Chiang: State Broke on March 8

JAN. 31, 2012

By CHRISS STREET

State Controller John Chiang shocked California legislators today when he sent a letter announcing that the state will run out of cash on March 8. That is, unless Legislature allows state Treasurer Bill Lockyer to delay $2.4 billion in payments to universities, counties and Medi-Cal, while borrowing another $3.3 billion from Wall Street bankers.

The controller’s announcement comes just two weeks after California Gov. Jerry Brown gave his State of the State speech to the Legislature and then immediately hit the road in a two-day campaign swing through Southern California to tout his November ballot initiative to raise taxes on all Californians by $7 billion.  At a stop with 50 of Orange County’s top business leaders and CEOs, the governor outlined how he was already making severe budget cuts, reorganizing state government and implementing a 12-point pension reform plan.

Brown said he offered these actions as credibility for asking business to support his November tax initiative.  The governor added that he welcomed California’s population growth and assured his audience that the state’s future is bright.  Brown reiterated his support for the nation’s first high-speed rail system and for expeditious completion of the environmental review on a proposed project to fix the state’s water delivery system.

The lawmakers had been assured by the Brown administration’s Department of Finance that the state had sufficient cash reserves through June 30, the end of the 2011-12 fiscal year.

But Chaing emphasized that, for the first six months of the fiscal year, state tax revenues came in $2.6 billion below budget and spending came in $2.6 billion more than budget. Total shortfall: $5.2 billion.

The controller’s announcement came on the same day the Assembly Budget Committee approved and sent to the floor legislation already passed by the state Senate that would supposedly fund the state until the end of the year by empowering the Treasurer to borrow $865 million from other segregated California trust funds.

Out of Funds

Chaing warned that the state would be unable to make timely payments to vendors and other governmental agencies of at least $730 million beginning on March 8 and lasting through approximately April 13. Furthermore, Chaing warned that the state needed to have at least a $2.5 billion reserve to handle the timing of large payments through the end of June.

The Sacramento Bee quoted Democratic Assemblyman Bob Blumenfield of Woodland Hills that the $5.4 billion shortfall was small relative to the $10 billion that state leaders were prepared to borrow last year. But Republicans questioned the ability of the state to pay back the accounts.

The Bee reported that Michael Cohen, chief deputy director of Brown’s Department of Finance, said the state would pay back special funds whenever programs need the money to operate.  Cohen also said the state is spending more money than expected because courts have blocked some cuts, while some savings may come later in the fiscal year than forecasters predicted.

This new budget crisis comes at a very difficult time for the governor after he travelled the state selling his tax initiative as preventing draconian funding cuts to popular K-12 schools.  Although early polling of voters had indicated growing support for the initiative, Brown’s credibility may collapse as voters learn the November tax increase initiative appears only to fund this year’s budget shortfall and will still result in draconian cuts to schools.

12 comments

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  1. Rex The Wonder Dog!
    Rex The Wonder Dog! 31 January, 2012, 19:28

    The governor added that he welcomed California’s population growth and assured his audience that the state’s future is bright.

    Bright????????????????? What planet is this dork living on? We are in the toilet. We have been in the toilet for 4 years. Our home values are STILL FALLING 4.5 years after the Great Depression started. We have GED government employees retiring at age 50 with $1-$10 million pensions.

    I am so sick of this BS I can’t take it anymore. That is why I can’t keep posting here-my blood pressure will kill me after reading this kind of talking point garbage.

    Reply this comment
  2. Bob
    Bob 31 January, 2012, 20:47

    Of course Crusty Clown Brown’s tax increases won’t be enough.

    No matter how much you allow these criminals to steal it will never be enough.

    Makes no difference if Clown Brown’s tax increases pass or not. Either way the DemoNcrats will be screaming MORE, MORE, MORE!

    Reply this comment
  3. Beelzebub
    Beelzebub 31 January, 2012, 21:36

    “This new budget crisis comes at a very difficult time for the governor after he travelled the state selling his tax initiative as preventing draconian funding cuts to popular K-12 schools”

    No, this latest budget crisis allows Jerry Clown an even greater opportunity to sell his tax plan to the Ca public. Now he can play his “tanks in the street” card if the tax plan gets voted down.

