How long until California goes under?

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the calif state budget has grown 40% since gray davis got booted. and on top of that, we're going to be short $40B by march, which we get to make up for in increased taxes.

what did we get to show for the extra 40% in spending? are the roads 40% smoother? 40% improvement in education? where did all that money go? wtf!
 
blackvault_cm said:
California has been under. Anybody want to move to Switzerland? Dubai? Two options I'm considering after Chicago.
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Dubai is too close to Iran, and it's in the middle of religious fanaticism.

If it weren't for the weather, I'd move out of CA for sure.
 
skek said:
It wasn't long ago that we were pondering this question with respect to banks like Countrywide, IndyMac and Washington Mutual. I'm growing increasingly concerned about the solvency (and lack of leadership) of the State of California. Is a California bond default or bankruptcy out of the question? I don't think so.

Here's an excerpt from an IBD piece written by OC Assemblyman Chuck DeVore (who has announced plans to run for Senate in 2010):

By CHUCK DEVORE | Published in Investor's Business Daily

In the past 10 years, under both Republican and Democratic governors, legislative Democrats have presided over a doubling of the California budget, from $72 billion in 1998 to $145 billion. This is double the rate of population and inflation growth, and it is unsustainable.

How unsustainable? California may have a $42 billion deficit over the next 18 months, an astonishing 30% of revenue expected just a few months earlier. California may run out of cash by the end of February, causing state financial officials to vote on Wednesday to halt $4 billion in construction spending. A California bond maturing in 30 years yields about 6.89% — 1.8 percentage points more than three months ago.

California has the nation's highest income taxes, the highest state sales tax rate, the highest gas tax and the highest corporate tax in the western U.S. And contrary to popular mythology about Proposition 13 (passed by the voters in 1978), the state's property taxes are at the national average.

Forbes magazine ranks California as having the highest business costs (taking into account taxes, labor and energy). The Tax Foundation ranks California as having the 48th worst business-tax climate, down from 38th just three years earlier. Only New Jersey and New York are assessed as more hostile to business.

Clearly, California does not have a yawning budget deficit because of a light, business-friendly tax burden. California has a spending problem, not a revenue problem.

Yet, in spite of all the overspending, majority Democrats are only offering one-time reductions in the spending of $8 billion. There is no talk of government reform without which any solution would last no more than a year.

California has America's most generous welfare rules. We have not fully implemented the historic welfare-to-work reforms signed into law by President Clinton in 1996, risking federal sanctions as a result. California even spends hundreds of millions of dollars on optional benefits for those in the U.S. illegally. Some state health and welfare programs are growing at a 7%-8% annual clip, with no letup in sight.

***

With an 8.2% unemployment rate, America's third-highest, California workers are likely to see far greater pain in the months ahead as lawmakers resist reducing taxes on capital and wealth generation, and instead seek to increase taxes by $11 billion over the next 18 months.

This includes a 2.5% income-tax surcharge, a 10% increase in sales tax collections by increasing the base rate from 7.25% to 8%, and a $2.1 billion increase in the gasoline tax and others — all on top of what are already the nation's highest income, sales and gas taxes.
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Looks pretty grim to me.
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I am watching this train wreck everyday. The legislature is so inept that it's just a plain joke-but it is not, as it is very chilling as there is going to be many years of real pain and suffering and a mass exodus of people and businesses leaving California because of the total mismanagement of State government not able to do their job. Tax increases are real nice shot in the foot when you will have soon 10% unemployment and continued sinking housing prices causing more foreclosures, personal and business bankruptcies and more job losses. It starts to make sense on the report of economic riots in the streets in the future...
 
lendingmaestro said:
blackvault_cm said:
California has been under. Anybody want to move to Switzerland? Dubai? Two options I'm considering after Chicago.
Click to expand...

Dubai is too close to Iran, and it's in the middle of religious fanaticism.

If it weren't for the weather, I'd move out of CA for sure.
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I'll grow a beard, buy a towel and read the Koran. Go with the flow and blend in the culture.

Have you been to Middle East? People are just as normal as we are...there are however fanatics that portray a bad picture of their own religion. You certanly don't believe that 1,000,000,000+ people are all terrorists and fanatics do you? I'm a Christian, however we have done our fair share of persecution of Muslims in the past. We aren't innocent. It's funny how people view Middle East as this evil, but nobody takes a look at their own history and realize what they have done to cause a few Muslims to be pissed off. Since then peace has been made, and I agree there are nuts out there who still want to wage war between Christians and Muslims...but not everybody is bad. You have to believe people are good in general until proven othervise.

I guess Im just very tolerant.

Dubai is bitchin btw. A glorified Las Vegas...it will be the next financial capital of the world if it already isn't since London and New York are dropping like flies. Majority of finance gurus left London and moved their families to Dubai. No income taxes btw, and high pay rates.
 
blackvault_cm said:
lendingmaestro said:
blackvault_cm said:
California has been under. Anybody want to move to Switzerland? Dubai? Two options I'm considering after Chicago.
Click to expand...

Dubai is too close to Iran, and it's in the middle of religious fanaticism.

If it weren't for the weather, I'd move out of CA for sure.
Click to expand...

I'll grow a beard, buy a towel and read the Koran. Go with the flow and blend in the culture.

Have you been to Middle East? People are just as normal as we are...there are however fanatics that portray a bad picture of their own religion. You certanly don't believe that 1,000,000,000+ people are all terrorists and fanatics do you? I'm a Christian, however we have done our fair share of persecution of Muslims in the past. We aren't innocent. It's funny how people view Middle East as this evil, but nobody takes a look at their own history and realize what they have done to cause a few Muslims to be pissed off. Since then peace has been made, and I agree there are nuts out there who still want to wage war between Christians and Muslims...but not everybody is bad. You have to believe people are good in general until proven othervise.

