California's fiscal situation contiues to get more bleak. The budget is projected to have a deficit of $20 billion, despite a total of $60 billion in program cuts, tax hikes and Federal bailout funds enacted last year!
Lawmakers are stuck in a stalemate: Republicans, such as Governor Arnold Schwarzenegger read Bush 1's lips: NO NEW TAXES! Democrats are being equally obstinate by refusing to sign any spending cuts. This suggests that the budget will once again be forced to extend its legal due date and IOUs will need to be issued AGAIN!
Democrats control the Legislature and are dismissive of the proposed budget. In additon, they view the proposal as nothing more than a re-tread of last year's budget, which was rejected.
Democrats do applaud the $6.9 billion owed to the State as a result of various mandates.
The Governor has been particularly sharp in his criticism of Democrats, declaring in his usually upbeat State-of-the-State address, that the Federal Government is partly to blame. He also appeared on NBCs "Meet The Press" and said that the Democratic legislature was also at fault.
Schwarzenegger particularly irritated Democrats by taking umbrage with the possible Federal medical overhaul known as "Obamacare", which would pile billions in spending onto the state. Yet the Governor pushed his own version of healthcare reform only 3 years ago!
Schwarzenegger DOES have some valid points. The Federal Government has failed to protect the state's borders, which cost California nearly $1 billion.
If the $6.9 billion does not materialize, The Governor will aim to eliminate the State's welfare program called CalWorks. He will also terminate the healthy families healthcare program for poor kids. He'd also remove the program called In-House-Services, which provides care for the elderly and disabled. Furthermore, the plan would include an additional 5% reduction in wages on top of the 10% cut enacted already!
California's budget negotiations will prove quite messy. But the election of 2010 will undoubtedly shake things up and hopefully end the stalemate.
Thanks for reading! Tomorrow, we re-visit Gold.
Marko's Take
Showing posts with label IOUs. Show all posts
Showing posts with label IOUs. Show all posts
Monday, January 11, 2010
Sunday, December 13, 2009
California Crisis Deepens.... Part 3
The situation in California continues to deteriorate despite all the preventitive measures employed. John Chiang, State Controller, just came out with his most recent report. In that report, he went into detail as to the current status of the emergency IOUs issued.
Chiang notes that the IOUs issued between July 2 and September 4, 2009, totalled 450,000 - worth $2.6 billion. He further reports that they have STOPPED accruing interest as of September 4th, the maturity date. The interest had been a rather paltry 3.75% to begin with!
Hurt by heavy investment losses over their last fiscal years, giants CalPers (California Public Employment Retirement System) and CalSTRs (California State Teachers Retirement Systems) were affected by downgrades from Moody's, a highly recognized credit rating agency. Moody's specifically noted the lowered possibility of these funds to meet future obligations to pensioners.
The two funds together STILL hold a staggering $338 billion in assets despite losses of more than 25% in their last fiscal years. CalPers remains the single largest pension fund.
According to the LA Times, the California State University System which incorporates 23 campuses and 450,000 students, has been subject to budget cuts of more than $500 million. As a result, "Cal State" has been unable to avoid staff and faculty furloughs, steep student fee hikes and severe reduction in enrollment.
Currently, according to a variety of analysts, California faces a $21 billion deficit for the current fiscal year, ending June, 30th. Futhermore, the deficit for the subsequent two fiscal years is projected to rise to ANOTHER $44 billion!
On the plus side, the news is rather scant. In October, for example, prices of homes actually up-ticked, although being driven by the Federal tax credit for first-time buyers. In addition, the state ADDED 26,000 new jobs. So, if these sources are correct, California is firing teachers and hiring more adminstrators. Talk about the left hand not knowing what the right hand is doing! Whodda thunk it?
Meanwhile, leading Republican candidates to replace the current governor, former Ebay head Meg Whitman and Steve Poizner, have offered no solutions to the fiscal gap on their own. What's a mother to do?
As you can clearly infer, California appears to be entering some sort of "death spiral". But, fortunately this only represents 1/10th of the population of the United States!
I hope you find this essay useful and informative. I welcome comments, both pro and con. I will continue to cover California over the ensuing weeks and months as new issues surface.
Marko's Take
Chiang notes that the IOUs issued between July 2 and September 4, 2009, totalled 450,000 - worth $2.6 billion. He further reports that they have STOPPED accruing interest as of September 4th, the maturity date. The interest had been a rather paltry 3.75% to begin with!
Hurt by heavy investment losses over their last fiscal years, giants CalPers (California Public Employment Retirement System) and CalSTRs (California State Teachers Retirement Systems) were affected by downgrades from Moody's, a highly recognized credit rating agency. Moody's specifically noted the lowered possibility of these funds to meet future obligations to pensioners.
The two funds together STILL hold a staggering $338 billion in assets despite losses of more than 25% in their last fiscal years. CalPers remains the single largest pension fund.
According to the LA Times, the California State University System which incorporates 23 campuses and 450,000 students, has been subject to budget cuts of more than $500 million. As a result, "Cal State" has been unable to avoid staff and faculty furloughs, steep student fee hikes and severe reduction in enrollment.
Currently, according to a variety of analysts, California faces a $21 billion deficit for the current fiscal year, ending June, 30th. Futhermore, the deficit for the subsequent two fiscal years is projected to rise to ANOTHER $44 billion!
On the plus side, the news is rather scant. In October, for example, prices of homes actually up-ticked, although being driven by the Federal tax credit for first-time buyers. In addition, the state ADDED 26,000 new jobs. So, if these sources are correct, California is firing teachers and hiring more adminstrators. Talk about the left hand not knowing what the right hand is doing! Whodda thunk it?
Meanwhile, leading Republican candidates to replace the current governor, former Ebay head Meg Whitman and Steve Poizner, have offered no solutions to the fiscal gap on their own. What's a mother to do?
As you can clearly infer, California appears to be entering some sort of "death spiral". But, fortunately this only represents 1/10th of the population of the United States!
I hope you find this essay useful and informative. I welcome comments, both pro and con. I will continue to cover California over the ensuing weeks and months as new issues surface.
Marko's Take
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