Posted on 11/05/2007 9:30:30 PM PST by BurbankKarl
whispers , eh?
no doubt it would just be part of a ripple effect of a 1 trillion dollar hit in the overall financial subprime mortgage lender brouhaha.. which is fast unfolding as CEOs drop like flies
When he took office, there was an $8 Billion deficit.
He borrowed $15 to cover it and squandered the difference (poof!).
Now we have an even bigger deficit, massive debt, and a huge debt servicing cost.
Life is good. /s
Never happen.
Senator Tom McClintock
Date: August 21, 2007
Publication Type: Press Release Print Version
The budget package that comes before us today is at least slightly improved over what was put before the Senate the night it walked off the job and went on summer holiday on August 1st.
At least an effort has been made to balance the budget on paper. And that’s something, since we just closed the last budget year with what appears to be the biggest budget deficit in California’s history, a deficit that has reduced the $10 ½ billion budget reserve that we began the last year with to around $4 billion.
My concern is that the reality – particularly given the state’s now brittle economy – is much more troubling than these figures imply.
We can start with the fact that nearly half of the amount the governor has promised to veto doesn’t reduce spending by a single penny – it is a bookkeeping adjustment reducing the Medi-Cal reserve.
But since so much of the budget is based on Enron accounting, let’s just go with the flow and pretend the governor’s line item vetoes are real and will at least take the budget reserve to $4 billion on paper.
That’s not what we’re getting. For example, this budget simply pretends that we took in $700 million more in May, June and July than we actually did. That money doesn’t exist – it never has – but the budget pretends that it does. Property tax and tribal gaming revenues are still inflated by nearly $400 million according to the LAO and the budget still ignores the fact that the governor has already agreed to more than $300 million in salary increases for prison guards this year.
So the actual budget reserve – even pretending the line item vetoes are real — is just $2.7 billion. And that is a paper thin margin to cover the governor’s other risky assumptions, starting with the cheery assurance that California’s economy will produce twice the rate of revenue growth this year as it did last year.
It’s possible – I suppose. We were spared a serious budget deficit in 2005 by a sudden surge of revenues. But I think that is highly unlikely to happen this year, given the draconian regulations that have been imposed on our economy over the past year.
As a result of those regulations, we’re watching unemployment increase rapidly, our foreclosure activity is growing FOUR times faster than the nation, job creation which had ground to a halt last month is now negative –we’re actually losing jobs month over month. And yet we’re expecting revenues to grow twice as fast as they did last year.
If the economy simply doesn’t get any worse and we have the same rate of revenue growth as we had last year, the result will be a $3.3 billion shortfall – enough to completely overwhelm the remaining reserve.
And that’s just the beginning of the risky assumptions:
The Legislative Analyst warns that we have not adequately budgeted to meet our health care obligations to retired state employees – plan on a big overrun there.
Financial experts are warning that the sale of the Ed Fund could fall as much as $800 million short of the billion dollars than is budgeted – if the feds approve it at all.
The federal courts are not likely to turn a blind eye to continuing the practice of looting safe deposit boxes and retirement and college funds to the tune of $700 million a year that this budget depends on.
We’ll be very lucky if this paper thin safety net of $2.7 billion can cover all these contingencies – and many more like them.
But because this budget also robs future budgets of revenue, while sticking them with added costs, it sets in motion a budget deficit of at least $5 ½ billion that we will be confronting just five months from now when the next budget is submitted in January.
Corrections made now could avert more difficult decisions next year — and here’s the fine point of it: If we can’t even genuinely reduce spending by even $700 million after three weeks of impasse – how do we expect to confront the $5 ½ billion budget deficit looming just over the horizon?
That’s an important question, because today we set in motion events that will require far more difficult and painful decisions starting just five months from now in what is likely to be a much worse economy.
I am afraid that with this vote, for the second time in a decade, this state is being driven to another Gray Davis-sized fiscal crisis that this vote makes inevitable for exactly the same reasons: Lack of restraint in good times combined with a lack of discipline in bad times.
I posted last week that Citibank was on the rocks, and laughed off by fellow Freepers.
10 billion here, 10 billion there.
Adds up after a while.
Oh dear!
It seems there was a surplus some time in the near past. Maybe further back or maybe I’m a little delusional...
bump
I dont think there has been a surplus since Pete Wilson was in office. Grey Out Davis and the Governator kept refinancing the debt to avoid paying the piper. Of course, you can’t do that now with interest rates higher.
Actually, I think I have come up with a plan. January 1st California will convert to the Euro.
The EUro,, how fitting... lol
a deficit is a good thing, Jaaa!
Oh man,, why were we so blessed?
karma?
Don't forget fees and charges for anything and everything related to doing business with the state. Licenses and permits could sky-rocket and most wouldn't care.
Funny thing is: these idiots cannot comprehend what maximizes revenue (hint- it ain't continued price increases).
I doubt I'll renew my fishing license next year though I wouldn't be surprised if it hit $60 in response to fiscal woes.
I haven't taken my boat to Folsom Lake in many years. Not because the fees were too high (they had gotten a bit rediculous) but because they banned beer in 'their' park. I just said "Screw their fascist crap" and haven't gone back. If it turns into a dirt-bowl it wouldn't bother me one bit.
There was a big surplus at the beginning of FY2007, I think it was (it might have been 2006, but I don’t think so). Revenue was rising fast and they still had some of the money left from selling the “economic recovery” bonds. They squandered it all, and then some.
They have always had a “structural deficit”—spending more in every given year than revenues for the same period. As such, this outcome was inevitable. You can’t just keep spending more money than you have without it catching up with you. Arnie’s been doing the smoke-and-mirrors game, trying to drum up cash wherever he could to keep the house of cards alive. It has caught up with him.
We just need to build some more Indian Casinos and sell some more Lotto tickets....dont you worry!
I confirmed... they started FY 2006 with a $9 billion surplus.
Good it has caught up with him
With gas at $3.20 around here, that 7.sumpin’% tax has got to be bringing a lot of revenue to the general fund. They never say how much that is benefiting the state. Oh, that’s right, they just spend it.
Arnold runs Calif as if it was a country!
Wow, I didn't think it was that recent. It seems so long ago. They fixed that in a hurry didn't they? LOL
I wish.
We've held them back so far.
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