WWCD?
[Guest post by DRJ]
What Will California Do to solve its $26.3B deficit? And in the meantime, will it have to pay its debts with IOUs as this LA Times article suggests?
“If lawmakers and the governor do not agree on a plan to wipe out the deficit — or at least part of it — by the end of today, State Controller John Chiang will begin giving out IOUs in lieu of checks to pay debts owed by the state.
***
Meanwhile, Chiang, who acts as the state’s banker, has scheduled a Thursday morning meeting of a state board that will determine what interest rate the state will pay on the $3 billion a month in IOUs it will begin issuing to contractors and some of California’s neediest citizens, including the elderly, the disabled and the poor.”
Small business owners, the elderly, the disabled and the poor seem like the people who can least afford to deal with not being paid.
— DRJ
This is the kind of thing that politicians do to punish the people from frustrating their selfish will. They deliberately begin holding the people hostage.
Tar and feathers went out of fashion far too soon.
SPQR (26be8b) — 7/1/2009 @ 7:35 pmIt might not be all that bad if there is someone out there willing to discount the IOUs.
nk (218382) — 7/1/2009 @ 7:39 pmI believe the unions got a law passed that makes it illegal to pay employees or schools with IOUs. I’m not sure on that but the California aristocracy is usually protected.
Machinist (95e752) — 7/1/2009 @ 7:40 pmFollow GM, Chrysler and Wall Street’s lead and go bankrupt, protect itself from creditors and open itself up to nullify existing state and municipal contracts. Then start selling off state assets; renegotiate all city and state employees salaries and benefits down to the bone. Declare a state of emergency and use the National Guard to fill in for all essential state services.
Of just move out to Arizona or Nevada.
DCSCA (9d1bb3) — 7/1/2009 @ 7:53 pmSeriously, this is a terrific chance for the payday loan and car loan sharks to make a killing. Would you buy California debt at half price, BTW?
nk (218382) — 7/1/2009 @ 7:55 pmThe voters of California had a chance to rectify at least a portion of the current situation about 3 years ago when they could have — when they should have — passed some ballot propositions, one in particular, that would have triggered a bit of long overdue reform. But, in their infinite wisdom (“we think our liberalism makes us modern, sophisticated and big-hearted!!!”), they happily and strongly gave thumbs down to those initiatives, and now they’re stuck with squat.
The people of the “Golden State,” when observing the current budget debacle, need to point the finger of blame at themselves, first and foremost.
Mark (411533) — 7/1/2009 @ 7:56 pmMachinist! Isn’t that always the way?
JD (aeb697) — 7/1/2009 @ 7:58 pmI like the GOP proposal that anyone can pay a debt/tax/fee owed to the State of California with a California-issued IOU.
Ed from SFV (dde255) — 7/1/2009 @ 8:02 pmSmall business owners, the elderly, the disabled and the poor seem like the people who can least afford to deal with not being paid.
The elderly, the disabled and the schools ie., the young, are really getting hit the hardest. A lot of lesser publicized services and programs the most vulnerable in the state look to for assistance are being slashed. This on top of soaring energy and water costs that hurt retirees on fixed incomes as well. Schwarzenegger is going to have to get creative and cut a lot and cause a lot of pain then go begging to the Federal government to meet him half way again.
DCSCA (9d1bb3) — 7/1/2009 @ 8:09 pmI like the GOP proposal that anyone can pay a debt/tax/fee owed to the State of California with a California-issued IOU.
Comment by Ed from SFV — 7/1/2009 @ 8:02 pm
That is vital, actually. If the debtor will not honor its own IOUs, they’re worthless.
nk (218382) — 7/1/2009 @ 8:11 pmSell the state to China. They could impose some fiscal discipline, whether you like it or not.
daleyrocks (718861) — 7/1/2009 @ 8:13 pmOf course California could secede, declare war on the United States, surrender immediately and allow itself to be occupied and have its infrastructure rebuilt courtesy of Haliburton, KBR and the U.S. taxpayer. A billion bucks a month should do the trick for, say, two years. THat might pique Rick Perry’s interest as well.
DCSCA (9d1bb3) — 7/1/2009 @ 8:16 pmCalifornia over the past several years has been managed by a preponderance of politicians of a certain ilk, a certain philosophy — a certain party — who could have told naysayers and opponents (as Obama did not too long ago) “we won.”
