California To Run Out Of Cash In One Month, Controller Warns

Tyler Durden's picture

If anyone is tired of the daily European soap opera with surrealistic tragicomic overtones, they can simply shift their gaze to the 8th largest economy in the world: the insolvent state of California, whose controller just told legislators has just over a month worth of cash left. From the Sacramento Bee: "California will run out of cash by early March if the state does not take swift action to find $3.3 billion through payment delays and borrowing, according to a letter state Controller John Chiang sent to state lawmakers today. The announcement is surprising since lawmakers previously believed the state had enough cash to last through the fiscal year that ends in June." ....uh, oops? But sure, fix the problem of excess debt by more "borrowing" why not. As for the math: "But Chiang said additional cash management solutions are needed because state tax revenues are $2.6 billion less than what Gov. Jerry Brown and state lawmakers assumed in their optimistic budget last year. Meanwhile, Chiang said, the state is spending $2.6 billion more than state leaders planned on." Quick, someone come up with a plan that involves subsidies and tariffs on China, or something else that deflects from what the source of the problem really is. Because the last thing that anyone in America would want to bring up is this thing called "responsibility" for their actions, or, as in now becoming the default case, the lack thereof. And why do that, when time spent so much more productively scapegoating this, and blaming that for one's own massive errors of judgment.

From the Bee:

The Assembly budget committee is considering a bill today that would enable $865 million of borrowing from existing state accounts, Senate Bill 95. Chiang, after consultation with the Department of Finance and state Treasurer Bill Lockyer, is also seeking about $2.4 billion in delayed payments to universities, counties and Medi-Cal, as well as additional borrowing from outside investors.


Absent these actions, the state would fall below its prudent $2.5 billion cash cushion on Feb. 29, Chiang estimated. On March 8, the state would actually end up $730 million in the red. The state would be below the safe cash cushion for several weeks ending April 13, save for several days at the end of March.


With such actions, Chiang believes the state would not have to use IOUs or delay tax refunds, maneuvers that have been relied upon in previous years. But Chiang also said that "more cash solutions may be required if our revenues continue to erode or if disbursements significantly exceed estimates."

So 3 years after Lehman filed for bankruptcy, everyone in the world continues to be terminally insolvent, but because everyone is in the same boat, everyone pretends not to notice and the best thing is just to blame Meredith Whitney for telling it like it is, if not getting the timing quite right? But at least the Fed isn't about to print up a tsunami of dollar-equivalent ones and zeros.

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nope-1004's picture

Again?  Didn't they run out of cash 8 times before?



tekhneek's picture

It's almost like this is going to keep happening over and over and over again.

trav7777's picture

we simply NEED more Mexicans in california as the budget arc with cradle-to-grave socialism works best the more diversity we have.  It's always the answer.

Clueless Economist's picture

But Chiang said additional cash management solutions are needed because state tax revenues are $2.6 billion less than what Gov. Jerry Brown and state lawmakers assumed in their optimistic budget last year. Meanwhile, Chiang said, the state is spending $2.6 billion more than state leaders planned on."

As an accredited Keynesian Economist, I applaud this type of planning.  The solution is quite simple, doing some quick calculations California should borrow an additional 5.2 BILLION $

The solution to the debt crisis is more debt.

--Nobel Winner P. Krugman

VanillAnalyst's picture

I don't see what the problem is here. Can't Ben just send them a check?

Side question, do pension fund liabilities typically have inflation guards in them? No? Ha ha!

tekhneek's picture

Or they could just borrow it from MF Global... oh wait...

Too soon?

Manthong's picture

Well, if Mexifornia just drives some more businesses out of the state with additional onerous regulations and laws, maybe they can make up the difference in decreased requirements for state and local services.

Oh, and if they tighten up their firearms control a bit more, they can save from the reduced need for law enforcement. 

Max Hunter's picture

I've already seen this movie.. Everything will be just fine.. Until it isn't.. :)

economics1996's picture

Let California for its own country.  Adios.

Mr Lennon Hendrix's picture

If that happened there would be an instant Civil War between NorCal and SoCal.

TruthInSunshine's picture

California is the harbinger of things to come for the rest of the nation, whether what fashions will be trendy, foods will be trendy, and even what financial conditions will be washing over the rest of the nation, like a slow moving weather front, usually with a lag time of 6 months to 18 months, at most.

California will now pay its workers and contractors with worthless IOUs, and they'll probably dish out state income tax refunds with worthless IOUs, also, just like before, while demanding Uncle Ben Bernanke's toilet paper for payment from the debt serfs.

California also has the world's 8th largest economy, about the size of Italy's - but much of its valuation is derived from real estate and REs associated services, so there's PLENTY of fake numbers there with further room to fall - again, much in common with Italy there too, financially speaking.

Xkwisetly Paneful's picture

Their credit rating like Illinois is on par with corp junk.

Why they refuse to open casinos and instead let all of that money flee to Nevada is mind boggling.

Michael's picture

I'm just glad California has the Democrat Governor Jerry Brown to solve all their problems for them.

StychoKiller's picture

You most definitely get the Govt you deserve, especially if You're California!

Hans Gruber 1962's picture

Just moved my company to Nevada at the end of last year.......gee, I hope I wasn't the straw that broke the ...................RIP CA!!!

Thomas's picture

California State Motto: At least we're not Illinois.

