Governor Gavin Newsom bragged of a surplus, but California is seriously underwater. The next recession will hit the state extremely hard.
Golden State Budget Fantasy
The City Journal founder Ed Ring comments on the Golden State Budget Fantasy
While finalizing the upcoming fiscal year’s state budget back in May 2022, California governor Gavin Newsom boasted of an extraordinary projected surplus: $97 billion. The governor immediately collaborated with an enthusiastic state legislature to spend it all. Of course, new spending on new programs and benefits tends to become permanent.
This has happened repeatedly in California. Between fiscal year 2012–13 and fiscal year 2022–23 (the year with the projected $97 billion surplus), per capita general-fund spending doubled, from just over $3,000 per resident to just under $6,000. (All figures are in 2022 inflation-adjusted dollars.)
The State Office of Legislative Analyst’s latest report projects a $73 billion dollar deficit for the next fiscal year. It won’t be easy to paper over this debt, but the state may use its opaque accounting system to hide the ball.
California’s general-fund budgets are reported on a cash basis. The state’s balance sheet, however, uses “accrual-based accounting.” Without getting too far into the weeds, this is an apples v. oranges situation. Instead of the algebraic perfection of private-sector income statements, balance sheets, and cash flows, government accounting provides no easy way to reconcile what you see on the budget.
Some watchdogs, however, have succeeded in cracking the code. John Moorlach, one of the only certified public accountants to serve in the California State Senate, just published a review of the state’s fiscal health, focusing on the balance sheet. According to Moorlach, California’s balance sheet is in trouble.
Moorlach declared in a March California Insider interview that the state “now has the largest unrestricted net deficit in the US: $222 Billion.” In plain English, Moorlach is saying that California’s state government accounts have liabilities that exceed assets by $222 billion. No matter how creative Newsom and his financial wizards may be, someday that money will have to be paid.
A remedy that California has turned to over the years and will undoubtedly turn to now is to accumulate additional long-term debt. Emulating the federal government, but lacking its dollar-printing ability, California’s state and local governments and agencies have racked up over a trillion dollars in debt, primarily in bonds and unfunded pension liabilities. These liabilities, too, must be paid. Since that’s all but impossible, the liabilities must be serviced with payments that, just as at the federal level, will eat up more and more of the operating budgets.
How Much Is California in Debt?
The above link says over a trillion. That’s being very generous to California. Click on it to discover … California State and Local Liabilities exceed $1.6 Trillion.
California’s total state and local government debt now stands at almost $1.6 trillion, or about half the state’s GDP.
That isn’t an alarming ratio when compared to the national debt, which has now soared to 128 percent of U.S. GDP with no end in sight. But Californians carry this $1.6 trillion state and local debt ($40,000 per capita) in addition to their share of the national debt (about $90,000 per capita).
That article was from February of 2022.
I suspect the liabilities are now close to $2 trillion.
Cost of Running a McDonalds Jumps $250,000 in CA
On February 4, I noted the Cost of Running a McDonalds Jumps $250,000 in CA Due to Minimum Wage Hikes
A blowback is underway.
California Restaurants Cut Jobs
On March 26, I commented California Restaurants Cut Jobs as Fast-Food Wages Set to Rise
Proposition 103 Backfires
Citing wildfire risk, State Farm will not renew policies on 30,000 homes and 42,000 business in California.
Also on March 26, I commented Proposition 103 Backfires, State Farm to Cancel 72,000 California Policies
Blame the state, not insurers.
Congratulations to NY, IL, LA, and CA for Losing the Most Population
People in California, increasingly getting sick of the state’s progressive madness, are voting with their feet.
For discussion, please see Congratulations to NY, IL, LA, and CA for Losing the Most Population
Absolute Basis Losers
- New York: -631,104
- California: -573,019
- Illinois: -263,780
California Leads the Nation in Unemployment
The BLS metro shows unemployment rates were up in 218 of 389 metro areas. Nonfarm employment only rose in 59 areas.
On March 15, I noted Unemployment Rates Rose in 218 of the 389 Metropolitan Areas
Unsurprisingly, California has the highest unemployment rate in the nation at 5.7 percent vs. 4.1 percent nationally.
A Booming Economy?
California has massive problems although the stock market is at a record high and the economy is allegedly booming.
