How’s that California paycheck looking?
by Rossputin | 1:33 am, July 3, 2009 | Comments Off
Yesterday afternoon, California started paying its bills with IOUs. You heard that right. The state with the world’s 8th largest economy is broke, and they’re leaning on banks to cash the IOUs for them with a promise of paying the banks 3.5% interest when the government settles up with them.
Saying that California operates like a banana republic is an insult to banana republics everywhere.
This month, the People’s Republic of California will issue over $3 billion in these “registered warrants”, the first time the state has had to function this way in 27 years. According to the WSJ, “The scrip will be issued to taxpayers, vendors, local governments and others the state can’t pay because it doesn’t have enough cash. Bondholders will be paid principal and interest as usual, when due, state officials have said.”
In the meantime, Governor Arnold Schwarzenegger, largely to blame for this mess for his early cave-in to Democrats and unions after they beat him on some ballot initiatives in 2005. His response was to hire a Democrat as his chief of staff. (To be fair, Susan Kennedy, while quite liberal does have some free-market leanings.)
Now, in what is almost certainly too little and absolutely too late, the Governator is getting the fiscal responsibility religion, forcing state workers to take “furlough Fridays” and suggesting cutting the state’s guaranteed funding levels for education (a great idea that Colorado should heed as soon as possible.) Those things, while I decent start, will hardly dent California’s $26 billion budget deficit.
According to Reuters, “Spending cuts will fall hard on state workers – some losing jobs and others losing pay through furloughs – and on recipients of state aid, including local government agencies already stretched by rising jobless and homeless rates.” I say it’s about time. California, probably even more than the federal government, has a bloated public sector and out-of-control welfare system which are sucking the lifeblood from their economy. The FIRST people that budget cuts should target are state workers, in part because the state’s workforce is far too large and with the added benefit of reducing the cash going to extremely destructive (of the private sector) unions.
For a little more “inside baseball” on California’s budget process, this page of THIS Reuters article (the article’s second page) is much better than one normally expects from that source.
My wife and I have on occasion spoken of where we might live if the day comes that we move from Colorado. I have said without fail that California is a political and economic disaster and I want no part of it. Unfortunately, current events are proving me right. Can you imagine how you’d feel if you worked for the state and got a paycheck in the form of an IOU? Even Hugo Chavez would be embarrassed to do that.
