Thursday, January 10, 2008

Cliff Diving

Update 2: Just in case everyone missed it. Da Governator said $14.5 billion just like I predicted weeks ago. Sadly neither he nor I was being truly honest. $14.5b is what FY08-09 would accrue. What we haven't talked about is unmet obligations, current fiscal year overspending and interactions. Da Gov is only projecting $14.5b next year based upon the assumption that voters approve another $40b in debt and spending. Without those new bonds for supposedly capital projects the multiplier to the general economy and thus State revenues evaporate. Nevermind the total insanity of planning on charging hospitals a new tax to cover expanded healthcare.

Does anyone remember when ABC Wide World of Sports used to feature this sport? Wow, as a kid in frosty New England I remember these events every bit as clearly as I remember the RFK assassination news and that poor guy who fell off the Olympic ski jump (live).

We are about to see a master of mixing sport and entertainment and brinksmanship announce his budget threats. It will be entertaining in the watching NASCAR for crashes, NHL for fights kind of way. Don't get too comfy you other 49 states.

Update 1:

10% across the board. [lie]

Suspend Constitutional spending allocations.

Cancel inflation adjusted spending increases but not suspend inflation adjusted tax increases.

Amendments with automatic triggers. [stupid, how we got here]

Quotes Reagan. Bad sign.

Praises his stewardship these last 4 years. Another bad sign.


Peripheral Visionary said...

Not getting comfy. These problems are coming soon to the rest of the other 50, or at least most of them. I suspect a few of the "fly over" states will do well with increasing income from commodities industries, but anywhere that anyone would actually want to live (and consequently where home prices have gotten out of control), there will be economy pain.

Anonymous said...

Let me be murst to say that property values are still going up around here, and the budget is balanced. Of course nobody wants to live here, and that's a good thing.

Agent #777 said...


Did he make any mention of the savings CA will realize from title 24 mandating the installation of PCTs going forward? Think of the savings from not having to upgrade the electrical infrastructure! All we will have to do is limit your A/C or Heat use to our manageable load level. I wonder how long until that makes it to other states as well.

For my peace of mind, I would want to know if I get sick because my house was too cold, is this going to preclude me from coverage in the government mandated health plan? ;-)

Search the Net by "PCT thermostat" if you want to know more.

Anonymous said...

I hear it's nice and toasty in Al Gore's house(s).

Rob Dawg said...

In California you cannot go off the grid. Should you become electricity independent you will still be billed for, get this, I'm serious, the lost profits that were never realized for nuclear plants that were never built based upon prices of generation that were never realized. Ahhh, Kalifornia. BTW the budget still includes the Govs $480m kiddie care and the $11/yr registration auto surcharge for alternative fuels research.

chickelit said...

Remind me again why the delayed timing of the catastophe is so important here?

Yes I remember that stuff on WW Sports. I think the cliff diving interest was touched off by the '63 movie "Fun in Acapulco" starring Elvis and Ursula Undress.

Bob said...

If I was all-powerful, I'd send CA the $14 billion that the feds and NYC are wasting on the completely useless Second Avenue subway line. We'd both come out ahead.

Bob said...
This comment has been removed by the author.
Rob Dawg said...

Man, it is pissing me off that I cannot get anything with numbers. Longtime readers know I speculate on numbers and only get definitive on hard numbers. There are NO numbers. No one will say 20k prisoners, 50k prisoners, $14.5b or whether that is a static or dynamic. No one will even come near me with revenue assumptions. This last is the worst. Ever since Arnold adopted my mantra "this is a spending problem, not a revenue problem" that I used in the 1998-2005 era revenue has been a problem. Da Gov. called these recent increases a sugar high. Sorry, we have a spending problem and it stems from a single party government that also happens to be singularly uninterested in fiscal restraint.

Rob Dawg said...

2nd Avenue subway. Don't get me started. Let's be clear here. 2AS exists to subsidize the NYC economy. Nothing more.

chickelit said...
This comment has been removed by the author.
chickelit said...

Thanks, here I thought PCT stood for "Patent Cooperation Treaty".

Boy was I wrong. Wouldn't affect me though. My wife keeps our thermostat parked at 60. I installed forced-air solar and regularly spew creosotes into the air which helps.

Bakersfield Bubble said...

I still say the $14.5 billion is too optomistic, sales tax revenue projections are far too optomistic.

Rob Dawg said...

Let's be clear here. California will spend and.or encumber $134b in FY08-09. California will collect $107b tops.

Winston said...

