"States will contend with about $140 billion in deficits in the next fiscal year"

"Jerry Brown returns as California governor today after an absence of almost three decades, facing a “day of reckoning” over a $28 billion budget gap...

Brown...has pledged an austerity budget, due Jan. 10...told Californians they’ll face painful choices to restore fiscal health.

...States will contend with about $140 billion in deficits in the next fiscal year after closing $160 billion in gaps this year...

...The reductions may include eliminating local redevelopment agencies, shrinking social-services benefits, slashing aid to state universities and closing parks...

...The governor inherits the nation’s third-highest unemployment rate at 12.4 percent, what the treasurer’s office says is $88.3 billion of bond debt and as much as $500 billion of pension liabilities following the longest recession since World War II.

...Curbing the cost of state workers’ salaries and their pensions may put Brown at odds with the labor unions that supported his campaign, such as the 120,000-member California Federation of Teachers.

...Payments to the two public-employee pensions, the largest in the U.S., will consume 5 percent of the general fund."

Michael B. Marois

Is Greece California? (Deflation Edition)

If sovereign and municipal credit markets tighten,
how could unemployment and business profitability be affected
if Greece, some other relatively weak European countries
and some US states implement severe budget cutbacks and tax increases
to balance budget deficits?

If the EU/US doesn’t bailout Greece/California
could the Euro and the US dollar retain credibility as commodity prices fall?

Could deleveraging in developed countries cause some over-indebted customers
to import less from lower wage paying emerging markets?

If cut off from credit markets and in danger of default,
could some emerging countries inflate currencies to maintain debt and spending?

We should consider ourselves unauthorized
to saddle posterity with our debts and morally bound to pay them ourselves.

Each generation has the right by will of its majority to bind themselves,
but none to bind the succeeding generation.

Thomas Jefferson

Is a Keynesian or Austrian path the most economically ethical?

Historical Rhyme: If Hungary, Bolivia, Brazil, Chile, The Dominican Republic, Ecuador, El Salvador, and Peru defaulted or had to restructure sovereign debt in 1931, and Austria, Bulgaria, Germany, Colombia, Nicaragua, Panama, and Paraguay did in 1932, before Romania, Serbia/Yugoslavia, Cuba, Guatemala, and Uruguay did the same in 1933…?

What could happen if a generation of underemployed, underpaid, educated and indebted young adults become disillusioned by their elders’ financial mismanagement and seek to identify and punish those responsible?

What may most likely happen after what happens after what happens next?

On Greece, Portugal, Spain, Italy etc…: Have the educated underemployed instigated most rebellions?

Is Greece California? (Inflation Edition)

Under a shared common currency, can a Eurozone member like Greece,
or an American state like California, inflate out of excessive spending and debt?

What could some unintended consequences be
if the European Union and/or the US federal government
intentionally inflate money supplies
to subsidize EU member and/or American state spending, debt and deficits?

Why would some oil exporters become reluctant to accept relatively lower prices
if the US federal government continues to amass unsustainable budget deficits?

We can guarantee cash benefits as far out and at whatever size you like,
 but we cannot guarantee their purchasing power.

Alan Greenspan

Ron Paul: Are US Taxpayers Bailing Out Greece?

Los Angeles Budget Cuts

Council Committee Recommends Cuts To Police, Fire Departments

…the Los Angeles City Council's Budget and Finance Committee on Monday recommended that cuts be made to the police and fire department…

The city is operating $208.5 million in the red and must make drastic cuts to make its fiscal budget by July. City Administrative Officer Miguel Santana is recommending 1,500 city-worker layoffs as well as the elimination of the Human Relations Commission, Commission on the Status of Women, the Children, Youth and Families Commission, the departments of Disability and Environmental Affairs, the Fire Department's next recruit class, and the Department of Cultural Affairs grants program.

Dennis Romero
LA Weekly

If California tax revenues were more than $1 billion off estimates 10 weeks into fiscal 2009-2010, how much could North Carolina be short, what will most likely be cut, and how much local taxes could be confiscated next?

