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Thread: California Continues to Lead The Way

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    Banned Eric Stoner's Avatar
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    Default California Continues to Lead The Way

    Proving that it still leads the country in fruit and nut production, California's retread Governor Jerry Brown has just approved a new contract for state prison guards. They can now retire and cash out an unlimited number of vacation days. Most California employees may only cash out 80 days. Thus many guards will receive lump sums exceeding $100,000. I'm sure it's a coincidence that the prison guard's union contributed $2 million to Brown's election.

    In 1980, 10% of California's general fund went to higher education and 3 % to prisons. In 2010 it was 11 % to prisons and 7.5% to higher education. The national average cost of incarceration is $29,000 per inmate. In California it is $49,000. It would be cheaper to send the prisoners to Ivy League colleges. Dartmouth costs $42,000 a year.

    Brown wanted to get a referendum on this year's ballot to extend several "temporary" taxes and fees imposed in 2009 and due to expire. He needed two thirds of the legislature to approve putting such a measure in the ballot. He needed two Republican votes in each house of the legislature. To their credit, the Republicans hung tough and agreed to support such a referendum IF Brown agreed to certain reforms. Including to a pension system where more than 12,000 state and municipal retirees collect more than $100,000 per year. Brown refused so no referendum and thus no extension of the taxes and fees. Nonetheless the state is still taking in some $90 billion a year in revenue.

    Ronald Reagan got elected by over a million votes in 1966, in part, as a result of the fiscal irresponsibility of Brown's father Pat. At the time, California was still a relatively low tax state. Now it is one of the highest. But nobody in California ever has to hold a benefit for a retired prison guard.
    Last edited by Eric Stoner; 05-20-2011 at 10:32 AM.

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    Banned Melonie's Avatar
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    Default Re: California Continues to Lead The Way

    actually, your author's attempted point about California education spending cuts require a different perspective if you look 'under the hood' ...

    (snip)"Just how much public education funding has been reduced in recent years is a complicated question. The teachers union and other education groups say it is in excess of $20 billion over the past three years, but they focus on state funding and don't count federal stimulus dollars that have backfilled education by billions. They also include deferred payments, which is when the state delays making scheduled payments to schools.

    The state Department of Finance points to the Prop. 98 funding in the budget, which would be $7.3 billion less under the governor's proposal than it was prior to the recession. And the nonpartisan Legislative Analyst's Office says the best measure is per-pupil spending that takes into account all sources of funding for schools.

    By that measurement, funding has dropped 6.6 percent or about $540 per student over the past three years.(snip)




    As to the cost to California for its prison system, that's not surprising ...

    (snip)"become a California prison guard and watch the money roll in, says hard-working day laborer Allysia Finley:

    The job might not sound glamorous, but a brochure from the California Department of Corrections and Rehabilitations boasts that it "has been called 'the greatest entry-level job in California'-and for good reason. Our officers earn a great salary, and a retirement package you just can't find in private industry. We even pay you to attend our academy." That's right-instead of paying more than $200,000 to attend Harvard, you could earn $3,050 a month at cadet academy.

    And that's not all:

    Training only takes four months, and upon graduating you can look forward to a job with great health, dental and vision benefits and a starting base salary between $45,288 and $65,364. By comparison, Harvard grads can expect to earn $49,897 fresh out of college and $124,759 after 20 years.

    As a California prison guard, you can make six figures in overtime and bonuses alone. While Harvard-educated lawyers and consultants often have to work long hours with little recompense besides Chinese take-out, prison guards receive time-and-a-half whenever they work more than 40 hours a week. One sergeant with a base salary of $81,683 collected $114,334 in overtime and $8,648 in bonuses last year, and he's not even the highest paid.

    The guards also get longer vacations, awesome pensions, medical benefits forever and ever—and all at the public's expense"(snip)


    ^^^ eloquently making the case that being a California Prison Guard is probably a better 'career' investment than graduating from Harvard Law School !!!

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    Veteran Member Krill_'s Avatar
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    Default Re: California Continues to Lead The Way

    I saw that hit piece in the WSJ and would like to quote one response to it I liked--

    Excuse me but in what fucking universe are Corrections Officers 'spoiled'?

    They spend their workdays locked inside a prison, filled with angry young people locked away by a society that deals with most of it's social problems with incarceration, and they are the human face of that system that those inmates hate, the only part of that system close enough for the inmates to touch.

    Or to shank, to be blunt about it.

    Those officers protect affluent people like Ms Apple from the wrath of the poor, they are part of the thin blue line that protects the bodies and belongings of the rich from the most aggressive elements of the lower classes.

