OT: Estimated state budget deficit reaches $25.4 billion

User Forum Topic
Submitted by jficquette on November 11, 2010 - 10:19am

"As Jerry Brown prepares to take over as governor, California faces a $25.4-billion deficit — far larger than state officials were projecting only days ago — the state's chief budget analyst said Wednesday."

http://www.latimes.com/news/local/la-me-...

Submitted by desmond on November 11, 2010 - 10:51am.

Is this in there (another $40 million-A DAY)
http://www.examiner.com/finance-examiner...

Submitted by harvey on November 11, 2010 - 11:17am.

Doesn't matter.

The important thing is that our heroes can retire at 50 and spend the next few decades on cruise ships and touring the country in mega RVs.

We can't let a little "crisis" interfere with priorities.

Submitted by Coronita on November 11, 2010 - 11:28am.

I think this email I just got is pretty appropriate for this thread...

TD Ameritrade will be participating in the $10 billion California Revenue Anticipation Note offering. These short-term notes will help pay for schools, health care and other public services.

Offer details:

* Limited-time retail order period: November 15 and 16
* Minimum investment: $5,000
* California resident orders will have priority over out-of-state orders

Find out more
Please call one of our fixed-income specialists at 800-454-4512, Monday through Friday, 8 a.m. to 6:30 p.m. ET, or log on and go to Research & Ideas. You'll find information in the "Bonds & CDs" section under "New Issues," in the "Municipal New Issues" section.

Hit or skip?

Submitted by jficquette on November 11, 2010 - 12:09pm.

Skip. Plus it's such joke. 80% of it will go to pay and benefits for employees. No way.

When will people get how the state is fleecing private sector employees???

Everytime you see where they need money for parks, health care etc remember 80% goes to union employees so they can afford to walk on the beach for 50 years.

John

Submitted by SD Transplant on November 11, 2010 - 1:27pm.

I'd say skip..

Submitted by EconProf on November 11, 2010 - 10:26pm.

We in California have done this to ourselves. The leftward lurch in this state that has lavished pay and benefits on state and local workers was just reinforced by the recent election. While the rest of the nation wakes up to the folly of big government, CA sends dimwits like Boxer back to the senate while other states boot her type out.
There is little hope for change, since our demographic trends are to repel our middle class taxpayers and attract the tax users from other states and countries. We are doomed.

Submitted by paramount on November 11, 2010 - 11:05pm.

jficquette wrote:
Skip. Plus it's such joke. 80% of it will go to pay and benefits for employees. No way.

When will people get how the state is fleecing private sector employees???

Everytime you see where they need money for parks, health care etc remember 80% goes to union employees so they can afford to walk on the beach for 50 years.

John

Couldn't have said it better myself, thank you!!

Submitted by harvey on November 12, 2010 - 7:18am.

EconProf wrote:
CA sends dimwits like Boxer back to the senate

Uh, Boxer doesn't have much influence on the state budget.

Plus the alternative was Fiorina, who was not only running for Senate, she was also running for the title of "queen of failing up."

Our professor doesn't have much substance in his lesson plan. Seems like every post is just a trite jab at the left.

Submitted by joec on November 12, 2010 - 7:25am.

Do people think Whitman would've had a better chance to win in the Senate race vs. the governor race?

There is a big difference in the 2 positions, but it seems elections are won by who people hate less / lesser of two evils and a lot of folks probably didn't vote for Fiorina for what happened at HP and I didn't vote for her for that reason as well.

Submitted by EconProf on November 12, 2010 - 7:33am.

My point was that while the rest of the nation comes to its senses about government spending and big government, CA moves to the left in electing its local, state, and federal politicians. Boxer is the most prominent example.

Submitted by Coronita on November 12, 2010 - 7:50am.

EconProf wrote:
My point was that while the rest of the nation comes to its senses about government spending and big government, CA moves to the left in electing its local, state, and federal politicians. Boxer is the most prominent example.

Listen, you have really nothing to worry about.

One of two things are going to happen in CA..

1)CA files for bankruptcy...This will result in public services cut, public outcry, and then the rep's will come out blazing blaming the demo's, and then there will be a government reorg, similar to what happened at the federal level.

