this should be interesting ...
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this should be interesting ...
I really wonder if the budget cut will really do something positive.
well first it depends whether the governator's proposed 10% spending cut actually happens, versus an attempt to rise the California income tax / property tax / sales tax by 10% instead. Then if spending cuts are really made, it depends on whether they are implemented across the board i.e. reducing welfare payments / MediCal payments / rent and utility subsidy payments right along with reducing salaries for teachers / cops / researchers / civil service workers, vs having to keep paying the same amounts for social welfare programs and having the dollars cut entirely on the gov't employee side.
That's why I said that this should be extremely interesting.
Actually, the biggest kicker in all of this is that California probably can no longer take the 'easy way out' via issuing huge amounts of new state / local municipal bonds to raise 'cash' to meet current payment obligations. California's bond rating has already been cut to 'junk', meaning that most 'institutional investors' are no longer allowed to buy them. Of course, a certain amount of new California muni bonds will be snapped up by 'rich' Californians as a means of avoiding impending California state income tax increases.
deeper and deeper ...
(snip)"[Schwarzenegger] Sound Bytes [from the big bond campaign 9 months ago]
* $42.7 billion in general obligation bonds issued last year is "only the foot in the door, to whet the appetite."
* It will take $500 billion to "rebuild California the way it ought to be".
* $500 billion is "too big for people to digest, so you don't talk about that" even though he is talking about it.
* California needs $500 billion even though it has "done tremendously with the revenue increases".
* California will not issue less debt even if the economy slows.
* California "could face lower tax revenues" but he opposes tax hikes.
Well here we are, 9 months later and the $4.1 billion reserve went to a $14 billion deficit in the last 4 months.
Schwarzenegger says he wants to fix the system. I agree. However, what needs to be fixed first is Schwarzenegger. State spending has gone up a whopping 40% in four years and earlier this year he wanted $500 billion to build California the way it ought to be built. Fat chance getting the bond market to go along with anything remotely close to $500 billion now with California's shrinking revenues.
His so-called plan to reform health care is nothing more than a sleight of hand shell game robbing Peter to pay Paul. I talked about that on October 27 in Drop in Revenue Growth at State and Federal Level.
His latest scheme is to use lottery proceeds to expand health care. Given that lottery proceeds now fund education, the governor's proposal would replace money from the lottery that now goes to education with funds from the state's general fund. Schwarzenegger did not say what would be used to fund the shortfall in the state's general fund.
Notice how quickly that $4 billion surplus turned into a huge deficit. That should be enough to tell you that the deficit is way understated. Worse yet, the fiscal crisis in California has barely started. Watch what happens when property values collapse another 25% which they will easily do.
Schwarzenegger has pledged to not cut spending even if the economy slows. He has also pledged not to raise taxes. I bet otherwise.
Schwarzenegger Has 3 Choices
* Cut Spending and Services
* Raise Taxes
* Attempt to float massive amounts of bonds in a hostile debt market
Arnold, it's your move. What's it gonna be?
There is no escape from this box. Note that this year's budget went up 11% and 10% of that was payment on bonds and special funds. Think floating bonds are a good option here? All bond issues would do is postpone the problem. And that problem is going to get bigger, much bigger."(snip)
(snip)"M&C takes a look at California in Schwarzenegger prepares California for fiscal emergency measures.
The Los Angeles Times reports the emergency will cause cuts in budgets for schools, colleges, prisons and aid programs for the poor, elderly, and out-of-work that have already spent nearly half their promised funding for the year.
[Mish Note: California's fiscal year starts July 1 so nearly half does not seem so shocking on the surface, but upcoming cuts coming will make it so]
If Schwarzenegger declares a fiscal emergency in January, he's required under Proposition 58, a balanced-budget measure voters approved in 2004, to correct the problem and to call the Legislature into special session to act on his recommendations.
If legislators don't pass a budget bill within 45 days once a special session is called, they would be prohibited from acting on any other legislation or adjourning until they agreed.
Although California is likely the biggest basket case looking forward, this same situation will be played out in many cities and states across the country. Unlike the federal government, state budgets have to be balanced.
Turn out the lights California, the party is over.
