It is becoming increasingly clear that the structural deficit in California cannot be solved by any means available to the legislature, by economic growth, or by just plain luck. It is time to think the unthinkable: that the only way for California to get its financial house in order is through bankruptcy.
A few decades ago, California was a Republican state. It was growing like crazy, had great roads, top public schools, top universities, and a vibrant growing economy. Drawn by the nice weather, a business friendly environment and all sorts of creative capital formation, entrepreneurs in technology, biology, engineering, health, and you name it flocked to the state. The universities turned out well educated graduates that stayed in the state and fed the almost insatiable hunger of the business community for intelligent, trainable employees. People young and old flocked to California which they rightfully perceived as a land of opportunity.
Things started to change in the seventies. Opposition to the Vietnam war had been strong in California and as the war wound down, that opposition, already organized around radical principles, began to assert itself as voters, electing ever more liberal local and statewide politicians. Gradually, the state became majority democratic and the legislature and many of the municipal entities became Democrat controlled. A left wing anti-business tax and spend regime gradually took hold and became firmly rooted.
The peculiar way in which the legislature organizes itself gave the Speaker of the Assembly almost dictatorial power and hidden away in Sacramento, there is essentially no fourth estate scrutiny over legislative activities. A succession of Speakers starting with Phillip Burton, then Willie Brown etc. came from San Francisco and the Bay Area, long a liberal bastion, and they were able to control the ebb and flow of legislation such that left wing constituencies were rewarded, municipal unions were strengthened and the teachers’ unions gained complete control over public education. Regulation after regulation was imposed on business and a vast array of social welfare and related programs were enacted. It is estimated that regulations in the state currently cost nearly $500 billion per year. As long as the revenue was there, the legislature could find ways to spend it. Gradually, funding was shifting away from infrastructure maintenance and away from education and toward a miasma of social programs. Deferred infrastructure maintenance grew and grew. State government insinuated itself into nearly all aspects of life. Businesses large and small began to move from the state to escape these burdens.
Special interests have always been excessively influential in Sacramento and in fact, the initiative process was amended into the state constitution as a way for the people to overcome special interest influence. Recently, the initiative process has backfired on its original intentions. Various interest groups learned how the initiative process could be used to preempt the legislative funding mechanisms and to shift tax burdens. Proposition 13, which capped what was becoming a meteoric rise in real property taxes was an early example. While Proposition 13 is perennially vilified by the left, it is perhaps the only area of taxation where the state has not gone completely overboard and the citizens have benefitted.
A series of initiatives have been passed that earmark percentages of the state’s revenues for particular purposes thereby removing these funds from the budgetary process. Without setting out a litany of these, at present nearly half of the state’s revenue is committed for particular purposes as a result of initiatives. Thus, the legislature has very little leeway even if it were disposed to be frugal.
At the same time, there has been an almost unbelievable rise in municipal and state compensation levels. At one time there was a perceived tradeoff between the security of civil service positions and a compensation level that was less than in private industry. That has completely reversed. As a group, state employees and municipal employees are compensated at levels that far exceed those in the private sector. The state has literally thousands of employees whose salaries are in six figures and that does not include a benefit load that exceeds fifty percent. It has been estimated that the state’s unfunded benefit burden is north of $62 billion. As these unions gain ever more legislative support, the state has lost any ability to reduce headcount or to reduce compensation levels. There are any number of boards and commissions which have no substantive functions other than to provide income to electorally defeated Democratic politicians. There are hundreds and hundreds of water districts, transportation districts, etc. each with its own taxing power and budgets, none of which are subject to public scrutiny. BART is a prime example where train operators start at $89,000 and fares are continually rising as BART is unable to match expenditures and revenues.
Finally, the state has financed much of its operations by incurring bonded indebtedness. Whether it is a few billion for stem cell research, or ten billion for high speed rail, or eighty billion for a constellation of infrastructure projects, the bonded debt has reached a point where nearly ten billion in annual revenue must be devoted to debt service. The state’s credit rating has been falling and there is no end in sight. Still, the legislature proposes even more bond issues.
In all of this, the state has acquired structural deficit that simply cannot be reduced. The legislature lacks the political will to honestly tackle this problem and the governor has no power to do so without legislative support. Last fiscal year, the deficit was about $25 billion and that gap was “filled” by accounting legerdemain, payment timing tricks, and other wishful thinking. Taxation was increased by $12.5 billion, $6 billion was borrowed, and the books were cooked in various ways to cover that deficit. This fiscal year the deficit is projected at another $21 billion and there are few if any more games available to play. If Obamacare is enacted, the state will incur another $3+ billion in MediCal expenses. MediCal is California’s version of Medicaid. Every tentative effort to reduce expenditures precipitates howls of protest from the affected Democratic constituencies and the legislature backs down.
The only response of the legislature has been to raise taxes. The sales tax is nearly 10%. The income tax is higher than all but a few states (Michigan and New Jersey, both of which are in similar difficulty). The nonpartisan Tax Foundation ranked California 48th among the states on business-tax competitiveness. California once had a vibrant manufacturing economy, but it is estimated that as a result of high taxes and excessive regulation, California lost nearly 80,000 manufacturing jobs between 2003 and 2007. Toyota has just determined to close the NUMI plant after GM abandoned the partnership. That means another 4,500 lost jobs directly and probably as many again from the many suppliers to that plant. Had California had a more healthy business climate, it is a certainty that Toyota would have stayed as the plant is modern, well located and supplies one of Toyota’s largest markets.
Meanwhile, the demand for services from a culturally dependent population continues to grow. Nearly 1/3rd of the nation’s welfare recipients live in California. The unemployment rate exceeds 12% and there is no end in sight. The California housing market was walloped in the latest downturn. The taxpaying population is shrinking as higher income people flee the state for more favorable locals while the population of government program consumers increases.