Yep, you won, and we (or anyone in the “Golden State” who has more than an ounce of sanity and common sense) lost.
Mark (411533) — 7/1/2009 @ 8:16 pmI respectfully suggest to our hosts that DCSCA not be allowed to comment, let’s say before comment #60 or so, in order to give a minimal chance of a rational discussion of the post.
nk (218382) — 7/1/2009 @ 8:19 pmCan we not simply use the 1998 budget, adjusting it for inflation and population growth?
Michael Ejercito (833607) — 7/1/2009 @ 8:33 pmCA Insolvent: Women, children, & minorties suffer most!
AD - RtR/OS! (5fd0fb) — 7/1/2009 @ 8:48 pmBTW, as has been explained to me, a State cannot technically enter bankruptcy, though it can have a receiver imposed by the Court upon application by a sufficient number of creditors.
AD - RtR/OS! (5fd0fb) — 7/1/2009 @ 8:51 pmHey, we’ve already got a Special Master running the prison system, lets get a whole crew of them for the rest of the system, and turn this turkey around.
Of course, that means no more perqs for our little College of Cardinals in Sacramento.
Comment by Michael Ejercito — 7/1/2009 @ 8:33 pm
If we did, we would be looking at about a $15B surplus, and they would hear the catterwauling all the way to Saturn.
AD - RtR/OS! (5fd0fb) — 7/1/2009 @ 8:52 pmHasta la Vista, Baby!
Official Internet Data Office (1aa78d) — 7/1/2009 @ 8:57 pmAre they gonna send me my IOU postage due?
I get notices from our great state’s Franchise Tax Board in the mail telling me I owe them .32.
There is the bill, the explanation, all the other stuff in an envelope. They stuff in a sheet telling me how to recycle, which is has a certain irony.
It probably costs the state $2-3 to tell me I owe them .32 and an illustrated third grade level lecture about how I need to remember to recycle.
That’d be OK if three weeks later I didn’t get a refund check for $56 followed two weeks later with a threatening letter about the original .32.
They are insane. These are the bureaucrats that will be running our healthcare soon.
My liberal city represented in Congress by an empty dress named Lois Capps, is $12 Million in the red. The city sends me a water bill in one envelope and then a week later a newsletter in another urging me to save water and energy.
We created a park that was carbon emissions neutral which meant it was a three card monte game.
All the emissions (fabrications) were offsite and all the delivery and installations had approved carbon offsets.
Costly charade, nothing more.
We fought over using grant money (which is a PC term to describe what used to be called “waste”)
to paint a blue line on all the streets and sidewalks depicting what sea levels would rise to “if” Al Gore’s predictions came true. Also we’d get some information kiosks and more 100% recycled paper mailers to educate us.
What a waste.
I hear all the usual stuff about how these cuts hurt the weakest and my heart does go out to them, but the question that still needs to be addressed is: how well is the money being used today?
When I hear about how money for schools is being cut I think about Compton School District or Compton’s wastehauling contracts… the money gets siphoned off before it hits the streets.
The people are already suffering, but they are represented by advocates driving Lincoln Navigators who travel from seminar junket to seminar junket on the end users dime.
Unfortunately we are reluctant to put a certain class of thieves behind bars, so we dance around the real issues of corruption vs. need.
When I give to charity, I like to see at least .80 cents on the dollar hit the streets (and degree of difficulty counts), but the state of CA bless it’s rotten heart will not even guess at how low it’s return ratio is lest it offend anyone.
These thieves are afraid of vouchers, afraid of efficient private charities and want to eliminate the competition.
The state needs to geld the thieves and unfortunately the people need to suffer before we can disconnect ourselves from the leeches
SteveG (c99c5c) — 7/1/2009 @ 9:01 pmMy now deceased father-in-law made his way to California in the mid-1930’s from tenant farming in Oklahoma. He came because like so many at the time who were hard up for work, he had heard the promise of the state: land, work, citrus groves, farming, water and sunshine. The golden state. When he arrived in Orange, CA, he made his way to the center of the then very small town and saw a new spouting fountain wreathed in flowers and roses. So overwhelmed by both reaching the end of his journey and by something more beautiful than he had ever seen, he said he knew, right then and there exactly what heaven would look like. He was overcome by being in California and moreso what it meant to him and what he believed: all dreams and promise would be his in this place.
A lot of people came to the golden state with similar dreams and hopes because they were very possible and within reach. Word spread, people came, the state lived up to it’s Golden in so many ways. It became the destination.
