Posted on 06/07/2007 6:31:35 PM PDT by NormsRevenge
When budget negotiations between legislative leaders and Governor Schwarzenegger begin, the red ink will be a little deeper than was projected only a few weeks ago.
Earlier today, the governor's budget team sent word to legislative leaders that early receipts from the month of May show that state revenues for the year are now $764 million behind projections.
The mark appears to have been missed the most on personal income tax revenues... where projections for the month of May, alone, were $407 million too optimistic.
Granted, the deficit for next year is still projected to be smaller than it has been in years past. But the range of choices may be smaller, too. "The shortfall," writes gubernatorial finance director Michael Genest in his letter to lawmakers, "underscores the need for the Legislature to adopt all of the savings proposed in the [governor's] May [budget] Revision."
Not so fast, say Democrats. In particular, they want to know just when the shortfall was discovered... given that the Schwarzenegger administration authorized the early payment of $1 billion in Proposition 57 deficit bonds just six days ago.
"The governor had the chance," said Assemblymember John Laird (D-Santa Cruz), "not to transfer monies. And I think it's difficult if they knew about this and then transferred $1 billion that they didn't have to do." Laird, the chairman of the Assembly Budget Committee, said he hopes to learn more about who knew what... and when.
The governor's budget spokesman, H.D. Palmer, says legislators had access to the data at the same time as did the administration. Nonetheless, he said, "the governor has made it very clear that paying down the Prop 57 debt is a priority."
no fed bailout
A “Fantastic” Budget
Senator Tom McClintock
Date: January 19, 2007
According to Gov. Schwarzenegger, California’s financial condition is “fantastic.” Spending has been brought under control, the budget has been balanced and our debt is being paid down. But as Churchill once said, “It is not possible to state the opposite of the truth with greater precision.”
To the governor’s credit, he has proposed some long-overdue spending reforms, most notably conforming state welfare eligibility standards to federal law.
But there’s very little else to praise about the Governor’s handling of the state’s finances. In fact, spending is growing faster than it did under Gray Davis, the state is now running the biggest deficit in its history, and the only way it can pay its bills is because of massive borrowing carried over from 2004, contributing to a doubling of the state’s debt burden in just three years.
When Gov. Schwarzenegger claims the budget is balanced, he ignores his Finance Department’s own figures that report a $7.6 billion shortfall in the 2006 budget ($1 billion worse than Davis’ worst year in 2000). His proposed 2007 budget adds $1.9 billion more to the state’s ocean of red ink.
The Governor justifies his claim that the budget is balanced by concocting a new accounting concept he calls the “net operating deficit.” Here’s how it works: to enable his claim that he is paying down debt when it is actually increasing, the Governor made some pre-payments during the last two years – akin to paying more than the minimum balance on your credit cards. But to hide the deficit he created on the other side of the ledger, he simply doesn’t enter those payments in the state’s checkbook. (Don’t try this at home, boys and girls, or you’ll be hearing from your banker).
California can get away with such bookkeeping gimmickry for a while because unprecedented borrowing in 2004 and a revenue windfall last year allowed Gov. Schwarzenegger to begin the year with $10.8 billion in the bank. The state’s deficit spending will nearly exhaust that cushion by next year under the Governor’s proposal.
Meanwhile, borrowing is now completely out of control. When Gov. Schwarzenegger took office, the percentage of the general fund required for debt service was three percent. Since then, that burden has doubled to six percent and will exceed eight percent next year. Put another way, our minimum credit card payment now consumes more tax money than the budget of the entire University of California. Ironically, the state’s debt service ratio never exceeded 2.2 percent throughout the 1960’s, when California was at its zenith in public works construction.
The new budget purports fiscal restraint – growing the general fund just one percent (after a staggering 30 percent during the last three years). But this is based on some very shaky assumptions that are very unlikely to materialize.
State revenues in 2006 were projected to grow just 1.2 percent, and actual revenues are now falling behind even his modest goal. The Governor’s 2007 budget is predicated on robust 7.1 percent growth next year. If the state’s economy merely does not deteriorate any further, it will produce a $7.5 billion deficit – placing the state on the brink of insolvency within 18 months.
But even assuming that every one of the Governor’s calculations is correct, and the Governor’s budget is adopted intact, the condition of the state’s finances will be this:
* The cumulative four-year general fund deficit under this administration will be $5.2 billion, compared to $4.2 billion during the five years under Gray Davis.
* State general fund spending will have increased at an average annual rate of 7.9 percent, compared with 7.1 percent under Davis.
* The state’s debt service ratio, which Davis reduced from four percent to three percent, will have more than doubled – and by the following year nearly tripled.
The Oxford English Dictionary notes that the original meaning of the word “fantastic” as, “existing only in imagination.” Perhaps that’s what the Governor means.
Pass that mandatory health insurance bill yet?
In 1988, California had about $4 billion of long term debt.
It was a manageable burden.
Today, the state of California has over $80 billion of long term debt. I give a small amount of credit to Arnold for balancing the budget, HOWEVER, there is so much accumulated debt that Calif. is rapidly getting to be like the federal government with a huge amount of long term debt that will never be paid off.
Wait a tick, isn’t San Francisco, Hollywood, Pebble Beach, etc. full of rich folks. All they have to do is tax the hell out of them to close the deficit since they all exploited the middle class to get where they are.
The Federal government has the authority to print money by monetizing the deficit. California has to pay what it owes.
People keep saying that the illegals pay their taxes and contribute more than they take, so that’s what Kalifornia needs - MORE illegals!!! /sarcasm
This is why Calif. has a big future financial problem. Since they can’t print money like the federal government, there will be a day of reckoning.
And there you hit on one of my real peeves. Most of those types shelter their assets.
Right now I know of a SF attorney; a real far left loon of a scumbag lawyer who also owns a 360 Ferrari.
I am a consultant on Ferrarichat where he is also a member.
- His initials are Arthur C. Chambers. (not dropping names or anything) and his Ferrari is registered out of State in Oregon to evade the very high registration taxes for that auto.
Pointing out his blatant hypocrisy only brings forth a torrent of inchoate nonsense that is typical of liberal doublespeak.
Taxing such liberal trash only results in capital flight.
you can drop a dime on him to the CHP and he will get hit with back taxes and penalties..
http://www.chp.ca.gov/prog/cheaters.cgi
If more California cities would get with the programs and reduce the illegals in their midst, they would be in better shape financially. Send the gang bangers back to Mexico, for a start. Cooperate with the feds like they are in Orange co.
That website is cool! More than a decade ago, a friend used to work “alien registration” (i.e. vehicles from out-of-state) for the CHP, specifically tracking down cheaters. I would keep a pad of paper in the car and jot down licenses that I noticed of obvious violators. All they needed was the license plate number and the location where the vehicle was seen.
I was told that if a person works ONE DAY in the state of California (a pretty easy thing to prove) then they are in violation if they have not gotten their car registered here. The DO track these people down.
Turn the scumbag in!
Pebble Beach is full of For Sale signs pal.
Damn. Maybe try freedom and liberty in your economics, left coast whack jobs.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
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