Reality must dawn soon. The state cannot continue as it has, but as long as the Democrats control the legislature, there simply is no hope for any short or long term solutions other than the cleansing bath of bankruptcy.
A bankruptcy could allow the state to void all of the excessive union contracts, could allow it to restructure its indebtedness, could allow a trustee-like entity to reexamine the distortions caused by the abuse of the initiative process, and could allow a restructuring of the budgets so that the revenue and outflows would be in balance. Fiscal control would be removed from the legislature and placed in the hands of a trustee-like body that would be able to avoid the special interests and rationalize the process so that the state could start on the path to fiscal sanity. The excessive employee head count could be reduced to rational levels. Salary levels could be reduced to private sector levels. The argument that the state would lose many of its “talented” employees is pure malarkey, for where would they go?
All of this would be plowing new ground. We have no precedents and we have no experience with either a state bankruptcy or even a bankruptcy of this magnitude. I have confidence however, that the quality of the Federal bankruptcy judges and the creativity of the public interests that would emerge would, under the Court’s guidance, be able to devise the entities and the structures that would effectively manage the process. In the meanwhile, the shock and embarrassment that the body politic would feel might just be enough to encourage the restructuring of the state Constitution so as to bring an end to the abuses that have brought us this far.
I don’t say it is easy and I don’t say that it will be smooth. But, I ask, does anyone have a better solution??
Only one problem: there’s no legal provision for a state to declare bankruptcy. Municipalities, yes, but not states.
Borrowing from Climategate, maybe the State of California should use Michael Mann’s trick to hide
the deficit.
There is no constitutional provision for a state to declare bankruptcy.
This has already be investigated and there is no BK “out” for the state.
Anon Y Mouse is entirely correct. There is no option for a state to declare bankruptcy, and it cannot have it’s assets and accounting turned over to a trustee.
Illinois’ Daily Herald had an article about IL’s budget problems, also mentioning CA, last February.
This means that CA’s only hope is to shave down their spending to below their reduced revenue in order not to cause a domino of municipality bankruptcies. A lot of those social welfare programs are simply going to have to go. The state legislatures are going to have to learn what our military and American families do…. that is to make do with less.
And if they are wise they will start making their state business friendly again, stopping the commercial exodus and enticing those that left to return.
I can’t imagine the political forces in California allowing a fair and prudent restructuring of California’s debt or employment base. The same special interest groups, the same ignorant politicians, would insist that only they could “fix the economy that George Bush wrecked”. Don’t “tell them how to clean up the Republicans mess, just grab a mop”.
I use to believe that the truth would always come to the fore. And that lies would eventually fall under their own weight. But not anymore. I have come rather to believe that delusion is too powerful. Truth only reigns supreme if the people truly desire truth more than being right. The folks in California (or the Democratic party in general) don’t want truth, they want to justify their current status and past choices. They would far rather distort the world realities than to learn from them.
Only once the liberals have lost influence, and their misadventures have become undeniable, will the public begin to thirst for truth. And as long as the Main Media streams continue to not report or to distort the facts, so as to support the Democrat/Liberal agenda, that day will never come. The public will remain deluded. Truth will remain an inconvenience.
Maybe someday life will be broken down to the most basic components where truth is inescapable. Where each person wants only what is right and fair for themselves in the here and now, and can see no other way for anyone else to be treated. Then truth will enjoy a renaissance. But by then the causes for out fall will be a small and distant concern.
Yeah, I’m not too keen on the prospects for next year. But then, I’m surrounded by liberals and see everyday how they ignore the destruction they are wreaking on our country, and they blame anyone with a competing political social view, no matter how disconnected they are from the problem.
“but will also end up costing the state revenue as those workers pay less tax on smaller incomes.”
Does anyone else’s skin crawl at the ingnorance of such a statement? The state will lose revenue if it reduces cost by say $100k because it wont collect back $10k?
Really? A $90k improvment is still a loss?!?
Is it no wonder the state is in the shit?
TSgt. Ciz hits the nail on the head.
The powers to be are delusional and the only way to remove them from power, thus saving what is left of the Republic, is a total economic and civil collapse.
Sad, but its the only way.
Sometimes a house is so infested with termites, rats, mice and mold that it needs to be torn down and started anew.
That “house” is California.
Hostile takeover of Nevada.
Bankruptcy legislation, although authorized by the US Constitution, is ultimately a creature of Federal statute. Were the Republicans to regain control over Congress, a legislative enactment that would establish a procedure for a state to go bankrupt would be an interesting dare to the legislatures in states that are in such serious financial difficulty that the only other option is to completely restructure the state finances over the opposition of the special interests. I wrote this post because we need to start a discussion on this issue. I have lived in California for nearly 40 years and frankly, see no way out of the mess. I practiced law for most of that time and did a considerable number of Chapter 11 reorganizations. Embodying a similar concept for essentially bankrupt states is not beyond the realm of reason. I cannot conceive of any other effective solution.
I reemphasize the point made above that as the state reduces payments to municipalities, they in turn are crashing. Contra Costa County in which I live has an unfunded pension and health care benefit burden in the billions of dollars, amount that far exceed its taxing abilities. Also, property values in this county have dropped considerably so that the tax base is even further reduced.
Disturber
Disturber,
An well written article, no doubt. But, the reality on the ground in California, and I lived there 44 out of my first 48 years and still maintain a business there, is that there is no way in Hades that the Union controlled Democratic Senate and Assembly will put forth legislation that would allow the State of California to renege on the plethora of lucrative contracts and pensions they state has inked with said union thugs.
There is such a disconnect with reality with the elected officials in California and the problems that confront the state it’s unreal.
Just sit back and watch the socialist hell-hole collapse of its own weight.
@TSgt Ciz, I certainly agree that math is a lost art where government employees (i.e. cost v revenue) are concerned. I think the greater loss is their loss of revenue with cost of government vs tax revenues from private individuals or business.