From the AP:

(01-10) 11:30 PST SACRAMENTO, (AP) --

Gov. Arnold Schwarzenegger proposed a $141 billion state budget Thursday that would cut nearly 10 percent of the funding for public education and grant early release to 22,000 prison inmates as part of a plan to erase a $14.5 billion revenue shortfall over the next 18 months.

The spending plan also would close nearly one in five state parks.

The reductions would result in an overall 3 percent reduction in spending from the $145.5 billion budget that the Republican governor signed last summer.

"This is a budget that doesn't please everybody, I know that for sure," Schwarzenegger said in releasing his annual spending plan. "But the bottom line is I think this is the fairest way to go."

The governor asked the Legislature to cut more than $4 billion from schools, according to a copy of the proposed cuts obtained in advance by The Associated Press. That would require lawmakers to suspend provisions of Proposition 98, the voter-approved initiative that guarantees a minimum funding level for schools.

That proposal already has stirred disagreement between the administration and educators, as well as Democrats who are reluctant to cut school spending.

"The governor's budget takes a giant step backwards," state Superintendent of Public Instruction Jack O'Connell said in a statement. "It will not help us close the achievement gap that threatens the futures of our students and our state. It will not help us effectively prepare the well-skilled workforce our state desperately needs to remain competitive.

"Our state shouldn't punish our children for its grown-ups' mistakes."

Schwarzenegger also asked for the early release of 22,000 state prison inmates over the next two years. Inmates with less than 20 months remaining on their sentences would be released if they are determined to be "low risk."

Only prisoners serving sentences on nonviolent, non-sex offender crimes would be eligible for early release.

He also proposed placing 18,522 parolees on a lower level of supervision. The prison cuts would allow the state to save on the cost of housing inmates and hiring guards.

It also was expected that the cuts would translate into layoffs of state prison guards, although it was not known how many.

The list of proposed cuts includes 48 state parks, nearly one in five.

Schwarzenegger also will resubmit a proposal the Legislature rejected last year to cut benefits for the children of welfare recipients if their parents fail to get jobs. State subsidies for the elderly, blind and disabled also would be frozen through the end of the decade, while Medi-Cal would be cut by $1 billion.

In essence, the governor's budget proposes many of the draconian cuts economists have long said would be necessary to bring the state's revenue and expenditures in line if the Republican governor would not raise taxes.

But the cuts may be politically impossible in a state controlled by Democrats, who have long championed robust spending on education and social programs.

The governor's plan is sure to re-ignite an intense partisan budget battle after several years in which tax windfalls prompted Schwarzenegger to increase spending on those popular programs.

The majority of the estimated $14 billion deficit is closed by an across-the-board cut of 10 percent to almost all state agencies and programs. The move saves almost $10 billion.

"Ten percent across-the-board is already tough, but it at least spreads the pain evenly," Schwarzenegger said Thursday.

The governor also proposes borrowing an additional $3.3 billion under bonds voters approved for deficit relief in 2004. That would extend the state's repayment of bonds designed to cover the budget shortfall resulting from the dot-com bust well into the next decade.

Schwarzenegger has vowed to avoid using the money since he persuaded voters to approve the massive borrowing shortly after taking office.

The budget mess brings Schwarzenegger full circle to a central, unresolved issue from the 2003 recall election that propelled him to office.

The $14 billion shortfall rivals the one left by his predecessor, former Gov. Gray Davis. Schwarzenegger covered that gap with loans and other fixes shortly after taking office. He then glided on borrowing and an unexpected surge in state tax revenue, but now has far fewer options to bring the state's spending and revenue in line.

California is further in debt thanks to bonds the governor has championed, voters have cut off the option of borrowing to balance the budget, and Schwarzenegger has promised not to raise taxes.

During his State of the State address earlier this week, Schwarzenegger confirmed his plan for the cuts, as well as his desire to resurrect a constitutional amendment to cap state spending as a long-term fix.

Democrats countered by arguing for a combination of cuts and tax increases. The details of Schwarzenegger's planned budget cuts for the 2008-09 fiscal year, however, are worse than they expected.

The governor proposes spending less in the budget year that starts July 1 than the state is spending in the current fiscal year, making it the first time since 2001 that the state would retract general fund spending.

Schwarzenegger's renewed call for a constitutional spending limit also has threatened to repeat a budget struggle unseen since Schwarzenegger's last attempt to pass a spending cap in 2005.

Republicans also take issue with a component of the governor's budget. He proposes a firefighting surcharge on homeowners' property insurance. The party typically views new fees as veiled attempts to increase taxes.

Such fees can be passed with a simple majority vote of the Democrat-controlled Legislature. Tax increases require a two-thirds majority and Republican support.

The budget Schwarzenegger released also kicks off a more complicated debate than usual.