    Corrections Officers do all of that - and unlike cops they don't even get to carry a pistol while doing it!
    I think it's pathetic that we live in a society where nobody thinks twice about a hedge fund manager baking $100 million by levering a fraction of a point somewhere, but someone who actually works in a shitty job and is compensated with a decent living wage is viewed with suspicion.

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    Default Re: California Continues to Lead The Way

    ^^^ I suppose the difference lies in the fact tht the highly compensated hedge fund manager's $100 million in earnings ( and very few are even close to that level ) is the result of their own financial education and expert market knowledge ... with the money actually being provided by other 'investors' who willingly assumed risks when making stock / bond / commodity market investments. Also, for every hedge fund manager who 'won' big time, another hedge fund manager 'lost' ( i.e. assumption of personal financial risk )

    In comparison, the California Prison Sargeant's ~$200,000 annual total compensation really didn't require much in the way of education. The money paid to the California Prison Sargeant was the result of involuntary taxation of California state residents and businesses. As to the actual level of personal risk involved for the California Prison Sargeant, Prison Guard Union stats show that 13 California prison guards have been killed over the course of the last 30 years. Far more California FARM workers have been 'killed on the job' than prison guards over the same time period, despite pay rates that were FAR below that of prison guards.

    Arguably, a certain political 'playbook' instructs advocates to always bring up the point that police, firemen, prison guards etc. endure 'dangerous' working conditions and thus are justified in receiving comparatively high salaries and benefits. But in reality, there are many private sector professions that are equally dangerous at least from a statistical standpoint, at far lower pay rates ... such as fishermen, loggers, farmers / ranchers etc.



    While stats are sketchy, one figure I found showed a workplace fatality rate of 11 per 100,000 for prison guards, versus 129 per 100,000 for fishermen, 116 per 100,000 for loggers, 40 per 100,000 for farmers / ranchers etc. Nope, the attempted 'high risk job' justification for high prison guard pay rates simply doesn't fly factually speaking ... even if the prison guard workplace fatality stat is off by a factor of 2:1 .

    However, one large structural difference between the public sector so-called 'dangerous' jobs and the private sector dangerous jobs is that the public sector workers are unionized ... and pay union dues which are in turn contributed to those politicians who serve as their 'bosses' in terms of negotiating their salary and benefit levels. Since the money to pay those public sector workers does NOT come from the politician 'bosses' but from ( unwitting ) taxpayers, those politician 'bosses' have essentially nothing to lose but much to gain by approving public sector worker salary and benefit levels that are far above those available in the private sector.

    Where prison guards are concerned, there IS an available alternative for states to allow 'private sector' managed prison operation ... which results in significantly lower costs to state taxpayers ... due in no small part to prison guards employed by 'private sector' prison management companies being compensated at much more 'reasonable' pay and benefit levels versus their public sector prison guard counterparts. Many states have exercised the 'private sector' prison operation option. However, despite DEEP state budget problems, California is not among them.

    Circling back on point, the level of compensation via salary and benefits provided to California gov't employee prison guards is ( ludicrously ? tragically ? unsustainably ? ) high in relation to the education / skill level actually required to qualify for and perform that job. As pointed out above, the level of compensation and benefits provided to California gov't employee prison guards is on a par with that of a Harvard Law School graduate attorney, and FAR above the salary and benefit levels paid by 'private sector' prison management corporations to private sector prison guards who perform exactly the same functions and assume exactly the same risks. Thus the continuation of the status quo re California gov't employee prison guards, and especially the official 'expansion' of California prison guard compensation and benefit levels as cited in the OP, has to be attributable to OTHER reasons.

    I'm sure it's a coincidence that the prison guard's union contributed $2 million to Brown's election.
    ^^^ undoubtedly a pure coincidence LOL !!!


    ~
    Last edited by Melonie; 05-22-2011 at 05:14 AM.

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    Veteran Member Krill_'s Avatar
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    Default Re: California Continues to Lead The Way

    I gather you are staunch libertarian Melonie, so we could probably go back and forth for a hundred pages and not cede any ground.

    Anyway, what do you feel is appropriate compensation for public employees? In the state I live in there is a labor board that governs negotiations between the state and public employee unions with the purpose of harmonizing wages and benefits vis-a-vis the private sector. It works fine and we haven't had to resort to draconian measures like private prisons that arguably come with worse long term consequences than public prison guard unions; i.e. they (the private prison business) fight for more frequent and longer sentencing and have safety records far worse than comparable publicly operated prisons.