Disturber, do allow me to qualify my response to your post and concerns by saying I was a CA resident for 19 years, two of them spent in your back yard – Contra Costa County. While I sympathize with your vision of California’s budgetary debacle, I can’t agree with the BK as a cure. I would not like to see the feds (ala the nations’ taxpayers) picking up the tab for a CA bankruptcy. So you need to examine where that BK “forgiveness” comes from before advocating such.
Short answer…. CA needs to live within the budget of tax revenues allowable via their laws.
Bottom line, they need to stop with the nanny welfare programs, and stop driving businesses out of the state. And if this is what forces reality for them, so be it.
Excellent piece, Disturber!
While you mentioned “the demand for services” in…
“Meanwhile, the demand for services from a culturally dependent population continues to grow. Nearly 1/3rd of the nation’s welfare recipients live in California. The unemployment rate exceeds 12% and there is no end in sight. The California housing market was walloped in the latest downturn. The taxpaying population is shrinking as higher income people flee the state for more favorable locals while the population of government program consumers increases.”
…you failed to mention the one truth that makes California stand out “above” (sarc) all others as the “Gimmee” or should I say, the “Da me” state–illegal immigration, otherwise known as the Invasion by Mexico. That huge (10 to 18 million in CA alone) protected class of people, all of them foreign nationals who either broke into the U.S. (Border jumpers) or came in on work or student visas and when those visa expired, stayed put (visa overstayers). Don’t believe the ridiculously low figure of “2.6 million illegals in CA” dished out by some experts and inside-the-Beltway orgs who are afraid of telling us the true figures (I have emails from their leaders to prove it). Sanctuary Cities abound in CA, as does the power of La Raza, the ACLU and other anti-America groups. California isn’t alone in this problem; Florida, Arizona, New York and other “Invasion states” are also on the verge of bankruptcy. CA spent 7.7 billion dollars just on educating anchor baby children in the year 2004-2005
http://vdare.com/walker/090112_crisis.htm
Whatever the actual number of illegal aliens in CA is, removing them from CA would solve many of the state’s problems. Disturber paints a disturbing picture of a state bent on suicide. Removing illegal aliens from CA would create millions of jobs for California citizens and reduce the welfare costs associated with the Invasion. Crime would drop sharply and so would the number of deaths caused by illegals both through murder as well as DUIs. While it’s not easy to imagine Gov. Schwarzenegger doing this, it would be done under Federal Immigration law and is a no brainer. Don’t forget that 5 million foreclosures-plus by illegal alien former homeowners helped begin the housing bust. Removing millions of illegals from CA would result in a drop in rents (due to millions of vacancies) and would reduce the white flight out of the state.
Not doing anything about the Invasion is almost treasonous.
MataHarley,
I couldn’t agree more that laying over California’s economic woes on the American body politic in general is a terrible idea. I don’t want the Feds to bail out the states although it seems like Harry Reid would disagree. I hate to say this, but I think the bondholders will get burned, at least those that are not insured. I think the government employees will get burned. I think the politicians will get burned, and I think the Californians themselves will experience considerable pain. Is all that good? Absolutely not. Is it necessary? There is no other way. We have to get back to a rational spending/taxing baseline that does not involve more debt, that does involve retirement of existing debt, and which faces directly and honestly the promises that the state simply cannot keep. The hole is simply too deep for conventional thinking.
My concept of a state bankruptcy is not to enlist Federal funding, but to treat the creditors of the state to the reality that the bets that they made are simply not going to pay off.
Disturber
The author of this excellent piece has only stated HALF THE SOLUTION TO CALIFORNIA’S PROBLEM. Declaring bankruptcy, WITHOUT STOPPING THE BOTTOMLESS PIT THAT FINANCIALLY DRAINS THE STATE, OVERCOMPENSATION TO PUBLIC EMPLOYEES, AND ENDLESS ILLEGAL IMMIGRATION, will accomplish NOTHING. Bankruptcy without solving these two problems will only be a temporary solution. Illegal immigration, and public employee pay, if they continue as they are, will turn California into a third world state, forever. Useless, cowardly, self-serving and traitorous politicians like Dianne Feinstein, Barbara Boxer, the La Raza contingent in Sacramento, and Los Angeles, know all of this, but THEY ARE WHAT THEY ARE– CRIMINAL TRAITORS, UNWILLING TO DO THEIR SWORN DUTIES FOR THE CITIZENRY.
and I think the Californians themselves will experience considerable pain. Is all that good? Absolutely not.
Yes, it is good. To hell with them I say. They’ve instituted a social state in California, one where the enviromentalists micromanage every aspect of the average voter’s lives-voters.
If one votes in a socialist, one deserves ever so richly the pain associated with said selfish act.
Since moving from California in 2006, I’ve learned ever so clearly just how hated, with good cause, Californians are.
Bobby,
You’re on target buddy, fire for effect!
BK won’t solve anything until they start massive deportations and then overturning all the idiotic legislation like AB 32.
Cold day in hell, a cold day in hell.
Ivan, thanks, but it won’t write what I know from talking to dozens of Californians, what they really feel. By the way, do you know what the request deletiion thing is below my opinion and the time clock that’s running. Did I say something that wasn’t true!!
The only solution for most productive taxpaying Californians (a resident for sixty years) is to pack up and leave and that is exactly what my wife and I intend to do when she retires March 1, 2011 (I am already retired). I was reared in a California with low taxes (a 3% sales tax), a state income tax that effected but a few high earners, and an explosively expanding economy that made millions of us wealthy.
I was educated in the finest well funded public school system in the nation during the govrernorships of Warren and Knight when state budgets were always balanced by the legislature.
My wife and I were both the first university graduates in our extended family and earned bachelors and masters degrees from one of the state college system’s most highly rated campuses two mosf highly rated state colleges of the day. Our or student fees that never rose above $58 a semester student activity fees included.