2)The economy miraculously recovers, making this a moot point...

Patience, grasshoppers.... Patience.... CA is just a laggard of what's happening at the Fed level...

Submitted by air_ogi on November 12, 2010 - 9:13am.

Since Jerry Brown left the office, California had been run by the Republican governors for 24 of out 28 years.
During the same time, San Diego, one of the worst examples of fiscal mismanagement was run by a Republican mayor for 21 out of 28 years.

And lets not forget the Republican control during Bush years that resulted in "small government".

What significant program did newly elected Republicans in congress propose cutting? Funding to NPR?

Submitted by EconProf on November 12, 2010 - 11:28am.

Schwarzenegger may have been elected as a Republican, but he governed as a Democrat, which would change your numbers somewhat. Equally important is who controls the legislature--which has been in Democrat hands for 40 years, excepting 1995 and 1996.
You are correct, San Diego Republican mayors don't exactly act conservative, especially Dick Murphy who caved to municipal unions a decade ago and gave away outrageous pension benefits now starting to hit the fan. Likewise our current "Republican" mayor Sanders who recently pushed for a sales tax hike and more recently put off budget cutting until next summer. Some conservative.
So...more important than party labels is whether liberals or real conservatives are in power, and the sentiment of the electorate in the state. On that score, liberals in California should be very happy. Not only did they increase their power here while getting shellacked in the rest of the country, they apparently hold the sympathies of the electorate. The demographic trends point to a more and more left-leaning population, as we drive middle-class taxpayers out and attract tax users. With 12% of the nation's population and 32% of the welfare recipients, our electoral trend is clear. We will continue to tax a smaller and smaller share of the population, which will continue to flee to friendlier business climates, worsening our state budget deficit, increasing calls for more revenue, etc.
With the nation's third worst unemployment rate and seemingly no clue as to what caused it, our state officeholders, now uniformly Democrat, get the full reins of power. Add to that the power to pass a budget with only 50% instead of two-thirds, the clout of public employee unions, most of the media in the state, a swell anti-global warming program, an increased grip on the senate and assembly, and above all an increasingly liberal electorate and the liberals have to be very pleased. Future comparisons of California versus other states promise to get even more interesting.

Submitted by harvey on November 12, 2010 - 11:38am.

EconProf wrote:
My point was that while the rest of the nation comes to its senses about government spending and big government

How did the rest of the nation come to it senses about government spending? You mean by voting Republican?

Read air_ogi's post. Republicans have zero track record for cutting spending. At the city level, at the state level, and at the federal level as well. Plenty of very fundamental stats to support this. Surplus under Clinton, defect under Bush. And it this trend goes back for decades.

The idea the Republicans are fiscal conservatives is the biggest myth in American politics. It is a lie they've been repeating for decades. Because many Americans (including some supposed professors) are too shallow to do some basic fact checking, they simply believe the lie and even make an effort to perpetuate it.

Republicans aren't going to cut anything that matters. They'll go after their favorite "liberal" targets, like NPR or Acorn, stuff that amounts for less than one tenth a percent of the deficit, and then tout their fiscal conservatism on Fox News for the next two years.

http://republicanwhip.house.gov/YouCut/

Aside from NPR, here's #2 on list:

Terminate Exchanges with Historic Whaling and Trading Partners Program
Savings of $87.5 million over ten years

Wow, $8.7 million a year? That's a lot of money!

So many arithmetically-challenged Americans will watch and cheer on the "victory," while the debt continues to grow.

Submitted by air_ogi on November 12, 2010 - 1:07pm.

It is a complete myth that conservatives are somehow more financially responsible. They like to spend other people's money, just on different things.

Just look at California's budget. During last 5 years, spending on corrections increased 36%, while pretty much everything else was reduced by double digits. That's what happens when you pass laws that imprison everyone that doesn't fit in your view of perfect society.

Same thing with federal budget. As much of credit as Obama gets for the budget deficit, Medicare prescription coverage (elderly vote overwhelmingly Republican) and more than doubling of defense spending contributed to the majority of spending increases in the last decade.

Submitted by faterikcartman on November 12, 2010 - 3:00pm.

