Grimes: Broke State Budget Hits Dead End

Russ Steele

Katy Grimes writing in the Cal WatchDog has the story, the state budget is about to hit the wall. The Governor’s budget deception, with a compliant legislature, are being exposed by reality. Katy writes:

In in an effort to avoid a cash-flow problem, State Treasurer Bill Lockyer appeared on Bloomberg news last week talking about the sale of $1 billion in state revenue anticipation notes to Barclay’s and JP Morgan.

“The private placement deal is part of a $3.3 billion plan devised by Controller John Chiang, the state’s Department of Finance, and Lockyer’s office to address a seven-week cash shortfall that the state anticipated, starting around the end of this month,” the Wall Street Journal reported.

Chiang has been warning that the state would soon be facing a cash flow problem, largely because expected “revenues” did not come in.

The state will be doing more internal borrowing and delaying other payments, and plans to issue about $2 billion in general obligation debt.

According to Investorpedia, revenue anticipation notes are, “A short-term debtsecurity issued on the premise that future revenues will be sufficient to meet repayment obligations.”

You can read the rest of Katy’s insightful article HERE. But here are some choice quotes:

According to a Capitol staffer who asked to remain anonymous, it means the majority-vote budget, crafted without bi-partisan support or Republican input, is bogus, and cannot be relied upon. “It is nothing more than a pie-in-the-eye spending plan, resulting with California deeper in debt,” the staffer explained.

The majority-vote budget is based largely on the hope of $4 billion more in projected tax revenues.

However, evidence of this problem is the state’s cash-flow shortage in a year when we actually took in $8 billion more than was originally projected in January 2011.

Spending is the problem, not revenue, and our progressive legislators knew that they were deceiving the voters and taxpayers.   Katy concludes:

State lawmakers and financial officers knew what they were doing when they made these manipulations, couched in terms of “general fund decreases,” designed to cover up the increasing spending and decreasing revenue.

This is nothing more than if you borrowed a large amount of money from your rich uncle when you don’t have the income to support it, or any way to pay it back. And family members always know that a loan is really a gift.

It’s a thinly disguised plan where state officials are hoping that revenues will improve before the state finances totally melt down into bankruptcy. We’ve kicked the can so far down the road, that we are about to hit a dead-end alley.

How many rich uncles can California find before we hit the wall?  Reality takes no prisoners!

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About Russ Steele
Freelance writer and climate change blogger. Russ spent twenty years in the Air Force as a navigator specializing in electronics warfare and digital systems. After his service he was employed for sixteen years as concept developer for TRW, an aerospace and automotive company, and then was CEO of a non-profit Internet provider for 18 months. Russ's articles have appeared in Comstock's Business, Capitol Journal, Trailer Life, Monitoring Times, and Idaho Magazine.

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