Californian’s during my youth enjoyed the nation’s best highways system, went to school in recently constructed clean public schools. Students were required to take physical education five days a week though college sophmore level. All students before age 16 had to take behind the wheel free as well as classroom driver’s education. Now the states educational system is total shambles and ranks near the bottom of the 50 states by any of a dozen measure such as spending per pupil, class size, student teacher ratios, dropout rates, and too many others to list.
California’s teacher’s and professors in the 1950s were among the best paid in the nation, Expenditures per pupil in public schools was always among the top ten in the nation. Our junior colleges as we called them then were free (my sister paid only an $8 student activity fee per semester to attend).
The California paradise began fading in 1958 when the democrats swept state elections in 1958. Union boss backed Edmund G (Fat Pat) Brown won the governorship and the democrats took control of the state legislature and ushered in California’s faux social justice welfare state. Since 1959 the reality has been out of control state spending periodically papered over by raising taxes.
By 1966 Fat Pat and the democrat controlled legislature welfare spending largesse had driven California to budgetary insolvency Voters responded by electing much maligned by the media as a cowboy actor Ronald Reagan who promised to put the state’s finances back in order. To do so Reagan allowed the legislature to raise the sales tax and begin state income tax witholding. The Reagan governorship had with the 1967 tax raises fixed the budget imbalance for a few years. By 1982 democreep Governor Moonbeam Med Fly the scion of Fat Pat and the democorrupt legislature had again driven California to the brink of financial ruin so voters elected a republican George Deukmejian governor and again taxes were massively raised.
In 1962 the democrat dominated legislature had put in the fix that sealed California’s now unfolding collapse with that year’s reapportionment gerymander. In 1962 the democrat dominated legislature redrew the state’s legislative boundaries giving the democrats a permanent majority in the state legislature and in California’s congressional delegation. At the same time Kenndy’s 1964 rewriting of immigration laws washed a tidal wave of poorly educated low productivity third world immigration up on the state. The ruination of California by 1975 was obvious to many of us.
The process many dub Callifornication is now complete and in the views of many Old Time Californians irreversible. Our only escape from the state’s downward spiral of liberal inflicted destruction is to leave
and take with us our momories of a once great state nowbest described as Mexifornia.
My only issue with a form of Bankruptcy for the State of California is how the various Unions and Special Intrest Groups would try to press legal blockage of Bankruptcy filings and/or attempt to perverse the system to empower themselves further. Per example is how the laws of Bankruptcy was totally ignored over General Motor’s move for Bankruptcy ended up stripping out Senior investors/creditors totally out of the picture of whom had first legal claims to General Motor’s debts and instead empowered the Autoworker Union chapter with most of the wealth when the Union was by contract a Junior creditor with only a very small portion of debt owed to them. The same thing could happen here in California, instead of a propper Bankruptcy the various groups of intrest who insist that these Union contracts and burdensome Entitlement programs remain could find a means to acquire the assests and land of the Senior Creditors which would be the legal Citizens/Residents who still pay taxes in California and haven’t been able to relocate.
One thing not mentioned in this excellent thread is the affect that political correctness–which started to shape things throughout California in 1970-1971–had on the State. It started in the major universities like Stanford and Cal Berkeley where the worst protests had occurred. It was Saul Alinsky subtle brainwashing and it worked. Any reference to American Indians was done away with. Mascots were changed, destroying decades of history. Jokes about the Chinese were suddenly verboten. Corporations/big business and the military industrial complec became the enemy, not the Soviets or Red Chinese or Cubans. Fidel and the late Che were made “heroes”. Anything Republican or conservative was reviled. The R.O.T.C. was reviled. While the 1965 INA pushed by Ted Kennedy and signed by LBJ as part of his Great Society plan had occurred, the Invasion by Mexico hadn’t begun in earnest. Yet, p.c. actually facilitated that Invasion by removing any criticism of poor Mexicans wanting to improve their lives by breaking into the U.S. and not leaving. Fear of lawsuits by the ACLU, SPLC and other anti-America groups was pervasive in the business community. In the early 70s, the gang problem in California was largely a Bloods and Crips fight. An amnesty for some supposedly 200,000 El Salvadorans under President Pappa Bush in 1989–extended by Clinton in 1994 and GW Bush in 2008–allowed El Salvadoran gang members to emigrate to the U.S. along with thousands who broke in from Mexico. That’s how MS 13 and MS 18 came to the U.S. and they along with the Mexican Mafia (the Surenos and Nortenos) have the power the Bloods and Crips once had. In January 2009, the FBI admitted that, conservatively speaking, there are 1 million gang members in the U.S. But they wouldn’t delineate what percentage are illegals. a very conservative estimate would be one third or 300,000. Many of them are in California. Political correctness is and has been “killing” Americans. It needs to be stopped.
THE WAY TO SOLVE IT IS GET RID OF ALL LEGAL AMERICANS IN L.A.? REPLACE WITH ALL ILLEGALS IN YOUR SANCTUARY CITY. THEN GET A RELIABLE HONEST CENSUS DONE BY A.C.O.R.N ? AND THEN YOUR MONEY PROBLEM WILL BE OVER. I MEAN WITH A.C.O.R.N. COUNTING AND THE FEDS INCENTIVES FOR ANYONE ILLEGAL YOU HIT THE JACKPOT.GIVE IT A TRY GET RID OF THOSE LEGAL NOGOOD AMERICANS……THANK YOU>>>>
Nothing to worry about. Uncle Obama will just print some more money and save California.
http://www.numbersusa.com/change/immigration/numbers/
Disturber, INRE:
The problem isn’t so simple, Disturber. Let’s play with your “let’s make state bankruptcy legal” theory. The majority of those bondholders and holders of CA’s IBDs are mostly California residents and businesses. The bottom line is that it is the private sector and individuals who *are* those who loaned CA cash via purchasing these bonds/IBDs. Some of California’s debt has also been refinanced. BTW, here’s the latest/greatest debt figures from the CA Treasury.
