California Division of Forestry Not Paying Bills, Vendors Demand Cash or Credit Cards Upfront

Here is gut wrenching story regarding firefighting and the California Division of Forestry.

ANON writes

I work in the aircraft repair/parts industry in California and thought I'd let you onto something. Many vendors to the CDF (California division of forestry) air operations have outstanding bills going back to last year. My company just put all California agencies on cash or credit card only. Many others are refusing to sell to the CDF because of huge amount of unpaid and late bills. We don't even get Registered Warrants!

Mish, this is scary. I know of one company that is doing repairs knowing they won't get paid just because they do not want to see fire fighting aircraft grounded!

Vendors must be given payment priority if the state wants to have any police and fire protection! Meanwhile the state is still purchasing new cars! Go figure.

Don't put my name on this please. Thank you for your good work.

Normally I use initials, sometimes straight up and sometimes reversing them. In this case, I do not want a witch hunt so I will not post any initials at all. Meanwhile, California burns while the California legislature fiddles. Meanwhile Furlough Fridays are in.

Furlough Fridays Return

Please consider the Sacramento Bee Q&A on IOUs & furloughs

California's fiscal woes are in sharp focus again today, as state offices close on the first of three "Furlough Fridays" this month, idling tens of thousands of state workers; major banks stop redeeming state-issued IOUs at the close of business; and state leaders appear no closer to resolving the $26.3 billion hole in the state spending plan.

IOUs For Sale

The SEC said Thursday the IOUs are investment securities and anyone who wants to buy or sell their notes should go through registered dealers. This could make it safer.

Furlough Fridays Return

Gov. Arnold Schwarzenegger ordered most state employees to take two furlough days a month starting in February. He has since ordered a third furlough day per month, which starts today. The three days amount to a 14.2 percent pay cut for state workers.

The governor also has proposed a 5 percent pay cut on top of the furloughs. Legislative Democrats are unlikely to go along with the cut, but the governor could conceivably achieve the same savings by ordering a fourth furlough day.

How many state workers are actually being furloughed?

Of the 235,000 under the governor's control, about 210,000 are being furloughed.

Something To Think About

The California budget deficit is $26 billion and growing every day. Interest is mounting on IOUs. 210,000 workers have taken a 14.2 percent pay cut yet this will only result in a savings of a mere $1.3 billion through July 2010 as noted in Furloughs "A Drop In The Bucket" Towards Balanced State Budgets.

California could fire all 200,000+ state workers on forced furloughs and still not balance its budget!

Long term, something has to give, and I just do not mean canceling programs, I mean reform in union contracts and explicitly pension reform. Regardless of how California balances its budget, if it does not include pension reform, the state will be back at crisis level within a couple years, if not sooner.

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