California 50 Days From Financial Meltdown

California State Controller John Chiang says California 50 Days From Financial Meltdown.

State Controller John Chiang today released his monthly report detailing California’s cash balance, receipts and disbursements in May and through the first 11 months of the fiscal year. In May, revenue was $827 million below the latest projections found in the Governor’s May Budget Revision.

"Without immediate solutions from the Governor and Legislature, we are less than 50 days away from a meltdown of State government.

This presents a terrible threat to California’s economy and to the State’s delivery of basic public services,” said Chiang. “A truly balanced budget is the only responsible way out of the worst cash crisis since the Great depression.”

Personal income taxes were $475 million below (-23.0%) estimates in the May Revision. Corporate taxes were down $84.4 million (-25.8%), and sales taxes fell by $109 million (-3.3%).

Statement of General Fund Cash Receipts and Disbursements

Inquiring minds are reading the Statement of General Fund Cash Receipts and Disbursements State Finances in May 2009.

The State’s revenues continued to deteriorate in May. Total General Fund revenues were down $827 million (-13.5%) from estimates in the Governor’s proposed 2009-10 May Budget Revision.

Personal income taxes were $475 million below the May Revision estimate (-23.0%), corporate taxes were down $84.4 million (-25.8%), and sales taxes lagged by $109
million (-3.3%).

Compared to the 2009-10 Budget, General Fund revenue in May was $1.75 billion below (-24.8%) the estimate for the month. Corporate taxes came in $1.16 billion lower (-82.6%) than estimated, and sales and use taxes lagged by $300 million (-8.7%). Personal income taxes fell short by $218 million (-12.1%).

Compared to May 2008, General Fund revenue in May 2009 was down $1.14 billion (-17.7%). The total for the three largest taxes was below 2008 levels by $1.2 billion (-19.5%). Sales taxes were $259 million lower (-7.6%) than last May, and personal income taxes were down $1.03 billion (-39.3%). Corporate taxes were $83
million above (52.1%) May 2008.

California Receipts

The Grim news goes on and on.

Democrats Propose Using Reserves To Balance Budgets

California is flat broke and losing more money each and every day. If anything, the sad situation has escalated to the downside.

Amazingly, Democrats are attempting to save programs and use "reserves" in the estimated budget to balance the budget. Please consider California Nears Financial "Meltdown" as Revs Tumble.

Schwarzenegger, a Republican, has proposed filling the state's budget gap with deep spending cuts, borrowing from local governments and by scrapping some state programs, including its welfare program.

Democrats who control the legislature are crafting a rival budget plan that includes spending cuts and saves programs Schwarzenegger has proposed eliminating. They instead would use reserves estimated in his budget to narrow the budget gap.

If pressed, California could sell revenue anticipation warrants, or RAWs, an idea floated by Schwarzenegger when he unveiled his budget plan last month. But he quickly shelved it amid opposition from lawmakers.

Borrowing from expected revenues is foolish anytime. When expectations have been as ridiculously optimistic as they have been for years, "foolish" is no longer the operative word. The operative word is "insane".

State Controller John Chiang says: “A truly balanced budget is the only responsible way out of the worst cash crisis since the Great depression.”

I agree. Now when does the California legislature get the message?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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