California must be dreaming

July 1, 2009

Agnes Crane – Agnes T. Crane is a Reuters columnist. The views expressed are her own –

Don’t underestimate the power of California, and its ability to suck in a reluctant federal government to bail it out of a fiscal mess of its own making.

But the Obama administration and Congress should resist. Not only is the federal government shouldering the already heavy burden of sorting out the auto and banking industries, the housing giants Fannie Mae and Freddie Mac and the hard-to-get-rid-of American International Group (AIG.N), but such action would undermine the state’s need to revamp what has become an ungovernable system built on gerrymandering, ill-conceived tax schemes like Proposition 13 and unrealistic restraints like needing a two-thirds majority to pass a budget.

Intervention in California would open another too-big-to-fail Pandora’s box, but one that is much more difficult to navigate politically since the federal government would be dictating which state, and by extension which voters, are worth saving.

California, though the most extreme case, isn’t the only state suffering. In fiscal year 2009, 38 states are experiencing revenue shortfalls, according to a joint survey by the National Governors Association and the National Association of State Budget Officers.

Over three quarters of the states have already slashed their budgets by $31.6 billion, but that won’t solve the more than $180 billion gap still projected between 2009 and 2011. It would also further encourage complacency in the $2.7 trillion municipal bond market, where the assumption persists that no matter how disastrous a state’s finances, investors need not worry about default.

That California has itself to blame as much as the slump in revenues should also make it a hard sell for a bailout. The embarrassing budget impasse has left the Golden State with a $24 billion gaping hole in its state finances and a cash crunch that will force the state controller to send out IOUs for the second time this year later this week.

So far the cash crunch is limited to a $2.8 billion shortfall in July that can be plugged by handing out IOUs to local governments, state vendors and recipients of income tax refunds. But by September that shortfall will swell to $6.5 billion, according to the state controller, and by October, California will need to pay off the IOUs issued this month.

Of course this could be remedied by the governor and state legislators if they could agree on a budget and painful measures to address the cash shortage, but even the June 30 deadline hasn’t been enough to force them to overcome the entrenched dysfunction in the state government.

It should be said that the prospect of defaulting on the state’s roughly $70 billion of bonds outstanding — that includes its general obligation bonds and its Economic Recovery Bonds — is likely some months away, but the rapid deterioration of the state’s finances, the size of the budget gap and the governor’s insistence that short-term borrowing in the credit markets is off the table as a solution, brings the possibility into much sharper focus.

The scope of the mess and state government’s inability to tackle it has caused those with an aversion to drama to sell California municipal debt, pushing up 30-year yields to a lofty 6.2 percent this week, up from the 5.3 percent to 5.4 percent seen in the beginning of May, according to Municipal Market Advisors. The cost of protecting the bonds has also been rising.

Given the unprecedented nature of a California default — you have to go back to The Depression to find a state, Arkansas, failing to meet its debt obligations — there’s an expectation that the federal government would intervene to ensure bond holders are protected, at least partially.

That’s because a state the size of California — it would be the world’s eighth largest economy if it stood alone — would have an extremely difficult time managing its finances without access to the capital markets. It also promises to darken the United States’ black eye from the credit crisis since it would show how weak such big states, which contribute to federal coffers, are.

That could pressure its own cost of borrowing higher as international investors become even less enamored with government debt. California has already asked the U.S. Treasury for a healthy heaping of funds from what has become the catch-all Troubled Asset Relief Program, which was initially created to buy toxic assets from financial institutions, but Timothy Geithner has kept his distance, signaling back in May that any decision to lend a helping hand to the state should come from Congress.

The pressure is likely to mount in the days, weeks and months ahead, however, if there’s no resolution from the state on how to right its finances. Fitch Ratings has already downgraded California’s ratings, and Moody’s Investors Service and Standard & Poor’s have warned that they could do the same if nothing is done.

Negative press surrounding hardships from those receiving IOUs in lieu of cash will also turn up the political heat to do something. The federal government, however, should stay out of the mess and signal more strongly to state politicians and investors alike that they’re on their own.

32 comments

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Californians did it to themselves and need to undo it by themselves. Prop 13 needs to go. The people with all those McMansions need to anty up.

Posted by William Scott | Report as abusive

Not to worry, Federal Ben will ride to the rescue with his printing press. In a few years we will be just like Chile or Argentina were when their inflation kicked in. To bad the TARP, Stimulus and the FED’s monetizing policies didn’t substantially fund anything useful.