I guess Im just very tolerant.

Dubai is bitchin btw. A glorified Las Vegas...it will be the next financial capital of the world if it already isn't since London and New York are dropping like flies. Majority of finance gurus left London and moved their families to Dubai. No income taxes btw, and high pay rates.
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Dubai is a massive real estate bubble. Expect it to fall much further than LA or Miami.
 
While cities and counties can declare bankruptcy, states cannot. They can however default on their bonds.

This means that the State cannot get cramdown relief for outstanding liabilities. It can however try to renegotiate some kinds of those liabilities. It's stuck with accrued pension and healthcare liabilities, though it does have some flexibility in timing of funding.

It is stuck with its already issued bonds and their terms. However, the State can and should think long and hard about the tens of billions of dollars of authorized bonds which are not yet issued (e.g., high speed rail).

The State has a number of places where it can cut. The problems have to do both with getting large enough cuts to balance the budget, and the powerful interest groups trying very hard to prevent cuts.
 
no_vaseline said:
The third rail is MediCal. It cannot be contained and cannot be managed. Everything else is a distraction.
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Why is it so hard to manage govt. operations. I bet you one good busienssman and a charter to get it done, would work wonders.

It would be interesting to find out what the metrics of operations were.

-bix
 
biscuitninja said:
no_vaseline said:
The third rail is MediCal. It cannot be contained and cannot be managed. Everything else is a distraction.
Click to expand...

Why is it so hard to manage govt. operations. I bet you one good busienssman and a charter to get it done, would work wonders.

It would be interesting to find out what the metrics of operations were.

-bix
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It's not hard to manage them, it's hard to finance them. You have no idea what your outlays will be, only a vague idea of what your budget will be, and your source of revenue is entirely dependent on tax revenues. So, in times of need, when your expenditures will be their greatest, your income will be at it's lowest. Add in a guarantee of service for specific ages and income levels and the cost of labor (either union wages or outsourcing to contractors) and you have a ticking time bomb. California has further limited it's options by creating tax laws that turn the whole process into a Gordian knot. What's worse is that everyone in the government is fighting for their piece of the pie, whether for political power reasons or financial viabitity or just plain self-interest. As long as protecting those things is more important than getting the budget under control, nothing will get changed.

Short of massive changes to both tax laws and spending requirements, California's bonds are worth less than the paper on which they are printed, and that includes every city and county in the state.
 
Oscar said:
biscuitninja said:
no_vaseline said:
The third rail is MediCal. It cannot be contained and cannot be managed. Everything else is a distraction.
Click to expand...

Why is it so hard to manage govt. operations. I bet you one good busienssman and a charter to get it done, would work wonders.

It would be interesting to find out what the metrics of operations were.

-bix
Click to expand...
It's not hard to manage them, it's hard to finance them. You have no idea what your outlays will be, only a vague idea of what your budget will be, and your source of revenue is entirely dependent on tax revenues. So, in times of need, when your expenditures will be their greatest, your income will be at it's lowest. Add in a guarantee of service for specific ages and income levels and the cost of labor (either union wages or outsourcing to contractors) and you have a ticking time bomb. California has further limited it's options by creating tax laws that turn the whole process into a Gordian knot. What's worse is that everyone in the government is fighting for their piece of the pie, whether for political power reasons or financial viabitity or just plain self-interest. As long as protecting those things is more important than getting the budget under control, nothing will get changed.

Short of massive changes to both tax laws and spending requirements, California's bonds are worth less than the paper on which they are printed, and that includes every city and county in the state.
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That doesn't sound good for muni-bond holders.
 
usctrojanman29 said:
That doesn't sound good for muni-bond holders.
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about a yr ago muni-bond prices plummeted and some were saying muni-bonds were a once in a generation opportunity. i guess not.
 
California has such a bloated government workforce and its inefficiency is legendary. Arnold is talking about taking away 2 of the 14 paid holidays plus some unpaid leaves and the union hacks are already screaming. How about everyone in state government takes a 10% salary cut. Wouldn't that go a long way in reducing the deficit?

I am so disappointed with Arnold. Instead of "blowing up the boxes", he added more of the same boxes and increased the size of the government probably more that Grey Davis. We just have a bunch of losers running our state.
 
I remember we had a thread about this before, but am still curious:

For all of you who say that the state payroll is "bloated", tell us what/who exactly you would cut?
 
freedomCM said:
I remember we had a thread about this before, but am still curious:

For all of you who say that the state payroll is "bloated", tell us what/who exactly you would cut?
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Water agencies... Here in Irvine, we get our water from Irvine Ranch Water District. IRWD is one of about 28 members of the Municipal Water District of Orange County. MWDOC is one of 24 members of the Metropolitan Water District of Southern California. MWDSC is one of the member agencies (others are located in the desert areas to the east of the Los Angeles basin) that allocates California's share of water from the Colorado River. Each of the other states in the river's basin has it's own set of agencies that administer its own share of water. Each agency identified above has it's own Board of Directors (5 to 42 members of each board, depending on which agency), General Manager, General Counsel, Board Secretary, Public Information Officer, lobbyists, and web site. Without reducing the quality of service, or laying off any worker who designs or constructs or maintains the water system, or sends out the bills, or answers the phone when you have a question -- can't we do without all the "Directors" and their minions?
 
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