The next recession will hit California exceptionally hard, and it’s not too far off.
hurry up with the reparations folks are waiting, gav
Paywall story on ZH: Hartnett says “Unchanged rates/yields & debt trend next 12 months & US refinancing rate is 4.4% and annual interest costs jump from $1.1tn to $1.6tn…”
“How Much Is California in Debt?”
California voters just barely passed a 6 billion $ ballot proposition for the homeless. Add that to the total.
“No matter how creative Newsom and his financial wizards may be, someday that money will have to be paid.”
Or there will be a default. What can’t be repaid, won’t. The laws of math never change, no matter how much people may try to game them. The pendulum swings in a direction until an inflection point. At what point does interest on the national debt reach an unsustainable percentage of taxes? The WEF talks of a Great Reset because the debt cycle is coming full circle to the end of the current cycle. Game over. Cycle starts over again. Four seasons, four turnings, Year of Jubilee, Ground Hog Day, starring Bill Murray.
The tax revenue from legalized recreational fentanyl might help.
got pass the party bowl to gav
just 1 pill will do trick
State and local debt problem are more widespread than most think.
link to mahoningmatters.com
That’s another reason drops in real estate “values” are verboten. Those prices support a lot of governmental units!
Unlike the Federal government, a state has to balance its budget every year.
Not to worry anyone but we are headed towards nuclear war.
link to newsweek.com
No sense in the chattle worrying about that. This isn’t the 1950s — lots of warheads to go around and it’ll either be a quick or slow trip to meet one’s maker. Even residing in the southern hemisphere won’t keep one heathy and the supply chains intact.
Look at all the people commenting on California who don’t live there.
You had me at “California”.
all th bigots blame.immigrants
Interestingly, citizens of blue cities, such as Denver, Chicago and New York City, are blaming illegal immigrants. Even Tucson and San Diego say they can’t handle the influx any more. Martha’s Vineyard couldn’t wait to get rid of them when just a few dozen showed up.
We’ve been told for years that immigrants are vital to saving the economy and retirement plans. Well?
I wonder what kind of shape their UE comp fund is in.
Will McDonalds pay illegal aliens $20 an hour in California, or is creative accounting going to be used to displace legal with illegal citizentry?
I believe in the latter.
I give up, bankruptcy all the way around.
Yes, why?
Glad I left, though it had many good things going for it. Leftist ninnies wreck everything they touch.
Blue states make more income than backward states.
Then why are they losing people?
Per California on the map above, and although it is not exact, but is that a red-county/blue-county divide according to unemployment? Must be a coincidence.
Not just California either …
Would anyone invest in this stock market?
International debt comparisons routinely fail to aggregate US state & local debt together with the federal debt. This makes Us debt levels appear smaller than they are compared to other nations.
California..The Land of FRUITS and NUTS.
The Golden State utopia has turned into a woke dystopia.
It is a real tragedy. Time was when California was the best run state in America. That was then, and this is now. There really was a California Dream. Not now.
link to youtube.com
Archie was right about everything.
Yuck yuck. Welcome to the 1970’s humor.
We grow them. You eat them. Picked by foreigners.
Not when the deep blue coastal cities cut off water for agriculture.
We need the people making big money in the markets to sell their holdings. That and cashing in stock options is what drives tax income here in CA.
1) In an emergency, and only in an emergency, “CA Financial Service Regulatory Relief Act” – if something like that exists – allows SF Fed to legally raid people’s bank accounts without their knowledge or permission. She is getting pd the max to supervise banks and steal from people’s bank accounts to rectify CA budget deficit. The richest people in CA earned high wages thanks to buybacks, CA standards of living and the talents coming out of Stanford and Berkeley. In the flyover areas similar talents cost half. In India and China, less than a third.
2) Walmart’s starting salary is $14/h plus benefits. In CA it’s a little higher. In the US, ex CA, the wage bandwidth is about $14/h and $25/h. In Ca WMT new bandwidth is $20/h and $26/h. The benefits are the same. CA equalized novice and experienced employees who work there for decades.
3) The multi units expanded in the flyover areas and in the south. Not in the major cities. Few were built in Great Neck and in Scarsdale NY. My first accountant and lawyer bought a 3BR apt near Great Neck LIRR stations decades ago.
4) AAPL and Meta accumulated more red months than regional banks. They will reach their DM targets.
genocide you bastard!
