and too big to bail out? Mike Shedlock notes that California’s state budget director, Rosy Scenario, is doing well there:
California tax collections since the start of the fiscal year have fallen $1.5 billion behind projections, raising concern that the most-populous U.S. state will face automatic spending cuts.
Revenue was $810.5 million less than budgeted in October, bringing the total to 6.2 percent below expectations for July 1 through Oct. 31, according to figures released today by Controller John Chiang. Since the start of the fiscal year, the state has spent $1.7 billion more than it budgeted.
That shortfall is large enough to cause automatic spending reductions to be put into place:
The first tier of cuts, if the shortfall is $1 billion, would trim University of California and California State University budgets by $100 million each, increase community- college fees by $10 per unit and cut in-home services for the elderly and disabled who need help.
That should be popular with the “Occupy” demonstrators.
Make no mistake: California is in a pickle. There is really no revenue solution there, what they need is economic growth, and residential housing, a mainstay of the California economy for nearly a century, is unlikely to recover for the foreseeable future.
I heard this same report on the news this morning. Jerry Brown, the governor of CA, is supposedly going to be working with the democratic-run state legislature dealing with pension/benefit reforms. Maybe he will be able to work something out with them, being of the same party affiliation.
However, there will also be calls to raise taxes, with little to no reflection that this state, when you add up all the taxes here, already has one of the highest tax bases. High taxes, and being seen as anti-business, is why so many people/businesses are leaving and moving to more tax-friendly states, leading to that revenue shortfall that is being reported. Nevertheless, that still doesn’t seem to quell the desire to strip more from those seen as having it. It appears to be a never-ending cycle, which might not be able resolve itself until the state simply declares bankruptcy.
States do not go bankrupt, that’s the whole point of fiscal transfer union. The Federal government should enact an $80 billion dollar program for statewide rollout of broadband infrastructure to every home in California and installation of solar panels on commercial properties, then hand ownership over to the private sector. That’s real wealth for businesses and consumers to leverage into economic growth.
It is interesting to note how ‘Mish,” the author of the above article felt CA could deal with it’s fiscal problems:
Hmmm…sounds familiar.