California Two Days From Paying Bills With IOUs?
Jun 29th, 2009 | 14 responses
Barring a miracle — I’d say a billion-to-one shot — the California legislature will not pass a budget by its constitutional deadline at midnight tomorrow forcing Gov. Arnold Schwarzenegger to pay bills by issuing IOU notes as he has vowed.
The state’s Democratic-dominated Assembly late Sunday passed a series of tax fees in an effort to balance the budget’s $24 billion shortfall knowing full well the governor will veto the bill as he did a similar measure last year.
And, the state is getting no love from its congressional delegation which is telling Sacramento to drop dead.
“Why would we bail out the state when it’s like giving drugs to a drug addict?” said Rep. Devin Nunes, a Republican who represents parts of California’s San Joaquin Valley. Asked if the federal government should be helping California with its budget crisis, Democratic Sen. Dianne Feinstein — the state’s senior senator — shot back: “Do you know what the state is getting in stimulus money? $50 billion.”
California is no penny ante state. It represents the world’s 8th largest economy. It is home to one of eight Americans. It holds the most electoral votes of any of the 50 states.
Rep. Zoe Lofgren, the chairwoman of the state’s 33-member Democratic delegation, said California’s budget quagmire is largely a result of structural process which requires any budget or tax increase pass by a two-thirds majority and as a result nothing gets done. “If we [in Congress] had to do what the California legislature does, we would never send a bill to the president of the United States,” she said. “That’s a problem. But I can’t solve that problem. . . . Ultimately the voters of California are going to have to confront what’s happening in their state and figure out what to do about it.”
The White House echoes this can’t-save-California-from-itself sentiment
A May Rasmussen poll found that 66 percent of voters nationwide opposed the federal government guaranteeing California’s loans. And 48 percent said it would be better to let California go bankrupt than to hand the state a federal bailout.
“The legislature and the governor have got to come together and make some decisions,” and then perhaps there is a way for the federal government to help, said veteran California Rep. George Miller, a Democrat and close ally of House Speaker Nancy Pelosi (D-San Francisco). “But I don’t see it now until the legislature takes the steps that they can and need to.”
The California situation amounts to a person “holding a gun to his head and saying, ‘If you don’t do something, I’ll shoot myself,’” said Alan Auerbach, an economist and public finance professor at UC Berkeley. “On the one hand, California needs help; but on the other hand, it certainly wouldn’t be unreasonable for the federal government to insist that California help itself too.”
Meanwhile, the Assembly bill passed Sunday, would balance the budget with the help of more than $2 billion in new taxes on smokers, oil companies, drivers and homeowners. State Senate leaders said they would take up the bill today.
Included in the package are a tax increase of $1.50 per pack of cigarettes, a 9.9% extraction tax on oil companies, a $15 vehicle license fee surcharge to fund state parks and a charge on homeowner insurance premiums to pay for emergency response systems.
Assembly Speaker Karen Bass (D-Los Angeles) said her caucus would push the package through to make the point that it is prepared to take action to close California’s deficit. The tax hikes account for a small share of revisions that included cuts in schools, healthcare programs and other government services as well as billions of dollars in deferrals and other accounting shifts that push state expenses into future years. “We just feel that it is very important that we act with or without [a budget] agreement,” she said.
Republicans are normally able to block tax increases despite being the minority party in both houses, because California is one of three states that require a two-thirds vote for budgets and tax hikes. Achieving that threshold requires some Republican votes.
The Democratic plan essentially swaps taxes and fees, employing an arcane loophole in state law that lets legislators pass a tax bill with a majority vote under certain conditions.
Can you imagine the outrage when state employees, vendors and bondholders are paid with IOUs?
I’m a native Californian and nothing surprises me concerning our state government. It’s a running scenario even Hollywood script writers would reject as too preposterous.
Wanna bet?
Cross posted on The Remmers Report
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14 Responses to “California Two Days From Paying Bills With IOUs?”
[...] the original post here: California Two Days From Paying Bills With IOUs? Related Posts:California budget balancerFinancing the Flipping Dream: Alt-A Mortgages and [...]
I'll give em 50 bucks for Arnold's Hummer.
[...] Barring a miracle — I’d say a billion-to-one shot — the California legislature will not pass a budget by its constitutional deadline at midnight tomorrow forcing Gov. Arnold Schwarzenegger to pay bills by issuing IOU notes as he has vowed Originally posted here: California Two Days From Paying Bills With IOUs? [...]
New York City bankrupted itself by the mid-1970s by liberal policies. Now it's about to happen in California, the Golden State with the liberal reverse Midas touch of Sacramento.
This California native has no sympathy for the state and its predicament.
No bailout by the federal government is ever in order in situations like these, but it is likely to happen. It makes me wonder if failures of blue states (CA, NY, NJ, MI, etc.) is why so much of the federal stimulus money wasn't already spent, or if this is just coincidental and the Demmie clowns in Washington were simply going to spend more money they don't have, without thinking about redirecting any stimulus money.
Maybe they should do something about that two-thirds requirement.
The supermajority requirement was established in order to at least try to restrain or retard some of the “Massachusetts Lite” excesses by Sacramento. The answer is reform and taxing as well as spending control, not making it easier to raise taxes or spend more.
California IOU…
No Sign of Deal to Close Deficit (Businessweek)
just a few days away two days away. The tenderloin might turn into a ghost town, and it might be like when Jerry Garcia died in 1995 and all the deadheads went back home and got a job
Roughly $3 bil…
Here is the problem and the solution. The Democrats are elected by the employee unions and they have given them everything they want and more. We have Hwy patrol getting 95 percent retirements and the rest 75 percent. If anyone want to reply how can any system work that raises taxes, then pay and taxes again. Here is the solution. Mandate no person getting a check from the state can get more than 50 percent in retirement and work until 62. Pay 1/3 of their medical premium. Lower class size to 25 to one. that would allow the state to retire 50 thousand teachers and 20 thousand adminstrators. Cut state pay 5 percent at 50 thousand and 40 percent for the high earners like the chancellors getting800 thousand a year. Get rid of all boards like the air resources Etc. Cut the attorney generals office by 50 percent. Build at least 25 Nuclear power plants and drill for oil where ever. Cut property taxes and sales taxes by 50 percent that would allow people to spend their own money on what they want and create maybe a few million jobs. This is the only answer ( I told you )
That damn well better start with issuing IOUs to the highest levels of elected offices in CA…or there may be a revolt like in Iran..
I'll give him $5 if his wife gives me a hummer.
Jct: There’s nothing wrong with small denomination California State IOUs if I or anyone else can pay their taxes with them. When Argentina’s government workers were faced with cuts, their unions talked 6 state governments into paying them with small-denomination state bonds which could be used to pay for state services and taxes and which everyone accepted as useful currency. Best of all, when the local currency is pegged to the Time Standard of Money (how many dollars per unskilled hour child labor) Hours earned locally can be intertraded with other timebanks globally! In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture. See my banking systems engineering analysis at http://youtube.com/kingofthepaupers
Too bad California State IOUs won’t be accepted in payment for state taxes and services like state bonds were in Argentina. Too bad California State IOUs will be denominated too big to use as local currency. Too bad Argentina people were smart enough to avoid the tent-cities catastrophe and California people are too stupid to follow their example.
California has dug itself into a hole that may soon empty out into the ocean on the other end: http://www.newsy.com/videos/california_s_new_cu…
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