And I’m pretty darned sure than any California resident who’s a bond holder is quite aware that they’ve bet on a losing horse. No reality check is necessary.
Were CA able to simply wipe clean it’s budgetary blackboard via a BK, these bondholders… aka American citizens and private business… are the ones left holding the bag. Their fate decided by trustees subject to either federal or union pressure for the crumb distribution. … like GM & Chrysler. Just as @Mr. Irons states above.
The individuals’ loss then cascades into an ugly circle as the unions and associations gain in power and assets. More California businesses fail (or move to avoid failure), more unemployment results, more state shortages post BK for lack of revenue.
There is no way to escape that a California financial failure falls heavily on the shoulders of it’s own residents, and throws what crumbs to be divvied up to the special interest lobbies that hold favor with the feds.. And you have to know that the feds will once again tread into unConstitutional waters by usurping any trustee for directing those crumbs to what creditor they deem “most worthy”.
Does the rest of the nation believe that we should help shoulder the California creditors’ loss with a federal bailout? Of course not. Nor should we. Fact is, most states are headed down the same road of spending… just to a different degree. Most of us have our own problems on the horizon as states, as well as paying for Obama’s “dreams”. As a bellwether state, CA may be a terrific education for other states’ voters: boot out your state representatives that insist upon spending money the taxpayers don’t have…. and fast.
And this same lesson applies to this Pelosi/Reid/Obama unholy fiscal trinity as well. At some point this nation and the voters are going to have to get a grip on the utter corruption of these “do good” politicians they continually elect. They are swayed by promises of “free” services. In California, the truth is in your face… there is no “free”… only economic disaster in the cards.
I will say this, tho. California should have split themselves up into a North and South California a long time ago. Perhaps at least one of them may have managed themselves with fiscal responsibility. But then the liberal powerhouses in SF would dearly miss the Hollywood state revenue.
In all of this, the state has acquired structural deficit that simply cannot be reduced. The legislature lacks the political will to honestly tackle this problem and the governor has no power to do so without legislative support.
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Sounds like the best job in Cali is either a legislator or a govenator! Don’t got to do JACK!
A bankruptcy could allow the state to void all of the excessive union contracts
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yaaaaa, I bet the coppers and firemen would LOVE that! I know to be a Republican you have to be anti union, esp anti muni union. But throwing the baby out with the bath water. Look no further than Chicago, were the cops are this // close to out right revolt over the way they get treated by their bosses, pols, and citz. In scraping a police contract, the only people that will thank you are the gangbangers and thieves. I would not recommend it…….
I just got this in my mail box. Anyone know if it is true?
From the L. A. Times
1. 40% of all workers in L. A. County ( L. A. County has 10.2 million people)are working for cash and not paying taxes. This is because they are predominantly illegal immigrants working without a green card.
2. 95% of warrants for murder in Los Angeles are for illegal aliens.
3. 75% of people on the most wanted list in Los Angeles are illegal aliens.
4. Over 2/3 of all births in Los Angeles County are to illegal alien Mexicans on Medi-Cal, whose births were paid for by taxpayers.
5. Nearly 35% of all inmates in California detention centers are Mexican nationals here illegally.
6. Over 300,000 illegal aliens in Los Angeles County are living in garages.
7. The FBI reports half of all gang members in Los Angeles are most likely illegal aliens from south of the border.
8 Nearly 60% of all occupants of HUD properties are illegal.
9. 21 radio stations in L. A. are Spanish speaking.
10.. In L. A. County 5.1 million people speak English, 3.9 million speak Spanish.
(There are 10.2 million people in L. A. County .. )
(All 10 of the above facts were published in the Los Angeles Times)
Less than 2% of illegal aliens are picking our crops, but 29% are on welfare. Over 70% of the United States ‘ annual population growth(and over 90% of California , Florida , and New York ) results from immigration. 29% of inmates in federal prisons are illegal aliens .
could allow a trustee-like entity to reexamine the distortions caused by the abuse of the initiative process, and could allow a restructuring of the budgets so that the revenue and outflows would be in balance. Fiscal control would be removed from the legislature and placed in the hands of a trustee-like body that would be able to avoid the special interests
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Two problems:
1.) Who will be the trustee? Some other Califorinian?
2.) In prying open the cooked books, it will expose all the past pol’s that lied, cheated, or stole all the money.
There would be blood in the streets.
MataHarley, many of your points are well taken and there is no question that the Californians will suffer. I was truly amazed that the Federal Bankruptcy Judge in the GM and Chrysler cases went along with the reordering of the statutory priorities. It sets a terrible precedent although I suspect that part of what occurred was “pre-packaged” before the actual filing as is the case with many Chapter 11 cases. What was certainly not kosher was the court’s willingness to overrule the objections of the secured creditors that had the highest statutory priority, which, by the way, was determined by Michigan law. Priorities are established by state law in general.
The bankruptcy courts here in California are excellent and the Judges are excellent as well. Perhaps I am a bit naive, but I believe that given the impact on bond holders and the general political activism in the state, and the fact that this could never happen unless there was a Republican resurgence that lead to control over the legislature, that the unions and similarly inclined special interests would not be able to grab what they did in Detroit. I don’t think the bond holders would be wiped out, as was virtually the case with GM, but rather that they would take a “haircut” of perhaps ten or twenty percent of the par value of their bonds. Since they would be fighting for the residual value, they would be a potent counter-force to the municipal unions. As you note, there are a huge number of bonds out there.
As for the cascading effect, it is difficult to predict without knowing how the population of bondholders overlaps with the business community. No doubt there will be pain, and lots of it. But for the life of me, I can’t imagine any other approach that has any likelihood of solving the overall problem. There are simply too many elements that have gone wrong and there seems to be no other way to address all of them.