For the first three months of the fiscal year, [California] total General Fund revenue was nearly $1.1 billion below the recently amended 2009-10 Budget Act estimates.

 

“Revenues more than $1 billion under estimates and recent adverse court rulings are dealing a major blow to a budget that is barely 10-weeks old,” said Controller Chiang. “While there are encouraging signs that California’s economy is preparing for a comeback, the recession continues to drag State revenues down. I urge lawmakers and the Governor to prepare for more difficult decisions ahead.”

 

The State’s three largest sources of revenue fell below estimates for the month of September… personal income tax revenues for the month were $934 million below estimates (-17.3%), corporate taxes were down $183 million (-10.5%), and sales taxes came in $99.8 million lower than expected (-4.5%).

 

The State started the fiscal year with an $11.9 billion cash deficit in the General Fund, which grew to $16.2 billion by September 30.

 

http://www.sco.ca.gov/eo_pressrel_6188.html

What could be California's job loss to budget cut ratio?

Cuts in California, New York Times

$5.8 billion - K-12 Education

$2.0 billion - Higher Education

$1.7 billion - Local Redevelopment Agencies

$1.4 billion - Medicare

$846 million - State Worker Compensation

$786 million - State Prisons

$695 million - Community Colleges

$510 million - State Welfare Program

$284 million - Developmental Services

$264 million - In-Home Supportive Services

$204 million - Other Health Programs

$179 million - Healthy Families Program

$169 million - Courts

$164 million - Mental Health

$121 million - Child Welfare and Foster Care

$108 million - Government Grants

$98.8 million - Alcohol and Drug Programs

$59.1 million - Office of AIDS

$27 million - Department of Forestry and Fire Protection

$14.2 million - State Parks

= $15,429,000,000

 

$15,429,000,000 / $200,000 = 77,145 jobs?

$15,429,000,000 / $150,000 = 102,860 jobs?

$15,429,000,000 / $100,000 = 154,290 jobs?

$15,429,000,000 / $75,000 = 205,720 jobs?

$15,429,000,000 / $50,000 = 308,580 jobs?

California Budget

Cuts to public schools are expected to force teacher layoffs,

more crowded classrooms

and scaled-back offerings in art, music and sports.

 

College students will pay hundreds of dollars more per year in fees,

course offerings will shrink and tens of thousands of prospective students

will be turned away.

 

Welfare, health care programs for low-income families

and in-home services for the disabled, elderly and frail

will be reduced.

 

Nearly 40,000 will have their in-home support services terminated.

 

The spending cuts amount to roughly 60 percent of a budget deficit

projected at $26 billion through June 2010.

 

The size of the shortfall is unprecedented,

representing nearly 30 percent of the state's $88 billion general fund.

 

Cities and counties, meanwhile,

have said they might to stop the state

from taking some $4 billion in local tax money.

 

Local governments throughout the state,

hit by declining property and sales taxes,

already are laying off law enforcement officers,

firefighters and other employees,

while trimming park maintenance, library, trash and other services.

 

…The loss of $1.1 billion from the budget package

 

[“A plan to take about $1 billion in transportation funding

from local governments

and a measure that would have allowed new oil drilling”]

 

means Schwarzenegger will use his veto authority

to make even deeper cuts to close the gap.

 

Judy Lin

Associated Press, July 25, 2009

California II

…there is currently no tax proposal being discussed in budget talks

regardless of Schwarzenegger's claims to the contrary

 

…the savings from many of these reforms may, with luck

 just offset the $1.5 billion to $3 billion the state lost

by blowing its June 30 deadline

 

...Are welfare programs chock-full of cheaters?

