California on the verge of bankruptcy... Paying vendors with IOU's

[briann]

California To Pay With IOUs for Second Time Since Depression, will run out of money in MARCH!!!

This directly effects me

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=a2TUhalNFDds

California, the world’s eighth largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said.

In a letter to legislative leaders Dec. 2, Genest said the state “will begin delaying payments or paying in registered warrants in March” unless an $11.2 billion deficit is closed or reduced. California, which approved its budget less than three months ago, may run out of cash by March, state officials say.

Governor Arnold Schwarzenegger warned that he may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow.

“It’s getting worse very quickly,” Schwarzenegger, a 61- year-old Republican, told reporters Dec. 1 after declaring a fiscal emergency and ordering the Legislature into a special session to find ways to close the deficit. “It’s like an avalanche in that it gains momentum. And that’s what we’re in right now, so it’s a real crisis.”

California is reeling more than any other state from budget woes that pushed the nation’s governors to seek help from Congress. States say federal money is needed to ease the pain from spending cuts and tax increases that would be a further blow to an economy in the throes of a recession.

The warrants would be given to landscapers, carpet cleaners, construction firms, food services companies and other state vendors. They would pay an interest rate of as much as 5 percent, based on state law. California last issued the IOUs in 1992 when lawmakers and then-Governor Pete Wilson deadlocked on a budget for 61 days past the start of the fiscal year.

Higher Yields

Investors are souring on the state. California 10-year bonds yield 0.73 percentage point more than top-rated municipal bonds, according to Bloomberg indexes, the highest since the depths of the last budget crisis in Jan. 2004. By comparison, the difference for New York is 0.27 percentage point.

California Controller John Chiang said that the state’s cash account will decline to $882 million by February, below its preferred cushion of $2.5 billion, and will be negative $1.9 billion by March.

Tax collections have been hammered as the collapse of the real estate market eliminated 136,000 construction jobs in the past two years and caused consumers to curb spending. California leads the nation in home foreclosures, its 8.2 percent unemployment rate is the third-highest in the U.S., and the wealthiest 1 percent of citizens pay almost half its personal income taxes, making it sensitive to swings in the stock market.

Stock Losses

“When the market tanks those people sneeze and we in Sacramento get a cold,” said H.D. Palmer, a spokesman for Schwarzenegger’s finance department.

California’s two year budget shortfall is about $28 billion, accounting for one-third of the deficits faced by U.S. states, according to figures from the National Conference of State Legislatures in Denver.

“If the state’s having budget problems and they’re about to run out of cash, that limits their opportunity to raise money in the capital markets,” said Terry Goode, who heads up municipal bond research for Wells Capital Management in San Francisco.

The Port Authority of New York and New Jersey attracted no bids from investment banks to manage a $300 million taxable note offering this week.

Biggest Borrower

California, the biggest borrower in the municipal-bond market, has $51.9 billion in general-obligation debt. It’s rated A+ by Standard & Poor’s and Fitch Ratings, the fifth-highest grades, and an equivalent A1 at Moody’s Investors Service.

Even if the state runs out of cash, constitutional law stipulates that holders of California state general obligation bonds are first in line for payment by the treasury.

The budget deficit has grown even as California cut spending on health care, universities, and welfare programs. Schwarzenegger proposed a tax increase for the first time since he took office in 2003 as Democrats agreed to slash $8 billion in spending. Republicans, who have enough support to block a two- thirds majority needed to pass a tax increase, have made sure the measure has failed.

“This is not blind ideology on the part of Republicans, but our sincere belief that higher taxes will hurt the economy and lead to more uncontrolled spending,” said Assembly Republican leader Mike Villines.

Schwarzenegger’s declaration of a fiscal emergency gives lawmakers 45 days to plug the shortfall. If they fail to find a solution in that time, they are barred from doing any other legislative work until they do. The declaration came after lawmakers were unable to agree on a plan to close the gap during a three-week special session that expired Nov. 30.

“We’re just barely hanging on right now,” Chiang said. “We need strong legislative action immediately.”

To contact the reporters on this story: Michael B. Marois in Sacramento, California, at 1612 or [email protected] ; William Selway in San Francisco at [email protected] .

[Roadwarrior]

No mention in the article of the massive burden imposed on California
by illegal immigration .....$10 billion per year

Was he afraid of being called racist

[Xoce]

Maybe it is time to cut insane programs.
For example the state sponsored "biotech" dens of iniquity which destroy human life (embryos) with NO RESULTS.  Try ADULT STEM CELLS and don't spend money that you don't have on evil, failed experiments, California.