    California's government is a mess on all fronts but that doesn't make it an example of failed liberal policies with the assumption that the opposite is a fix all. There's been a string of policies spanned out over decades from liberals and conservatives alike that have led to their current woes. Unfortunately an honest assessment of the situation and middle of the road solution never seems to be in the cards. I would argue that is because the more people a specific policy governs, negative influences rise at an exponential rate (interest groups not interested in reasonable approaches). That's why the federal government is gridlocked and state governments in California, Texas and New York have also slowly ground to gridlock. The result being the status quo of bad or untenable policies, and radical policies looking more attractive in the public eye. Does this make any sense?

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    Default Re: California Continues to Lead The Way

    I gather you are staunch libertarian Melonie, so we could probably go back and forth for a hundred pages and not cede any ground.
    I'm a libertarian on most issues ... although not a 'staunch' one. And I'll readily agree with you that both conservative and liberal policies can lead to 'failure' if pursued in a vacuum. All such policies have unintended consequences. But my real 'bitch' stems from gov't officials who are fully aware of the 'unintended' consequences beforehand, but advocate such policies anyhow !


    I would argue that is because the more people a specific policy governs, negative influences rise at an exponential rate (interest groups not interested in reasonable approaches). That's why the federal government is gridlocked and state governments in California, Texas and New York have also slowly ground to gridlock. The result being the status quo of bad or untenable policies, and radical policies looking more attractive in the public eye. Does this make any sense?
    I partially agree that, the tougher things get from a personal standpoint, the more likely it is that registered voters will permit the pursuit of 'radical' policies. However, if one adds up the percentage of registered voters who don't actually have to pay income taxes, the percentage of registered voters whose careers depend on the continuation of 'overly generous' public sector worker pay and benefit policies for as long as possible, the percentage of registered voters whose personal standard of living depends on the continued largesse of gov't social welfare programs, etc., then the realistic possibility of having any 'radical' policy voted into effect ... or any current large scale gov't policy voted OUT of effect ... is relatively miniscule. Last november's election results were fairly strong proof of this, i.e. liberal versus conservative equals 'gridlock'.


    In the state I live in there is a labor board that governs negotiations between the state and public employee unions with the purpose of harmonizing wages and benefits vis-a-vis the private sector. It works fine and we haven't had to resort to draconian measures
    I would wager that your state isn't paying it's gov't employee prison guards $200,000 a year either !!! I don't have any personal vendetta against gov't employees per se. Indeed there is a consideration that promises made should be promises kept ! But when said promises have reached the level of the ridiculous, with one such example being that the gov't is forced to fire current gov't workers in order to continue to pay for benefits promised to retired gov't workers, something has to give. The root of the problem of course is that everyone refuses to admit that the vast majority of states are technically bankrupt ... such that past promises and present spending levels ( = gov't employee salary levels ) need to be readjusted to realistically reflect the actual ability of those states to balance future budgets.
    Last edited by Melonie; 05-22-2011 at 12:15 PM.

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    Veteran Member Krill_'s Avatar
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    Default Re: California Continues to Lead The Way

    Quote Originally Posted by Melonie View Post
    However, if one adds up the percentage of registered voters who don't actually have to pay income taxes, the percentage of registered voters whose careers depend on the continuation of 'overly generous' public sector worker pay and benefit policies for as long as possible, the percentage of registered voters whose personal standard of living depends on the continued largesse of gov't social welfare programs, etc., then the realistic possibility of having any 'radical' policy voted into effect ... or any current large scale gov't policy voted OUT of effect ... is relatively miniscule. Last november's election results were fairly strong proof of this, i.e. liberal versus conservative equals 'gridlock'.
    I won't claim to be an expert on California's budget but yes, it is curious that that an obviously broken system of public employee pay and benefit has been kept off the table as a remedy for their fiscal problems. The problem I see is there are people like Scott Walker (Wisconsin) pushing hard for strait union busting which is an automatic nonstarter for any hope of a reasonable negotiation. So before negotiations of any kind take place the narrative is in place of a Republican wanting to decimate unions (and by extension the middle class) and Democrats uniting to stop it. At which point, it becomes politically impossible for the legislature to actually do anything like negotiating reasonable contracts in a budget.


    The root of the problem of course is that everyone refuses to admit that the vast majority of states are technically bankrupt ... such that past promises and present spending levels ( = gov't employee salary levels ) need to be readjusted to realistically reflect the actual ability of those states to balance future budgets.
    Well, raising revenues (i.e. taxes) and cutting salaries / services at the same time is certainly never popular. Some states have a revenue problem, some have a spending problem and many have both. One tidbit I found amusing last week was Rick Perry crying that the federal government had declared war on Texas for not declaring a state of emergency for the wildfires while at the same time the Texas legislature voted to slash funding to fight wildfires by 1/3. There seems to be a huge gulf between the amount of taxes people are willing to pay and the services they expect government to provide.

