Uh oh. California is drowning in red ink:
A financial report issued by state auditors finds that the state of California is in the red by an unsustainable $127.2 billion.
The report says that the state’s negative status increased that year, largely because it spent $1.7 billion more than it received in revenues and wound up with an accumulated deficit of just under $23 billion in fiscal year 2011-2012, the Sacramento Bee stated.
The response of the liberal bureaurats responsible for creating this crippling debt was both appalling and predictable:
A state panel on Wednesday approved a 5% pay raise for Gov. Jerry Brown, legislators and other state elected officials…
The panel’s action boosts the salary of Brown from $165,288 to $173,987 in December, and increases legislators’ pay from $90,520 to $95,291 at the same time. Raises will also be provided to the state attorney general, state treasurer and other constitutional officers.
By putting the cartoonishly irresponsible Jerry Brown back in office, California voters elected to go over the cliff; over the cliff they go. This happened because the population of the erstwhile Golden State has been permanently transformed by massive (and largely illegal) Third World immigration. Now that whites are a minority, whoever is most likely to keep the looting spree going right up to the point of total economic collapse is assured of election. Applying this phenomenon nationwide is the purpose of the current amnesty bill.
And the Sacramento Bee ended with this chilling outlook:
…The report listed the state’s long-term obligations at $167.9 billion, nearly half of which ($79.9 billion) were in general obligation bonds, with another $30.8 billion in revenue bonds, many of which were issued to build state prisons, whose “revenue” is lease payments from the state general fund.
The list of long-term obligations did not include the much-disputed unfunded liabilities for state employees’ future pensions, nor the $60-plus billion in unfunded liabilities for retiree health care. The Governmental Accounting Standards Board and Moody’s, a major bond credit rating house, have been pushing states and localities to include unfunded retiree obligations in their balance sheets and were they to be added to California’s, it could push its negative net worth down by several hundred billion dollars.
Remember this older upload about Cali’s unfunded liabilities:
HotAir nails it!
Since it’s not a web ad featuring a super cool, hipster-celebrity making suggestive analogies about President Obama’s oh-so-dreamy and glamorous political qualities, I doubt it will get nearly the same traffic as Team Obama’s recent Lena Dunham ad — which is most unfortunate, because rather than a cotton-candy, war-on-women appeal to the youths, we actually see the real-world effect that Obama’s policies have had on hardworking, middle-class Americans.
President Obama’s policies have been brutal to the business world, and small businesses in particular. An onslaught of red-tape regulations, ObamaCare, the threat of higher taxes, generally poor economic growth — none of these have been kind to entrepreneurs or owners trying to grow their outfits. Despite the Obama administration’s several showy moves to come to the aid of small business, their vital signs just haven’t picked up, via Bloomberg Businessweek:
The measure estimates employment at independent companies with fewer than 20 employees that use Intuit’s online payroll product. Companies with fewer than 20 workers make up nearly 90 percent private employers in the U.S. …
Companies with fewer than 20 employees have actually shed jobs during the economic recovery; the Intuit Small Business Employment Index was 0.9 percent lower in October 2012 than in July 2009. Moreover, since May, the index has moved in the opposite direction from BLS estimates of overall employment, with Intuit reporting a loss of 10,000 small business jobs in each of the last two months alone. …
Compensation and hours are similarly weak. Adjusting for inflation and seasonality, monthly compensation for all employees (including the owners) at businesses with fewer than 20 employees is 10.2 percent lower than when the president took office.
California is in a worse boat that Virginia, for instance, we [California] have ranked dead last 8-years in a row as far as a business friendly environment goes:
It was alarming the first three or four times California was ranked last among 50 states for business environment. Now, Chief Executive magazine’s annual ranking, based on a survey of 650 chief executives on taxation, regulation, workforce quality and living environment, again places California dead last, 50th of 50 – for the eighth year in a row.
Eight years in a row ceases to be alarming. It now is a defining status.
Gov. Jerry Brown insists those who say California is unfriendly to business are wrong. But Mr. Brown, of course, is not the chief executive officer of a private business. He is the top executive of a deficit-burdened, intrusive, bloated government bureaucracy that has perfected squandering other peoples’ money while botching delivery of services such as education and lavishing public employees with unaffordable pay and benefits.
California public school teachers are the nation’s highest-paid, while their students’ performance ranks among the worst. The state’s various unfunded pension and retirement health care benefits promise to bankrupt the already overextended government.
As chief executive opinions go, Mr. Brown’s are considerably less credible than CEO magazines’ private-sector leaders.
“California’s enduring place of perpetual decline continues in this year’s ranking,” the magazine said. “Once the most attractive business environment, the Golden State appears to slip deeper into the ninth circle of business hell.”
The CEOs aren’t alone in their harsh critique. The state got an “F” grade in January from Thumbtack.com and the Kauffman Foundation in a survey of 6,000 small businesses across the nation, and the Tax Foundation ranked California 48th worst on business taxes.
There is little prospect of improvement. Despite finding itself in a hole, state government keeps digging. This week the state Senate Judiciary Committee killed a California Chamber of Commerce-sponsored job-creator bill to protect employers from inappropriate litigation.
Mr. Brown’s Air Resources Board is ratcheting up costly new regulations and preparing an ill-advised cap-and-trade carbon-emissions auction to coerce private energy providers to do things the government’s way. The governor and other Big Government champions also are advancing proposals for the November ballot to extract upwards of another $20 billion per year in taxes.
As CEO magazine’s poll shows, the state’s failings are obvious to business people. But Mr. Brown and California’s other governmental leaders just don’t get it.
This entire article is imported from American Thinker, and even though it is dated, maybe many Californians missed this HUGE problem prior to the election?
California is the nation’s shameful example of what happens when Democrats influenced by big-government labor rule the statehouse for forty years.
