I do several radio talk shows every week. Mostly I talk about public policy and the economic status of California. People ask me why I am so negative—Dr. Doom and Gloom some call me.
We know California runs tens of billions in deficits, and has every year, for years. Unions, illegal aliens, AB 32 and SB 375 have been our jobs. The pension systems are insolvent and causing local government to cut law enforcement just to pay for the pensions.
We now have vicious criminals wearing bracelets and walking our streets instead of serving their prison sentences. Illegal aliens are getting scholarships to our government schools and last week unions tried to close down ten hospitals.
On Monday Gov. Brown is going to present a revised budget. Special interests will be crying—no not about the cuts, but demanding tax increases to make more people unemployed or newly minted Texans.
I am not negative, just telling the truth—which is negative. Pass this to your friends.
Editorial: The Coming Fiscal Collapse of California by Stephen Frank
5/13/12
Please mark January 1, 2013 on your calendar. That will be an historic day for the State of California.
Unless things change, President Obama will give us a $494 billion tax increase, nationwide. That day ends the Bush tax cuts, the AMT patch and starts the massive, first stage, of Obamacare tax increases.
In California, that will be the first day of the ten billion dollar per year transfer of funds from one business to another, with billions also going to government, for the scam of the century, “Cap and Trade”. This does not clean one little bit of our air, just moves the dirty air around. That is ten billion.
Then, if passed, that will be the first day of the Brown/union $10 billion per year tax increase. If it passes, families and businesses in California will transfer $10 billion a year to government—causing a loss of jobs in the private sector, forcing more businesses to move out of State.
If it fails, government will have to cut ten billion per year, or go into debt and deficit by that amount. This will cause the cutting of thousands of government jobs and programs (which might save the State).
At the same time, if it passes, the Munger $10 billion per year going to “education” will transfer that money from families and businesses to union run government schools—with no reforms of the failed government school system. Because of the massive collapse of the pension system, already insolvent, most of the new tax money will go to bail out CalSTRS, not into the classroom or quality education.
So far Munger has given $8 million to tax you $120 billion over twelve years. She has pledged to spend whatever it takes—and she is a billionaire.
Also, for January 1, 2013 if it passes, is a new one billion tax on business by “closing” loopholes (really tax credits to create jobs). That is one billion less for businesses to expand or create jobs. The billionaire behind this measure promised to spend $20 million of his own money to pay this job killer.
Businesses see all these financial disasters and are looking at moving to another State (many have gone to business friendly Texas), stop expanding or closing down. Even if all these measures fail, and I expect they will, business understands they are the target of an out of control Democrat/union run State.
Add to this disaster the fact that we owe the Feds $10 billion for bailing out our unemployment system—and need to borrow more, since it is again about to be insolvent. In September we will have to pay the Feds $492 million, just for the interest on the loan—and that comes from our General Fund.
Both CalPRS and CalSTRS are insolvent, with hundreds of billions of unfunded liabilities Worse, they are claiming a 7.5% return on equity. They know that is a lie. CalPRS last year had a 2.3% return. CalSTRS for the last six months of 2011 had a “return” of a negative 3.4%.
The difference between the predicted return and the actual is the amount of ADDED unfunded liabilities of the systems. If they were private companies the Federal government would take them over.
California has an admitted unemployment rate of over 11%, while the real rate (including the discouraged, those who have lost benefits, those who are underemployed) is really over 20%. Thanks to the increased pension demands (CalPRS is demanding an extra $213 million from local government) local government is cutting back on services and personnel)
Did I mention that California, when ALL is counted, is headed toward another real deficit, year to year, of $40 billion? The seven years of Arnold gave us a total of $200 billion in deficits. Brown now admits to the deficit being $16 billion—but he is lying as well.
January 1, 2013 is the tipping point for the financial collapse of the “Late, Great, State of California.”
Local government is nickel and diming families and businesses at the same time. Los Angeles has decided to add $40,000 to the cost of opening a new grocery store by mandating a “cart” retrieval system. Get a parking meter ticket in LA? The cost is $73—or more.
San Diego, a bankrupt city, is debating adding hundreds of thousands to the “arts” community. Currently the city cutting cops and parks is paying more than $7.7 million for the arts.
Yet, with this fiscal collapse, Gov. Brown is still demanding we spend $200 billion on a choo choo train—yet refuses to tell us where the money will come from. He wants us to start building it with the financing in place. So far, only government has financed this loser.
Defeating the tax increases on the November ballot is mandatory. But, that will not end the problem. Until Sacramento gets serious and ends its relationship with special interests like unions, agrees to drill for oil to gain revenues and jobs, expect the complete fiscal collapse of California the first quarter of 2013. It will start on New Years Day—and that will give you a hangover.
As someone whose grandparents followed the rules, spent the time, and paid the costs to be citizens I am offended at the blind eye turned to the criminals who border hop. These people are never required to renounce their former allegiance like naturalized citizens are.
In any event the state is going to end up filing for bankruptcy. If the tax increases pass any business that can flee the state will do so. If they do not pass then the unfunded liabilities will cripple public services. Either way, there will not be enough money to cover expenses.
October 16, 2012 at 10:04 am
I will vote NO on any taxes increase.
November 2, 2012 at 7:18 pm
I’d like to see the republicans introduce a bill allowing illegal aliens to get preferential hiring over citizens in the public sector. In our sanctuary state, they are “super citizens” anyway. I would cut the wage scale, give them jobs and hopefully cut the cost of California’s many branches of civil service.
We all ready allow green card immigrants to work, so why get stuck on technicalities?
The democrats should be in agreement with this plan since they have granted the status of “super citizen” as it is.