That's nothing! Now the Democrat state legislators will only need a bare majority to pass a budget thanks to clueless California voters. The next five years should reveal even more dramatic deficits.

Submitted by briansd1 on November 12, 2010 - 3:12pm.

EconProf wrote:
We in California have done this to ourselves. The leftward lurch in this state that has lavished pay and benefits on state and local workers was just reinforced by the recent election. While the rest of the nation wakes up to the folly of big government, CA sends dimwits like Boxer back to the senate while other states boot her type out.
There is little hope for change, since our demographic trends are to repel our middle class taxpayers and attract the tax users from other states and countries. We are doomed.

Does that mean that we should sell our real estate and move to the Red States where the opportunities are greater?

Submitted by harvey on November 12, 2010 - 3:19pm.

EconProf wrote:
Equally important is who controls the legislature--which has been in Democrat hands for 40 years, excepting 1995 and 1996.

And how has California's economy done in those past 40 years?

It was the center of the biggest economic expansion the world has seen since the industrial revolution.

So all those liberal taxes didn't seem to stop Silicon Valley from creating an entire generation of multimillionaires, but now suddenly business are going to start leaving CA in droves because the "right" party is not in control?

Quote:
With the nation's third worst unemployment rate and seemingly no clue as to what caused it [...]

Here's a clue: It was caused by the bursting of the housing bubble. I seem to remember a website about this somewhere...

The frustrating part of these discussions is that we actually agree on may things. I'm in favor of huge social services cuts - I even think unemployment benefits have been far too generous. But the solution that so many "conservatives" advocate is total BS: Put the Republicans in charge and we'll get the fiscal discipline we need. That is complete nonsense, and anyone who has been paying attention should know better.

Submitted by EconProf on November 12, 2010 - 3:22pm.

Brian, that is up to you. If you are on welfare you should stay here. If you are a state or local government employee, you surely want to stay here. On the other hand, if you want a job, move to North Dakota or Texas, where the unemployment rates are 3.7% and 8.1%, respectively.

Submitted by briansd1 on November 12, 2010 - 4:19pm.

If I'm on welfare, how do I afford to buy a house in California? Isn't there a 5 year lifetime limit on welfare?

Submitted by CA renter on November 12, 2010 - 6:33pm.

EconProf wrote:
We in California have done this to ourselves. The leftward lurch in this state that has lavished pay and benefits on state and local workers was just reinforced by the recent election. While the rest of the nation wakes up to the folly of big government, CA sends dimwits like Boxer back to the senate while other states boot her type out.
There is little hope for change, since our demographic trends are to repel our middle class taxpayers and attract the tax users from other states and countries. We are doomed.

You DO realize that the "financial crisis" (including the "pension crisis") was caused by the financial industrty, and not public unions, right?

While there were plenty of Democrats with blood on their hands WRT financial deregulation and the encouraging of financial speculation at all levels, it seems to me that most of the financial "gods" who caused this mess lean fairly right. Am I missing something?

Submitted by EconProf on November 12, 2010 - 9:11pm.

CA renter, there is plenty of blame to go around, and in hindsight both Democrats and Republicans made plenty of mistakes.
But we have to get beyond Republican and Democrat labels, as I have tried to point out. Some responses to me don't get that and cite instances of Republican spending excesses which actually makes my case. True conservatives want to limit government power, expand personal freedom, and allow businesses and individuals to create and prosper or fail according to their own merits. Allowing Fannie and the big banks to leverage 30 to 1 with the assurance that any downturn would be bailed out by the government is not what a conservative could stomach. But it became the prevailing view during the bubble years.
Now let's get back to the original subject of this thread: CA's ballooning deficit and our political environment. I haven't seen anything in your response or that of others to counter the points I made about California's likely economic and political future.

Submitted by sdrealtor on November 12, 2010 - 9:26pm.

Yes and true conservatives love all the unborn babies in the world. That is until they are born. Then they hate the welfare dependent resource draining babies. The world is full of hypocrits on both sides of the coin be they liberal or conservative, democrat or republican. Ultimately, Its all about the benjamin's particularly those that are in or soon to be in their pockets.

Submitted by harvey on November 12, 2010 - 10:10pm.