One of the most painful aspects of this is that the University of California, which is one of the great universities in the world would ultimately suffer as well. (By the way, the same is true of the U. of Michigan, my alma mater as the state of Michigan is in virtually the identical mess and for the very same reasons.)
I repeat myself from an earlier post, but my motivation here was to start a discussion in the hopes that the collective creative juices of the attendees at this table would come up with a solution other than BK.
I want to also stress my agreement with your comments at the Federal level. Federal fiscal irresponsibility is shear madness. I can’t imagine what they are thinking. The only reason that the Treasury is selling bonds is that the banks and other qualified financial institutions are borrowing money from the Fed at near zero interest rates and buying Federal bonds in what is referred to as the “carry trade.” When Japanese interests rates were uniquely near zero, that was a common investment strategy. Borrow Yen at near zero rates and buy American corporates or Treasury securities and pocket the spread. As interest rates rise, and that deal ceases to be attractive, sooner or later the Treasury is going to have a failed auction. I suspect the DOW will go into free fall on that day. There is a tin ear in Washington whenever the subject of fiscal responsibility comes up. I suspect that the turnover in Congress is going to be a whole lot larger than even the most optimistic pundits are predicting and if so, there may be some hope.
By the way, thanks to your and your colleagues for creating this forum. I think that in general the quality of the discussions is quite good, which is why I am here. Lots of other places to purely vent.
Disturber
Joe Form Chi, cops and firemen work for the local municipalities and not the state. However, in my town of 17,000, the fire chief retired at age 52 with a pension of $250,000 and immediately took a job as fire chief in another town at a salary of $175,000. Believe me, there are many abuses at the local levels as well.
Disturber
RE: California
Let. It. Burn.
(And I live here.)
Nothing will cure Kalifornia unless the whole state is completely razed. BK will NOT fix Kalifornia because the politicians absolutely REFUSE to do what needs to be done to fix it.
If BK is declared (which it can’t be, apparently), it won’t fix a single thing.
Let. It. Burn.
This issue with Californina echos within Kansas’ borders rather harshly with fiscal irresponsiblity, and since I live within Kansas what happens in California’s citizens could be quickly mirrored within my home State by the ruling body in Topeka with little understanding how it would further derode the Economy of Wichita’s Aircraft market.
This is an example of what drives my ire over Teacher’s Unions and Unions in general:
Yet here is the situation: A run away group of School Boards within District 259 are angry that the State of Kansas, pockets praticaly empty, have listed that the Bond of 2008 will be one of the many cuts of funding for the State Budget for years. So here is a group of special intrests trying to further burden Wichita’s taxpayers especialy after the fact massive layoffs have hit Cessna Aircraft and Hawker Beechcraft (which is about to get hit again). The schools in Wichita are seeing a decline or stangnant population of students due to families relocating to cheaper Counties other than Sedgwick (or States) and yet the District can’t see their own policies of jacking up property taxes and a crumbling City Economy is the root problem. No, they want their money and power no matter how much damage is inflicted even if it means decreasing the population of the City and kill business.
The private propperty issue that ransacked New London, Connecticut could quickly engulf California and Kansas yet instead of a private business seeking land it could be the “junior” creditors seeking lands public and private as rightful payment to the “junior” creditor if a Bankruptcy is filed. And some of the Teacher’s Union and I.A.M. Union members haven’t been exteremly shy from the idea Communist ideas related to private land. The means of this type of land grab would be from monsterously huge taxes placed on property, and I wouldn’t put it past these people to consider this. Hells, some of the I.A.M. members I used to work with fully agreed that Talk Radio should be taxed at a 100 percent rate and that home owners should be taxed that much as well and be forced to live in an apartment like everyone else.
I also like to re-highlight that the Bankruptcy of General Motors was for, some ever alien reason, manipulated by the Federal Government to violate State Laws. The current behavior of the House of Congress and the White House each hint that they’d could easily step in and repeat what has happened with General Motors for California and Kansas if such a filing can happen.
#18 Old One, a very accurate and totally honest explanation of the causes of the California debacle. I would like to think that it won’t be repeated in other states, but it already is being repeated in at least nine or ten. As I’ve opined so often, the reason the United States is collapsing into a state of chaos is its dishonest, cowardly, and treasonous pulbic officials and politicians. I know this sounds crazy to some people, but let us be honest. A state or even a nation cannot be a healthy one, that serves the taxpaying citizens fairly and advances their best interests, when you have a philosophy of government that basically encourages an “I got mine attitude and to hell with my fellow citizens,”etc. I doesn’t make for a viable nation. Citizens support things like illegal immigration, despite the fact they know it’s illegal, but many benefit from exploiting illegal immigration. The fact that it also depresses the wages of the citizenry, and raises their taxes, means nothing to the illegal immigration exploiters. These would be the open borders lovers, like Clinton and Gore, for instance. These two traitors pushed NAFTA onto the this nation and it has ruined the jobs of countless Americans as well as Mexicans, and yet, moronic leftist democrats, still think these two clowns are just fine. So, we have arrived at the state we are now in–chaos, confusion, corruption, dishonesty, and grand canyon size apathy.
California unemployment is improving, but conditions vary throughout the state according to this heat map:
http://www.localetrends.com/st/ca-california-unemployment.php?MAP_TYPE=curr_ue
Disturber:
That has nothing to do with the grunts on the ground. Ya know, the guys that get shot at, punched at, run into burning buildings and have thier names run thru the mud. Your chief is not a fireman nor was he probably ever. He’s just a politician with a badge and rank. Most of his salary is probably kicked back to his clout that got him there. Wiping out contracts only hurt the men, not the “leaders”. The clouted up “leaders” will fall on thier feet.
