Inquiring minds are asking “What the Hell is California’s budget deficit?” That’s a good question so let’s see if we can answer it.

On Thursday in California is a Complete Basket Case; Treasurer Requests Tarp Funds; LA Mayor Declares Emergency I noted the following:

California Treasurer Bill Lockyer estimated that California’s cash flow shortfall in fiscal 2009-2010 will be more than $13 billion.

Governor Schwarzenegger has sent a letter asking the feds to reconsider, noting the cuts were taken in response to “an unprecedented fiscal crisis.” Even now the state faces an estimated cash-flow problem of some $17 billion by July.

Today I see California ordering layoffs to cover $15.4B deficit.

California Gov. Arnold Schwarzenegger says thousands of state employees must be laid off and billions of dollars must be slashed from the budget to deal with the state’s latest budget deficit.

Schwarzenegger said Thursday he has no choice but to order layoffs and cut spending, and added that more cuts may be needed within days.

The state approved billions in budget cuts and revenue increases earlier this year but they were not enough to keep up with a sharp drop in tax revenue as the recession batters the state’s economy.

California still faces a deficit of $15.4 billion in the fiscal year that starts July 1. That will grow to $21.3 billion if voters reject budget-related measures during a special election next week.

Let’s Do The math

According to Schwarzenegger, California faces a deficit of $15.4 billion (growing to $21.3 billion if voters reject the propositions). Also according to Schwarzenegger, California faces a $17 billion shortfall by July (with assumptions unknown as to the propositions).

If you prefer, Treasurer Bill Lockyer estimates the cash flow shortfall in fiscal 2009-2010 will be more than $13 billion.

Note that propositions 1A through 1F are supposed to raise $16 billion. However, it’s important to remember that the $16 billion supposedly raised by the propositions will be spread over 4 years to miraculously end at that point in time as if every California problem will be cured.

How much of this is front loaded is anyone’s guess. If you can untangle that mess, please be my guest.

I have been tracking California for quite some time and this is how I look at the situation: California is sinking further into the hole at a rate of $2 billion per month. I see no end in sight to the carnage. Thus, if California passes the propositions raising $16 billion, it will need another $24 billion (minimum) a year from now.

The solution is not more taxes, the solution is more spending cuts. If you vote for these propositions you are nuts. Schwarzenegger’s layoffs are cleverly timed to persuade voters to increase taxes. Don’t fall for it.

Addendum:

“JL” just pinged me with an interesting rant…

I had a big argument with a state employee about how broke the state is. The system is so self-perpetuating that they actually go on rants about taxing the rich to pay themselves. But, in reality, the state went on a 4 day furlough and no one gave a damn.

Do I care if the zoning departments shut down 1-2 days a week? Or the Dog Pound? Or the useless city governances? The DMV? Redundant Sheriff departments? Empty buses?

I said,”You can’t tax your way out of a depression.”
His response,”I disagree.”

He wanted to tax the rich at 75% He said the shortfall would be plugged by getting the car registration tax back (that was already voted in anyway and covers 8 billion a year only.)

People don’t understand in California. You will pay a lot more and get a lot less. To make up for the nationwide shortfall, Obama has instigated class warfare and an attitude of entitlement.

The public deserves it-they have voted bond after bond after bond.

What we get for our high taxes are record murder rates in Oakland, potholes, corrupt police, union domination and mismanagement.

That’s one point of view and I thought interesting enough to share.

Mike “Mish” Shedlock
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