Sharing The Pain In California

In San Diego, Mayor Jerry Sanders is seeking cuts in services, fee hikes, and water rationing. Please consider A call to share the pain in San Diego

Mayor sees cut in services, fee hikes, water rationing

San Diegans should expect shared pain in the form of scaled-back city services, higher fees and mandatory water rationing, Mayor Jerry Sanders said last night in his fourth State of the City address.

Sanders also said city employees face layoffs if five unions don't accept reduced retirement benefits during contract negotiations this year.

The audience of 1,100 applauded plenty, laughed a little and left the Balboa Theatre with some wondering if the mayor was laying the groundwork for a tax increase by exhorting everyone “to look for solutions on both sides of the balance sheet.”

The 39-minute speech was dominated by Sanders' request that residents befriend neighbors and become volunteers, because the city can't continue to provide services even at the diminished levels it has over seven years.

“Before we have any chance to talk to San Diegans about revenue enhancement like taxes, we have to square away the pension system,” Sanders said.

He added that layoffs seem inevitable, even if labor concessions come, driving the point home harder than he had in his speech.

“We've got $54 million at least to cut in this next year's budget,” he said. “There's no way we can avoid laying off people. There's going to be some of that. That's one reason why we'd like to see other people step up and help us out. You can't close a gap like that without cutting personnel.”

Lorena Gonzalez, the head of the San Diego-Imperial Counties Labor Council, whose membership includes city safety and blue-collar workers, said it was “a little bit short of substance.”

“Clearly the plan has to be bigger than increasing volunteers and further cutting employee benefits,” Gonzalez said. “There's got to be more than that.”

Gonzalez says “There's got to be more than that.”

I agree wholeheartedly. Jobs should be privatized and pension plans modified for starters. In addition, government wages, benefits, and pensions, simply must be brought in line with that of the private sector.

There is no other way out. It is unfair, and not even possible to attempt to balance this mess on the backs of overburdened taxpayers. For more on this growing realization, please see Ohio Governor Asks For Across The Board Union Pay Cuts.

California delaying tax refunds amid cash crisis

In an attempt to conserve cash amidst a budget crisis, California Delays Tax Refunds.

California will not pay state tax refunds for individuals and business that overpaid 2008 taxes, in order to conserve dwindling cash for priority payments including school spending and debt repayment required by state law, the state's controller office said on Friday.

Other state checks to be postponed for 30 days include payments for vendors who provide services and products to the state government and state checks to a million aged, blind and disabled Californians to cover rent and utilities bills, State Controller John Chiang's office said in a statement.

The financial market turmoil that has Wall Street reeling is also slashing into California's revenues, which rely heavily on personal income taxes. They are shrinking due to the recession and rising unemployment and because stocks and other assets have lost so much of their value in recent months.

The governor in his state of the state speech on Thursday said California faces insolvency within weeks if it does not balance its books.

"I take this action with great reluctance," Chiang said in the statement. "I know it will put many California families who rightfully expect their state tax refunds in a desperate position."

"Individuals who already are vulnerable will be hit hard," Chiang added. "Small businesses that don't get paid may have to lay off more workers. Rather than helping stimulate the economy, withholding money from Californians will prolong our pain and delay our economic recovery."

Schwarzenegger, a Republican, has backed some form of tax increase to raise revenues, angering Republican lawmakers, and is pressing Democrats to cut spending.

California desperately needs to privatize services, eliminate programs, take care of its prison system, and do something about the illegal alien problem. The demand for free services is unlimited, as are wants by, and promises to unions. California leads the nation in free services, so California has the biggest problem.

Unpaid Bills Mount

California's unpaid bills are mounting up. The total amount of California Unpaid Bills hit $3,126,408,000 as of 2009-01-14. Thee single biggest item is $1,222,967,000 for the Office of Public School Construction. See page 7 of the above link for details. To rotate the view, right click on the PDF and Rotate Clockwise.

The amount of unpaid bills is increasing every day. As of 2009-01-17 the amount was at $3.7 billion up from $3.1 billion three days earlier.

California controller to suspend tax refunds, welfare checks, student grants

The Los Angeles Times is reporting California controller to suspend tax refunds, welfare checks, student grants.

The state will suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, Controller John Chiang announced Friday.

Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state's nearly $42-billion budget deficit. More than half of those payments are tax refunds.

The controller said the suspended payments could be rolled into IOUs if California still lacks sufficient cash to pay its bills come March or April.

It pains me to pull this trigger," Chiang said at a news conference in his office. "But it is an action that is critically necessary."

California is projected to be $346 million short of the funds it needs to pay all its bills in February. By March, the state would be so far in the red that even continuing to suspend payments would not cover the shortfall. California would be insolvent, making the issuance of IOUs likely.

State officials have already designed an IOU template, Chiang said, and have been negotiating with banks over whether taxpayers could cash or deposit them if they are issued. The state could be forced to pay as much as 5% interest on delayed tax refunds if they are not paid by the end of May, Chiang said.

The last time the state issued such IOUs -- the only time since the Great Depression -- was in 1992.

Schwarzenegger has ordered that most state workers take two days off per month without pay -- equivalent to about a 10% pay cut. The governor also ordered most state offices -- including all DMV field offices -- to close on those two days. The order is being challenged in court by labor unions.

About a third of all state welfare payments go to Los Angeles County, where officials said they can shift money around to keep the payments flowing in the short term.

"The million-dollar question is how long this will last," said L.A. County Chief Executive William T Fujioka. "We cannot sustain a huge and very long hit."

How Big Is California's Budget Hole?

Inquiring minds are asking How big is California's budget hole?

If Gov. Arnold Schwarzenegger were to fire every employee in state government tomorrow, it would easily patch California's enormous deficit, right? Not even close.

But surely shutting down all state prisons would do the trick? That, too, would only get him about a quarter of the way there.

Now what if he were to close every prison and cut off funding for health care and other services for the poor? Now we're in the ballpark.

Schwarzenegger on Thursday delivered his annual State of the State address, and there was only one topic on his mind: A budget deficit that's ballooned to $40 billion through mid-2010.

State lawmakers seem only now to be coming to grips with the enormity of their problem, after months of finger-pointing. No matter how big the shortfall got over the past year, Democrats and Republicans hewed to their long-held opposition to deep program cuts or tax increases.

It's been only this month, with the state literally on the verge of not being able to pay many of its bills, that signs have emerged that both sides realize they're going to have to make major concessions.

Payroll for California's roughly 230,000 civil servants tallies a mere $18 billion — not including legislative aides or people who work for the state's courts or university systems. (Those 149,000 additional folks aren't under the governor's control, but even if Schwarzenegger could fire them, their salaries wouldn't be enough to patch the $40 billion deficit.)

California Is Bankrupt

If you did not know it before, you do now. California is bankrupt. So is Ohio. So are numerous cities like San Diego. All told, 44 States Face Huge Budget Shortfalls. My big fear in this mess is that Obama will attempt to bail out the states before much needed reforms are made. Such actions will only postpone the problems.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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