Posted on 11/12/2009 8:55:29 AM PST by NormsRevenge
Days after lawmakers agreed to ask voters for $11.1 billion in debt for water projects, the state had to pay more than expected to sell its most recent bond issue.
Brokers underwriting the sale of $1.9 billion in state general obligation bonds originally thought investors would demand a 3 percent yield. Instead, as the Los Angeles Times reported Wednesday, "the state was forced to offer a 4 percent annualized tax-free yield to lure investors."
That pushed the state's cost of borrowing at least a third higher than originally projected. That means the state, in order to borrow $1.9 billion, will pay millions of dollars more in interest than originally projected. ..
Myriad factors influence individual bond sales. But at least one bond manager said the higher cost in the state's latest sale was related to the "saturation of the market" by California. Over the last seven weeks, California has sold more than $21 billion in debt. The state's growing debt burden is cause for alarm.
Currently the state has more than $130 billion of outstanding bond debt. A little more than half, $66.4 billion, has been sold to investors. The state will pay $5.75 billion to service that debt this fiscal year, or 6.7 percent of general fund revenues. The state treasurer's office projects that those debt payments could more than double, growing to $13.54 billion by 2018, or more than 10 percent of revenues. That's an astounding number.
In the 1980s, debt service consumed less than 2 percent of the state's general fund revenues, but had drifted to 5.5 percent by the mid-1990s. ..
The state's growing debt load and its inability to cut spending or raise taxes explains why California has the lowest credit rating of all of the 50 states. ..
(Excerpt) Read more at sacbee.com ...
California leads the way in the amounts it will need to repay and at higher rates.
Great Job, California "leadership".
What will they do over the next year to prevent complete anarchy over there?
Raise taxes and fees—DEM mantra there.
New CA state slogan-—We will tax the sunshine.
When Arnold came into office, pledging fiscal conservatism and promising to fix Gray Davis’s budget mess, the first thing he did was to put through a huge bond sale to pay off the debt.
OK, maybe, if he had then started to cut spending and start paying it down. But, instead, he took advantage of an economic rise at that time to start spending like crazy, and he hasn’t stopped since.
Now the economy is really tanking, and the bill has come due. And all he and the Dems can think of is to borrow more and spend more. This situation is far worse than the one Gray Davis was unable to cope with.
Bastions of government led redistributive prosperity.
Here’s a challenge for the libs – go fix Haiti. Come back when finished.
The first thing he did was lght more fires by borrowing 15 billion to let the dems and legislature nutcases and bureaucracies off the hook..
Why did we have a REcall in the first place?
and Please, to all the naysayers who may chime in as anti-Recall, Recall or not, this state was pretty much headed over the cliff anyway.. Telling those who stayed on the train, ‘bad move’ is a bit redundant. OK? ;-)
Idiots - silent ALL summer long about the shut down due to the Delta Smelt (and they still are), now want to waste more money on water projects that the envirowackos will keep tied up in court for years.
After that they should privatize most of the rest of state government. California could become a leader again.
CA needs to keep the tree huggers and smelt lovers at bay.
Just pass the legislation and use influence with judges (goes on all the time) to not tie up lawsuits.
Except the legislature, judges and current atty general are all treehuggers.
ok
who is buying cal general obligation bonds at 4%?
The thing is, where were a small group of us who had lived in Lotus Land in the past, studied their budgets and were trying to tell the CA GOP “Don’t bother with putting a Republican into the governor’s office... because whoever is in there in the next 5+ years will own the blame...”
This situation was clearly and unequivocally apparent to anyone who wanted to read the California budgets and business trends in detail in 2002. They could see that the legislature had locked in spending based on revenue projections of the dot-com personal/corporate income “bubble” - and that bubble had collapsed by 2001, along with tax revenues in 2001 and 2002. Come 2003, it was very apparent that the state was now locked into crushing systemic deficits unless the legislature woke up, grew a set and clawed back a HUGE amount of money from the public employees’ pension, health and salary packages negotiated in 2000.
But NO.... the CA GOP wanted to own this problem. They said “Look at that Davis goofball! He can’t balance the budget, he’s ham-fisting the power problems” etc, etc. Well, Davis was incompetent, it is true, but the truth is that NO ONE in the governor’s office has the power necessary to truly fix this problem. I don’t care who you put in there, the governor’s office simply cannot write legislation, and that’s what is needed here.
Furthermore, even the legislature can’t make the changes necessary - much of California’s budget is out of reach of the legislature, having been put into “autopilot” by voter initiatives. The legislature CAN balance the budget, but they have to go after the minority of the budget which they control with utter ruthlessness. They can’t fix the educational budget fiasco.
But the GOP wanted to own this problem. So now they do.
Can’t borrow your way out of debt.
Actually, if Bush and Rove and their minion in California hadn’t stabbed Bill Simon in the back, he would have won the election, and likely would have tried to straighten things out.
But they wanted a RINO in there, and manipulated it until they got one.
After this Republican governor proved that he could be even more incompetent than Gray Davis, it seems unlikely that California will ever vote for a Republican again. There only reason for doing so in the first place was that Davis was so corrupt and hateful. Then Arnie proved to be even worse.
Total BS. The dems, unions and special interests control the state and have gotten it to where it is today. To say that the GOP owns it because the gov. is a RINO is silly and off base.
CARB’s not having any trouble supplementing it’s revenue.
http://www.arb.ca.gov/enf/casesett/casesett.htm
http://www.arb.ca.gov/newsrel/newsrel.htm
A huge amount of older diesel engines will no longer be allowed
to run after Dec. 31 2009.
CARB has 500 new inspectors ready to hit the road Jan. 1 2010.
They are also implementing a Whistle Blower program that pays
up to 10% of any fines levied.
Example of 1 fine:
Sacramento - The Air Resources Board this month fined Orange County-based On the Edge Marketing and CSK Auto Inc. of Phoenix $240,000 for selling gasoline-powered blenders using illegal uncertified small off-road engines to California businesses and residents.
“Gasoline-powered blenders may be this year’s tailgate sensation, but drinkers should not be polluting our air while having a good time,” said ARB Chairman Mary D. Nichols.
http://www.arb.ca.gov/newsrel/nr091609b.htm
The GOP backed the recall effort against Davis. Then they got behind putting the RINO into office. Since he’s the guy who is on the job right now, yes, they own the problem.
That’s the way public perception of the economy works. We can see it here on FR right now: People are blaming Obama for the economy. Did Obama set up the whole situation that is leading to the increase in unemployment? No. But he wanted to sit in the big chair, so now he owns the problems.
That’s the way voters think. It might not be fair, but that’s the way it is.
Nice try Sac Bee. California's tax rates are the highest or very near the highest rates in every tax category. The claimed inability to raise taxes is clearly and factually false. Spend, spend and spend some more Democrats are the problem.
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