Mike "Mish" Shedlock"(snip)
from
Would you happen to know if placing a proposition on a state ballot, in either California or other states, to permanently remove the concept of "sovereign immunity" from state governments would be declared unconstitutional? This would be either by state supreme courts or the federal courts.
Since the economy here has been so badly mismanaged, perhaps having the threat of lawsuits by the general public would finally end the disingenuous detritus ("legislation") we're treated to by our state legislators re: the state economy. Those of us in the general public could then sue the legislature for "economic malfeasance"!}:D
^^^ will never happen ! The entire premise of running for public office is to f#@k up badly and then claim 'sovereign immunity'.
^^^ and you won't believe the first proposal to help cut California budget expenditures by $1.1 billion dollars ...
(snip)""By letting people out 20 months early, which is supposed to be when they get their re-entry skills, they're not going to get them at all, so recidivism is going to get worse," Spitzer said. "This budget plan is a forfeiture of AB 900 [ Assembly Bill to construct 58,000 new prison cells passed last year - sic] principles which was supposed to change how we treat criminality in California.""(snip)
yup, that's right ... they're planning to release 28,000 prisoners almost 2 years early, which will allow them to also postpone construction of new prison cells.
The People's Republic Of California is aptly named for it is going the way of the USSR.
Ahrnald tried to cut spending when he first got in and was blocked by the legislature over and over.
So he decided to put the issues to the people in a vote and they voted everyone of them down.
They have the chance to elect new legislators yet they keep electing the same tax and spend crowd over and over and over.
Kalifornia is impossible to rule - the people are quite silly and insane there.
It is only when the lights finally go out they will change their attitude out there (oh wait - the light had already gone out there!)
with the courts just deciding to allow the California mini-Kyoto Treaty to proceed, i.e. a 'carbon tax' being imposed on California fossil fuel power generators, you are literally correct !Quote:
It is only when the lights finally go out they will change their attitude out there (oh wait - the light had already gone out there!)
not really ! What you now have is a majority of state voters who have a personal stake in the status-quo. The 'poor' have to vote for their social welfare benefits and subsidies to continue. The 'very rich' have to vote for their tax favored / tax exempt / subsidized investment profits to continue. The civil servants i.e. teachers, cops, gov't clerks and apparatchiks have to vote for their jobs to continue. Together, these three groups now outnumber middle class private sector workers - essentially making any legislated spending cuts impossible because a 'tyranny of the majority' situation now arguably exists in regard to taxing those private sector workers' paychecks.Quote:
Kalifornia is impossible to rule - the people are quite silly and insane there.
Oh how sad...but so true. You can feel the desperation, particularly in Hollywood. It became almost impossible for me to make any money at all. I was literally forced to leave. Then you have to think, what other state would elect a celebrity as a governor? "Silly and insane" may be a matter of generalization and opinion but I did find that the place brings out the worst in many people.
Of course your economic status is everything there.
Is anyone really surprised ?
Ahhhnolt ran against "Gray-out Davis" on a platform of fiscal sanity and reform.
He tried to introduce real structural reform to Kaleeefornya but the voter rejected ALL of his proposals.
He increased state control of the economy and failed to control spending.
What is happening now was predicted at least FIVE years ago and Melonie has been chirping about it for as long as I can remember.
At least half the states in this country are staring at their own days of reckoning
as revenues flatten or even decline and obligations increase. Not having the luxury of printing their own money will force some very tough choices indeed.
The real nightmare would be Federal bail-outs. Don't laugh. Part of California's problem is having to pay for Illegal Immigrants. The proper response OUGHT to be: " Arizona is seeing a decline in Illegals because they refuse to be a sanctuary state and insist on making it illegal to employ and HOUSE Illegals." California could have and should have done likewise but refused.
this would be comical if it weren't going to affect so many people ...
(snip)"State of the Living Dead
January 12, 2008; Page A8
Arnold Schwarzenegger said in an address this week that California must end its "binge and purge" budget process -- his way of kicking off a binge worthy of Imperial Rome in its decadent late period. Yep: As his state reels from one of its recurrent fiscal crises, the Governor is making some headway on his "universal" health-care plan.