These days that’s mostly a quaint memory that others who came before us share about while reminiscing during holiday meals. Today, California is place where a whole lot of people mostly dream of leaving.
Dana (8d88ef) — 7/1/2009 @ 9:30 pmDana, you are a gifted writer. dcsca, that was pretty funny.
I do wonder about the wealth we have spent on Iraq, but given recent spending, I am grateful we spent the money on peace in Iraq. Those people have priceless freedoms and there is very little we could have spent that would have yielded anything as valuable. I hate how democrats complain that they aren’t ‘us’ and don’t deserve it. But really, our nation tragically permitted the UN to dictate the 1991 war, which left that nation in deep trouble with an awful government. We owed them their freedom, in my view. Why is it that Iraqi’s aren’t worthy of the greatest humanitarian effort possible: war to oust a tyrant?
And remember that we would have saved money by finishing the job sooner, and spent more by going later.
I wonder, when we finally do have a war with Iran, how much more expensive it will be than a simple invasion in 1979. Not that a pre-Reagan military would have done nearly as well as Rumsfield’s army.
Juan (cab674) — 7/1/2009 @ 9:40 pmFrankly, were I one of those contractors that will be paid by IOU, I would simply cease to provide whatever service I used to provide.
I suspect the state would have a hard time finding a replacement provider, since the state wouldn’t actually be offering to pay real money.
Scott Jacobs (d027b8) — 7/1/2009 @ 9:44 pmIn 1979 the force was so “hollow” we would have had trouble invading and occupying Staten Island.
AD - RtR/OS! (5fd0fb) — 7/1/2009 @ 9:47 pmJust remember the disaster that was the Embassy Hostage Rescue!
I still say that the plan involving the modified C-130 landing on a soccer pitch is one of the coolest plans ever.
Scott Jacobs (d027b8) — 7/1/2009 @ 9:53 pmThe last time this happened was in the first term of Pete Wilson, and was the result of the demilitarization following the collapse of the Soviet Union – the Peace Dividend.
The only way they kept things going was by getting the big banks (BofA and Wells and others) to agree to accept the “warrants” at face value; but there was an active market for the script at reduced rates.
But then, Pete and the Dems running the Legislature (some things seem to be constant) jacked-up taxes and fees, and it took years for the State to recover – we were the last to recover from that down-turn of all of the States.
Oh well, enough of this, there are things to do tomorrow, and sleep is essential.
AD - RtR/OS! (5fd0fb) — 7/1/2009 @ 9:53 pmOh, AD, that is such a miserable memory. Desert One, was it?
I was looking at Tehran on Google Earth, and saw a helicopter that looked a lot like a Sea Stallion… There was speculation it was a trophy from that event, though I have no idea.
That plan could have worked, and I really admire the people who gave their sweat and even blood to pursue it. Carter should have done something a bit more bold, but democrats like the GI Joe idea.
Juan (cab674) — 7/1/2009 @ 9:54 pmThere’s cool, and then there’s being able to do it.
AD - RtR/OS! (5fd0fb) — 7/1/2009 @ 9:54 pmWhen you can’t, it’s not too cool.
Scott,
I assume that’s why the first IOUs are going to the elderly, disabled, and poor. California wouldn’t dare give an IOU to (for example) the companies that deliver food to the prisons because they would just stop making deliveries.
DRJ (cdbef5) — 7/1/2009 @ 9:55 pmSo long as the gates stay locked, I frankly don’t have a terribly big problem with that…
That’s the thing. The C-130 plan probably would have worked… The test-flight had a problem, but it was correctable.
The mission was scrapped because Iran released the hostages (due to completely rational terror over what Reagan was going to do to their sorry asses).
Scott Jacobs (d027b8) — 7/1/2009 @ 9:57 pmThe C-130 probably would have been able to land and take off if it wasn’t shot up too badly… those planes are the Honda Accords of the sky. The plan was indeed scrapped not because it wouldn’t work but because Reagan was taking over and it wasn’t needed.
but the plan, beyond the air, was still pretty iffy. There’s no way to know just how far the revolutionary crazies would have gone, but I think a smoldering martyr pile of former embassy was a real possibility. I think the original plan was better… adding on USMC pilots was what got the schedule all screwed up… that was classic micromanaging.
Still, both plans are great examples of our forces working really hard under some boneheads. We will see more of that in the next couple of years.
