All we hear about in the financial MSM is Greece and Spain, yet California, the world’s 7th largest economy is on the verge of bankruptcy and default.
California’s tax revenues were down a cool $475 million in July, including a massive 33.% decline in sales tax revenues, and the state’s cash deficit has ballooned from $9.6 billion June 30th to $18 billion at the end of July!!
California is now attempting to sell $10 billion in muni’s kick the default can a little further down the road. Wait till the ratings firms downgrade California’s credit rating to junk.
State Controller John Chaing said that California’s July sales tax revenue was down 33.5% from the Budget approved in late June. Even more ominously, the state’s $9.6 billion cash deficit that was rolled over from the June 30th fiscal year has catapulted to $18 billion last month.
The state has avoided default by temporarily borrowing from state trust funds, but those accounts will soon need their cash back to continue operating. Today California quickly began trying to sell $10 billion in municipal bonds to fund the record $28 billion they need to keep the lights on. With tax revenue plummeting and the state already the second lowest rated credit in the country, if the independent credit rating agencies downgrade the state to “junk bond”, California will be short up to $18 billion and default.
Governor Brown used his line-item veto authority to strike $128.9 million in spending from the $91.3 billion California general fund before signing the state budget. Brown’s cuts surprisingly hit Democrat priorities, such as spending for child care and preschool for low-income children, and closing 30 state parks. But Republican Senator Tom Berryhill warned Brown: “This budget is a slow-motion train wreck, and you’re driving the bus.” Berryhill criticized Democrats for failing to reign in public pensions, regulatory terrorism and cap state spending that Republicans say are all needed to rescue state government. But by agreeing to sign the budget before the June 30th end of the fiscal year, Brown spared all the California legislators from losing their paychecks under a voter-approved initiative that blocks their pay if a budget is late.
The governor justified signing the budget based on the twin assumption that the California economy was expanding and the voters would approve his tax initiative that would raise $8.5 billion. Many analysts doubted the voters willingness to vote to raise sales tax on themselves, but we were virtually alone in warning California’s shallow economic recovery had peaked and the state was at risk for a double dip recession.
State Controller John Chiang tried to rationalize that even though California revenues were “disappointingly” down $475 million in July: “However, because spending appears to be tracking and the funds that the State depends on for liquidity are performing well, California’s cash outlook remains stable.” This is sort of like the pilot of a jumbo jet announcing to the passengers that as a safety precaution they may want to cross your arms over your calves and grab your ankles and to brace yourself for possible impact.
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CA needs an infusion of hopium. Yes we can!!
And another one gone and another one gone
I can see pot legalization finally getting approved in CA. Think of how much they would make in tax revenue, coupled with how much they would save in (attempting) to police it. The swing has to be pretty massive. It probably wouldn’t solve all of their problems, but it would likely help take a big chunk of this deficit off the books.
Without Medical MJ and no capital gains on Facebook—capital losses more likely, I guess they will have to sell Oakland and San Francisco. Obama has ordered $100,000,000 in cash to the states, $9,000,000 to California to prevent state employee layoffs. This would help stabilized unemployment of state employees, keeping the unemployment rate stable and keep these Democratic voters employed until after the election.
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Please check out this European News Station talking about California
I found the money. Page 101 Table 6.
456 Billion in ASSETS they don’t want you to know they hold. Sell the stocks and bonds and pay your bills.
http://www.sco.ca.gov/Files-ARD/CAFR/cafr11web.pdf
Those are fiduciary funds for employee benefit programs and pensions. It would be pretty bad if they started raiding those funds to plug holes in the deficit, especially as those pension and benefit programs are probably already carrying massive unfunded liabilities on their books…
If they would just tax the Hollywood elite, I am sure they would raise the necessary funds. They are all for raising their own taxes so why not oblige them?
“They are all for raising their own taxes so why not oblige them?”
Like most socialists, the Hollywood elite are in favor of raising OTHER people’s taxes. If they want to pay more taxes, they can write a check for the additional amount they think necessary and the US Treasury WILL accept and cash the check.
Like all things run by liberals, CA is a complete gaggle (polite talk for a flaming cluster-f***) and has been circling the drain for the past several years. Spending HUGE amounts of tax money on benefits for non-citizens is why they are out of money… and they are STILL doing it! These idiots will not be satisfied until the entire state of Calif. looks like a Detroit suburb… which it will.
California is onboard with the FED. Make no mistake.
All the politicians and Fed officials all know what’s coming down the pike for Californians.
They are all carefully following a script as best they can to prevent THE PEOPLE FROM PANICKING.
If California were a country, it would be the eighth largest in the world. The MSM press has been busy poking fun at the European problems KNOWING FULL WELL what’s going to happen to California and its people.
CAFR for 2011 shows $577 BILLION in taxpayer surpluses when the accounts are added. Why can’t a $600B ‘fund’, fund $27B pension, $16B budget deficit?
Walter Burien is the pioneer to expose CAFR surpluses and Clint Richardson did the work to fully document the $577 billion. You can go here to see what I was trying to point out. http://cafr1.com/
Or just google it and you get all kinds of dish on the CAFR
Oh, that was page 101 on the Adobe page, not the PDF page. In case some got lost.