EconProf wrote:
True conservatives want to limit government power, expand personal freedom, and allow businesses and individuals to create and prosper or fail according to their own merits.

More useless rhetoric.

Have you ever heard anyone, left or right, say that they want to increase government power, reduce personal freedom, or eliminate merit as a component of success?

Motherhood and Apple Pie.

But when it comes to actual policy, conservatives do plenty to increase government power (massive military, prison system, ...), reduce personal freedom (Patriot Act, War on Drugs, ....), and eliminate merit as a component of success (farm subsidies, "too big to fail", ...)

But the pot won't stop screaming that the kettle is black.

Quote:
I haven't seen anything in your response or that of others to counter the points I made about California's likely economic and political future.

All you've said so far is that we are doomed because liberals are running the state. And then you pointed out that liberals have been running the state for 40 years.

California's had a helluva run in the past 40 years, so your points are already countered by the glaring reality of history. No further responses are necessary.

(And BTW, economic comparisons between California and North Dakota are ridiculous. More evidence that you don't have any credibility.)

Submitted by harvey on November 12, 2010 - 10:18pm.

CA renter wrote:
You DO realize that the "financial crisis" (including the "pension crisis") was caused by the financial industrty, and not public unions, right?

Although they have some elements in common, the two "crises" are not the same.

The bulk of the pension crisis for government employees was caused by aggressive and sneaky union tactics.

One small example:

http://www.pe.com/localnews/stories/PE_N...

This has nothing to do with the financial crisis. It has everything to do with public unions throwing big money behind legislation that will bankrupt the county.

Submitted by Arraya on November 12, 2010 - 11:46pm.

It's all a ponzi-webbed, interconnected unsustainable system.

Submitted by CA renter on November 13, 2010 - 12:41am.

pri_dk wrote:
CA renter wrote:
You DO realize that the "financial crisis" (including the "pension crisis") was caused by the financial industrty, and not public unions, right?

Although they have some elements in common, the two "crises" are not the same.

The bulk of the pension crisis for government employees was caused by aggressive and sneaky union tactics.

One small example:

http://www.pe.com/localnews/stories/PE_N...

This has nothing to do with the financial crisis. It has everything to do with public unions throwing big money behind legislation that will bankrupt the county.

I'm not sure what was "aggressive" or "sneaky" about those propositions. What it pointed out was there was an ~$800 million deficit in lifetime pension benefits *at this point in time.*

Ultimately, that number could be much greater -- if everyone lives well beyond what the actuaries have calculated, and if investment losses/lower returns are worse than what they've projected...OR, they could end up with a surplus if workers die earlier and/or investment returns outperform thier projected estimated returns.

Let me say this first (and I've said it many times before): the current pension benefits are too generous. They made some very irresponsible decisions over a decade ago, and we are now dealing with the consequences. However, those foolish decisions were based on a bubble mentality that has been with us now for over a decade. Those pensions were superfunded (over-funded) when those decisions were made, but it was entirely due to the stock/internet bubble.

One VERY important point: the pension funds have sustained very large losses because they were invested in precisely the types of investments that caused our financial crisis. They, and many other typically-conservative investment funds/entities, were forced into these riskier investments because the Fed held rates so low for so long that everyone had to move out on the risk curve in order to maintain their projected returns. I place that blame squarely on the Fed and the govt regulators who allowed the financial deregulation that enabled the **MASSIVE LEVERAGE** and those "innovative" products to come to market in the first place. We have been lacking good, solid regulation for too long. We need people like Elizabeth Warren, Ron Paul, Ralph Nader, Ross Perot, Dennis Kucinich, Bernie Sanders, etc. to lead this country -- all of whom strike me as people who *actually care* about the United States and our citizens, and who have some understanding of economics and trade. (Note how they come from all across the political spectrum...it's not a party issue.)

I believe the pension crisis will be fixed because the govt employers are already beginning to shift the pension contribution requirements from the employers to the employees. After that is done, I believe the formulas will be changed so that the projected investment returns will be lowered, and contribution requirements will rise. This will be borne by the employees, not the taxpayers. It could be an effective 20-30% cut in pay. Additionally, many employers have already moved toward a two-tiered system where the new employees are being put on the pre-pension-boost formula (2% vs. 3%). They cannot change the ones who are already vested, but the obligations going forward will be lower.