    Dunno though, should be interesting to see how the federal deficit ceiling battle plays out this summer and whether the "winning" side becomes emboldened on the state level.

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    Default Re: California Continues to Lead The Way

    should be interesting to see how the federal deficit ceiling battle plays out this summer and whether the "winning" side becomes emboldened on the state level.
    I doubt that there will actually BE a winning side. More likely 'gridlock' will continue. So will the gov't accounting games to get around the statutory debt limit via stopping contributions to gov't worker pension funds etc. So will current levels of gov't spending. The 'gold foil hat' crowd would probably tell you that the nearest 'resolution' for this 'gridlock' will come as a result of the november 2012 election ( i.e. tax increases versus spending cuts ).

    The same 'gold foil hat' crowd would probably tell you that bankrupt gov't tax versus spend dilemmas in US states can look towards Greece / Spain / Ireland etc. as a 'predictor' of likely future developments ... from

    (snip)"A year after an insolvent European continent realized it is long overdue to implement fiscal consolidation, aka tightening, also known as 2010's keyword of choice: "austerity", the political regimes who have supported fiscal prudence are one after another falling victim to the general population's dissatisfaction with the gradual elimination of a myriad of socialist policies. Following recent electoral losses in Germany, not to mention the overthrow of the Portuguese government, which like Belgium, continues to be in limbo, today we move on to the second to last domino in the PIIGS chain: Spain (and Italy is next: S&P took the time at 6pm on Saturday to remind everyone about that particular unpleasant fact).

    Per Reuters: "Spaniards began voting on Sunday in local and regional polls expected to deal heavy losses to the ruling Socialists, who are blamed for widespread unemployment that has set off a wave of pre-election protests. Tens of thousands of Spaniards demonstrated in the past week in city squares around the country against austerity measures that have kept a fiscal crisis at bay but aggravated the highest jobless rate in the European Union. [as a reminder a webcam of the Madrid protests can be found here]. The protesters have called on Spaniards to reject the Socialists and the center-right Popular Party, the main two political options in Spain." The problem is that when you overthrow socialists, it is unlikely that you will get more socialism down the road. Which, however, is what everyone in this country of 21% unemployment, and nearly 50% joblessness in the 18-25 age group really wants. "(snip)


    The obvious take-away is that nearly everybody already benefitting from a gov't job / food stamps / social welfare benefits etc. wants a continuation of whatever gov't 'trough' they are currently feeding from, but at the same time nobody actually wants to have to personally pay more ( via increased taxes ) to keep filling that 'trough'. This is likely to lead to an unresolvable domestic political battle ... that will in turn eventually be resolved by 'force' from outside agents i.e. bond vigilantes who will simply deny these gov'ts access to additional borrowed money. At that point these gov'ts will have no options available besides raising taxes or cutting spending - probably both, and by a sizeable margin.

    And indeed California will be one of the first US states ( after Michigan ? ) to be faced with that dilemma. However, depending on the political balance in Washington, California and Michigan also have another possible option ... a bailout by US federal taxpayers ( or to be more precise, ANOTHER bailout by federal taxpayers given that last year's federal stimulus spending in large part amounted to federal taxpayers financing large federal grants to 'blue' states ). However, if that gets started in earnest, it could set the stage for some very nasty future developments i.e. Civil War 2.

    ~
    Last edited by Melonie; 05-22-2011 at 04:02 PM.

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    Default Re: California Continues to Lead The Way

    here's another California 'money saver' ... from

    (snip)Justices upheld an order from a three-judge panel in California that called for releasing 38,000 to 46,000 prisoners. Since then, the state has transferred about 9,000 state inmates to county jails. As a result, the total prison population is now about 32,000 more than the capacity limit set by the panel.

    Justice Anthony M. Kennedy, speaking for the majority, said California's prisons had "fallen short of minimum constitutional requirements" because of overcrowding. As many as 200 prisoners may live in gymnasium, he said, and as many as 54 prisoners share a single toilet.

    Kennedy insisted that the state had no choice but to release more prisoners. The justices, however, agreed that California officials should be given more time to make the needed reductions.

    In dissent, Justice Antonin Scalia called the ruling "staggering" and "absurd."

