As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Sunday, January 25, 2009


The accounting gimmicks and clever tricks have reached their end. Sacramento is out of money.

(John) Chiang, whose office writes the state's checks, says California is about out of stopgap tricks to pay its bills and keep all its programs running.

The controller says California is down to Plan D on its checklist of paying bills. Its cash reserves are piddling; the special funds it borrows from are tapped out, and no one in the private sector is going to lend it any cash at a reasonable interest rate.

That leaves what in state government circles are called "payment deferrals" and what in real life is called "stiffing your creditors."

In this case the creditors include income taxpayers expecting refunds, college students waiting on state aid, counties that operate public assistance programs, and companies that sell goods and services to state agencies.

Chiang has said he won't write $3.7 billion worth of checks for those and other state programs if legislators and the governor haven't reached a deal by next Sunday to close the budget gap.

The overarching problem here is a tax system that is too closely aligned to the boom and bust cycles of the national economy. That is protected by the 2/3 rule. And the result is a state that lurches from one crisis to the next, seemingly without end.

Well, the end is pretty much near. The state may not declare bankruptcy, but that will be functionally the case. And while IOUs may be a couple months down the road, the payment deferrals are going to put a lot more people out of work. The counties and various agencies aren't in the financial position to float by until some revenue floods in.

Of course the fact that IOUs still may be a few months away is of limited consolation to those who will be out of luck if Chiang pulls the no-payment trigger next week.

"For the first time in my career, there are counties facing the reality of just not being able to front the state the money to keep these programs operating," said Frank Mecca, executive director of the County Welfare Directors Association.

Mecca, who has been in the human services field for 20 years, said counties are facing a double whammy: Revenue is withering while needs are blossoming.

This is at a time when we're seeing jobless rates as high as 15% in some counties, and over 10% in 31 of the 58 counties in the state.

That stimulus spending from the federal government, perhaps $21.5 billion over two years, can't come fast enough. But if there's not a solution in the next week, it may not matter. The damage will be done and the pain will spiral out of control.

Labels: , , , , ,