Sunday, November 18, 2012

Cancel the kitchen scraps for Republicans

Great article on what lies ahead for CA now that they've voted tax hikes.

California’s real deficit

California’s sham “balanced” 2012-13 budget already was upside-down within weeks of passage. The state had to borrow billions of dollars almost immediately, adding to the skyrocketing debt — a debt that is always understated.

Last May, I wrote about the state’s real budget deficit totals, noting how state Controller John Chiang parsed words by only detailing the status of the general fund.

“The state ended last fiscal year with a cash deficit of $8.2 billion,” the controller reported. “The combined current-year cash deficit stands at $21.5 billion. Those deficits are being covered with $15.1 billion of internal borrowing (temporary loans from special funds) and $6.4 billion of external borrowing.”

But the controller neglected to say that California owes the federal government nearly $10 billion, money that was borrowed to keep joblessness benefits coming to the state’s legions of unemployed; and that it owes $313 million to the state disability insurance trust fund after taking the money to pay for the debt service on the federal loans. Chiang also neglected to include the billions in health care obligations, or the public pension obligations of CalSTRS and CalPERS, the state’s teacher pension and state worker employee pension systems. The pension funds are covered by internal borrowing from special state funds, and more than $6 billion in “external borrowing,” money the state has to pay hefty interest on.

Bottom line: California’s deficit is really more than $35 billion, and that number does not include the more than $500 billion in unfunded pension liabilities. So Brown’s Prop. 30 tax increase, which is estimated to only raise $6 billion, will not go to schools as advertised, but will instead be fed right into the current deficit trough.

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