Juan (cab674) — 7/1/2009 @ 10:02 pmPatton definitely had the right idea…
Scott Jacobs (d027b8) — 7/1/2009 @ 10:15 pm#21- Dana, I responded to this post on the other thread as well. Agreed. We were East Coast people with that attutude and jaunt in our steps. When we moved to California in the early 1990’s from New York, we walked a little slower, smiled a lot more but almost immediately began to notice that the perpetuated ‘image’ of the California Dream, that ‘destination’ image you painted– and we expected to find– had already begun to evaporate. Over the past near 20 years, it has gotten noticably worse and that lament of California being a place to ‘leave’ is a very real cry. The decline is real.
Mostly we noticed it in frozen architecture tainted with hints of decay, that had a late 1960s look. At first, quaint. Later too unchanging in a state once known for fast change and fresh trends. In Los Angeles, roads named for aviation pioneers around empty buildings where a legendary aerospace industry once flourished. Gone. And then the alarming decline in the quality of the local education system and state university system in the state. But generally, it seems to be the decay in the quality of life, the distain for other cultures and their resistence- or resentment at integrating into the California/American lifestyle. In Hollywood we’d quip amongst ourselves, “Bad roads. Bad cops. Bad air. BelAir! We love L.A.” We’d wanted to drive up into northern California and experience the majesty of that part of this truly beautiful state, but again, the car myth proved to be just that- a myth as the rising cost of fuel made such monthly jaunts too expensive. Add to it a run of bad and costly brush fires, the rise in earthquake insurance, the perpetual worry over draughts, not to mention gunfire from gang fights– and now the budget disaster in a state that is truly America’s richest in terms of stark beauty, but growing poorer every day through mismanagement and frustration. The cry to leave is heard a lot, especially from the younger residents, who want a place to grow. Utah? Nevada? Wyoming? Oregon? New Mexico? Dare I say it, Texas? Where to go. California’s most redeeing quality is its climate. If it wasnt for that, it soon will have all the charm of Rutherford, N.J. And I loved South Jersey.
DCSCA (9d1bb3) — 7/1/2009 @ 10:30 pmCarter had a suggestion to deal with the hostage crisis. The Joint Chiefs suggested taking out Kharg Island, Iran’s oil terminal. Had we done that, it would have been over.
Mike K (2cf494) — 7/1/2009 @ 10:31 pmYes we can heal this nation.
Yes we can repair this world.
“He broke it. He should fix it,” Bass said tersely. How did Bass say, “He broke it. He should fix it?” Tersely.
We will remember that there is something happening in America;
that we are not as divided as our politics suggests.
happyfeet (e8d590) — 7/1/2009 @ 10:41 pmI do think it’s a remarkable and appropriate example of the US Army that our special operations, Delta Force, Grey Fox, Force 21, whatever they are called this week, was basically started in that super special capacity in the wake of tremendous failure.
They bit off more than they could chew, and failed in a big way. They went back and started new pilot programs and joint force programs and dog faced it with determination. Some militaries do not face failure like that. It’s interesting to me that Russia was always inflating their abilities and having war games that covered up defects, while the US military always played war games with at least one hand tied behind its back. I guess that’s the difference between having a military for bluster and intimidation, and having one that actually has to depose a tyrant every decade or so.
Juan (cab674) — 7/1/2009 @ 10:43 pmUnless you are counting half dressed self-starving women I have to disagree here. Alaska has far more in the way of natural beauty.
As I thought one day while flying home:
PS. Most of those women are at least partially fake.
Soronel Haetir (506ccb) — 7/1/2009 @ 10:55 pmSteveG #20
Lois Capps’ district must have been crafted as an homage to Eldridge Gerry!
23rd Congressional District
JoeH (eeb280) — 7/1/2009 @ 11:37 pmI’m just curious – do they even have a functioning govt out there? Seems like incompetence reigns on both sides of the aisle.
JEA (9f9fc9) — 7/2/2009 @ 3:11 am#39- They sit and argue and accomplish nothing. It’s beyond the expected friction between parties. It’s essentially gridlocked government. It’s broken.
DCSCA (9d1bb3) — 7/2/2009 @ 3:24 am#30- DRJ, here’s the mindset. Rather than trying to avoid issuing IOUs at all costs in the first place, they’re discussing how to avoid counterfeit IOUs from surfacing to be redeemed. California truly has a broke– and broken government.