California, Levi’s and Bay Watch brought down the iron curtain. The libertarian California Zeitgeist was one of the most powerful and infective social movements of all time.
Live and let live
Pursue your dreams
Of course it would be co-opted and turned into a weapon by those wanting to control the world.
The end result is CIAICON Valley and their pets Google Facebook and Twitter.
Sprang to life in 1849 now it’s just a hollowed out shell.
Pants and a TV show didn’t cause the Soviet Union to fall. It fell because the people there didn’t believe in the bullshit the Communist Party had been feeding them for a long time.
Sure, ….Big question being now, WHAT will make OUR illusory bullshit fall apart, ?
Well as you point out Russia is in its second illusory phase now and will fall apart again.
The USSR fell because oil export earnings were hammered by the collapse of world oil prices in the 1980s.Not Star Wars or Afghanistan.
Connecticut is in worse shape on a per capita basis. Second only to Illinois.
Their economy has been bleeding good paying jobs since 1990. The insurance industry all but packed up and left Hartford. It had the slowest recovery of any state after the 2008 financial crisis.
The only thing that has saved the state from collapsing further is immigration.
I heard Mike Rowe comment during a YT video (I didn’t save it, my bad.) that as he stood in a grocery line, he chatted with the Hispanic man in front of him who came to the US Legally. The Hispanic man said, “I didn’t come to the US to live in what I left”! 🔦✝️
NY state has had the top deficit for decades, total debt accrued: ?. They essentially ‘print’ their own money as needed, by ? arrangement. It looks like CA has caught on to it and will surpass soon. This is becoming ‘normal’ for large gov constructs everywhere. They will not turn back once started.
How do they print their own money? What is the “arrangement” you allude to without stating it.
BS on this. NYC went bankrupt in 1970s and needed massive intervention.
The Federal government needs to do some creative financing such as delegate all housing, education, and welfare programs to states, while making less proportionate cuts to federal taxes. The end result of this strategy is to allow states to file for bankruptcy, while preserving the credit rating of the US government. If California fails and receives a bailout, then the Federal government will have to file bankruptcy or hyper inflate.
The bailout funding is in planning … don’t spread it around but it’s called the Superior Housing for Immigrant Transitions (SHIT) Law. (ah, a lazy Saturday!)
Delegating would imply fedgov has Constitutional authority to somewhat they are doing in housing, education, and welfare. They don’t have any authority.
There isn’t a bankruptcy process for states. But they can and have defaulted on bonds.
All they have to do is put on taxes again.
I have to think FJB has heavily (backdoor) reimbursed CA, NY, IL, CO for their help settling the migrants … still, the drain must be larger than Federal assistance.
Certainly the medicaid expansion is costing the blue-states … that’ll need fixing soon.
Plus ton’s of tax revenue come from Cap Gains (at ~9-12.3% tax rate) … w/o NVIDA gains, etc, watch out!
My wife and I were in Pismo Beach, at an RV park. We met a couple charging the local Utility HUNDREDS of 1000’s of dollars re-surfacing the Inner Avila Beach Nuclear Power plant….subsidized By Tax Payers…only to plan to SHUT IT DOWN by 2025…that has been delayed since they suddenly realized that without it, they will continue to suffer more BROWN OUTS.
Idiocy!
Idiocracy.
I also have met on vacation people who claim the most outrageous things.
…well, you at least seem to know what he was on about …
Some people like to claim to be something they are not.
The Fed will be buying California bonds soon.
In 2010 I got a tax bill from California although I have never lived there in my life. I threw it in the garbage. I wonder if ever I go back for a visit if I will be arrested.
You don’t have to live there to get a tax bill. You just have to do work there and you can be taxed on that.
This happens to professional athletes, entertainers etc who get taxed for playing a few games / shows in California.
Never did business there either.
Yes, the border police have your mugshot in their files and are looking out for you. The only safe way in is over the southern border from Mexico. Everyone is allowed through there.
“Gavin Newsom boasted of an extraordinary projected surplus: $97 billion.”
Those who can, do. Only those who can’t, project.
About the most surefire clue you are dealing with a complete idiot who knows nothing; has always been that he’s talking about all the great things he/we/they/… WILL do.In the “future.” Whether “AI”, “budgets”, supernatural batteries or anything else: If he could,he would. He don’t: Ergo he can’t. Guaranteed.
😂🤣😂🤣😂🤣😂
GOOD