Posted by Anubis | Report as abusive

Yes, keep the Feds out of it. It is a problem the state needs to resolve. What does not help is we voted for a big bond measure for a high speed rail. Dumb.

Posted by Bob | Report as abusive

Ms. Crane,

Either you are a registered Democratic living in the state of California, or you do not live here and have been fed the Democratic Party line that the state’s problems lie in Prop. 13 and the 2/3 rule.

First, if the 2/3 rule were so cumbersome to getting budgets and taxes passed, how does California have one of the highest tax burdens in the nation? $16 billion worth of new taxes were passed just months ago, as well, so again, the 2/3 rule was not an insurmountable barrier.

Second, Prop 13 is a godsend for homeowners! Could you imagine having to pay property taxes on a house that you bought for $250,000 in 1990 and in 2005 you had to pay taxes on a house now ‘valued’ at $700,000+?? Did your income likely rise by 280% from ’90 to to ’05? Very doubtful! Prop 13 would limit the amount that your property taxes could be raised in a given year, so that homeowners are not clobbered by housing bubbles, thank you.

Lastly, Ms. Crane, you mention NOTHING about overspending in this state. You fail to mention that tax revenue had increased 30% from 2003 to 2007….but spending increased over 40% during that timeframe. In the past decade, spending has wildly outstripped an increasing tax revenue stream. Yet not a single utterance about the accountability of government spending to account for our fiscal woes.

How sad.

Posted by Tom | Report as abusive

You’re absolutely right. California has a pension system that is drowning us. Pensions were raised in 1999 and have been exponentially increasing since then. If the pensions investment plans lose money, they are required by law to be “solvent”, which means the tax payers are on the hook for any bad investments made. We are paying for Illegal immigrants to the tune of two billion a year, our welfare system is supposedly full of fraud, there were posts in the times of government workers saying that state offices were re-decorated once a year, and lavishly. State workers have lavish expense accounts and beautiful cars. All of this on the backs of the private workers. The state needs to go bankrupt, only then can the pensions be re-negotiated. The people are not completely off the hook, voting for expensive systems every time there are ballot measures.The Federal govt probably has an even more extravagant pension program, but I digress. The fed bailing us out would be the equivalent of giving a pint of scotch to a hungover sailor!

Posted by Karen | Report as abusive

Don’t blame Prop 13, which limits property tax increases. Don’t blame requiring a two-thirds majority to increase spending.
Do blame the legislature and the people who have spent every cent they could get their hands on. The problem now is those same people have spent more than they can get their hands on. If not for the limits of Prop 13 and the two-thirds majority rule they just would have spent more and the budget gap would be even deeper.
Unions in California have the best legislature that money can buy. The state is broke but fire captians can retire on a quarter million dollars per year.

Posted by John Merritt | Report as abusive

We haven’t pointed out the true villian here: the majority of California voters, who are convinced that the role of government is to hand everybody anything they want and then make someone else pay.

As long as that’s the business model, there will NEVER be enough money. We’re talking to a bottomless pit.

Posted by Martin Owens | Report as abusive

Miss Crane,

I usually do not respond to blogs, as I think blogs are something hacked up by cats on the sofa. But I am in complete agreement with Tom on this subject.

You either are not a homeowner, never will be, or don’t live here to slam initiatives by the PEOPLE of this State to correct poor government.

Proposition 13 was a godsend. And just to show you have no clue what you’re talking about, any house sold has its property tax accessed to 1% (might be 1.25% now) of its sale price. So people with mansions DO pay.

But what it did was to protect you from local planning commisions and their means to tax you out of your house. If your house was re-zoned (a process you have no control over) your property tax was raised to the rezoned accessment. So if they rezoned it commercial and they decided a $4 million building could go there, your tax was levied for that building!

Additionally, it is the poor (mostly Democratic) government here that has forced voters to pass the 2/3 majority rule on taxes. We are the most TAXED State in the Union, worse than Massachussetts! These Legislators here would tax extreme parts of your body if they could get away with it. In San Francisco, they are now impossing a fee at bars for drinks. Oh, not a tax, but a fee! What is that? If the government imposes it, it’s a tax. So it’s back to the polls to change it to fees as well.

