Wikinvest Wire

Here come the California IOUs

Wednesday, July 01, 2009

Senate President Darrell Steinberg and Senate Republican leader Dennis Hollingsworth leave the California Senate chamber last night after failing to reach a budget agreement.
IMAGE The combined efforts of Democrats and Rebublicans in the most recent round of negotations saw the state dig an even deeper budget hole, by some $2 billion, after yesterday's failure to cut education spending, the deficit now standing at more than $26 billion.

Naturally, state of fiscal emergency has been declared and a special session has been called for the legislature, this Sacramento Bee report providing the latest details.

Tuesday's failure to cut education spending and shift redevelopment funds expanded the deficit overnight because of the way school funding formulas are calculated.

Schwarzenegger plans to declare a new state of fiscal emergency today, launch another special session and propose additional program cuts to solve the larger deficit problem, spokesman Aaron McLear said.
Senate President Pro Tem Darrell Steinberg said Schwarzenegger's veto threat against a stopgap package to cut the 2008-09 education budget and delay IOUs "may be the most irresponsible act I have seen in my 15 years of public service. And for what? It's a monumental blunder."

But Schwarzenegger said Democrats instead were to blame for failing to compromise with him on a plan to solve the entire $24 billion deficit with enough spending cuts and permanent program reductions.

"The Legislature's latest proposal is no different than what Sacramento has been doing for the past two decades – kicking the can down the alley," McLear said in a written statement.

Absent a significant budget deal today, state Controller John Chiang has warned he must take the next step of issuing IOUs on Thursday to vendors who do business with the state, local governments and people who are owed tax refunds. Chiang said IOUs are necessary to preserve enough cash to meet constitutionally mandated obligations to schools and state bondholders in July.

Hallye Jordan, a Chiang spokeswoman, said the first batch to go out would consist of 28,742 IOUs, worth a total of $53.3 million, to taxpayers awaiting refunds.
This really is a perpetual crisis.

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donna said...

Fuck Arnold and the Republicans. Jerks.

Tom said...

Hey look ^^^^^donna^^^^^ a union worker!!!!

No not F Arnold he is doing the will of the people of the state of CA. Unlike the Dems who want to kick the can and not cut anything and keep their blaoted union deals so they can get the campaign money back(NOT THE WILL OF THE PEOPLE OF CA)

Dan said...

It is known that to the right of the Indies there exists an island called California very near the terrestrial paradise; and peopled by black women among whom there was not a single man since they lived in the way of the Amazons. They had beautiful robust bodies, spirited courage and great strength. Their island was the most impregnable in the world with its cliffs and headlands and rocky coasts. Their weapons were all of gold
. . . because in all the island there was no metal except gold. And there ruled over that island of California a queen of majestic proportions, more beautiful than all others, and in the very vigor of her womanhood. She was not petite, nor blond, nor golden-haired. She was large, and black as the ace of clubs. But the prejudice of color did not then exist even among the most brazen-faced or the most copper-headed. For, as you shall learn, she was reputed the most beautiful of women; and it was she, O Californias! who accomplished great deeds, she was valiant and courageous and ardent with a brave heart, and had ambitions to execute nobler actions than had been performed by any other ruler — Queen Califia.

Anonymous said...

At what point do CA state IOUs start becoming an alternative currency, that can be traded for all manner of things?

And why not? Any objection you could raise probably also applies to the dollar.

Greyhair said...

For those starve the beast types, here are some facts out of my local newspaper editorial:


Here’s some valuable perspective on the immediate problem, courtesy of Los Angeles Times columnist George Skelton:

• Schwarzenegger could lay off all 235,000 state employees under his control and California still would have most of its budget deficit.

• Services for illegal immigrants are responsible for perhaps a quarter of the deficit. But the state can’t cut off payments for schools, incarceration or social services for illegal immigrants. That power lies with Congress and the U.S. Supreme Court.

*Cutting legislators’ pay, taking away their cars and eliminating waste, fraud and abuse won’t fix the problem, either (although they’re worthy goals).

The big-ticket items in the budget are public schools (money sent straight to Santa Rosa and hundreds of other communities statewide), health and welfare, prisons and higher education. Among them, they account for 91 percent of the general fund. Balancing this year’s budget will require cutting these programs and/or raising taxes to pay for them.


California doesn't have a budget problem. That's a symptom.

The problem is an attempt to govern via direct democracy ... the proposition process. It's never worked and it certainly isn't working now.

Living in a representative democracy requires an well informed public that is willing to maturely accept there are costs associated with quality of life. In direct democracy, voters get seduced by marketeers who tell them they can have it all. Thus Californians have voted for large expenditures on, for example, prisons and education and yet have refused to pay for them. And asking for a 2/3's majority to approve anything is nuts (hell, a significant minority of voters believe in the tooth fairy).

Until the system is changed, California will chronically be stalemated. No one wins and everybody loses something.

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