[briann]

No mention in the article of the massive burden imposed on California
by illegal immigration .....$10 billion per year

Was he afraid of being called racist

Thats a HUGE underestimation!!!!  Illegals come here with HUGE families.... we pay for their Health care... their education... Their kids education(Can cost state $100,000 per family)... and all sorts of ludicrous programs... all to get strawberries picked for less money.

Illegal Immigration IS our debt.  That along with our runaway retirement plans for Public servants is whats bankrupting us.

[muman613]

Talking about why we are bankrupt.... It's because of Illegal Aliens!

I received the following message from my father:


Subject: Why Bankruptcy?

If you think the war in Iraq is costing us too much, please read the following:

We have been hammered with the propaganda that it is the Iraq war, and the war on terror that is bankrupting us.  Following are 14 additional reasons why the American taxpayer is being bankrupted. Included the URL's for verification of all the following facts.

1.   $11 Billion to $22 billion is spent on welfare to illegal aliens each year by state governments. Verify at: http://tinyurl.com/zob77

2. $2.2 Billion dollars a year is spent on food assistance programs such as food stamps, WIC, and f ree school lunches for illegal aliens.   Verify at: http://www.cis.org/articles/2004/fiscalexec.html

3.   $2.5 Billion dollars a year is spent on Medicaid for illegal aliens.   Verify at: http://www.cis.org/articles/2004/fiscalexec.html

4.   $12 Billion dollars a year is spent on primary and secondary school education for children here illegally , and they cannot speak a word of English!   Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.0.html

5.   $17 Billion dollars a year is spent for education for the American-born children of illegal aliens, known as anchor babies. Verify at http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.01.html

6. $3 Million d ollars a DAY is spent to incarcerate illegal aliens.   Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.01.html

7. 30% perc ent of all Federal Prison inmates are illegal aliens. Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.01.html

8. $90 Billion Dollars a year is spent on illegal aliens for welfare & social services by the American taxpayers. Verify at: http://premium.cnn.com/TRANSCIPTS/0610/29/ldt.01.html

9. $200 Billion dollars a year in suppressed American wages are caused by the illegal aliens. Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.01.html

10. The illegal aliens in the United States have a crime rate that's two and a half times that of non-illegal aliens. In particular, their children, are going to make a huge additional crime problem in the US. Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0606/12/ldt.01.html

11. During the year of 2005 there were 4 to 10 MILLION illegal aliens that crossed our Southern Border. Also, as many as 19,500 illegal aliens from Terrorist Countries. Millions of pounds of drugs, cocaine, meth, heroin and marijuana, crossed into the U. S from the Southern border. Verify at: Homeland Security Report: http://tinyurl.com/t9sht

12. The National Policy Institute estimated that the total cost of mass deporta tion would be between $206 and $230 billion , or an average cost of between $41 and $46 billion annually over a five year period.   Verify at: http://www.nationalpolicyinstitute.org/pdf/deportation.pdf

13. In 2006 , illegal aliens sent home $45 BILLION in remittances to their countries of origin. Verify at: http://www.rense.com/general75/niht.htm

14. The Dark Side of Illegal Immigration: Nea rly One million sex crimes are committed by i llegal i mmigrants i n t he United States. Verify at: www.drdsk.com/articleshtml

The total cost is a whopping $ 338.3 BILLION DOLLARS A YEAR!!!

Are we THAT stupid?

If this doesn't bother you , then just delete the message. If, on the other hand, it does raise the hair on the back of your neck, I hope you forward it to every elected representative in Washington D.C. - five times a week for as long as it takes to restore some semblance of intelligence in our policies and enforcement , thereof.

[SavetheWest]

What a mess.  Getting those AAA municipal bonds downgraded is a huge problem.  If bond investors stay away then the state has to raise the interest they are paying to attract more investors.  California cannot continue with those insane state worker salaries too. That is a massive problem and they protest like crazy anytime someone points that out.  Of all the Mexcians crossing the border, 15% come just for criminality.  So you have bloated government salaries, spending on massive welfare programs and subsidizing Latin America's poor in every sector. Never mind the decline of the overall culture and the affirmative action programs that give out a lot but bring in very little.

Just terrible. 