    He said the high court had repeatedly overruled the 9th Circuit Court of Appeals for ordering the release of individual prisoners. Now, he said, the majority were ordering the release of "46,000 happy-go-lucky felons." He added that "terrible things are sure to happen as a consequence of this outrageous order." Justice Clarence Thomas agreed with him.

    In a separate dissent, Justice Samuel A. Alito Jr. and Chief Justice John G. Roberts Jr. said the ruling conflicted with a federal law intended to limit the power of federal judges to order a release of prisoners.

    State officials and lawyers for inmates differ over just how many prisoners will have to be released. In recent figures, the state said it had about 142,000 inmates behind bars, and the judges calculated the prison population would need to be reduced to about 110,000 to comply with constitutional standards.

    Kennedy said the judges in California overseeing the prison-release order should "accord the state considerable latitude to find mechanisms and make plans" that are "consistent with the public safety."

    The American Civil Liberties Union said the court had "done the right thing" by addressing the "egregious and extreme overcrowding in California's prisons."

    David Fathi, director of the ACLU national prison project, said "reducing the number of people in prison not only would save the state taxpayers half a billion annually, it would lead to the implementation of truly rehabilitative programs that lower recidivism rates and create safer communities."

    Meanwhile, the court took no action on another California case in which a conservative group is challenging the state's policy of granting in-state tuition at its colleges and universities to students who are illegal immigrants and have graduated from its high schools.

    The justices said they would consider the appeal in a later private conference."(snip)



    Since the state of California will now be releasing about 1/3rd of it's incarcerated criminals, it will be interesting to see whether or not 1/3rd of California's gov't employee prison guards will get pink slips !!!

    Also, by pure 'coincidence', California allows convicted felons to vote as long as they are not currently incarcerated !!!

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    Default Re: California Continues to Lead The Way

    More fiscal sleight of hand from La La Land : California is leading other states by stealing ( Ooops ! Excuse me. I mean borrowing... um... er , the hell with it , TAKING ! ) money paid by banks and other lenders for foreclosure relief as part of the much ballyhooed National Foreclosure Settlement. Not a nickel is going to help borrowers stay in their homes. Instead California, and some other states are using the money to plug short term budget deficits rather than cut spending.

    Just like many states did with money from the National Tobacco Settlement. Cats Do Not Bark ! Whenever a pot of money is available , politicians will use every trick and excuse to get their hands on it and spend it.

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    Default Re: California Continues to Lead The Way

    well he's not having much luck closing California's budget deficit by any other means. From


    (snip)"No governor, under the system we have in California, really has the ability to deal with the mess we've created," said Mark Paul, a former deputy state treasurer and the coauthor of a book about the state's financial quandary. "This is the third governor in a row who has run up against the same problem."

    Brown is stuck between Republicans who refuse tax hikes, Democrats who resist cuts and a tangle of special interests and voter-mandated budget requirements that make it politically easier to push the problem down the road. That's what Brown has started to do.

    Last year, after being unable to persuade Republicans to help raise taxes, Brown signed a budget that made some deep cuts but dodged others by assuming a $4-billion revenue windfall that never arrived. In January, he remained optimistic that the rebounding economy would fill state coffers. Now he has acknowledged that the money hasn't come in and the deficit has nearly doubled to almost $16 billion.

    To close that gap, Brown pins most of his hopes on voters approving $8.5 billion in tax hikes in November. He would make up the difference with spending reductions, a raid on unused dedicated funds and the type of one-time savings he once derided as typical Sacramento trickery.

    Brown defended recent decisions to defer some permanent cuts in hope of an economic turnaround.

    "When I have to cut and people lose their jobs, a mother loses her child care, I'm reluctant to do that if it doesn't have to happen," Brown said at a news conference Monday.

    Still, in a familiar refrain, he also lambasted "more than a decade" of bad budget decisions and warned that there will be "a day of reckoning."

    It's natural to want to avoid permanent pain, said Thad Kousser, a political scientist at UC San Diego. It's easier, he said, "to convince everyone to take their medicine when they only have to do it for a little while."

    "No one thinks this is a permanent economic downturn," he continued, "so no one … wants to make permanent choices. That includes the governor, the interest groups and the voters."

    Many experts pin the state's perennial problems on ballot measures that constrain taxes — as Proposition 13 does — or require that the state devote specific amounts to certain services. Changing such requirements is considered politically impossible because the state's voters cherish their sometimes contradictory mandates.

    That limits government's ability to adjust to economic downturns, like the ones that socked California after the dot-com and housing busts. Spending mandates don't necessarily decline when revenue does, and there are few ways to raise money to close the gaps.