Manthong's picture

Must have lifted that from Illinois: At least we're not California.

beachdude's picture

Original California State Motto: At least we're not Mexico. Oh... wait... uh...

Have lived at the SoCal beaches my entire life. There were bumper stickers in the '80 that were wildly popular that read:


I'm thinking about producing some and re-introducing them. Think I'll be called a racist?

Cpl Hicks's picture

Forget about the stickers- with a name like 'beachdude' you've got to be a recist.

How can you be so insensitive?

stocktivity's picture

probably....and your tires will be slashed.

He_Who Carried The Sun's picture

...and the women taken....  Gov. Arnie was right. He saw it comin'...

Mr.Bigfoot's picture

I was born and raised in CA.  Made the smartest move of my life by moving to Texas.  As they say around here..., "I wasn't born in Texas, but I got here as fast as I could!"

StychoKiller's picture

Dang!  When Sasquatch deserts ya, you're close to rock-bottom! :>D

beachdude's picture

The bumper stickers were a commentary on overcrowding. L.A. population exploded in the '80's and there was a strong reaction from those who had been here in the '60's and '70's.

This time it would be a commentary against the "Reconquista". Look it up. I'll live alongside anyone, but remember...

This is the UNITED STATES OF AMERICA, not Meh-hico. Close the borders and form a line for immigration.

Red Raspberry's picture

Chicago says...


With the G8 and NATO conferences this summer, and the increase in fines, speed cameras and dog registrations we will cover Illinois.....

Thomas's picture

BTW-Big state; lots of electoral votes no problem.

Manthong's picture

Same with Illinois..  and if the U.I.C. (Usurper-In-Chief) can spring billions for cronies and their bogus green companies, he can spot CA and IL enough to keep them good untill the election.

swamp's picture

UIC = He, can't do a damn thing. It's OUR money. OUR money. 

Kobe Beef's picture

Technically it's the Fed's money. It's just our FUTURE being tossed down the drain.

Kobe Beef's picture

Dont forget the Cash for Bastards & Anchors for Aliens federal transfers to CA & IL. That's a lot of spending.

Whiner's picture

Corzine ( just bundled $550M for Obummer ) and The Squid are to ba called in for solution with currency swaps involving Caleefornya IOUs and Greek drachmas. No need to borrow more, Gov Moonbeam.

Caggge's picture

Better yet, Cali could hired MF globals accountants. They can make all the debt vaporize.

Comay Mierda's picture

only one way to a budget surplus in CA - legalize weed, tax the shit out of it

Matt's picture

only one way to a budget surplus in CA - spend less than you collect in taxes.

There, FTFY.

EDIT: WTF, strike-through shows on edit but not when posted?!

Financial_Guardian_Angel's picture

Same thing happens to me.

I like the strike-through, wish I could use it.

PrintPressPimpin's picture

Oakland decided to take that plan and run with it... It was great revenues and business streamed into Oakland.. Oakland was called oaksterdam for a reason!! my gf got a card and its almost comical going to the dispensaries. Theres no reason too..  You can save almost 50% by using the web..  Unfortunately it looks like obongo and co are taking in interest in harassing our 215 patients.  As a result the state and municipalities are probagbly looking at some decreased revenues from prop 215 mj compared to last year..  Part of the beauty of the 215 legislation is it allows awesome sites like budtrader and craigslist to be able to post p2p adds offering medical mj.   So far it seems legit selling clones, bud, hash etc on what is essentially the black market as long as you have a card... if you live in ca you should check it out shits so cash.. unlike the IOUs the state is going to be handing out to its workers..

casamader's picture

 No amount of reshuffling the cards or rearranging the deck chairs will refloat this barge.  All Ponzis have a shelf life.  Ca is at it's end.  Hey, maybe it's time to raise taxes.  casas prefabricadas

Cpl Hicks's picture

Think about it.

If you tax the shit out of weed you're still going to have the smugglers and the illegal growers.

I know I won't shut down my distribution network.

FrankDrakman's picture

If you tax the shit out of weed you're still going to have the smugglers and the illegal growers.

Oh, please. You could use the same argument for booze, but where are all the illegal distillers? Oh, right..

The gov't just sets the initial price low relative to today's market to eliminate the windfall profits, meanwhile jacking up sentences and fines for black market sales. Once the dealers have virtually disappeared, gov't slowly ratchets up the price.

We saw the same thing here in Canada for a while with smokes. The gov't taxed them so much, black market smokes started appearing (supplied by Indians - er, aboriginal Canadians - who aren't subject to our federal duties), sold out of the backs of vans or under the counter. A few well publicized $10,000 fines later, the black market smokes virtually vanished. When your profit is only $5 on 200 smokes, why bother taking the chance?

StychoKiller's picture

Pretty sure that Illinois will be happy to lend them some scratch...:>D

Matt's picture

Or Hong Kong / Taiwan Chinese: just adapt the municipal plan to State level, buy $100,000 in State bonds, get a green card.

Van Halen's picture

What California needs is a (now estimated to be $100 billion) high-speed choo-choo!

Poetic injustice's picture

Hey, if you get paid every time you ask for more money, who would refuse to do it again and again?
I mean, it's not like there would be austerity measures and restructuring required.

I Got Worms's picture

The smuggest, most pretentious motherfucker I know lives in San Francisco - I would love to hear reports of him having to take a crap in a 5 gallon bucket and lug it around the Presidio when his municipal water gets shut off.