California running out of money

[Tyek]

http://news.yahoo.com/s/csm/20081210/ts_csm/abellyup

California running out of money
New Calif. Lawmakers Face Grim Budget Outlook

A confluence of the national recession and years of legislative budget games is squeezing the Golden State as never before. Although it's not the largest budget gap the state has ever faced, this time it will be harder for California to get help from private lenders. Standard & Poor's now ranks it lower than any other state except Louisiana, which shares the same rating.

The question is: Will lawmakers finally make the tough budget decisions they've put off for so long?

"Because California does have a perennial budget crisis, it's very easy to fall into the 'boy who cried wolf' syndrome," says Dan Schnur, director of the Jesse M. Unruh Institute of Politics at the University of Southern California. "This time the sky is really falling."

The state faces a $28 billion budget shortfall over the next two years. If nothing is done, nearly $5 billion in public-works projects could be halted in little more than a week for lack of bond sales – everything from bridge replacements to a new highway tunnel and billions of dollars' worth of school construction, according to state Treasurer Bill Lockyer.

Already, the state failed to attract enough buyers three weeks ago to sell all of the bonds it had floated, he told state lawmakers Monday. "Expecting investors to purchase our bonds now, when we can't agree on a budget that lenders can rely on, is like expecting someone to buy a stock when they know it's losing value," said Mr. Lockyer.

He and three other state finance officials testified Monday in a rare joint session of the legislature.

The picture worsens next spring if legislators don't pass some plan to increase revenues or cut spending or both. California will run out of operating cash in March, state controller John Chiang told the lawmakers. The recession has severely squeezed state tax revenues.

Normally, the state would borrow to cover any shortfall. But internal revenue sources have already been depleted and outside lenders are less accommodating.

"It's not because of [California's] economy, because it's deep and diverse," says David Hitchcock, primary credit analyst for California with Standard & Poor's. "It's because, financially, they've had budgets that have not proved realistic. They've had large deficits and they've only been able to pay for their budgets through borrowing for the last couple years."

Mr. Chiang said the state may be forced to seek special loans at exorbitant rates or issue IOUs to state workers and vendors, further damaging the California economy.

"Failure is not an option here," said Chiang, referring to the need to align state spending and revenues. "It would take years to recover ... deepening and prolonging the recession."

Bringing the budget back in line will require drastic cuts, significant tax raises, or both. Those options will harm the economy in the short run and cost the state jobs – but so would any delay in taking action, said legislative analyst Mac Taylor.

Not fixing the budget would worsen the state's credit rating, making infrastructure projects even harder to fund.

"It means that the stimulus that we all want won't occur," Lockyer said. "Millions of dollars that would have gone to thousands of private-sector businesses, creating tens of thousands of jobs, will be cut off."

Other states are stuck in similar positions of budget duress, making federal money key to jump-starting their economies, says Stephen Levy, director and senior economist at the Center for the Continuing Study of the California Economy.

Washington could also help California by backstopping state and local bonds with a federal guarantee. That would reassure investors, preventing the freeze-up in infrastructure projects. It would almost certainly cost the federal government nothing, says Mr. Levy. President-elect Obama hasn't advocated this yet, he adds, but his advisers are discussing the option.

Even with federal guarantees for bonds, lawmakers in Sacramento would still have to tackle the budget deficit, notes Levy.

During the joint session, members listened attentively, but their questions and statements afterward didn't reveal much softening of positions. Republicans signaled continued opposition to tax raises, while Democrats stressed they had already countenanced "devastating spending cuts" and some new revenue was needed. Democrats are a few seats shy of a full two-thirds majority needed to pass a budget on their own.

"It's not clear what my colleagues on the other side of the aisle want," said Karen Bass (D), speaker of the state Assembly, who helped organize Monday's joint session.

"I didn't hear anything that was new today," says Sen. Jeff Denham (R). "People around the state would expect us to deal with all of the waste first, get rid of all the bells and whistles."

To that end, he's proposing eliminating a $2 million waste-management board and supports selling state property, like San Quentin prison. He would close tax loopholes but wouldn't name any taxes he thought Republicans would be willing to raise.