California’s problems have been stewing since the day of Pat Brown (Jerry’s dad) and through Reagan and all of them. Nobody wants to cut any of their pet programs, and it’s a shell game where the money would come from. Schwarzenegger (sp.) even pitched the Indian Casino’s as a holy grail for money. Now that the economy is not good, no money from there either. Nodody’s gambling. Oh, well…

This State needs to sit down and realize where it is throwing money away. If it means selling oil leases, then you have to sell them. Everyone wants something for nothing here, hence the Enron sham when the State shipped all the power plants out-of-state and then they stopped producing when the fuel got too expensive. They want it all, but not to pay for it, or lease it, or sell it, or whatever.

I suggest you take your writer’s salary, buy something here, and see how they tax you. You’ll be on the next tax revolt bandwagon, guaranteed!

Posted by Dr. Gonzo | Report as abusive

I noticed that none of the commentary even suggests that those not receiving amounts due include State employees, represedntatives and their staffs. Maybe they could cut about 5 levels of the education beuracracy

Posted by Pat | Report as abusive

So the leeches in Congress need to bail out the leeches in the California legislature.
Please save Calfornia from itself…otherwise there will be californians leaving the state and contaminating everywhere else.

Posted by Dan | Report as abusive

Proposition 13 was sold as reducing taxes on little old folks barely getting by. It did this, yes, but its actual reason for existing was to protect big corporations and rich families, who very very rarely sell their land.

Indeed, one company recently sold a building to some other company, and tried to call it a “transfer” not a “sale”! Many rich families use trusts to avoid EVER selling. So, 13 does have to go—most of it anyway, as helping old folks is still a good idea.

In 2007, Californians borrowed eighty-two BILLION dollars, to have forty-one billion dollars of work done. The year before, it was borrowing thirty billion dollars to pay off fifteen billion dollars of debt/spending. These were all bonds, and I voted against them. The CalVet program pretty much pays for itself, so I voted ‘yes’ on that, ‘no’ on all the others!

So much of California is run on scab labor that the unions are unimportant. Unions exist to counter the power of the business-owner lobby. In this, they have become ineffective. Wing-nuts hate unions, because unions return some power to working people. This explains why unions are painted as the bad guy, when they do little at all.

Indeed, California’s right-wing groups spent a lot of money to get a proposition passed to open CalTrans projects to scab companies. Selling it as good for driving, they were successful. California is car-crazy, so the “good for driving” argument almost always works.

As far as I am aware, Californians are the only people who believe they can borrow their way out of debt! That idea is worse than gambling, as one ALWAYS loses!!

Wing nuts is right! Left wing, right wing — two wings of the same bird of prey.

Big Government is a failure. Collectivism is a failure.

Here’s how you fix California.

1. Eliminate a bicameral legislature. No good reason exists to have a state senate.

2. Increase the size of the state house to reflect today’s populous. Every adult deserves proper representation in California. Today a ratio of 1:25,000 makes sense.

Set up a hexagonal grid overlay upon the state. Equally apportion 25,000 per hexagon and call that a district.

3. Make it illegal for the state to float bonds for anything but construction of roads, bridges, ports, aqueducts, reservoirs.

The state has no business picking winners and losers in a free market economy.

Never should the state borrow money to fund operations.

Money borrowing must be dedicated solely for infrastructure. After all, it’s from infrastructure that network effects and future economic growth arise.

4. Eliminate the state income tax. Income taxation and redistribution amounts to theft. While ethical, it’s immoral.

Money is a commodity like corn or wheat. Walking into a farmer’s field and demanding a part of his crops is theft. Taxing income amounts to the same act.

5. Establish a single statewide sales tax with all cash going into a General Fund.

Make legislatures battle it out for funding of only the most important programs and those most favored by most of the people represented.

6. Eliminate state involvement in education.

Education is a local issue. Local folks must decide at what level they want to fund education. If they choose to ignore education locally, their local economy shall suffer.

7. Strip all commissions of their power to make law and enforce it.

Commissions should act as recommending bodies only.

All laws should be enacted by the legislature based on recommendation. This would ensure that the citizens get the laws they want.

8. Make all state and municipal employees pay for their own retirements, that is, eliminate defined benefit pensions funded by taxpayers.

Everywhere else, persons have defined-contribution pensions or self-managed pensions.

No one should be entitled to a Welfare Pension paid for by taxpayers.

Throttle back existing pension collectees to 50% of their average yearly salary.

