tax revenue drops 33.5 percent exposing Sacramento’s delusion
Revenue from Consumer sales fell a whopping 33.5 percent or $475 million, further demonstrating a severe reality check for the Golden State’s recovery plan.
Decades of poor leadership from the state capital have contributed to an unsustainable yearly budget which means California voters must either substantially raise taxes or cut, cut, cut.
All the accounting gimmicks have failed, Obama’s stimulus dollars only postponed the inevitable, Facebook’s shares have crashed, taxpayers haven’t approved a tax hike in the past few elections as their wallets are empty, the high-speed train to nowhere will only add to the state’s budget crisis and now the nation’s leading credit industry Moody’s will make it official by bludgeoning municipal credit worthiness.
The new report from State Controller John Chiang pointed out that California’s July sales tax revenue was down 33.5 percent from estimates that supported the just passed state budget.
Piling onto California’s mounting financial earthquake is the state’s $9.6 billion cash deficit that jumped to $18 billion last month. “Today California quickly began trying to sell $10 billion in municipal bonds to fund the record $28 billion they need to keep the lights on,” said Chriss Street of Cal Watchdog. “With tax revenue plummeting and the state already having the second-lowest rated credit in the country, if the independent credit rating agencies downgrade the state to ‘junk bond,’ California will be short up to $18 billion and default. State Controller John Chiang tried to rationalize that, even though California revenues were ‘disappointingly’ down $475 million in July.”
These dismal numbers prompted Moody’s Investors Service to review the Golden State. Last week it announced it would audit the state’s financial solvency by going city-by-city to determine if the recent string of high profile bankruptcies are the new California trend. This unwelcome news concerns city managers and state officials alike because many of the troubled localities have turned to “creative financing” and easily obtainable municipal bonds to cover their economic woes. A lower credit rating would make it harder and more expensive for cities to obtain a financing.
The League of California Cities jumped into the fray hoping to change Moody’s opinion of the Golden State. “Moody’s has an obligation to review changing circumstances, but we would just suggest that their assessment of the framework and ground activities is perhaps exaggerated,” Chris McKenzie, executive director of the League of California Cities told the Associated Press.
The financial fix is in
In California governor Jerry Brown’s State-of-the-State address this year he said, “Contrary to those declinists who sing of Texas and bemoan our woes, California is still the land of dreams. It’s the place where Apple and countless other creative companies all began.”
California may be dreaming, but Texas is working, said Chuck DeVore, former Golden State lawmaker and new Texas resident. Defying the retread governor’s optimism, Apple opened a brand new $304 million campus in Texas and will add approximately 3,600 taxpaying jobs.
Compare this to California’s very own DREAM Act. The newly enacted-state tuition is designed to assist residents of a state get a government-supported college education cheaper. “That’s why the open-borders types want illegal aliens to get that break, as they do in many states,” said David North Center for Immigration Studies.
However, the state’s lack of foresight has led to problems for students looking to achieve the American Dream. “One part of the state’s higher education system has decided that if you qualify for in-state tuition, and want, for instance, a master’s degree in computer science, you will not be admitted,” North said. “There is room only for foreign students and out-of-state Americans who pay at the higher out-of-state rates. And the former are expected to out-number the latter by a large margin.”
Nearly one-third of America’s welfare recipients reside in California.
According to new research, nearly 60 percent of all government-run public school students qualified for reduced or free lunches. “Of those students, nearly 84 percent had family incomes at or below $28,665 (130 percent the federal poverty level for a family of four) making them eligible for free meals,” an ABC news story said last year. Further compounding the issue is the steady rise in welfare and food stamp usage by Californians hit hard by stubborn double-digit unemployment ranks.
Combine all these factors and California has a recipe for financial disaster. According to the Census Bureau, more then 4,000 taxpaying families are fleeing the overtaxed state, most head to the prosperous Lone Star State.
While these families are leaving behind great year-round weather, they are also fleeing increased lawlessness. Orange County, home to one of the largest illegal alien populations and Disneyland, witnessed riots pitting criminal gang members against local police departments. The state is even pitting neighbor against neighbor by paying many irresponsible homeowners’ entire monthly mortgage payments. (Fox News story here)
Politicos love the class warfare and fairness argument, it’s used in virtually every campaign, but this time all the grandstanding and soaking the rich will not fix California’s bleak future, financial armageddon is on the horizon and a nagging question remains- is California too big to fail?
Recent California financial crisis story: Poway School District takes a $105 million bond, but will pay nearly one billion in interest charges
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