[cjd]

I see a rough time ahead for States like California, New York and the like. States where  municipal workers have contracts that give them better pay and benefits then the private sector could or would ever dish out. Civil service workers pay should reflect the regional and customary pay of the people paying taxes in the region where they work. Here on Long Island New York we have Teachers, Policemen and other civil service workers often getting almost twice what the average salary is of the tax payers  who employ them. 20 or 30 year retirement plans and medical for life is the norm for most of the jobs like this. In the private sector most people have to work into their 70's because they must rely on social security and medicaid in order to make retirement possible. California as in New York property tax has almost reached the levels of confiscation 8 to 10 thousand dollars a year is an  average property tax. With some teachers and police people making 100g's a year you don't need to be an accountant to see that figures like this will soon bankrupt even the strongest municipality once you figure in the legacy costs. I think the situation we are falling in will cause many of the comfortable contracts negotiated over the years to be revisited through bankruptcy because the tax payer will no longer be able to sustain this farce. At that point many of the contracts that gave people crazy amounts of pay and benefits will be brought down to reasonable levels.

[Roadwarrior]

No mention in the article of the massive burden imposed on California
by illegal immigration .....$10 billion per year

Was he afraid of being called racist

Thats a HUGE underestimation!!!!  Illegals come here with HUGE families.... we pay for their Health care... their education... Their kids education(Can cost state $100,000 per family)... and all sorts of ludicrous programs... all to get strawberries picked for less money.

Illegal Immigration IS our debt.  That along with our runaway retirement plans for Public servants is whats bankrupting us.

NO Bailout for California !!!

Now with the recession kicking in with higher unemployment,
Illegals will be roaming about with nothing to do except collect even more
more welfare ...drowning the budget in more debt....

I am afraid California is the harbinger of the Nation

[briann]

Talking about why we are bankrupt.... It's because of Illegal Aliens!

I received the following message from my father:


Subject: Why Bankruptcy?

If you think the war in Iraq is costing us too much, please read the following:

We have been hammered with the propaganda that it is the Iraq war, and the war on terror that is bankrupting us.  Following are 14 additional reasons why the American taxpayer is being bankrupted. Included the URL's for verification of all the following facts.

1.   $11 Billion to $22 billion is spent on welfare to illegal aliens each year by state governments. Verify at: http://tinyurl.com/zob77

2. $2.2 Billion dollars a year is spent on food assistance programs such as food stamps, WIC, and f ree school lunches for illegal aliens.   Verify at: http://www.cis.org/articles/2004/fiscalexec.html

3.   $2.5 Billion dollars a year is spent on Medicaid for illegal aliens.   Verify at: http://www.cis.org/articles/2004/fiscalexec.html

4.   $12 Billion dollars a year is spent on primary and secondary school education for children here illegally , and they cannot speak a word of English!   Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.0.html

5.   $17 Billion dollars a year is spent for education for the American-born children of illegal aliens, known as anchor babies. Verify at http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.01.html

6. $3 Million d ollars a DAY is spent to incarcerate illegal aliens.   Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.01.html

7. 30% perc ent of all Federal Prison inmates are illegal aliens. Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.01.html

8. $90 Billion Dollars a year is spent on illegal aliens for welfare & social services by the American taxpayers. Verify at: http://premium.cnn.com/TRANSCIPTS/0610/29/ldt.01.html

9. $200 Billion dollars a year in suppressed American wages are caused by the illegal aliens. Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0604/01/ldt.01.html

10. The illegal aliens in the United States have a crime rate that's two and a half times that of non-illegal aliens. In particular, their children, are going to make a huge additional crime problem in the US. Verify at: http://transcripts.cnn.com/TRANSCRIPTS/0606/12/ldt.01.html

11. During the year of 2005 there were 4 to 10 MILLION illegal aliens that crossed our Southern Border. Also, as many as 19,500 illegal aliens from Terrorist Countries. Millions of pounds of drugs, cocaine, meth, heroin and marijuana, crossed into the U. S from the Southern border. Verify at: Homeland Security Report: http://tinyurl.com/t9sht

12. The National Policy Institute estimated that the total cost of mass deporta tion would be between $206 and $230 billion , or an average cost of between $41 and $46 billion annually over a five year period.   Verify at: http://www.nationalpolicyinstitute.org/pdf/deportation.pdf

13. In 2006 , illegal aliens sent home $45 BILLION in remittances to their countries of origin. Verify at: http://www.rense.com/general75/niht.htm

14. The Dark Side of Illegal Immigration: Nea rly One million sex crimes are committed by i llegal i mmigrants i n t he United States. Verify at: www.drdsk.com/articleshtml

The total cost is a whopping $ 338.3 BILLION DOLLARS A YEAR!!!