Posted by Smack MacDougal | Report as abusive

From the sound of your column, I assume you don’t live in California? God knows we are in a mess, but prop 13 is a god-send, I recently added the property taxes into my house payment,that added $300 dollars a month just for the property tax! Without Prop 13 I would be paying an additional $1600 a month, that is how the property taxes use to work in this state. All I can do is breath a sigh of relief.
I think we have the second, or third, highest tax rate in the US. Were has all the money gone! Well we are the third largest state, with the second highest population in the country (not counting the millions of undocumented illegal aliens). I think the biggest problem we have is incompetent state government officials (I didn’t vote for Arnie) and killer welfare programs (that support everybody including those aliens). To add more insult, unemployment here is at 14%, highest in the country from what I understand,and I’m one of them. (Still haven’t been able to contact the EDD!$@#$#@%@#%)
What I wonder is, if we go down, what happens to everybody else? Because if I (and everyone else) go belly-up here, I’m (and everyone else)are going to have to move, Oregon is looking good.

My guess is Miss Crane is not from California. It may be hard to manage but certainly not ungovernable. Gerrymandering has always existed throughout America’s history but just has grown worse in the past few decades.

As you can see from the comments here that typically non-native homeowners tend to be the most reactionary self-entitled whiners in California. Generally speaking the property tax here in lower than average. That means less autonomy to local municipals to function more smoothly. The average non-native homeowner here wants all the benefits of a tweet tweet town but doesn’t want to pay for it nor hardly supports the local economies. They tend to think they can willy nilly do what ever they want and don’t understand the land laws here. Most of the real estate licenses that were issued here in 03 to 06 were to non-natives flocking here hoping to benefit off get rich quick schemes by flipping houses.
Many wanted to moved to nice areas so as to exploit the speculative margin of market versus assessed value. Then a healthy majority of them believed in their self-entitled narcissism that they themselves were also worth more due to their own decision of moving to an expensive neighborhood. That is like me moving to Manhattan then telling my McManager he needs to pay me $30-50 an hour flipping burgers because I decided to rent a $4000 a month apartment. Greedy people who move here during booms are always the first to complain during downturns which are normal in a dynamic economy. BTW I’m originally from the east coast but agree with many of the natives here, many who have been forced out. Many homeowners here are the biggest crybabies who remain stubbornly in denial and have martyr complexes.

I don’t recall IOU’s being issued this year as you claim in your article but in the 90′s and the 30′s. The majority of state workers across the board took and accepted a 9 to 18% paycut. The thing is many of the feckless private management who oftentimes produce little of value still EXPECT to be paid above market wages still. They don’t seem to get California’s dynamic economy and hate not living on the hog anymore so are the first to blame government. Of course its never their fault for being uneducated voters on how the system works here. The rest of the US is correct that many Californians need to start living within their means. This is an individualist country and government data is freely available so if anyone made any poor decisions believing the hype of get rich quick schemes then the burden ultimately defaults to their (lack of) reasoning and double checking their facts first.

Posted by kev | Report as abusive

To quote Karen “State workers have lavish expense accounts and beautiful cars” This is untrue. Yes the state politicians have this – but not the workers. Last year the state workers were forced to take furloughs. You are talking about people who make an average of $30,000 to $40,000 a year. State workers include DMV workers, Unemployemnt workers, workers comp workers etc. Please don’t lump them with the state politicians.

I am a county welfare worker. I have worked in the welfare industry for 15 years. My job is currently in danger because of budget cuts. I earn $40,000./year. No lavish expense accounts.

My personal belief is that all the Hollywood stars and RICH folk in California want to GIVE, GIVE, GIVE, to the poor. I disagree with some of the actions they take.

For example, Clinton passed a 5 year welfare law. After 5 years the family is cut off aid – but NOT in Califonia, only the parents are cut off. Note 48 states cut off the entire family. We have families moving to California by the bussloads, no requirements on length of resident. They come in after they have used their 5 years i other states. They usually receive more money for their children than they did for the entire family in the state they came from.

California also has the most liberal Medi-Cal rules. (It’s Medicaid in the other 49 states). The budgets to qualify for Medi-Cal are a lot less restricitve.

Also, California is no longer “Employer Friendly”. Many big companies have simply moved out of California because they can not keep up with all of the requirements.
A lot of the programs mentioned above are state funded. And California is the only state that has this much state funded welfare. Estimated millions – if not billions a year.