 

We're left to rely on the word of the governor

the same man who is raising special-interest money to run commercials

pretending that he is in the midst of a fight over taxes

 

…as its credibility erodes, California is nearing default

 in which the state doesn't merely fail to pay its bills

but shows no prospect of ever being able to do so

 

Then it would be too late for reform

no one would do business with California

and other states on the edge -- and finally all states -- could fall

 

California's budget

Los Angeles Times Editorial Board, July 17, 2009

California

Even if California Governor Arnold Schwarzenegger and top lawmakers

quickly plug a $26.3 billion deficit to balance the state's budget

the state's weak revenues signal that a new shortfall will emerge

 

…a balanced budget is seen as fleeting because California's economy

which is reeling from high unemployment and the recession

will remain in the dumps for some time

 

Closing the current shortfall

does not account for further deterioration in the economy and revenue

that many economists expect

 

California's revenues from personal income tax collections

its main revenue source

are posting their worst decline since the Great Depression

 

California's budget gap won't close for long

Jim Christie

Reuters, July 18, 2009

Furloughs

With states facing a $121 billion shortfall in the next fiscal year

a growing number of them have turned to squeezing their workforce

for savings

 

…more than 728,500 state employees in at least 21 states

 have already or will be furloughed

 

…at least 54,000 state workers have been laid off so far

 

…furloughs translate to pay cuts for workers

 ranging from 0.5 percent in North Carolina to 13.8 percent in Hawaii

 

Employees whose jobs are deemed essential to public health and safety

 such as police officers and veterans’ homes employees, aren’t furloughed

 

Furloughs cut into state services

Pauline Vu

 Stateline.org, June 30, 2009

North Carolina: $65 million savings

10 hours over a year

 

California: 238,000 employees, $1.3 billion savings

34 furlough days over 18 months

 

The California budget deficit is $26 billion now and counting

 

Shortfalls are rising every day as is interest on IOUs

 

California could fire all 200,000+ state workers on forced furloughs

and still not balance its budget!

 

…furloughs are a drop in the bucket

towards solving state budget problems

 

Massive programs need to be cut

and pension benefits must be brought under control

 

Mike "Mish" Shedlock

Global Economic Trend Analysis, July 10, 2009

Should good paying jobs migrate away from regions with high taxes, crime and excessive debt?

...officials began issuing billions of dollars in "IOUs"

 to avoid a cash crisis on the second day of a new fiscal year

 without an agreement to balance the state's books

 

California faces a financial stranglehold

after lawmakers failed to balance the budget

by the start of the state's new fiscal year

…leaving a $26.3 billion deficit

 

Jim Christie

Reuters, July 3, 2009

California III

California will force state employees

to take a third unpaid day off work per month starting in July

if the legislature cannot close a mounting budget gap

 

State Controller John Chiang

has said he will start paying state bills with IOUs on July 2

…if the $24.3 billion budget gap is not closed

…since the state is running out of cash

 

California plans more furloughs due to budget

Peter Henderson

Reuters, June 26, 2009

California II

Unless lawmakers act quickly to solve the state’s budget and cash crises

California is eight days away from issuing IOUs to many of its creditors

state Controller John Chiang announced this morning

 

Did the world’s wealthiest generation

forfeit their children’s financial future

for present prosperity?

 

Without such action

Chiang said his office will begin issuing registered warrants

on July 2

 to private businesses, local governments

and owners of unclaimed property owed money by the state government

as well as taxpayers due income tax refunds

 

California Eight Days From IOUs

From Bond Buyer, via Paul Kedrosky and The Business Insider

 

California

…California is facing a multi-notch downgrade

…if it fails to resolve its budget woes

Moody’s Investors Service said

 

“If the legislature does not take action quickly

the state’s cash situation will deteriorate to the point

 where the controller will have to delay

 most non-priority payments

 in July

 

Lack of action

 could result in a multi-notch downgrade”

Moody’s said

 

Moody’s Joins S&P in Warning on California Debt

New York Times, June 19, 2009

 

Can the wants of a few who know

outweigh the needs of many that don’t until enough figure it out?

 

If power can corrupt a few

can apathy devastate many?

 

To help balance its budget

California has reduced the state tax credit

for dependents

 

The change will increase a family's California taxes for 2009

by about $210 per dependent compared with 2008

 

This may come as a shock to parents

who have been too busy shuttling between soccer games

…to keep up with the state's budget fiasco

 

State cuts tax exemptions for kids

Kathleen Pender

San Francisco Chronicle, June 23, 2009