After announcing his spending plan for the budget year beginning in July, Schwarzenegger was expected to issue a fiscal emergency declaration for the current budget year. He also opening debate on his proposed constitutional amendment to limit spending.

Essentially, three budget battles will begin. Schwarzenegger hopes the process will lead to longer-term fixes for the state's budgeting process, which he blames for the current mess.

For a variety of reasons, state spending rises automatically each year, even when revenues level off.

"I think it's total madness," he said. "No family can stay afloat with that kind of budgeting."

Schwarzenegger's emergency declaration will be his first since voters gave the governor that power in 2004 by passing Proposition 58. The declaration triggers a special session and a constitutional mandate for the Legislature to address the current year's budget, either by cutting costs or increasing taxes within 45 days.

Schwarzenegger has said the state will fall $3.3 billion into the red by July if it does not cut spending. The shortfall for the 2008-09 budget year that starts July 1 makes up the balance of the projected $14 billion hole.

Later this month, the state will receive revenue estimates that could show it's even worse off than Schwarzenegger forecasts.

The governor must introduce his proposed constitutional amendment by Feb. 1, right in the middle of that legislative debate.

Peripheral Visionary said...

Actually, I like the 10% across-the-board cut (although it's very often not across-the-board, of course.) But it also has to be accompanied by a raise in taxes (which it's not) as well as a freeze on all new spending (which it's not.) The advantage of that approach is that it (should) minimize the level of arguing. Nobody can argue that "their" program is getting singled out, and nobody can argue that spending is being cut without raising taxes, or vice versa.

But I suspect it will take a crisis in California's debt (as in, a clear refusal to accept new California debt by the markets) to force a real resolution to the budget crisis.

serinitis said...

The 10% is only for general revenue departments. Those with their own source (e.g FTB, BOE) normally are not cut.

Across the board cuts reduces the whining - dream on.

If you want a state job, now is the time to get it. Every department in the state is trying to fill their positions in preparation for a hiring freeze.

Lou Minatti said...

Bummer. Edmund Hillary passed away.

Lou Minatti said...

If you want a state job, now is the time to get it. Every department in the state is trying to fill their positions in preparation for a hiring freeze.

How about purchasing budgets? Will there be an orgy of spending over the next few days/weeks to get in those last minute goodies? If so, I may play Dialing for Your Tax Dollars with some contacts in the California state government.

We all agree that the Federal government is wasteful. I got news for ya: States are even worse. I can't tell you how many times I get a phone call from some state worker who wants me to prepare a quote in 5 minutes because "if we don't spend the rest of this money by Noon today our budget for next year will be smaller." It's an annual feeding frenzy, and you taxpayer suckers don't know about it.

Centipede said...

In my corner of California govt, we are bringing in non-tax payer revenue via our SW development projects. In addition, a number of highly paid retired boomers haven’t been replaced since the state’s finances hit the fan this fiscal year. We’ve cut well more than a net of 10%. However, there seem to be a number of other vague and bureaucratic corners of the state govt that are hemorrhaging.
It *is* tiresome to continually bail out a bunch of losers eating my tax dollars.

Funny Circus Bears said...

Lou, I'll do ya one better: One of my business' has as a customer my local county government. Every year end, like clockwork, they send me money without buying anything whatsoever. They just need to spend or lose, so they send me a check to be applied their account. The amount varies depending upon how much they need to spend, but it is never less than a high 4 figure amount. I suspect this practice may be a no-no, but I'm not sure. Every so often this particular department will get a new manager, who will invariably call me with pointed questions thinking I am somehow taking advantage of them. After explaining the situation and offering to send them a check, I've never been asked to do so and the checks keep coming.

Ogg the Caveman said...

The group I work for is essentially a contractor within a larger goverment agency. At the end of every fiscal year we get clients coming in with projects and saying, "I don't really care when it gets done but it has to be billed by the end of the month".

The_Scum said...

HAh H ah HAhHah!

I remember watching the "Agony of Defeat" ski jump crash when it happened live as well. Later in the show the announcers said the jumper was okay and even apologized for taking out one of ABC's cameras.

Then, it became "The Agony of Defeat" clip shown for years and years.

Christ, I have sucked with no life for a long time.

I even watched "Blazing Saddles" tonight to watch Slim Pickens ask "What in the Wide, Wide World of Sports is going on here?" and to watch Mongo say "Mongo only pawn in game of life."

Thank you, and now back to your regularly scheduled blogging.

Akubi said...

This quote is a classic: "Health care reform has nothing to do with the budget; it's revenue neutral," the governor said, vowing to continue his push for universal health coverage.