Posted on 05/06/2002 9:24:07 AM PDT by dewaste
Last week the fiscal crisis in California became tangible. State Controller Kathleen Connell recognized that the slumping economy, an unresolved energy crisis, and tax returns that failed to reach Governor Davis wishful expectations have contributed to the state treasury shortfall. On Wednesday, April 25, Connell revealed that California must borrow between $7.5 billion and $11 billion to pay for state expenses through July. This is the largest loan of its kind in United States history!
The $7.5 billion loan, proposed by the Controller will cover a shortfall of $4.6 billion due to weak tax receipts and higher-than-expected bills, and repayment of the $5.7 billion the state remunerated for electrical power last August. Connell is calling for the issue of revenue anticipation warrants, which are repaid the following fiscal year, most likely in the second half of 2002-03. California has issued such warrants five times since 1939; the last, in the recession of 1994, was for $7.2 billion.
The loan will only compensate for Californias bills through July. Money to cover the rest of the summer would come from the anticipated sale of $6.4 billion in bonds for electricity purchases made on behalf of utility companies last year. Keep your fingers crossed, because it seems that Wall Street has little faith in the Governors fiscal track record. Since last summer, California has been unsuccessful in securing the sale of these bonds and no one is sure of future prospects.
This short-term solution allows the state to continue doing business. The greater challenge is the $20 billion-plus shortfall. The decline in tax receipts is significant the governors preliminary budget in January estimated collecting $8.3 billion; the reality is that less than $4.5 billion was received in state income tax. Analysts now estimate California will collect revenue equal to three years ago; however, in that time government has grown 36%.
Before all Californians were impacted by the energy crisis, Governor Davis was given ample warning to react. Republicans and energy experts met with the governor to discuss the oncoming crisis and he took no action. Even stronger warnings were given to the governor regarding the budget deficit. In spite of such warnings on Thursday the governors lieutenants in the State Legislature closed the legislative special session that was convened solely to deal with the states fiscal woes.
Californias economic woes can be overcome with strong leadership. Over the past three years, budget spending has skyrocketed by 37%. The budget must be cut by at least $15 billion to reflect a modest and reasonable growth over the last 4 years. The state reserves must be increased until the economy is in a solid recovery. Government waste must be reduced by adopting a zero based budget practice for all state departments. These tough decisions must be made immediately if California is to get back in the black.
This monetary crisis worsens by the day. Since January, budget-conscious Assembly Republicans have been asking the governor and leaders of the majority party to take definitive action to close this deficit. We share the peoples frustration of watching this budget gap widen when prudent minds say spending reductions are needed now.
Controller Connell estimates that this RAW will be between $10 and $11 billion, and may be repaid during the latter half of fiscal year 2002-03.
Let's see, there is a growing deficit of from $20 to 22 billion, but they need to pay off $6 billion in warrants as well so they can make it through the fiscal year. So that makes a total of ........$26 to 28 billion. Did I do the math right or does the $20 to 22 billion inlcude the warrants?
"It is the California model that has failed, not the principle," Elizabeth A. Moler, former chairwoman of the Federal Energy Regulatory Commission and now senior vice president of the Exelon Corp. power utility, said at a recent conference in Washington."
Also, remember that Elizabeth A. Moler was also acting Secretary of Energy, Deputy Secretary of Energy, and subsequent to that, highly paid ENRON lobbyist in violation of Clinton's 'no lobbying' executive order.
Now, what common grounds does our governor share with Ms. Moler?
How are the Democrats going to escape their fate of being the responsible party for the debt?
I know -- lie like HE double L.,
So a bond of $6.4 plus a RAW of $11 billion won't be nearly enough. Yup, you did the numbers right.
Davis would never do that, but maybe Simon will.
Perot made a pretty good showing with his little charts and all...
Does that mean then that Davis and the legislature are looking at something in excess of 23 billion (by how ever many years they decide to pay off the 6 billion)?
I think you just explained to me why the whole Enron, Enron, Enron chant has been resurected by the Democratic party at a national level. California is in trouble and Congressional seats in California could be important, plus they want Davis to remain in office. The Democrats need something, anything to try to save California. The only thing they can try to get a handle on is Ernon.
If Democrats handled this responsibly they would have to face reality and destroy relations with some constituency group during an election year. They can't do that so they have to find a Republican sounding boogie man that forced such action upon them. It will be Republicans and Enron that force the buget cuts in schools, social services and government employee unions! This will be an election in California of class warfare and the big lie. The re-election speeches on the California Assembly floor during budget debates should be something to behold.
This Enron thing being played across the media is not about Enron, it is not about Bush, it is all about saving the Democratic party in California. If it harms Bush that is great, but the main purpose from a national perspective is California and not Bush.
Yep. To prove your point, the Clymers at the NY Times last week ran a couple Demron/Grayout articles blaming Demron for California's woes. When the East Coast fishwraps are running campaign pieces for Grayout, you know they are worried. GoSimonGo...
Davis didn't need any disaster.
He was able to create one with a little help
from his friends in the legislature and elsewhere !
LOL!
See this for some history:
'Worst yet to come in state's power woes, experts say'(What Gov. Davis knew and when he knew it)
Yup, as usual, we FReepers have caught on before anyone else. From this thread of a few days ago"
To: Liz
Sometimes I sits and thinks, and sometimes I just sits.
But I think I have this all figured out:
This "Get Enron" media hysteria is just an attempt to divert attention from the upcoming bankruptcy of California. I'd bet money that Lehane and Fabiani are still secretly working for Davis.
Mark my words. Later this month, or early next, when California State employee paychecks start to bounce, Enron will be the culprit.
If you re-read the article, you will find that Davis is already setting the stage for this - blaming Enron for the recession in California. He will blame Enron for the upcoming bankruptcy, too.
You heard it here first.
29 posted on 5/11/02 4:15 PM Eastern by snopercod
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Now I think that Freepers need to try to do something about it. I for one, have talked to my Democratic congressman's staff and warned him that this could backfire on the Northwest democratic congressional delegation because there is a stronger Cal-ISO connection to Enron corruption than there is to Bush/Cheney. I have also written to several newspaper reporters in this state and in the California press telling them that they are missing the real story by just re-writing democratic party press releases and that the real story of corruption is the Cal-ISO violating FERC rules and federal anti-trust laws by recruiting Enron to game the power market on behalf of the Cal ISO.
Freepers need to come up with an action plan to try to push some reporters to get the real story out.
They can raise taxes and everything will be okay. Utah, Nevada, and Arizona are waiting with open arms for the industrial out-migration.
Then there will be no energy crsis and the California Kooks can sit around the campfire and sing "Kumbaya"!
Yes, we need to get the word out. I already wrote Rebecca Smith of the WSJ, but she hasn't (and probably won't) answer.
I do owe the WSJ a scathing letter on this, though. Most of the time they are better than they were last week. The articles they printed were almost word for word copies of those in the NYT.
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