California is carrying a $14 billion budget deficit and Mr. Schwarzenegger is suggesting across-the-board spending cuts. So perhaps it's unwise to introduce a new government entitlement that costs north of $14.4 billion a year. But then, you have to understand the Kremlinology of liberal health-care reform: This effort has as much to do with politics as public policy.
Mr. Schwarzenegger devoted more than a year to health feuding with Sacramento. He strafed his own party for opposing tax increases. Meanwhile, many Democrats (and most labor unions) fought the Governor's agenda because the subsidies weren't extravagant enough. Desperate, the Governor brokered a last-minute bargain with Assembly Speaker Fabian Nunez in December.
Thus Mr. Schwarzenegger's ambitions didn't die -- but for now, maybe call them the living dead. The negotiators rushed to patch together a policy framework before 2007 ended, but they didn't have the votes to actually pay for it. A two-thirds majority in the state legislature is required for tax increases, and Mr. Schwarzenegger alienated the Republicans he needed. So if this scheme is to become reality, new taxes on tobacco, hospitals and business must be ratified by voters in a November ballot initiative.
Assuming that the bill reaches Mr. Schwarzenegger's desk at all. His plan may hit a wall in the state Senate, where President Pro Tem Don Perata, a Democrat, has qualms about the plan's cost in the midst of a budget meltdown. Apparently, Mr. Perata is one of the few adults in Sacramento.
Mr. Schwarzenegger and his collaborators insist their proposal is revenue neutral and requires no new spending after the start-up costs. But the numbers are flimsy. When the bill moved out of the Assembly hopper, the financing fine print remained unresolved and legislators were practically working off the back of an envelope. Mr. Perata is leery of potential consequences for the state's general fund.
With good reason -- these health plans are always more expensive than predicted. But that's what happens with governance via political ego. Having invested himself so fully in the congratulations for "doing something" about health care, Mr. Schwarzenegger wanted a plan, anything to claim victory. He's spinning it as "post-partisan" pragmatism. At least he's not calling it a "free market" solution, as did Mitt Romney after he pioneered a similar plan.
Like Massachusetts, Mr. Schwarzenegger's program is built around the "individual mandate," which requires that everyone acquire insurance or else pay penalties. While bumping up subsidies for the uninsured, California would also lay down more severe insurance regulations, instituting price controls and compelling companies to offer policies to all applicants without regard to age or health condition. Such mandates have all but devastated the insurance markets in every other state where they've been tried, but then all this is the triumph of politics over experience anyway.
In addition to hiking state levies on cigarettes to $1.75 a pack and imposing a 4% tax on hospital revenues, there are new taxes on business. Companies must either spend a certain amount on covering their employees or pay a tax sliding between 1% and 6.5%, depending on the size of the payroll. If Mr. Perata is watching out for his state's bottom line, such taxes may drive businesses to Nevada or Arizona -- or simply lead them to dump their health-care liabilities on the state and pay the 6.5%.
None of this is what California's cooling economy needs -- to say nothing of the damage that such a plan would do to the insurance markets, or the national precedent it would set. "(snip)
and HERE is where Der Governator needs to start making big spending reductions if he's going to have any chance of keeping California out of bankruptcy ...
(snip)"Public Health Care
Department of Health care services MediCal Program
Public health care program for low income individuals
supposedly in a fiscally prudent manner.
The budget for this is a staggering $36,076,971,000
[ MediCal now constitutes just about 1/3rd of California's total $111 billion state budget - sic ]
Chop this thing in half and save a whopping $18,038,485,000
The only way to do that is reduce service.
Yes, this means rationing health care.
Too much money is wasted giving things away care for "free".
So called "free" services drive up the cost for everyone else.
Broken bones and emergencies are one thing.
Liver and heart transplants for patients with no insurance are another.
Excessive procedures for terminally ill should be eliminated. Without insurance, not much above pain killers should be provided.
The choices sound harsh, but we should not bankrupt the country with giveaway program that cannot be afforded. Oddly enough, if people are turned away responsibly, cost of insurance will drop."(snip)
from
... but instead, Schwarzenegger is proposing a state health care system that will charge employers a 6.5% additional 'tax' for California state run health insurance coverage for their employees as an alternative to buying private health insurance for their employees, which in turn will cause the California taxpayer to take on whatever the actual costs of providing health care for these employees turns out to be.