People always talk about illegal immigrants. The illegal immigrants do not get public services – but if their children are citizens they can receive benefits for their children. U.S. rules state anyone born in U.S. is a citizen. Sadly, we have many immigrants come here just to have their babies here. I really don’t know what California can do about that.

Many companies both big and small have moved out of California because they can not keep up with the requirements set forth by Califonia government.

California politicians really need to wake up – but should the hard working citizens such as myself have to suffer because of their actions? Many people like me would love to move out of California, but for one reason or another can’t right now. Please remember a majority of Californians are U.S. citizens too!

Posted by Cindy | Report as abusive

Excuse me? And GM isn’t responsible for its fiscal crisis? So why bailout a PRIVATE company whose products consumers generally do not want to purchase? I suppose California should have contributed to the Obama Administration, just like all the GM-related lobbyists, etc. Then maybe it can get an undeserved handout as well.

Posted by Non-GM vehicle owner | Report as abusive

California’s problems will soon be the USA’s problems. We are just ahead of the curve of what Obama wants to do. We have millions of people who draw income and resources out of the state coffer and never give any back. The issue isn’t that the people who pay need to pay more, it’s that their are way more who take and never give back…and most of them aren’t even supposed to be in the country. The individuals who pay, don’t have much more to give. Also, CA has the highest tax base and regulations for businesses, so most of the big corporations try to avoid getting tied to the state financially. Silicon valley is almost void of the big companies that created it, because the state regulations and taxes drove them out. They couldn’t afford to pay employees enough to live there, so they went to less expensive states. When the same becomes true for the US, those same companies will leave our nation for less expensive ones, as they have already done. Never mind that our legislators think it’s more important to fund land conservation than schools, police or fire departments.

Posted by Red-in-a-blue-state | Report as abusive

All this is very interesting and I agree that Prop 13 was a godsend for homeowners and very much needed.

One thing that is not mentioned on how California got so deep in a hole is California Cal Works and Medi-Cal system. I have seen who gets what from the state. It is not taxpayers stuck from being laid off or unable to find a job and need help in the interim. Also my family is one of those that cannot get health insurance as we are self employed & high risk and cannot afford the rates and can’t even through the State system for high risk/uninsurable people.

I understand that in an emergency no matter who you are, you should get treatment. Yes, for sure, but…to give a free ride to those who never pay in, take, make money on the side and have children just to get more money is downright unfair. Let alone they are 99.5% illegal.

So instead of looking into this neverending pothole of a system, we cut budgets for programs that we all need, want and pay for, ie. schools & parks and money goes where???

I could go on, but just reform this entity alone would free up and enormous amount of cash flow. Guaranteed no one has ever audited or done a review to see the extent of abuse here. And…don’t forget California has Octomom to pay for!! We are truly suckers and yes…we did it to ourselves! We had the power to kick out Gray Davis, where is our voice now?

Posted by Elissa | Report as abusive

California has been dreamin’ since the Mama’s and the Papa’s, and Agnes, unfortunately has her head in the sand.

California’s a symptom of problems that aren’t limited to the left coast. So goes California, so goes the nation…

…California is suffering from 30+ years of gerry-mandered imposed socialism, and is dying under its own weight.

Here, Agnes is right for the wrong reasons: It really needs to go under.

A complete, politically embarrasing bankruptcy is the only way to eliminate the state government largess, eliminate the union control of state government, eliminate the extraordinarily generous welfare programs that attract illegals to the state, eliminate our idiotic constitution that is so hamstrung with plums for special interests that it prevents effective state management. (Yes, I benefit from Prop 13, too. But its become a bandaid trying to cure a much larger problem. The larger problem needs to be addressed.)

Only after a total failure, with junk credit ratings and eventual bankruptcy will the state have the ability to be reborn into something sensible that can be effectively managed and provide opportunities for real growth.

And yes, as goes California so goes the nation. The nation needs to look at California as though it is our future, because it is: you just can’t have a free lunch. Or pension. Someone, somewhere, sometime has to pay for it. Ignoring funding of social security, ignoring increasing debt costs, putting TARPs on our grandchildren, and nationalizing healthcare will only take the country down the same path as Sacramento.

Yes, just watch. It’s your future.