August 3, 2012 at 8:45 am
California is finished. The only question is how violent the end will be.
June 17, 2012 at 4:48 pm
Most Californians are aware that our state government has a profound spending problem. Red ink spilling out of Sacramento, large and clumsy bureaucracies, and spend-aholic politicians have only made the situation worse. We can’t afford risking our fragile economic recovery on ill-conceived schemes that will drag it down even further.
So while the initiative might satisfy powerful special interests that have a significant state in propping up the current system, it does not reform the system in a meaningful way.
Waste Watchers Inc
http://www.wastewatchersinc.org
Richard Ahern-Vice President
Governor Brown should be recalled
June 4, 2012 at 4:14 pm
Here is California’s plan:
Strengthen the anti-business structure of California.
Reward those who do not work by allowing them to remain on CalWORKs (Welfare).
Raise taxes on those who create jobs so that they will have less money to spend, thus hire less people.
California is tax addicted, and its people are addicted to Government Services. California will not hear the calls for it to get itself right. Like all addicts, they do not see they have a problem. California’s tax addiction has been ignored for too long. Now California is about to OD and the government is crying out for a new source of taxes for its addiction. However, the fact is that no matter how much of our taxes are coming in to the government, it will never be enough. They are addicted! I will miss California. Too bad that no one was willing to force it into rehab. Moreover, as California goes so goes the nation.
June 1, 2012 at 4:53 pm
Well, Mr. Franks certainly LOOKS the part of a well fed Republican, clinging onto his corporate mythology that California’s corporations are ‘overtaxed’, when the reality is anything but….
I’d suggest referencing Lenny Goldberg’s Californians for Tax Reform for a more equitable view, as well as another Frank’s views, those of THOMAS FRANK, whose PITY THE BILLIONAIRE speaks to the present author’s overcompensating insecurities and tortured economics…
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Why doesn’t someone investigate Cal Fire? They have sued to have overtime paid out on their lump sum vacation, holiday, etc. This will cost the state millions if not billions! They have changed the name of the overtime to make it appear to be part of their salary however, once the separated or retire their leave balances are reverted to the 40 clock not the 7k exempt workeek they normally work. This is the biggest scam they have pulled…Trust me there have been many more before this…Look into the AB that involved their name change…And the misuse of State Vehicle…just to name a few. Now they have the gall to ask for the voters to vote on measure D and suck up more money….Come on Someone really investigate these greedy blood sucking leaches.
May 14, 2012 at 12:25 pm
My understanding of California finances is that it sells bonds(>1yr duration) /RANs (Revenue anticipation notes- < 1yr duration) to fund future obligations (salaries, projects, services, etc.) If this is a reasonable description of how Ca. finances work then it seems that the music stops (probably quite suddenly) when the bond/RAN buyers perceive their capital at significant risk.
These lenders understand that our constitution guarantees that they get paid 1st. I see 3 risks to Ca. being able to borrow at the presently very low interest rate. 1) California gets significantly downgraded by the rating agencies. 2) Ca. opts to delay full-repayment of bonds/RANs at the time of maturity (technical default), 3) Ca. sues to renegotiate the terms much like home borrowers demand that the “shifty” banks renegotiate their loan terms. Bond rating agencies would face enormous political pressure to not downgrade thus I do not see them as being truly objective. Delay repayment and suing to renegotiate terms seem a lot more likely.
I see no end to Ca. spending/borrowing until the major lenders realize that they are loaning money to a government that has no intention of honoring its obligation if it is forced to choose between paying the bonds and everything else. When I see 3 month RAN bond buyers demanding 5% - 10% annualized ROC then I will know that the music has stopped. If my anecdotal evidence is any indicator most citizens are nearly clueless about finances on this scale so I do not look for California’s salvation in the voting booth.
Does anyone else have an opinion on this? I am genuinely interested what others think.
May 14, 2012 at 12:07 pm
It will be interesting to watch when the State Controller has to decide between paying off a short-term bond and issuing paychecks to all the state workers. Better to cut 20% of the state workers now and reduce the risk of having to face that in the future.
May 14, 2012 at 12:28 pm
You have bin misled Friend, Kamala Harris is nohting but a Liar, she does not want to legalize medical marijuana, I live here, she is evil and has bin bought and paid for many years ago here, same as Gavin Newsom, everyone who voted for them will regret this day.
December 15, 2012 at 4:13 am
One thread of this tattered Bear Flag is the rush to spend the fed’s High Speed Rail money, on the infamous “Valley Segment”. Because “tahoevallylines” beat is the railway mode and application through te Oil Interregnum< we offer the following. Some may apply to the fiscal discussion.
It requires less technical knowledge than political acumen for the High Speed Rail to invite the Governor along to Washington, DC, to meet & confer with Ray LaHood. Better yet, bring Mr. LaHood to a closed door session in Sacramento, and demandr redirect of the Federal High Speed Rail "seed money". The HSR start-up money should be used for reducing rail terminal and mains bottlenecks.
The rail passenger constituency must be expanded before there will ever be another ballot measure passing in favor of rail passenger projects of any kind. The rail bottleneck from Bakersfield to Palmdale must be fixed; adding through Cap Corridor trains between Bakersfield to the LA area will triple the passenger train ridership seen at present… Economic benefits to California resulting from easier flow of rail freight is reason enough to talk to Ray LaHood!
May 14, 2012 at 11:20 am
“rail passenger constituency”? Who would that be?
Just how is the federal government to pay for any of this? Maybe with Unicorn Farts and My Little Pony burps? They don’t have any money, either.
If commercial rail users need expanded capacity, they’re welcome to use their capital to fund it.
May 14, 2012 at 12:25 pm