    Cuts are no picnic either. Reducing parts of the budget that are not protected — the court system, employee pay, healthcare for the poor — is always difficult and takes a toll on politicians' popularity, said Mike Genest, who was Schwarzenegger's budget director.

    "Every one of those things has very powerful special-interest groups organized against that stuff," he said. "You're left with gimmicks and things that don't work, or things that will work but will only work once."(snip)

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    Default Re: California Continues to Lead The Way

    California voters approved Proposition 30 which raises the state sales tax from 7.25 % to 7.5.
    The OLD income tax rate on millionaires WAS 10.3 %. Now that rate applies to those with incomes between $250,000 and $300,000. It is now 11.3% on incomes between $300,000 and $500,000 ; 12.3 % on $500,000 and $1 million; and the new top rate on incomes over $1 million is now 13.3 % !

    Look for more tax avoidance and more high earning Californians to pack up and leave for neighboring lower tax states like Arizona, Nevada, Idaho and even Oregon.

    It will be interesting to see what effect these increases have on California's employment picture as many businesses will cut back on new hires and may even lay off workers. Worst of all, there has been little to no movement on controlling state spending, especially pensions and other benefits for state workers.

    New revenues are projected to be anywhere from $8 billion ( according to Dum Dum Brown ) to as low as 5.9 % according to some private, non-partisan estimates. For Tax Year 2012 ONLY ! These increases are retroactive to income earned since January 1, 2012 and NOBODY except Brown is making any projections for the out years. And we all know how accurate HIS revenue projections have proved to be lol.

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    Default Re: California Continues to Lead The Way

    Eric, the major 'revalation' from last week's developments is that in practical terms 'it doesn't matter'. On the surface, the above amounts to a <1% increase in overall retail prices for all Californians ... no immediate change in the size of take home paychecks for middle class Californians ... no change in the size of unemployment checks, SNAP card credits ... no change in the size of California public sector worker paychecks etc.

    And for California's uber-rich, what's the difference between leveeing a 10% tax rate on a triple tax free California municipal bond or a 13% tax rate on a triple tax free California municipal bond ??? There isn't any !!! And why worry about rising debt levels ??? The interest rate paid out to the uber-rich owners of future California municipal bonds will be even higher than it is today if California's credit rating experiences more downgrades !

    As to the concept of 'unfunded liabilities', California gov't pension paychecks are still being sent out so why worry. And in regard to the concept of California businesses folding or moving, the recent vote by Hostess workers which resulted in the company shutting down didn't appear to upset the ( arguably self-inflicted ) newly unemployed Hostess workers in California ... who will merely trade their former paychecks for 99 weeks worth of unemployment checks, plus food stamp benefits, etc. ... while waiting for California to create some new public sector 'stimulus' jobs !

    The above appears to be the 'new reality' in regard to California economic policy. This policy isn't going to change as long as California is still able to keep writing checks for social benefits and for pension benefits and for public sector employee paychecks and for muni bond interest payments ! Sure, the financial calculations all show that major economic 'damage' will continue to occur to California's private sector economy / businesses. But those 'rich' business owners deserve to pay their fair share. And as long as California keeps sending out benefit checks, pension checks, gov't worker paychecks, and tax free muni bond interest payments, there aren't any 'apparent' problems worth worrying about.

    And if, by some strange 'coincidence', California somehow finds itself unable to send out benefit checks, pension checks, gov't worker paychecks, or tax free muni bond interest payments within the next four years, Californians still don't have to worry because a US federal 'bailout' will surely follow.

    The concensus on 'professional investor' boards is that the above trend is now clear and clearly unstoppable. Thus the only logical response is to make the trend your 'friend'. Accordingly, the sale of California tax free municipal bonds has gone 'off the charts' over the past week.
    Last edited by Melonie; 11-17-2012 at 01:38 AM.

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    Default Re: California Continues to Lead The Way

    Hmmm. You're right as ususal BUT some effects have been there for all to see and are likely to get WORSE ! For instance, California has lost some 16,000 jobs in the film and T.V. industries. Mostly to New York, believe it or not. Why ? Lower taxes.

    The fact remains that the trend line for California is clearly downhill and is unlikely to improve any time soon. At some point Dum Dum et. al. WILL run out of other people's money.

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    Default Re: California Continues to Lead The Way

    ^^^ at the risk of repeating myself, if California winds up doing additional damage to the state's credit rating via ongoing deficit spending in excess of tax revenues ...

    A. this is a GOOD thing for the uber-rich California residents who would like nothing better than to loan their money to the California state and local gov'ts in exchange for a 6-8-10% TAX FREE interest payment on future California muni bonds. This will allow them to side-step California's uber-high personal income tax as well as higher US federal taxes, and thus avoid thoughts of moving out of state / country.