Posted by Smith | Report as abusive

I wish I could be irresponsible and have someone bail me out. California is a disgrace. A few years ago, when I was reading stories about CA prison guards, with no college, making six figures I thought to myself what a waste. More recently, I have been reading about La Jolla, CA having to declare bankruptcy because of the firefighters/police benefits. I know La Jolla is local government but I think it epitomizes the problems that are facing the state also. I think it is ironic that the ultra-conservative Governor that is big friends with the Bush’s would look for a bail-out. I guess the republican ideals of a free market and capitalism go down the toilet when you are trouble. The republicans love the upside of capitalism, but they look democratic when things go bad.

I noticed Arnold plans to cut out all aid to the poor, which was pretty meager to begin with, but hey the poor do not have any political clout and they are an easy target. Why don’t they lay off more public workers? They give public workers guaranteed pensions and health care. The private sector that pays the taxes for public sector salaries has largely eliminated pensions, but the public sector has these jokers that are retiring at 40, collecting a pension, and then taking another job at the same time.

California is a disgrace and every CA Politician should be embarrassed to go out in public.

Posted by Steve | Report as abusive

From a Texas perspective I just hear a lot of California whiners. Why should the other 49 states of this union send their money their “extra” money to the federal government, only to have it sent to the insane state of California? IN Texas we are REQUIRED by our state constitution to balance our budget!!! We have a surplus this year! It’s not always easy, but it does get accomplished every single year. Lose the superior attitude and start living within your means.

Posted by James | Report as abusive

A state cannot be structured in such a way that it is forced to pay for propositions that the people pass but is unable to raise taxes to pay for them. It is time the people of California demand a reduction in their payments to welfare recipients and get in the black. California has long been known as one of the most generous states to immigrants and the poor. Nice if you can pay for it, but at some point, a hungry stomach is the best incentive for getting a job.

Posted by Em | Report as abusive

DRILL BABY DRILL.
Set oil platforms up and down that coast, and drill your way out of your problems. Use wind power for your local needs, and sell the oil to the states that don’t produce it. Build a new refinery at Pendleton, refine your and others’ oils. Desalinate ocean water, sell the sea salt to other states. Don’t waste the new cash surplus these natural commodities create for CA and now you’ve got ample jobs for your folk with these new initiatives. If the rich have a problem lookin’ out at an oil rig, have your movie folk set up screens in front of it all and show pretty pictures for your rich to enjoy their views, which they never really use anyhow cause they’re outta town not suffering w/ the rest of the CA citizenry.

Next!

Posted by gina | Report as abusive

There are some good words here about why California needs to be allowed to fail or succeed without a bailout.

I do have to disagree with Red-in-a-blue-state and Smith about the saying that “as goes California so goes the nation.” There are many states running surpluses this year and most of the rest are not in such dire straits. The societal values that have put California in a pickle aren’t replicated to the same extreme elsewhere, and I don’t see any current movement to imitate California’s culture in other places. If anything, the state’s reputation is tattered to the point that other Americans want to distance themselves from it.

Posted by civilator | Report as abusive

I went to a private college in California in the late 70s. During the time, I discovered that the state’s community colleges were FREE to residents. In fact, you only needed to live in California for 1 year to qualify for the free college courses. I was only about 19 years old then, and I thought that it was unsustainable, especially with millions migrating and immigrating into the state. Nothing should be free, because it really isn’t free. Too many programs like these can bankrupt a state. Apparently, California had a lot of them.

Posted by ccollins | Report as abusive

I need to set everyone straight. The unions don’t control state government. If they did, we wouldn’t be taking a 15% pay cut, now would we? The union is ineffectual, and exists SOLELY for the purpose of funding Democrat politicians.

The problem with California is that most of the budget is directed by constitutional laws, such as Prop 98, which requires 45% of the state budget goes to the black hole of education in California. Other similar constitutionally-mandated funding means that the legislature is handcuffed in what they can do.

We need to take the handcuffs off and re-write these draconian laws (passed by the people after misleading ads run by the teacher mafia).

Until and unless this happens, the state will continue to be a basketcase.

And firing all state employees won’t solve the problem (BTW, would you please volunteer to house a convicted murderer in your house when there are no prisons? Thank you!)