"My guess is you can find a small number of Republican votes for additional taxes if there is a trade-off for some job and business incentives," says Mr. Schnur. Possible incentives include scrapping stringent 40-hour workweek regulations and scaling back on the state's ambitious greenhouse-gas targets, he says.

Next up in the Bailout lottery, your State Government. I am so excited that I live in one of the most expensive states to live in and it looks like it is going to get a lot worse tax wise. I know my company is looking for someone in Canada, maybe I will go there.

[Fairweather Pure]

I'm amazed any other state in the country would run out of money before Michigan.

[Leonaerd]

We still have Kellogg!

[Fairweather Pure]

We still have Kellogg!

The only reason Kellogg's is still alive is because they broke the Union about 8 years ago. I think they're actually doing pretty well. They have several expansions still on the books here in Battle Creek.

[Leonaerd]

They have a pretty efficient system set up, at least from the Engineering side of things. We had a Food Engineer from Kellogg speak during a lecture period. She handles many projects at a time and goes to places like Greece for business trips. Oh, and she was hot. A hot engineer.

[Animalor]

They have a pretty efficient system set up, at least from the Engineering side of things. We had a Food Engineer from Kellogg speak during a lecture period. She handles many projects at a time and goes to places like Greece for business trips. Oh, and she was hot. A hot engineer.

A hot engineer with access to a near infinite amount of fucking Frosted Flakes....

FROSTED FLAKES!!

[Winnow]

AZ needs to put up border fences to keep the Californians away from our state!

[Leonaerd]

They have a pretty efficient system set up, at least from the Engineering side of things. We had a Food Engineer from Kellogg speak during a lecture period. She handles many projects at a time and goes to places like Greece for business trips. Oh, and she was hot. A hot engineer.

A hot engineer with access to a near infinite amount of fucking Frosted Flakes....

FROSTED FLAKES!!

She said she's been covered head to toe in glazed sugar before. I couldn't focus on what she was saying after that.

[Animalor]

They have a pretty efficient system set up, at least from the Engineering side of things. We had a Food Engineer from Kellogg speak during a lecture period. She handles many projects at a time and goes to places like Greece for business trips. Oh, and she was hot. A hot engineer.

A hot engineer with access to a near infinite amount of fucking Frosted Flakes....

FROSTED FLAKES!!

She said she's been covered head to toe in glazed sugar before. I couldn't focus on what she was saying after that.

Warning - NSFW!!

http://www.youtube.com/watch?v=4pXfHLUlZf4

[Fairweather Pure]

AZ needs to put up border fences to keep the Californians away from our state!

Doesn't Vegas have the highest % of people behind on mortages than anywhere else in the entire country (or something like that)? I overheard something like that on the radio the other day. It sounded pretty bad!

[Boogahz]

Warning - NSFW!!

http://www.youtube.com/watch?v=4pXfHLUlZf4

lol

[Bubba Grizz]

They should sell off sections of the state to the surround states until they can pay their budget. AZ could own San Diego!

[Truant]

AZ needs to put up border fences to keep the Californians away from our state!

Doesn't Vegas have the highest % of people behind on mortages than anywhere else in the entire country (or something like that)? I overheard something like that on the radio the other day. It sounded pretty bad!

I can't confirm for sure, but it's pretty likely. Vegas was one of the fastest growing cities in the country when I was there. Due to the fact that it had a very low priced real estate market, people were moving (mostly from CA) and buying 2 or sometimes 3 homes in Vegas for what they sold their one home for in CA. They would turn around and sell them almost instantly for a 10% (or more) profit. Anyways, at some point the bubble burst...and everyone got fucked.

[Boogahz]

They should sell off sections of the state to the surround states until they can pay their budget. AZ could own San Diego!

I don't know, but I think this would be a bad investment since California will end up in the Ocean eventually!

[Sabek]

They should sell off sections of the state to the surround states until they can pay their budget. AZ could own San Diego!

Or maybe they could sell a championship in any given sport to AZ so that AZ can actually win one.

[*~*stragi*~*]

cards are winning the superbowl quote dis when im right

[Tyek]

cards are winning the superbowl quote dis when im right

Hopefully this site will be around in 2052.

[Zamtuk]

Just hope winnow doesn't agree or that statement is null and void.

NULL I SAY