Are we THAT stupid?

If this doesn't bother you , then just delete the message. If, on the other hand, it does raise the hair on the back of your neck, I hope you forward it to every elected representative in Washington D.C. - five times a week for as long as it takes to restore some semblance of intelligence in our policies and enforcement , thereof.

Good information... but its ignoring the anchor baby cost.   My wife teaches Elementary school... and she asked them to talk about their parent's and how they came to America... and 19 out of 20 said their parents were snuck accross.

A majority of our kids in LA county SHOULDNT be here... and they are costing us HUGE amounts of money.  They cost FAR more money to educate than domestic kids.

[SavetheWest]

I see a rough time ahead for States like California, New York and the like. States where  municipal workers have contracts that give them better pay and benefits then the private sector could or would ever dish out. Civil service workers pay should reflect the regional and customary pay of the people paying taxes in the region where they work. Here on Long Island New York we have Teachers, Policemen and other civil service workers often getting almost twice what the average salary is of the tax payers  who employ them. 20 or 30 year retirement plans and medical for life is the norm for most of the jobs like this. In the private sector most people have to work into their 70's because they must rely on social security and medicaid in order to make retirement possible. California as in New York property tax has almost reached the levels of confiscation 8 to 10 thousand dollars a year is an  average property tax. With some teachers and police people making 100g's a year you don't need to be an accountant to see that figures like this will soon bankrupt even the strongest municipality once you figure in the legacy costs. I think the situation we are falling in will cause many of the comfortable contracts negotiated over the years to be revisited through bankruptcy because the tax payer will no longer be able to sustain this farce. At that point many of the contracts that gave people crazy amounts of pay and benefits will be brought down to reasonable levels.

You're right that this will happen to other states. I heard people cleaning the subways in NYC start at $60,000 per year and that's why they went on strike. What's the point of going to school and getting a degree when you can make six figures at the sanitation department?  The other thing that's crazy is that workers get a pension based on their last year of work.  Of course, which police officer wouldn't be at all the NYC parades and which teacher wouldn't do massive overtime.  I know a teacher from NYC who retired early 10 years ago and get a yearly pension of $90,000 per year.  I know these people should be paid well but that's ridiculous. 

Wasn't there a city in CA profiled on CNN that went bankrupt already?  I think it was near San Francisco called Vallejo or something.  The average cops and firemen were making $146,000 per year. 

[briann]

I see a rough time ahead for States like California, New York and the like. States where  municipal workers have contracts that give them better pay and benefits then the private sector could or would ever dish out. Civil service workers pay should reflect the regional and customary pay of the people paying taxes in the region where they work. Here on Long Island New York we have Teachers, Policemen and other civil service workers often getting almost twice what the average salary is of the tax payers  who employ them. 20 or 30 year retirement plans and medical for life is the norm for most of the jobs like this. In the private sector most people have to work into their 70's because they must rely on social security and medicaid in order to make retirement possible. California as in New York property tax has almost reached the levels of confiscation 8 to 10 thousand dollars a year is an  average property tax. With some teachers and police people making 100g's a year you don't need to be an accountant to see that figures like this will soon bankrupt even the strongest municipality once you figure in the legacy costs. I think the situation we are falling in will cause many of the comfortable contracts negotiated over the years to be revisited through bankruptcy because the tax payer will no longer be able to sustain this farce. At that point many of the contracts that gave people crazy amounts of pay and benefits will be brought down to reasonable levels.

You're right that this will happen to other states. I heard people cleaning the subways in NYC start at $60,000 per year and that's why they went on strike. What's the point of going to school and getting a degree when you can make six figures at the sanitation department?  The other thing that's crazy is that workers get a pension based on their last year of work.  Of course, which police officer wouldn't be at all the NYC parades and which teacher wouldn't do massive overtime.  I know a teacher from NYC who retired early 10 years ago and get a yearly pension of $90,000 per year.  I know these people should be paid well but that's ridiculous. 

Wasn't there a city in CA profiled on CNN that went bankrupt already?  I think it was near San Francisco called Vallejo or something.  The average cops and firemen were making $146,000 per year. 

Not sure... but its actually our retirement plan for public workers that is the biggest drain!!!  ITs killing us right now.