DCSCA (9d1bb3) — 7/2/2009 @ 3:32 amDCSCA, what would you have the california leg do, anyway? They are gridlocked, yes, but if you could magically undo that, what solution do you have in mind?
It seems that California will either have to tax even more, or drastically ease back on its government’s scope, or both. Probably both.
Juan (cab674) — 7/2/2009 @ 3:48 am#42- Well, Schwarzenegger is essentially a lame duck now and has little influence. The legislature is literally discussing cowtails in the midst of this budget nightmare. They’re useless. The only real solution is to establish some kind of disciplined financing plan, refrain from borrowing from CA cities and municipalities, cut services, salaries and perks while streamlining existing services, sell off or lease state assets, up state university tuitions and impose smart, targeted tax increases. There’s a lot of fat to cut out and it’s going to hurt. Raising DMV fees and such just keeps ticking off everyone. I’ll give you a small example. My retired mother lives in a small house on a fixed imcome and her monthly water bill is about $100 which for California is low. $75 of it is fixed costs for city and state fees/services and so on and the other $25 is for the water, and they are planning a rate increase on that while imposing an 8% reduction in water usage due to draught. She’s livid that 79% of her water bill isnt even for water. That kind of bureaucracy needs to be culled out across the board in all facets of California. Then there’s the unions to deal with. It can be done, but nobody wants to work on compromise. They just sit and argue and nothing gets accomplished.
DCSCA (9d1bb3) — 7/2/2009 @ 4:05 amSo here’s what I want to know – how can they do this? Article II Section 10 of the Constition says:
“Section 10. No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.”
IOUs would seem to be forbidden.
Skip (ba6438) — 7/2/2009 @ 6:36 amAs California goes, so goes Illinois–we have no budget, and our whiny, inept legislature and governor can’t get together long enough to pass a budget. They’d rather rant about more taxes and play chicken with people’s lives.
rochf (ae9c58) — 7/2/2009 @ 8:11 amEven more importantly, the IOUs are a violation of the preceding clause, state are not allowed to “emit bills of credit.” They don’t mean bonds here–they mean scrip.
Official Internet Data Office (687ef5) — 7/2/2009 @ 8:24 amThe state is bloated with spending. It is bloated with regulation.
SteveG (c99c5c) — 7/2/2009 @ 8:27 amCaring for illegal aliens in hospitals, incarcerating them etc. costs us tons.
The state employs way too many people and they need to trim 25% of them.
Walk into most government offices and just watch the work dynamic. Within about 30 minutes you will notice the people who don’t seem to be doing anything, and the people who are disrupting those who are working. Spend a month there and you’ll see those who are chronically late, those who are lazy, those who complain, those whose work is useless. Let them all go.
If you find out you need to re-add people, there are plenty of highly motivated people out there looking for work and upgrade.
Fire all the dust control monitors and snowy plover nesting site observers.
Fire all the people in the valley whose job is keeping water from farmers because of a tiny fish.
Fire most of the constructon end of CalTrans and sell their equipment. Contract work out to the lowest bidder and do next to zero in house… they just stand around or are on break.
Comment by JoeH — 7/1/2009 @ 11:37 pm
They had to do that to find enough Dems to make up a Dem-majority district for her. If you can’t smell the surf, you’re out of her district.
“… Raising DMV fees and such just keeps ticking off everyone…”
Just got my DMV renewal form for that ’67 car I bought 33-years ago. My first full-years registration (Sept-76) was $68, this year – for a car 33-years older – it is $108!
AD - RtR/OS! (b9e569) — 7/2/2009 @ 8:35 amNah, I’m not upset (he said as he fumbled for additional reloads).
#48- Yeah, well, we keep 20 year old Jeeps preened and operating and the DMV fees are $64. Last year $58. New car or recent model years are really getting hammered on fees and insurance. Then fuel costs. And considering the feesm, insurance plus the poor road conditions in Los Angeles, buying a new car for in-town use there is absurd.
DCSCA (9d1bb3) — 7/2/2009 @ 1:51 pm#48- A postscript. Check out your auto insurance policy. Seems every insurance company has passed along to all insured CA drivers a surcharge of $1.80/yr. to go directly into a state insurance fund. Compliments of Governor Schwarzenegger and the budget impass.
DCSCA (9d1bb3) — 7/2/2009 @ 2:30 pm