With 12.5% unemployment (up from 4.5% a mere three years ago) and a “recognized” budget deficit of $21 billion, California has just found that out it is in much, much more financial trouble than anyone, especially a Democrat, really wants to admit.
California’s governor Schwarzenegger commissioned a study by Stanford University, which has found that California’s three public employee pension funds (The California Public Employees’ Retirement System [CalPERS], California State Teachers’ Retirement System [CalSTRS], and University of California Retirement System [UCRS]) lost $109.7 billion in portfolio value in one year (June ’08 to June ’09) and are currently in shortfall of “more than half a trillion dollars.”
By law, California taxpayers are required to pay the public employees’ pensions shortfalls that may occur. Local governments cannot “print money” as the federal government does to cover budget deficits.
What should have been considered a huge scandal in the state pension fund system in the past year got little attention but is more pertinent now: The two largest plans, CalPERS and CalSTRS, were reportedly near bankruptcy in 2009 after it was learned the funds had lost from 25%-41% of their value due to risky investments in real estate and the stock market. Former employees of the state plans were accused in January of getting huge fees to direct pension investments to certain banks or ventures.
There are outrageous examples of abuse in the California public pension system.
PensionTsunami.com, which has been tracking the pension fund liability issue for five years, has found that 9, 233 retired members of CalPERS or CalSTRS receive more than $100,000 per year in retirement benefits, amounting to more than a billion dollars a year.
The retired city administrator of Vernon, California, Bruce Malkenhorst, receives an annual pension of $449,675 from CalPERS. Vernon, a Los Angeles suburb, has 92 residents.
California’s state employee pension fund liabilities have ballooned for years with increased numbers of state employees, many of whom can retire at age 50, can “spike” their last years’ income with overtime to increase their retirement, and can then move on to other government or private jobs without losing their pensions.
Why should Californians care about this confusing, complicated budget problem with a huge, unfathomable invoice attached? David Crane, writing for the Los Angeles Times, says that today’s pension fund shortfall is tomorrow’s budget cut to something some Californian is likely to miss.
In California’s case, past pension underfunding means reduced funding of current programs. This explains why pension costs rose 2,000% from 1999 to 2009, while state funding for higher education declined over the same period.
Californians are feeling the pain of the budget crisis, but they often misplace their criticisms.
Approximately 22,000 California teachers have just received “pink slips” indicating that they may be laid off due to budget cuts next fall. An additional 20,000 were laid off last year. California is cutting “live” teachers out of classrooms in order to pay for retired teachers.
California schools have gone from number one in the country in the 1970s to at or near the bottom in performance and funding.
Who is to blame for this ticking-time bomb of unfunded public pension liability?
Brown, who has been governor, Oakland mayor, and attorney general, now wants to be California governor…again. Four big, grateful government labor unions are backing him…again.
Speaking recently to the Service Employees International Union, Jerry Brown “the populist” said he was proud to have given state employees “the choice” to belong to unions in the ’70s, and he will “take a look” at the pension funds to make sure that they are actuarially sound. Big applause line.
Speaking to another union group in Sacramento, Brown was caught on videotape asking the labor leaders to “do the dirty work” and “attack” Republican candidates who oppose him in the governor’s race. (Hear it here.)
Who else is to blame?
Since Brown gave them a green light in the 1970s, public employee unions have become a muscular, dominating force in California politics. State employee unions spent a whopping $31.7 million on state races just from 2001-2006, according to the California Fair Political Practices commission — higher than any other group, including corporations. The majority-Democrat California legislature has voted accordingly.
What can be done?
Jerry Brown the rerun, who is running technically unopposed by any other candidate in the Democratic primary, has been oddly silent on his state’s dire budgetary woes. His campaign site news releases do not mention budget problems.
At the same time, it has been noted by the tabloid media that Jerry Brown has been weirdly over-involved as California’s attorney general, his current job, in the celebrity death investigations of Anna Nicole Smith, Michael Jackson, and Corey Haim. His office spent several months investigating ACORN employees who were caught in a videotape sting organizing houses of prostitution in government housing. Brown has just determined that there will be no prosecution of ACORN in his state.
Brown also went to the unusual extra step to seal his gubernatorial records from his 1970s-’80s term for fifty years. (U.S. presidents can seal records only up to twelve years for national security purposes.)
Brown refuses to join with fourteen other states’ attorneys general in challenging the recently-passed health care reform law, even though it will mandate billions more in unfunded expenses to the financially-strapped California Medicaid program. He says that to challenge Obamacare would be to engage in “poisonous partisanship.”
Republican gubernatorial candidates are tacking the pension fund liability:
Steve Poizner says he supports a “two-tier” system for current and new state employees but doesn’t think that a new governor will be able to come in and “steamroll” the unions.
Meg Whitman has campaigned on cutting state employee rolls and advocates “401(k)” style pensions for government workers and higher retirement ages (from age 50 to 55 or 65).
What can California do?
The U.S. Constitution technically does not allow for states to go bankrupt. Vallejo, California was the first city in the country to go bankrupt and has been establishing new “tiers” of retirement plans for police and fire employees.
The newly-elected governor of New Jersey, Chris Christie, is tackling government employees’ unions to some effect. Christie has announced his intentions to cut substantially from government executive positions, privatize other state jobs, and cut positions.
There has been criticism of increased funding and budget overruns for state prisons due to the influence of the California prison guards’ union.
The Citizen Power Campaign seeks to “unplug” the public employee unions and is endorsed by many of the conservative candidates for office in California, including Republican Steve Poizner for governor.
One thing California clearly does not need is the déjà vu “hair of the dog” in the person of 1970s retread Democrat Jerry Brown.
Jane Jamison is editor news/commentary blog UNCOVERAGE.net.