:O Cerously?
I am so glad I don't run a business in California.
Pretty soon the only small business in California will be noodle houses and taco carts.
I think it is time for the hospital ER biz to be more specific about what is an emergency and what isn't -- and the legislature is going to have to protect them on that.
If they are going to be so socialist in medicine, it's time to take the mask off, start opening state run urgent care facilities and simply call it what it is. At least they will have better cost controls.
Most seriously ! There are a lot of details at However the old 2002 figures used in this report ONLY showed a California 2002 state MediCal budget of a mere $27.2 billion dollars ! An overview can be found at - which shows among other things that 40% of California children are now receiving MediCal benefit coverage, and also shows that the federal gov't also provides at least an equal amount of tax dollars in 'matching funds'.Quote:
seriously ?
Thus the California MediCal budget is really only 1/2 of the story ... literally. Another fact from the above link is that federal tax money collected from taxpayers in other states injects at least another $38 billion dollars worth of 'federal matching funds' into California, meaning that the total amount of tax money being spent to provide MediCal health benefits actually exceeds $76 billion ! Essentially the same phenomenon is happening for other states with huge medical programs like NY and IL and MI and NJ. However, the matching funds aspect is a fairly well kept secret. So is the fact that California is now concentrating efforts to 'reduce' MediCal costs to the state budget not by major reductions in spending, but by lobbying for percentage increases in federal matching funds payouts i.e. allowing the federal taxpayers in other state to unknowingly pick up an even larger share of MediCal's costs !!!
Well, doing so leads to the same sort of problems that Canada, UK and other European Countries have experienced. If MediCal care becomes a public program where medical benefits are supposedly distributed 'equally', then how do you explain to very rich California residents that they can't get a heart transplant to extend their lives a few years without also funding heart transplants for the 'poor', for illegal aliens etc. More importantly, if very rich California residents are going to fall under the same socialized medicine system as the 'poor', and are going to be 'rationed' the same levels of health care, why on earth would very rich California residents keep residing in California ? What will actually happen of course is the evolution of a two tier health care system, where only the very rich are able to get state of the art health care by paying for it privately.Quote:
If they are going to be so socialist in medicine, it's time to take the mask off, start opening state run urgent care facilities and simply call it what it is
The two tier system will also be hastened along by decisions by the state of California to cut MediCal payouts to doctors etc by 10% across the board ... prompting the most talented and skilled doctors to abandon the MediCal system in favor of a private pay upper tier health care system ... undoubtedly also involving new private hospitals and clinics that won't accept MediCal patients because of the low officially mandated payout rates and the low or non-existant MediCal payouts for 'heroic', experimental, or high risk treatments. This is even more likely to be the case in California which has a high percentage of AIDS patients, many of whom are also comparatively rich.
This of course is would be a step backwards for middle class California residents in particular if their employers drop private health insurance in favor of paying the 6.5% 'tax' to make their employees eligible for MediCal (and thus offloading employers' risk of rising future health care costs). If the publicly funded health care system is to stay solvent then this will in turn mean strict State rationing of health care benefits for the poor and middle class alike i.e. no payouts for 'heroic' measures, no payouts for experimental treatments, no payouts for high risk organ transplants, etc.
I didn't mean to get bogged down in the relative merits of public health care, only to point out the HUGE cost component that MediCal already represents both to California taxpayers and to federal taxpayers nationwide. Ultimately, the MediCal care now being provided is not sustainably affordable, meaning that either fewer patients must be eligible for benefits, fewer and less expensive treatments must be mandated, state taxes must be increased, or some combination of all three. But so far the only measures being actively pursued are cutting payouts to doctors and hospitals by 10% for providing the same treatments (i.e. cutting their salaries / profit margins by 10%, or forcing them to RAISE medical bills for privately insured patients to make up the difference), and attempting to have more federal tax money transferred to California from taxpayers in other states !
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The scary part is that California is not alone. In New Jersey, Governor Corzine refuses to cut spending; has promised property tax relief and is reduced to doubling tolls every four years on the Parkway & Turnpike AND trying to introduce new ones on previously "free" highways like I-78; I-287; 18 and 440.
