California To Run Out Of Cash In One Month, Controller Warns
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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* bullish *
Again? Didn't they run out of cash 8 times before?
LOL.
It's almost like this is going to keep happening over and over and over again.
Ground Hogs Day?
http://www.zootpatrol.com/wp-content/uploads/2011/02/ground1.jpg
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.
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
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!
Or they could just borrow it from MF Global... oh wait...
Too soon?
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.
I've already seen this movie.. Everything will be just fine.. Until it isn't.. :)
Let California for its own country. Adios.
If that happened there would be an instant Civil War between NorCal and SoCal.
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.
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.
I'm just glad California has the Democrat Governor Jerry Brown to solve all their problems for them.
You most definitely get the Govt you deserve, especially if You're California!
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!!!
Too late.
California State Motto: At least we're not Illinois.
Must have lifted that from Illinois: At least we're not California.
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:
"WELCOME TO LOS ANGELES. NOW GO HOME." and WELCOME TO CALIFORNIA. NOW GO HOME"
I'm thinking about producing some and re-introducing them. Think I'll be called a racist?
Forget about the stickers- with a name like 'beachdude' you've got to be a recist.
How can you be so insensitive?
probably....and your tires will be slashed.
...and the women taken.... Gov. Arnie was right. He saw it comin'...
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!"
Dang! When Sasquatch deserts ya, you're close to rock-bottom! :>D
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.
Chicago says...
With the G8 and NATO conferences this summer, and the increase in fines, speed cameras and dog registrations we will cover Illinois.....
BTW-Big state; lots of electoral votes no problem.
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.
UIC = He, can't do a damn thing. It's OUR money. OUR money.
Technically it's the Fed's money. It's just our FUTURE being tossed down the drain.
Dont forget the Cash for Bastards & Anchors for Aliens federal transfers to CA & IL. That's a lot of spending.
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.
Better yet, Cali could hired MF globals accountants. They can make all the debt vaporize.
Duplicate!
only one way to a budget surplus in CA - legalize weed, tax the shit out of it
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?!
Same thing happens to me.
I like the strike-through, wish I could use it.
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..
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
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.
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?
http://dsc.discovery.com/tv/moonshiners/
Cha-Chiang.
Pretty sure that Illinois will be happy to lend them some scratch...:>D
Or Hong Kong / Taiwan Chinese: just adapt the municipal plan to State level, buy $100,000 in State bonds, get a green card.
What California needs is a (now estimated to be $100 billion) high-speed choo-choo!
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.
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.
i first thought you were talking about Nancy "the pig" Piglosi", no? fuck californicate!
When I get to the bottom I go back to the top of the slide
Where I stop and I turn and I go for a ride
Till I get to the bottom and I see you again.
[...]
Look out helter skelter
She's coming down fast.
Yes she is.
Yes she is
The one-time theme song of Charlie and the Family.
Manson is probably ROTFLHAO!
Thats because history is merely repeating itself.
Nothing New, Under the Sun...
Just wait until the federal government actually cuts their spending and delivers less tax revenue to California. Then it will happen all over again ... a few more times.
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." As Californicate goes so goes the US.
Today the word from the CBO is that FY2012 and FY2013 US GDP will be lower than expected, and much lower than the 5% Obummer predicted in his deficit reduction efforts/economic growth forecasts for future FY's. FY2013 GDP is expected to be 1%, due to implementation of Obamacare. We are screwed.
The RAN's needed as a bridge will probably yield approx 1% .......... reflecting the huge appetite for fixed income from a quality (lol) source
Memo to Chaing: 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. Can't wait to see how you protect Fort Hollywood
I was wondering why PCK was at 52 week highs today. Because it's opposite day, duh!
Pimco's so smart they have none of the crappy issues, they figured out a way to hedge against everything
Indeed. Panic for nothing. As ever.
Watch out everyone there is a speed bump here...
@looking...clearly you are not familiar with that whole exponential growth thingee, where it looks like nothing is happening, until it actually happens. many extinct civilizations have followed your logic....... you should check out chris martensons fenway park analogy...you will really like the part where fenway park is 93 percent empty after 45 minutes of doubling drops of water from an eyedropper every minute, yet at the 49th minute, the ENTIRE PARK IS FILLED WITH WATER. keep sitting there Lookingwithamazement, keep sitting there...........
That's the "physics" scenaro with no other people in the park. With real people in the park you have to consider what they will do and plan to leave before it's too late to get out due to others trying to get out block the paths to the exits.
That's when (or before) the first puddle shows up in the field.
Consider that at 49 minutes - 1 minute the park is already half full, -2 minutes 1/4 full, -3 minutes 1/8 full...
Where are we in this -- should you be out already?
Where's the exit?
The big problem occurred about a month ago. The state's autotrigger cuts activated when revenue came in low. They were required to chop $1 billion from MediCal, by law (it was in the budget agreement of July).
The state did the chop as required by law. MediCal patients sued to prevent the chop.