When we incentivize speculation/investment over labor, we get bubbles because "gambling" becomes more profitable than working. We have allowed the financial industry (the REIC, actually) to run this country into the ground. We need to turn away from the worshipping of the financial "gods" and corporate executives, dealmakers, etc., and get back to the business of creating and building things. We need to turn away from "free trade" with third-world countries when that "free trade" means all our jobs are being off-shored.

There are many problems with our economy, and many possible solutions; but scapegoating public union workers totally ignores the root causes of our problems and prevents us from being able to establish workable, common-sense, solutions that acutally address the REAL causes of our economic distress. We need to move away from this nonsensical partisan bickering and focus on what will make this country strong and successful again. The problem is at the TOP, not the bottom.

Submitted by EconProf on November 13, 2010 - 7:56am.

CA renter, there is a lot in your post I agree with, especially our tendency to make decisions based only on short run considerations while ignoring the long term impact. "Short-termism" prompts bad behavior at the personal level (instant gratification, buying on credit, addictions, diet), and in politics. The choice by Republican and Democrat city council members a decade ago to massively increase pension benefits gained them momentary popularity with the far-thinking union members. The public, and most of the economists and accountants who slept on the job, ignored the long-run costs we are now about to pay.
Likewise our state politicians, of whatever stripe, are famous for budgetary ledgerdermain, annually kicking the can into the future. Their tricks to postpone or hide costs and accelerate revenue collections are legendary, and make us the butt of jokes.
You have correctly pointed to some of the remedies for these past decisions, and they will be painful and costly because we have been slow to wake up to short-termism. Better late than never.

Submitted by no_such_reality on November 13, 2010 - 8:21am.

CA renter wrote:
There are many problems with our economy, and many possible solutions; but scapegoating public union workers totally ignores the root causes of our problems and prevents us from being able to establish workable, common-sense, solutions that acutally address the REAL causes of our economic distress. We need to move away from this nonsensical partisan bickering and focus on what will make this country strong and successful again. The problem is at the TOP, not the bottom.

I disagree. With the unions in place, the problems runs right through from the top to the roots. Many, probably the vast majority of public service workers, IMHO, *WANT* to do the right thing. The Union, combative management, and insane bureaucracy saddles them in an organization that tolerates mediocrity. saddles them carrying a subset of low-performers and systematic drains money out of core services and into the bureaucracy.

Teachers are in classrooms with 20-30+ students. The students are funded at nearly $10K a pupil yet the teachers lack basic supplies while districts like LAUSD spend hundreds of million on building a single school campus. Remember the furloughs last year and the expose captured of the DMVs in LA intentionally creating massive lines?

It's a case of one bad apple, the question is is the one bad apple 1%, 10% or 20%? 80% percent, I assume, really want to work and do the right thing for the State. The other 20% are in it for themselves and unfortunately, between the union rules and general Government culture in place won't let them be dealt with.

Submitted by davelj on November 13, 2010 - 9:56am.

Some budget stats to consider. Here's the breakdown of the Big 4 for 2010/2011:

Education (K-12 & Higher Ed.): 40%
Health & Human Services: 28%
Bus., Transportation & Housing: 10%
Corrections & Rehab: 7%

That's 85% of CA's budget right there. So that's where you have to cut. Everything else is just fiddling around at the edges.

The big whopper, of course, is education. Interestingly, according to the National Center for Education Statistics, instructional spending comprises just 54% of per-pupil spending in CA for K-12. The other 46% is administration. Per-pupil K-12 spending is going to be roughly $11,200 this year. That means that there's about $6,000 of ADMINISTRATIVE expense for every K-12 student in CA. Sacramento, we have a problem. But I think I know where we can find some cuts for the budget. And it starts in the administrative bureaucracy that is the CA Dept. of Education.

I'm going to research this a bit, but I bet that the education budget for CA has increased over the last 12 years at a FAR higher rate than the sum of student population growth plus inflation. And I think I know where most of that ended up. And it ain't in the classroom.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.