    B. this doesn't matter to California public sector workers and retirees ... as long as those checks keep being printed every week nobody cares what happens 5 years down the road.

    C. this doesn't matter to California social welfare benefit recipients either ... as long as those 'checks' keep being printed every month nobody cares what happens 5 years down the road.

    D. if the bond market gets reluctant, an implied or stated federal guarantee is virtually a given for the next 4 years at least ... which will effectively make the citizens of balanced budget states involuntary 'cosigners' for California's state gov't debt.

    Agreed that when the citizens of balanced budget states run out of money, THEN the situation will become problematic. But that's years down the road so, for the present, nobody cares !!!

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    Default Re: California Continues to Lead The Way

    Quote Originally Posted by Melonie View Post

    And if, by some strange 'coincidence', California somehow finds itself unable to send out benefit checks, pension checks, gov't worker paychecks, or tax free muni bond interest payments within the next four years, Californians still don't have to worry because a US federal 'bailout' will surely follow.
    This is true all over the world..... Interest rates no longer reflect the credit risk of the entity.... They represent the ability of the entity to be bailed out.... In the case of nations, Central Bankers come to the rescue.
    The country has been looted.

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    Default Re: California Continues to Lead The Way

    Quote Originally Posted by Melonie View Post
    ^^^ at the risk of repeating myself, if California winds up doing additional damage to the state's credit rating via ongoing deficit spending in excess of tax revenues ...

    A. this is a GOOD thing for the uber-rich California residents who would like nothing better than to loan their money to the California state and local gov'ts in exchange for a 6-8-10% TAX FREE interest payment on future California muni bonds. This will allow them to side-step California's uber-high personal income tax as well as higher US federal taxes, and thus avoid thoughts of moving out of state / country.

    B. this doesn't matter to California public sector workers and retirees ... as long as those checks keep being printed every week nobody cares what happens 5 years down the road.

    C. this doesn't matter to California social welfare benefit recipients either ... as long as those 'checks' keep being printed every month nobody cares what happens 5 years down the road.

    D. if the bond market gets reluctant, an implied or stated federal guarantee is virtually a given for the next 4 years at least ... which will effectively make the citizens of balanced budget states involuntary 'cosigners' for California's state gov't debt.

    Agreed that when the citizens of balanced budget states run out of money, THEN the situation will become problematic. But that's years down the road so, for the present, nobody cares !!!
    A- Yes, so long as the interest on Muni bonds continues to be triple tax exempt. What happens if the Feds revoke the Federal exemption ? As they ought to do btw.

    B- AGREED !

    C- You are right again, BUT

    D- Who says so ? One of the few things I've given Obama credit for is saying : "NO" to California every time it has tried to get a Federal bail-out. I don't know of anything he has said or done that indicates a change in his position.

    When I spoke about "OPM" I was limiting it to California and Californians. Right now, California sends more money to Washington than it gets back. One of many ridiculous ironies in our ridiciulous system.

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    Default Re: California Continues to Lead The Way

    ^^^ actually, the California federal tax money equation has changed significantly ...


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    Default Re: California Continues to Lead The Way

    Just a quick look at that map..... and you can see the beauty of running deficits.
    The country has been looted.

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    Default Re: California Continues to Lead The Way

    Quote Originally Posted by mikef View Post
    Just a quick look at that map..... and you can see the beauty of running deficits.
    That's right. On a Federal level we are getting $5 of government but only paying $3 for it.

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    Default Re: California Continues to Lead The Way

    Honestly, I'm not sure that there is a direct correlation between state budget issues and the net flow of federal tax dollars. I'm guessing that federal receipts to return measurement is driven as much by (1) the affluence of the state's population; and (2) political favoritism, as anything else.

    In any event, CA is yet one more example of what happens when the political pigs run wild. Tax receipts are like cocaine - the more they get, the more they need. It should come as no surprise that the biggest tax rate pigs are also the states with the worst budget problems. This is what happens when you hand control of ever increasing shares of economic spending to politicians - they fuck it up - every - single - time. That, of course, is because their spending decisions are driven by political priorities rather than fiscal responsibility. And worse, once the trouble starts, these dipshits will knowingly watch it unfold, and even do things to worsen matters, rather than try to get in front of it because it is more convenient to have the political cover of a catastrophe in order to effect serious changes.