    Besides, this shortfall is relatively small and will continue to be papered over through intergovernmental borrowing and sale of future revenues. Illinois has $8.5 billion in overdue invoices and they don’t give a crap. Until tax revenues REALLY starts to tank, nothing will be done. And if push comes to shove Obama will figure out a way to save his largest voting block.

    They would probably send you IOU in lieu of your state tax refund this year like they did in 2009 to fix the problem. However, most everyone (at least the smart ones) has adjusted their withholds to ensure that they owe just a little bit at the end of the tax year! That way there’s nothing left for the taxman to steal! So the IOU scam would no longer work! 😀

    Reply this comment
  4. surfcitybob
    surfcitybob 31 January, 2012, 22:12

    It doesn’t matter a hill of beans to me! STOP spending my taxes on useless things!!

    Reply this comment
  5. Rex The Wonder Dog!
    Rex The Wonder Dog! 31 January, 2012, 22:31

    We are in this same situation every single year-every one. Time to freeze all pay and all benefits-everything- for 5 years.

    Reply this comment
  6. queeg
    queeg 31 January, 2012, 22:54

    All the leeches sucking on the state will defer a tad to get the socialists over this speed bump.

    Then the merry…go…round fires up again.

    Reply this comment
  7. Roy
    Roy 1 February, 2012, 11:54

    I really dont see how cynicism is going to help anything. You have the right to be mad, but we have to work together to find solutions.

    Reply this comment
  8. TheBeachBum
    TheBeachBum 1 February, 2012, 14:04

    California is in a state of fiscal crisis while the Governor, along with the majority party state legislators, continue `business as usual’. They propose a totally bogus budget, only to set the Governor up as a public savior by `rejecting’ it, then approving an almost equally bogus budget, kicking the can-down-the-road, but freeing up legislative paychecks. Then Brown proposes a `reform’ measure that a.) hasn’t been acted on and b.) relies on a pie-in-the-sky tax measure that won’t even be acted upon (rejected) until November (more `can-down-the-road’ tactics). It seems like they are all a part of some medical marijuana research group. After all, they have put California (local & state) on a continuous high! We have the…
    – Highest paid Legislators in the nation,
    – Highest paid City Managers in the nation,
    – Highest paid State Troopers in the nation,
    – Highest paid Prison Guards in the nation,
    – Highest paid Firefighters in the nation,
    – Highest paid public university Professors in the nation,
    – Highest paid K-12 Teachers in the nation, (our schools rank at or near the lowest)

    And… at public expense, for the rest of their non-working, retired, lives….
    – The most generous government employee pensions in the nation.

    To keep the above high standard of living (WELL above the rest of the non-government state and nation workers), they have seen fit to saddle California with the highest overall taxes in the nation, forcing our businesses to shut down or move elsewhere. Now they are shutting down parks and services at an unprecedented rate to meet state employee salary and benefit obligations… AND WE’RE STILL BROKE!

    This is not only unsustainable, it is unjust and immoral!

    Public employee compensation should be no better, and no worse, than what is available to other employees in the community.

    Reply this comment
  9. Tough Love
    Tough Love 1 February, 2012, 21:12

    Renege on ALL the ridiculously excessive pensions and retire healthcare promises.

    Reply this comment
  10. queeg
    queeg 2 February, 2012, 10:03

    Work together???? A joke!!!

    Democrats run everything….and we work together….????

    How??? By rolling over and giving all our assets to government???

    Reply this comment
  11. hishandywork
    hishandywork 10 February, 2012, 04:33

    Really? What is really scary isn’t Gov Brown, it’s that people in Stupidfornia are so dumbed down they voted him into office! What are the likes of GREAT NAMES like Waters, Feinstein, Boxer, Brown (and the list goes on and on and on) doing to bring companies back to California? Companies that left and took all the jobs with them! Nothing, that’s what they are doing because the liberal mentality is to let the state of Stupidfornia go back to pastureland or back to Mexico. Too many liberals in California and the only way to fix it is for all the conservatives to move out of state. Once all the givers are gone, the takers will start to starve and that will be the only way to fix this mess. As for me, I am on my way out. I just need about another 12 months and I will be gone like so many other people I know who are leaving.

    Reply this comment

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