California's State Government

Ponzi game in full motion, rob Paul to pay Peter. Sure they cut stuff here in California but did you know we have 132 more governmental agencies than Texas? When companies experience funding/cash problems they wisely "streamline" by getting get rid of duplication and waste. Sacramento is so bloated with career department managers, etc. who have worked hard to create their niche and sustain that by making whatever policy/fiscal controls appear absolutely necessary... the keys to their programs will have to be ripped from their "cold dead hands"..... sorry Charlton.

Read what Mike has to say....

California's State Government

Something to chew on contributed by Mike Walker, Col. USMC (retired)

Joe,

You asked why California’s governmental fiscal mess is no longer in the headlines. This is why:

The get out of a fiscal hole you need to either cut spending or increase revenues. For Governments to grow revenue they basically follow two paths: grow the economy to collect more taxes and/or raise tax rates.

Here is what happened in California: We did everything.

First, Sacramento made deep cuts to spending.

For example, cuts to State public school funding during the recession exceeded those of the 1930s Great Depression (about three times the magnitude of the recent sequestration cuts to the Federal budget).

In November 2012, tax increases were voted in (higher income tax for big earners plus higher sales taxes that affect everyone).

Finally, the economy has started to pick up thus increasing State tax revenues.

That is the good news. Here is the bad news.

California had a mountain of debt that has to be repaid in the not-too-distant future.

It has $74B in GO bond debt that has to be repaid and voters authorized another $53B for more borrowing in the future.

Additionally, the State borrowed $27B during the recent budget crises to plug the holes then that have to be repaid now (a classic example of hobbling your fiscal future to “get through today”).

The State is also (1) raiding other Governmental funds at the rate of $500M a year that will have to be paid back, (2) it underfunded the retiree health care fund for government employees to the tune of $60B that is coming due as the Baby Boomers retire, and (3) the State Teacher’s Retirement Fund has a huge hole that is eating up $4.5B per year without end (although we were promised that the fund was self-sufficient and would never need a dime from the taxpayers).

Finally, the tax increases passed in November expire on 31 December 2016 cutting off those revenues.

What you are witnessing is the calm before the storm. 

Sacramento has a window of opportunity over the next few years to fix these problems before its fiscal house crashes and burns again.

Does anyone think Sacramento has gotten that smart? If the answer proves to be "no" then California will be in the headlines again in a few years

Mike