AND THEY WON. About 700 million dollars.
The court forced California to spend that money. The ruling was that the chop would decrease MediCal care levels below Federal requirements.
That money doesn't exist. The state is appealing the ruling, but that was the opening shot of the war between judges and mathematics, and that ruling is presently in force.
THAT is why they are coming up short today.
And here we have the end of socialism. Courts have no business deciding budget matters like this, and should not be involved. They will ALWAYS side with the "injured" party and not the taxpayer.
I would called the Judge and told him to send me 700 million or drop dead. His order is unforceable.
Nope. The judge can command that Federal guidelines be complied with.
The correct response is not to defy a judge's order.
It is to defund any court efforts that hear suits against the state of Calif.
Well, it looks like stacking the courts with liberal judges will come back to bite you in the butt. Looks like Arthur left just in time.
End the PROP 13 nightmare and CA. would bridge the budget gap. Can't have granny living in her $2mm San Jose mansion paying a thousand a year in taxes while everyone else pays 1-1.5%. Brown was supposed to fix this and the unions, but just like Obama, hasn't touched the politically charged issues.
I guess you bought at the top!
Not every granny is living in an overpriced McMansions in fact I would say most are not. But, that sure does help with your lame argument about prop 13.
Not just Granny. Remember there is a parent child reassesment exclusion alah Prop 58 of primary residence plus a million of assessed value by gift or bequest. So Granny's spoiled kids can just move in and pay the same lowball taxes growing glacially capped by Prop 13.
And the plus a million means that if Granny had the foresight to own any apartment buildings or income producing property then kiddies get that without triggering a reassesment so long as the net value is under a million.
Prop 13 was well intentioned to help keep grannie from being reassesed ( taxed) out of her home. But what it and its progeny have turned into is a total distortion of the market. Add in a step up in basis and a $5 million applicable exclusion amount (from estate / gift taxes)[ $10 million per couple] and well it pays to be a California native with parents or grandparents who have been there forever and happen to own real estate. Totally farked up.
Someday soon maybe California will do something sensible like bifurcate primary residence from income producing property with regards to Prop 13 and Prop 58.
The most absurd result of Prop 13 is Disneyland v. Universal Studios. I think Disneyland per acre is assessed at 20X the value per square foot as Universal Studios because of change of control/ ownership rules. How'd you like to compete in the same industry with a radically different carryign cost structure?
Actually, I once sold at the top. But that has nothing to do with Prop 13. If you owned property and paid property taxes you would understand. Why should one person in house A that bought 20 years ago and uses the same services as everyone else pay less than someone that bought five years ago and uses the same services. There is no reason for the disparity. Talk to your dad, he can fill you in.
Yeah, that's the answer, hate on grandma, not the spendaholic law makers who booted up YOUR taxes for their pensions.
They know the scam. Obama wants to be re-elected. He won't get Cali if it spins down the crapper. ergo, somehow, someway, everybody must bail out Cali. Its like Germany being forced to bail out Greece because there is a super-meister over the whole thing with a media ready to perform fellatio at his whim.
Meredith Whitney call.... was a lil premature
I wonder if the local restaurants will start accepting IOUs.
Or maybe the retired state workers can kick in some of their $200k pensions to help out. BWAHAHAAA, that was a joke. The part where they would help out.
Technically if they are accepting paper money, they are already accepting IOUs
Ohhh Rothschild spreadin' the wisdom FTMFW
it's amazing isn't it... the most inept and incompetent career in global history, the political class, and we vote them in as our 'leaders'
God built humans with a marble short
absolutely bloody mindless we continue this rotting sham called Govt
No, I never voted a one of them as my "leader" and I don't subscribe to the propaganda lingo. They are servants, but brainwashed you call them leaders.
Have you lost contact with reality?
Or perhaps your job is killing people at our master's whim, so you doing a little self-justification?
I'm just asking because I don't see how you could make such an absurd comment perhaps I missed the sarcasm I'm not so sharp.
Does anyone perceive that the top is in a week or so in and after that it's a free fall starting in march?
the muni market burst could be that long neglected last straw/ black swan. Just because everyone think that they will get the money they won't... of course, it will be not the only problem in the world, just the impulse. Iran, Russia, China, israel, the EU, the US, Japan. Who doesn't have a BIG problem now....
Yeah, always another 30 days away...
It's a darn good thing the US equity market has absolutely zero forward looking vision. I think it trades exactly 30 seconds in front of its last step.
It trades based on headline reading algorithms. There is nothing in the algorithm telling the computer that California is relevant to the HFT battle with the other guy's computer.
Sell all the illegal US trained mexican workers back to Mexico to raise money!
$2.6 Billion revenue shortfall, so we need to borrow $3.3 Billion .... hmm.
$700 million kickback?
Burn Baby, burn....this is what Socialism produces.
Heck, anybody can run short of cash from time to time..
At least they have been fiscally responsible up to this point.
And a month is FOREVER in the mind of a comptroller.