Posted by Scott S. | Report as abusive

I wonder if those of you that blame “welfare” have ever looked at the actual numbers. You would be amazed at the big wonderful corporations and conglomerates that get welfare, not to mention all the tax write offs. Those are the big WELFARE receivers. Look into it, and yes we have alot of people that never will pay a dime, but again the biggest welfare dollars go to the companies that make billions, and still collect from the govenment. Those little people that get big bucks of about $1000 a month, don’t hurt the state, the tax breaks and write offs, and all the other things the really really rich get is what hurt all the states and especially California. Not too mention the really really rich governor. I don’t know who elected him, because NO ONE will admit to it, but somehow there he is, adding additional problems. I suggest you try to get welfare, if you have worked most of your life, paid into the system, and did your best and was thrown to the wolves by all the greedy, money hungry leeches out there, you will NOT gualify, so you have to either have that foreign name or an additional million in you pocket. But if you do, I doubt you will bother because you will NOT survive. Those little guys don’t hurt us, its less than (I believe) 1%, so before we speak we really should know the facts. It the big guys that want you to fear the little ones. You might find out who really gets all the money.

Posted by Paulene | Report as abusive

HA! A Texan telling others to ‘lose the superior attitude…” That’s more golden then the Golden State itself. The only reason Texas has a surplus this year is because it uses a high property tax and low income tax formula which is the opposite of Prop 13. So when their is a recession that means less income tax dollars generated.

Posted by john | Report as abusive

The solution to California’s and the country’s problem is very easy to conceive but difficult to execute. OUST THE LEGISLATORS. They are thge enemy of the people. As long as the political class stays in existence, we’ll suffer.

Posted by James | Report as abusive

According to an article published by the Reason Foundation titled “What Caused the Budget Mess” The size of California budget(Government) has tripled since 1990 with the budget growing from 51.4 billion in FY 1990-91 to 144.5 billion in FY 2008-09. Yet the citizens of California are not 3 times better off since 1991. But the most astonishing part of the article pointed out that

“If California had simply limited its spending increases to the 4.38 percent average increase in the state’s consumer price index and population growth each year since FY 1990-91, the California would be sitting on a $15 billion surplus right now.”

So I have to respectfully disagree with you Agnes that prop 13 and the 2/3 majority for Tax increases is the cause of the current mess. Prop 13 and the 2/3 majority are the only thing stopping the legislature from taxing the taxpayers of California in oblivion.

The problem with California is as Thomas Paine so eloquently stated: We the voters of California have allow “the ELECTED (officails) to form for themselves an interest separate and aprart from the ELECTORS(voters)

In California we have allowed the California Democratic Party to setup a “Legislative Monarchy” with political succession from within the CDL

Posted by theodore | Report as abusive

To say the least, I was startled by one contributor’s statement that a fire captain can retire at $250+k in California. Curious, I went to the Los Angeles Fire Department’s pension webpage — or tried to. The Google link took me to a page at LAFD saying the file either didn’t exist or had been replaced by another file. So, off to the LAFD homepage. After some time poking around . . . nothing. Curiouser and curiouser still . . . I also am a bit surprised by the spirited defense of Prop 13, though I am not a Californian (and haven’t ever lived there, owned property there, etc.), but, then, I was unaware of the apparently beneficial aspects for the elderly (for example). However, that stuff has to be paid for. How? I haven’t a clue. A federal bail-out could, conceivably, be political suicide for anyone in Washington supporting it, as opponents to such a move would undoubtedly argue it would show favoring one state over the rest (though that ignores California’s status of having the 8th-largest economy in the world if it were an independent nation). Californians will have to expect non-Californians on all sides of the issue to be piping up, loudly, should the feds step in; after all, in that scenario, we taxpayers in the rest of the U.S. will be helping foot the bill, and if we pay for it, that’s a ticket to speak up. I’ve been thinking about the Great Depression and outfits such as the CCC; I guess that wouldn’t wash with a lot of people, especially conservatives, though it would employ a substantial number of people. Maybe a private version of the same thing? What I mean is give a company (one with the wherewithal to pull it off) a significant tax break for taking on public works projects, big ones, projects the company agrees to do for a price providing only the most modest of profits (since it would be profiting elsewhere, in the form of reduced taxes). Sort of like the ideas behind breaks for solar, wind, etc., but on steroids — maybe expand those areas, and toss in roads, nuclear, rail, port modernization/expansion — anything that might benefit the private sector, both workers and companies. Which, by extension, should benefit the various levels of government. Not a tax expert, nor economist, nor public policy whiz .. . none of those things we normally look to for guidance. Just a guy musing over how to help . . .

Posted by Mekhong Kurt | Report as abusive

Californians should vote out Feinstein and Boxer and get real representation in Washington DC. Obama is not the leader of We the People. Bretton Woods or new Constitutional convention?