Posted on 04/01/2024 10:24:42 PM PDT by SeekAndFind
Governor Gavin Newsom bragged of a surplus, but California is seriously underwater. The next recession will hit the state extremely hard.
The City Journal founder Ed Ring comments on the Golden State Budget Fantasy
While finalizing the upcoming fiscal year’s state budget back in May 2022, California governor Gavin Newsom boasted of an extraordinary projected surplus: $97 billion. The governor immediately collaborated with an enthusiastic state legislature to spend it all. Of course, new spending on new programs and benefits tends to become permanent.
This has happened repeatedly in California. Between fiscal year 2012–13 and fiscal year 2022–23 (the year with the projected $97 billion surplus), per capita general-fund spending doubled, from just over $3,000 per resident to just under $6,000. (All figures are in 2022 inflation-adjusted dollars.)
The State Office of Legislative Analyst’s latest report projects a $73 billion dollar deficit for the next fiscal year. It won’t be easy to paper over this debt, but the state may use its opaque accounting system to hide the ball.
California’s general-fund budgets are reported on a cash basis. The state’s balance sheet, however, uses “accrual-based accounting.” Without getting too far into the weeds, this is an apples v. oranges situation. Instead of the algebraic perfection of private-sector income statements, balance sheets, and cash flows, government accounting provides no easy way to reconcile what you see on the budget.
Some watchdogs, however, have succeeded in cracking the code. John Moorlach, one of the only certified public accountants to serve in the California State Senate, just published a review of the state’s fiscal health, focusing on the balance sheet. According to Moorlach, California’s balance sheet is in trouble.
Moorlach declared in a March California Insider interview that the state “now has the largest unrestricted net deficit in the US: $222 Billion.” In plain English, Moorlach is saying that California’s state government accounts have liabilities that exceed assets by $222 billion. No matter how creative Newsom and his financial wizards may be, someday that money will have to be paid.
A remedy that California has turned to over the years and will undoubtedly turn to now is to accumulate additional long-term debt. Emulating the federal government, but lacking its dollar-printing ability, California’s state and local governments and agencies have racked up over a trillion dollars in debt, primarily in bonds and unfunded pension liabilities. These liabilities, too, must be paid. Since that’s all but impossible, the liabilities must be serviced with payments that, just as at the federal level, will eat up more and more of the operating budgets.
The above link says over a trillion. That’s being very generous to California. Click on it to discover … California State and Local Liabilities exceed $1.6 Trillion.
California’s total state and local government debt now stands at almost $1.6 trillion, or about half the state’s GDP.
That isn’t an alarming ratio when compared to the national debt, which has now soared to 128 percent of U.S. GDP with no end in sight. But Californians carry this $1.6 trillion state and local debt ($40,000 per capita) in addition to their share of the national debt (about $90,000 per capita).
That article was from February of 2022. I suspect the liabilities are now close to $2 trillion.
On February 4, I noted the Cost of Running a McDonalds Jumps $250,000 in CA Due to Minimum Wage Hikes.
A blowback is underway.
On March 26, I commented California Restaurants Cut Jobs as Fast-Food Wages Set to Rise
Citing wildfire risk, State Farm will not renew policies on 30,000 homes and 42,000 business in California.
Also on March 26, I commented Proposition 103 Backfires, State Farm to Cancel 72,000 California Policies
Blame the state, not insurers.
People in California, increasingly getting sick of the state’s progressive madness, are voting with their feet.
For discussion, please see Congratulations to NY, IL, LA, and CA for Losing the Most Population
New York: -631,104
California: -573,019
Illinois: -263,780
The BLS metro shows unemployment rates were up in 218 of 389 metro areas. Nonfarm employment only rose in 59 areas.
On March 15, I noted Unemployment Rates Rose in 218 of the 389 Metropolitan Areas
Unsurprisingly, California has the highest unemployment rate in the nation at 5.7 percent vs. 4.1 percent nationally.
California has massive problems although the stock market is at a record high and the economy is allegedly booming. The next recession will hit California exceptionally hard, and it’s not too far off.
This surplus 2022 money they talked about....don’t you think that was bogus?
Based on all the fed covid $$$$ Cali received.
Cash basis, accrual basis, I know they can muddy the waters of the financial picture, depending on which they use.
A key question is, does the state have money in the bank? Regardless of cash or accrual accounting, can the state pay its bills?
If the Dems win a majority in November, I predict the feds will trade state debt for state rights.
Only in the Democrat party would such a disastrously bad governor as Gavin Newsom be considered the great hope for the future
Nothing a few hundred more miles of train-to-nowhere can’t fix.
$222 Billion eh...That's a lot of dough
I’s ok, all the rest of us will bail them out.
And Newsom thinks he has a snowballs chance to become pres in 2024?
So he can do to America what he has helped do to Calif.
With such great representation, the citizens will love more taxation. /s
Thanks for posting. Depressing information given all of the other things California citizens must be concerned about.
Don’t worry, the rest of the US will pay to bail them out.
US broke too.
/echo That is the plan.
Those who say “It’s California’s problem, they voted for it” are mistaken. The number one recipient of federal income tax dollars is ca. Over all other national expenditures.
Their mistakes directly cost everyone everywhere.
You’re probably right. One way or another California will get the feds to subsidize and/or bail them out.
This topic rarely hits headlines.
IMHO, it’s all about the state debt, certainly centered among left-run states, and that - combined with other market forces (banks, commercial real estate, etc.) - will spark the next fiscal crisis (better labeled ‘collapse’).
I thought for sure that the admin would have used the plandemic $$ & IRA as a slush funds to remedy much of the state (pension) debt in such states, but it seems that student loans and war etc. (uke) have diverted attention and meager resources for said printed/devalued money.
Withe the CA governor and his wife’s Easter statements on the Trans Day of Visibility, this should all turn around and quickly.
Clearly Governor Gruesome has his priorities and plans to steady the state of affairs in order!
Remember when California was the Golden State?
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