@Disturber: the alternative to a non-existent and illegal state bankruptcy is for California legislators to tighten their belts, and spend less than the projected (and declining) tax revenues expected. Nothing else. Period. It’s the same thing any US household has to do, and what our federal Congress should do. There are no quick fixes. Spend less, and slowly pay down the debt.
The next thing they should do is concentrate on how to increase tax revenues while they are spending less, and that means reverting back to a business friendly policy. Not raising taxes, but creating a prolific biz atmosphere to generate more tax income by higher profits.
If California doesn’t do either of these, I agree with bronze… let Rome burn.
@Peter, how you can look at your supplied heat maps and see “improvement” is beyond me. Click first on the zoomed out map for April 2009, then Sept 2009, and Oct 2009, and the increasing 10-15% unemployment overtaking the map is abundantly clear. Did you remember to remove your rose colored glasses??
I have to agree with that one, MataHarley. I’m confused as to why an increase in population percentage in unemployement anywhere could be viewed as an improvement to a situation. I thought to improve unemployement you have to decrease the ammount of unemployed, and that heat map does nothing but prove a monthly by monthly increase. Am I living in an insane world when swelling unemployement of Americans is a good thing, or am I the insane one?
Just last night while driving, I listened to a Liberal Hack from Sacramento explain how federal stimulus money is justified for California: he explained that the country will follow California out of the recession. Therefore rewarding fiscal irresponsibility is justified because of the collective advantage for all.
Arnold was installed and Davis was deposed in an effort to correct this fiscal irresponsibility; Arnold promised us he would kick those nurses in the butt, although this was only so much impotent bluster from the Obama school. (I didn’t really want him to kick nurses, {his words} but taking a stand would have been impressive for a muscle man.) The only things he accomplished was to make vague and ambiguous statements about education and attend Climate Conferences as if California was some banana republic and the world was going to care what a pathetic actor turned politician had to say.
Yes we should reward irresponsible behavior and incompetent leadership with taxpayer money in an effort to revive the economy.
Bobby great commentary.
Disturber, please continue to disturb the water bucket, it muddies up the water and disrupts the propaganda that will be ladled out to make the Progressive Socialist Agenda more palatable.
I love the irony, yet hate that it’s happening,of which people claim the Stimulus Money spending is such a great plan. It mirrors what the Wiemar Republic did with their monies to solve an Economical collaspe that it’s disturbing.
http://en.wikipedia.org/wiki/Hyperinflation
The other State’s taxes should not go to feed an ever growing Fenrir in New York, California, or even New Jersey; as this is taxation without Represensation. Yet Federal hunger dwarfs the State budgets drasticly, even having to result to borrowing hundreds of billions of dollars from the Chinese due to the little problem that current tax revenues are far too low to fund current Entitlement programs and upcoming ones. Our nation is face track towards Hyperinflation if the rest of the first (technicaly second) Stimulus bill is spent and if another gets legalized. And most of the money has gone to fake Congressional Districts and pet projects that have not “trickled” into the Economy. There should be audits and investigations of where this money went and to whom. This is on par with Tea Pot scandal (Harding), Crédit Mobilier scandal and even the Bogus agents Scandal (Grant).
Liberals who worship large expansive programs with larger taxation policies in place have always turned a blind eye to how the American people will react to the taxation part: Evading and relocation to lower tax areas. If this nutcase thinks California is a wonderful prime example of Economical Recovery via Centralized Economic policies (Communisism), then he really is blind to the Collapse.
On that idea of scandals, Obama reminds me far more of Ulysses S. Grant in how he’s formed his cabinet and how he constantly defends people with very disturbing backgrounds.
Old One’s covered it pretty well, though he (she?) left off the outrageous deals cut by Gray Davis with the public employees unions in the late 90s when the tech bubble was projected to go on forever. A future so bright, you gotta wear shades! We’re stuck with those deals because the state constitutions prohibits restructuring them. I expect we’ll end up where a lot of unionized business have gone before, with a two-tiered benefit system for public employees that screws the younger workers.
One thing no one’s mentioned is that, thanks to redistributive policies at the federal level, California is (or was) a net donor of tax monies to the rest of the country. At one time we got back just 70 cents of every dollar we sent to DC, while a lot of so-called “red states” were net recipients. That’s undoubtedly changed on an absolute basis, though probably not a relative one. So, think about it before tossing us out of the union, OK?
As for California being shades of things to come, well, unlike a profligate national government, California can’t just print it’s way out of the problem with funny money, so in one sense our death spiral can’t end the same way that the national ones will.
Or maybe it can? If the state were cut loose or seceded, then we could fire up the presses! We could print $3 bills with Boxer on them! Naw, jus kidding – we’d put Boxer on the $11 and President for Life Pelosi would be on the three.
California pols selling out (other say being bought and paid for) to state employees began with a deal struck betwen state prison guards and the liberal RINO Gov. Earl Warren back in the late 1940s. Ever since that deal more than sisxty years ago the “public safety unions have had the state legislature both Republicans and Democrats in their pockets and their hands ever deeper in the pockets of California taxpayers.
Orange County voters were shocked recently by the revelation that its county sheriff deputies averaged more than $120,000 a year incomes (not including their benefit and retirement package costs) thanks to the deputies scamming overtime pay. Some years ago the California Highway Patrol union got their salaries pegged to those of the police departments in California’s large metro areas. Using a website that lists state payments made to all state employees my son investigated the payments made to an CHP officer who wrote a ticket to a friend of his and discovered that the officer had been paid well over $120,000 in 2008.
Using a websites listing the earning of state employeees one discovers there are tens of thousands of state employees being paid over $100,000 aannually and thousands that receiver many times $100,000 led by figures over a million dollars a year for numerous University of California employees. A real outrage is the fact that hundreds if not thousands of state employees received more than $50,000 last year in overtime pay.
