California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.
The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.
The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.
Plans by several state and local governments to borrow in recent days have been upended by the credit freeze. New Mexico was forced to put off a $500-million bond sale, Massachusetts had to pull the plug halfway into a $400-million offering, and Maine is considering canceling road projects that were to be funded with bonds.
[url=http://livingininterestingtimes.files.wordpress.com/2008/01/pigs_trough.jpg]Let the feeding begin![/url]
I only need a couple hundred thousand!
Sorry, Ah-nuld, but the well is dry. How about trimming $7b from your bloated budget instead?
California isn’t asking for money it won’t have, it’s asking for a loan so it can continue to write paychecks and order copier paper and buy fuel for its CDF units until it can account for and receive tax revenues that are on the books. While it’s easy to say “just don’t spend the money until you have it,” we’re talking government here, not household or even some small-business accounts. What part of your government don’t you want right now and how much are you willing to pay for its mothballing and the probable restart when the money is available. What do your neighbors want to keep running? What about the community on the other side of the county or state? I suspect there are some big conflicts over what people really want and expect from their government(s).
Large businesses are running into the same problem with short-term loans as they try to borrow money to purchase raw material to turn into finished products (or the analogs of the service sector). It’s going to be interesting to watch, to say the least.
I’ll share my prediction again – many of the people calling for the US government to abandon the credit markets to the fate they deserve (and I agree that they deserve it) will be calling for government to save them when there are no jobs and nothing on the shelves of homes or stores. Some of the people who post here are self-reliant and others feel they can be. I hope people are up to being proven.
California’s budget is what, $150 billion a year or more? Are you saying it can’t find 5% of unnecessary spending to cut for a year? Or raise taxes accordingly?
If the people of California want their state to spend like a drunken sailor, let them deal with the hangover. Maybe next time they won’t be thumping the tub quite as loudly for their neighbor’s paycheck.
unfortunately #5 they don’t have the will to increase taxes or cut spending. they have though increased fees like crazy to the point where driving in the carpool lane costs $271 or $350 for turning right on red without fully stopping. But that is obviously not enough to make up for the shortfall – the California Dream (primarily embodied by the public school system) of the 1960s really is dead.
I’m not saying the State of California can’t cut spending – in fact it probably will have to and reallocate resources (and re-reallocate as things keep changing). As far as raising taxes, it can (not that it should), but the problem is that until it actually accounts for the taxes it thinks it should be collecting, California, and all other states (and businesses with revenues), will be in need of carry-over loans to keep day-to-day operations going. Those loans are getting hard to get and harder to afford.
That’s where things get interesting. For states it may mean days or weeks of shutting down agencies – and there are dollar costs to doing that and for restarting the ones you find you can’t do without. For business it may mean it no longer makes sense to stay in business – something government shouldn’t really consider. For anyone employed by that business or a closed-down government agency, or for a business that served the closed business or agency, well, life’s tough.
Well, #7, if I were Governor of California, I’d be stalking the halls in Sacramento with an axe…today. I bet he could find $7 billion before the sun goes down. As you said, time is of the essence, so best not wait.
So, how is California’s budgetary profligacy any concern of mine? My state is now running a $300 Million deficit for the year. For the past two years, they had a nearly $1 Billion surplus…which they held on to, rather than cut taxes or refund. Let California deal with their own financial mess. They created it. Maybe the sanctuary cities will go bankrupt, and serve them right! My own state will be facing a mandatory spending cut because they have gone to the well too often and it is now dry. Blood from a turnip, etc.
Connecticut’s deficit estimates are based on a $75 million decrease in expected personal income tax revenue and a $27 million drop in oil company tax revenue. When times were good, they grew government while taxing us with the highest property taxes in the United States, a sales tax, and an income tax. It seemed no wasteful government socialist project could be denied. In a rich vein of irony, the state government is lamenting the loss of cigarette tax revenue that decreased by more than $5 million. The alleged reason for the tax…to get people to quit smoking. So, people quit smoking and now there is a financial panic. The revenue stream is drying up. What idiots they are not to understand that confiscatory taxes lead either to an underground economy or the end of demand!
Perhaps California could begin controlling their budget here: “State Controller Audit Confirms Massive Wasteful Spending and Abuse in California Prison Medical Systemâ€.
http://www.californiaprogressreport.com/2006/08/state_controlle.html
Perhaps they should not have [b]increased state spending 44 percent over the past four years.[/b] http://republican.assembly.ca.gov/audio/ad59//AdamsBudget012408.mp3
What ever California decides to do, they can jolly well leave their hands of my wallet in Connecticut. Let them eat cake.
Argh! “hands off my wallet” not “of my wallet”
As long as someone thinks he can plunder another’s wealth to pay for what he consumes, he will not live within his means and life will be little more than a round-robin purse snatching contest. Having to clean up your own mess is a big incentive to not make the mess to begin with.
It’s best to take a look at what you really DO need and what would be nice to have, then don’t buy what would be nice to have, and find ways to buy what you DO need without breaking the bank…..and if it can wait a while, then let it wait!
Consolidate state agencies, reduce staff by attrition through early retirements, and focus only on keeing only those which are really needed and which best serve the public interest. “Frugal but prudent and wise” should be the motto.
We have the same problem the U.S. Congress has, Democrats refuse to cut spending, and Republicans refuse to raise taxes. The only time they agree is when they raise spending in exchange for cutting taxes. Personally I have always found it rather glib to suggest the axe, or the tax hike. What some call “pork-spending”, others call their local program, their youth center, their daycare for poor families, their favorite state park, research on an important disease, aid for their elderly friends. It may be necessary, but it is not easy to cut spending like that. To be sure there is wasteful spending that is easy to cut, but not all of it is. And as for new taxes, no one wants to pay them, and many think it will slow the economy.
The other problem not mentioned here is that California has some rather peculiar laws. One of our biggest problems is ballot box budgeting. So much of our budget is locked into education and transportation (which continue to suffer anyway), it makes it hard to budget properly. We also have a rather particular and popular freeze on property tax hikes (Prop. 13). Property tax is capped at 1% and can only be reassessed when its sold. So though real estate values have soared, especially in our urban and scenic areas, the state has not entirely benefited. A now million dollar mansion in San Francisco is still valued at its rate for 1979 if it’s in the same family. This certainly has its benefits to our landowners, but it has actually created an inequitable situation where one family pays more for a comparable property to their neighbors. One more odd regulation that holds our state budget back. Changes and repeals of these laws are complicated (as I said those laws were popularly enacted through the referendum process, and generally remain popular). The Governator has recommended measures to break the deadlock, like legislative redistricting, but so far as I know not suggested even reviewing these laws. It certainly would have been brave. Back in the Recall, he promised to be our great reformer, our fiscal savior, and so far has been an abysmal failure (though no worse than his predecessors).
I am glad I am not a state legislator, and I don’t know who would want the governor’s job right now.
[blockquote]What part of your government don’t you want right now and how much are you willing to pay for its mothballing [/blockquote]
Gee, let’s start by taking the 4 judges you reversed the will of the people and introduced gay “marraige” into my home state. Let them flip some burgers. Then there is our esteemed public treasury trough dwellar Jerry”Moonbeam” Brown our AG who rigs the language of Prop 8 to ban gay “marraige.” to satisfy the LGBT crowd.
My family has been here for 130 years and one cannot live in California anymore… it has become a sentence.
Intercessor