    I am seriously starting to believe that people should be required to pass a basic civics and economics test before they are allowed to vote. I hate the thought that my financial well being, and that of my children, continues to be heavily influenced by voters with little understanding of how the economy works and who elect people based upon what they can get from the government, which in turn leads to an even more entrenched entitlement mentality. Looking at Greece, for example, I was actually shocked at the scope of rioting over spending cuts and thought that every healthy, grown man in those crowds should have had his kneecaps smashed in with a baseball bat.

    My frustration levels are high enough that I can only post in here so often - LOL.

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    Default Re: California Continues to Lead The Way

    Quote Originally Posted by rickdugan View Post
    Honestly, I'm not sure that there is a direct correlation between state budget issues and the net flow of federal tax dollars. I'm guessing that federal receipts to return measurement is driven as much by (1) the affluence of the state's population; and (2) political favoritism, as anything else.

    In any event, CA is yet one more example of what happens when the political pigs run wild. Tax receipts are like cocaine - the more they get, the more they need. It should come as no surprise that the biggest tax rate pigs are also the states with the worst budget problems. This is what happens when you hand control of ever increasing shares of economic spending to politicians - they fuck it up - every - single - time. That, of course, is because their spending decisions are driven by political priorities rather than fiscal responsibility. And worse, once the trouble starts, these dipshits will knowingly watch it unfold, and even do things to worsen matters, rather than try to get in front of it because it is more convenient to have the political cover of a catastrophe in order to effect serious changes.

    I am seriously starting to believe that people should be required to pass a basic civics and economics test before they are allowed to vote. I hate the thought that my financial well being, and that of my children, continues to be heavily influenced by voters with little understanding of how the economy works and who elect people based upon what they can get from the government, which in turn leads to an even more entrenched entitlement mentality. Looking at Greece, for example, I was actually shocked at the scope of rioting over spending cuts and thought that every healthy, grown man in those crowds should have had his kneecaps smashed in with a baseball bat.

    My frustration levels are high enough that I can only post in here so often - LOL.
    Most surveys that measure now much particular states "pay out" and "get back" include transfer payments to individuals , corporations, hospitals ( Medicare & Medicaid ) and not just direct payment to a state's coffers. I think the largest direct transfers to state treasuries are for Federal aid to education and transportation funding. Where it gets ridiculous is when the folks in N.J. and N.Y. help to pay for Interstates in North Dakota and Alaska. Who says THAT is fair ?

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    Default Re: California Continues to Lead The Way

    Quote Originally Posted by Eric Stoner View Post
    Most surveys that measure now much particular states "pay out" and "get back" include transfer payments to individuals , corporations, hospitals ( Medicare & Medicaid ) and not just direct payment to a state's coffers. I think the largest direct transfers to state treasuries are for Federal aid to education and transportation funding. Where it gets ridiculous is when the folks in N.J. and N.Y. help to pay for Interstates in North Dakota and Alaska. Who says THAT is fair ?
    I'm sure the folks in North Dakota & Alaska will bristle at the rebuliding that will go on in the storm ravaged areas..... Helped with below market rate Federal Hurricane Insurance. Not to mention the Federal money that is/will be used for new sand dunes.
    The country has been looted.

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    Default Re: California Continues to Lead The Way

    That is a legitimate area for debate and discussion. It opens up a huge can of worms with multiple issues including whether we should build at all in certain areas.

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    Default Re: California Continues to Lead The Way

    ^^^ actually, this basic point is shared with a host of other financials as well ... because it constitutes 'mispriced' risk backed by US taxpayer guaranteed payments ( i.e. subsidies ) when underpriced risk finally comes home to roost. On the topic of storm damage costs, we've all known since hurricane Katrina swept through New Orleans that if residents were forced to pay market rates for flood insurance they wouldn't have been able to afford living there in the first place, and if forced to pay market rates for flood insurance on replacement housing many couldn't afford to live there today. Enter the US federal gov't offering taxpayer subsidized flood insurance. Same situation applies to flood prone areas of NY, NJ, CT etc. But financial 'reality' dictates that residents of low risk areas must subsidize others living in high risk areas, although such transfer of federal tax dollars out of low risk states and into higher risk states isn't accounted for in any relative tax payment / benefit analysis I have ever seen.

    Same point applies to many other financials, with another glaring example being tax free California muni bonds discussed earlier in this thread. Once actual market based private sector bond loss insurance premiums rose as a result of California's deteriorating credit rating and growing state deficits, the California gov't entities simply stopped buying insurance for newly issued muni bonds. Now they rely on implied gov't 'insurance' against investor losses on these muni bonds, via the FED becoming a buyer of last resort, via a federal taxpayer financed direct future bailout of fat cat bond holders etc.

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