The facts are California governors of both political parties were fattening the pay, benefits, & pension packets of state employees long before Bleak Davis rolled over two turns for public employee unions. In turn state elected officers, governors, and the left-wing democrat dominated legislature all have enjoyed campaign war chests generously greased by state employee organizations and union. The SEIU “represents” almost half of California state employees and funnels huge amounts of money to the democrats campaign war chests.
California’s deficits mushroom as the numbers of state employees, their wages, and benefits packages continue to rise and the California economy suffers and shrinks under a crushing tax burden, regulatory totalitarianism, bureaucratic arrogance, inefficiency, and ramantant incompetence. The state’s economy continues to melt down and California’s most educated, productive, entrepreneurial, and affluent head for Texas, Nevada, Utah,and Arizona.
Old One: Thank you for providing even more information. I knew some public employees were making bank, but I had no idea it was that many.
Where do you intend to retire to Old one?
John and Ken of KFI Talk Radio have done an excellent job of exposing the brigandage that exist at all levels of Californai government. The average wage of a California private sector worker is $36,000 a year. For California state employees the average is $66,000 annually(plus benefits and pension costs) What is worse is the same scam is being executed in every California city, county, specail district, and school district in the state. Not surprisingly the media in this state has no interest in reporting on the malfaeasance and pundering of the public treasury by government employees that is all pervasive statewide.
The school district I worked for for 40 years in 2006 maxed teachers salaries out at $76,000 after thirty years experience and 98 semester units beyond a bachelors degree but was paying the principal at the inner city school where I taught for 18 years . In 2008-9 hthe pricipal earned $200,000 annually. Despite the fat salary he filtered off $400,000 in school funds for his own ends and guess what no legal action has been taken against him. A prior principal at the school who departed in 1999 had pulled exactly the same antic and she too was allowed to retire with no action taken against her. Shockingly she was later rehired as a consultant by the district so she could continue collecting her retirement pension and work for the district as an administrator at the same time.
Unless the market in Southern California coastal real estate completely collapses before we can flee in 15 months (so far it has not) we will easily be able to purchase a house in southern Nevada that will be a legal permanent residence that will be home from mid-September through May (or whenever the heat hits) as well as a more modest retreat in a summer cool mountain abode in Southwestern Utah or in the Fairbanks, Alaska area (home to my wife’s forbearers).
The states we are considering are non-nanny states with low taxes. Both Alaska and Nevada have no income tax and most boroughs in Alaska have no sales tax either. Yet all those states offer superior public services compared to dysfunctional tax mad California. If and when dotage & incapacitation overtake us we will likely head for Texas as home where most of our California rborn and reared relatives have fled.
If the democorrupts health care denial act sticks we will out of necessity have to take up residence in either Costa Rica or the state of Jalisco in Mexico where we can purchase an affordable private health coverage for less than we now pay. I worked in a field where the employer(public schools) did not pay into social security or medicare so when my wife retires she too will be on her own for medical insurance a fate that befell me when I hit age 65. We know that the democorrupts ‘reforms’ will wipe out my excellent “cadillac” private insurance plan that presently costs us more than $800 a month rising to over $1,100 when she retires. The destruction of our private policy by Ozero Care will force us to leave the country to avoid gov’t care denial for my asthmatic wife We will be able to afford a health care plan in either of those 2 countries.
Wow, it seems lack of ethicall conduct is endemic to our nation with all these Admins ripping off the tax-payer. They must have dirt on everyone above them I guess. It wouldn’t surprise me, honor is dead in this nation so it has become every man for himself.
May I ask why you would consider Mexico given the instability that is going on and will probably get worse?
And when you say Southern Nevada you mean Vegas or Primm, yes?
Hello.
I am a full time national tea party organizer/activist.
I would appreciate having a copy of your wonderful blog emailed to me
for wide distribution– informational/ educational purposes only.
You have done an excellent job of articulating a very complex
situation. You have not shirked from placing blame squarely where it lies.
I hope that CA will now realize that the libs are NOT in control,
after we were able to win the MA US Senate seat for Scott Brown.
For the time being, Obamacare is dead. We know they’re re- loading.
So are we!
Ivan
The news about the drug terror in Mexico is crap. Like in the US unless you are involverd in the traffic the danger is near zero. There are more thsn a million American and Canadia retirees who live partime or full year in Mexico with many having not been to the US in years and none are planning to leave as burial is 1/5 of US costs. If you have the money good medical care and insurance are available in Mexico at reasonable prices. A fulltime live in certified nurse(not a maid) can be hired for a $1,000 a month, doctors willl happily make house calls for $50 or less, pharmaceuticals sell for 1/3 of US prices or less, ordinary Mexicans are good kind-hearted people and if you treat them as your equals and friends they look out for you. You buy into a gated community, make local friends and you are set if you speak or learn Spanish, join a church, and do what you do here.
Coste rica is a similar situation to mexico but it lacks in the charm and historic treasures one finds in Mexico in the places where American retirees choose to settle and it is no cheaper than mexico these days though it has less urban hassle. The lack of urban hassle in Coste Rica also means an inferior infrastructure and alack of high culture which you can find in Mexico’s larger state capitals cities. My wife prefes Costa Rica andI prefer Mexico. If Obamao’s death care comes to be we will have to choose one or the other but since our son is likely to land up in Texas ehn he to flees the People’s republic of california. Where we will light in Mexico is only a long day’s drive from the border I and mexico will likely triumph with another card for Mexico being the presence of my wife’s California refugeee neices and nephews in Texas.
And no not Primm and certianly not Las Vegas which is nearly as bad a helll as California has become with even worse traffic congestion will not be our nevada location if Death care goes down. My spot is undisclosed but within an hour or so of Las Vegas and out of the Clark County kingdom of the corrupt and venal Dingy Harry Reid machine that along with mobsters he has run for 40 years. Now his son Rory is trying a state takeover the entire state as governor.