While it has a had a long history of LOCAL waste and corruption; New Jersey used to be a model of an efficient , LOW- Tax State. Not anymore. Now it's one of the highest tax states in the country and it's still going broke. New York too.
More Liberal Democratic government anyone ?
Before someone injures themselves jumping up to point out that Kean & Whitman were Republicans ( as was Pataki in N.Y.) all three were tax and spend Liberals or more accurately BORROW and spend Liberals WITH the connivance of Democrat Legislatures.
^^^ well to be completely correct, let's invent a composite term ...
Tax and Borrow and still spend it all RINO's
Total agreement that New York is not far behind. For the past few years NY has banked on huge tax revenues stemming from state income taxes on Wall St. businesses and individuals ... including the famous six figure end of year bonuses ! I saw it stated in some analysis blog that 20% of NY state total tax revenues stem from Wall St. Well guess what - in 2008 those tax revenues are going to fall off a cliff, and Gov. Spitzer knows this better than anybody.
Which is one reason why Spitzer is trying to out-do Corzine and Schwartzenegger
for budget tricks and gimmicks. Putting the NYS State Lottery on the market as a Derivative Option ? I'm not making this up. Spitzer wants to let investors "buy and bet" on what the total Lottery revenues will be for any one year.
that presupposes that the average voter CARES about how the state legislature is spending money. Unfortunately, in states like NY, CA, NJ etc. you now have a situation where 'poor' people wanting continued social welfare program benefits, plus 'civil servants' and gov't contractors wanting continued paychecks, can muster a 51% majority vote versus private sector taxpayers.Quote:
The legislature needs more financial analysts than lawyers these days.
and just when you thought that California might actually cut gov't spending ...
(snip)""The people of California are feeling the hit of the sub-prime mortgage crisis and housing slump," Schwarzenegger said in a statement today. "While other sectors of our economy remain strong, creating more than 15,000 new jobs last month, it's clear that California and the rest of the nation will have to weather this disruption for a while."
The construction and financial activities sectors, which include home-building and mortgage lending, posted the biggest losses in December, shedding a combined 6,200 jobs.
The governor said he instructed Finance Director Mike Genest to authorize the release of $300 million in funds for roads, highway and other transportation improvements. The Department of Water Resources will also begin preparatory work to allow $200 million of already allocated levee projects to move more quickly, he said. He also directed the Employment Development Department to extend its hours of operation at all job assistance centers to help displaced workers find jobs."(snip)
... which basically boils down to a belated realization that private sector employment in California is dropping rapidly (who'd a thunk it !!!). In light of California's 14 billion dollar budget deficit projection for this year, Der Governator's answer to rising private sector unemployment (no doubt heavily promoted by California senators and reps) is to INCREASE state spending by another 1/2 billion dollars in order to pay for the creation of more PUBLIC SECTOR jobs to replace the private sector jobs which have been lost !!! Of course this circles right back to the basic problem that increasing public sector jobs must be funded by increased taxes on the private sector or by driving the state even deeper into debt !!!
So far the only actual reductions in California state spending that have been proposed are ...
- releasing tens of thousands of criminals from California prisons before their sentences are completed
- closing state parks / charging hefty admissions fees
- reducing state gov't spending on education (which will only cause a mandatory increase in local gov't spending on education to replace the lost state funding)
... and even these baby step cost control measures are already drawing hues and cries !
the 'tin foil hat' crowd is speculating that Der Governator and other California politicians are simply treading water waiting for a concensus from California voters that they prefer the passage of state tax increases rather than spending cuts. Of course this isn't all that much of an intellectual reach, since over 50% of California voters are either 'low income' unskilled workers who don't actually pay taxes (but DO collect social welfare benefits), public sector employees or gov't contractors who depend on continued California gov't spending for continuation of their jobs, or the uber-rich who will be able to avoid actually having to pay higher taxes via purchasing California tax free muni bonds or by investing in a tax favored industry like alternative energy !
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California is great entertainment and all...
but all this just means people are going to bail outta that place and bring their stupid ideas with them wrecking other parts of the country.