A Study in Financial Insanity
“Insanity: Doing the same thing over and over again, expecting different results” – Albert Einstein
As I live through the California Budget Crisis I’m astounded by how every news article I read or I see seemed to be like a broken record repeating itself over and over. The story has been the same for the last couple years:
- Revenue less than expected
- Deficits rise and budget crisis begins
- Legislators unable to make any real changes and instead use false projections and accounting gimmicks to create false sense of security
- Reality hits – Revenue less than expected
- Back to step one
That was pretty much my interpretation of the last several years here in California. Then I see this article in the San Francisco Chronicle with a complete timeline of the budget crisis. As I read I was blown away by how crazy the situation has been and it proves my point that California has been stuck in a Groundhog Day type loop when it comes to our fiscal situation. Since 2008 there have been at least 4 budget shortfalls and The Legislative Analyst’s Office projects that California will have a $25.4 billion deficit through June 2012! Changes have to be made. The government needs to learn how to live within its means just like everybody else. What astounds me even more is that in California the people have re-elected all the same politicians that got us into this problem in the first place. This reminds me of another Einstein quote – “We can’t solve problems by using the same kind of thinking we used when we created them.” The solution to California’s problems will require radical new thinking and new outlooks. California needs to cut spending, needs to cut services, and it needs do a 180 on its regulatory red-tape nightmare and become more business friendly and help to promote growth in the economy. I hope these kinds of changes can be made soon. California needs help!
Shown below is the entire timeline, so far, of the California Budget Crisis:
2008
Jan. 11, 2008: Gov. Arnold Schwarzenegger declares a fiscal emergency, saying the state faces a $14.5 billion deficit in its general fund through June 2009. The state, at this time, has a budget of $102.9 billion, an all-time high.
Feb. 16, 2008: The governor and the Legislature erase $7 billion of the deficit through spending cuts, borrowing and delaying payments.
Feb. 21, 2008: The state’s deficit grows to $9 billion through June 2009 due to a drop in revenue.
May 15, 2008: The deficit grows to $17.2 billion due to declining revenue.
Sept. 23, 2008: After an 85-day delay, the governor and the Legislature enact a $90.9 billion budget that closes the deficit.
Oct. 9, 2008: Revenue continues to drop. A $3 billion deficit emerges.
Nov. 12, 2008: The Legislative Analyst’s Office projects that California’s revenues will continue falling and the state will face a deficit of $27.8 billion by June 2010 unless state officials take measures to cut spending and/or raise taxes.
Dec. 2 2008: The governor declares a second fiscal emergency and calls a special session of the Legislature to deal with the deficit.
Dec. 10, 2008: Revenue continues dropping. Schwarzenegger says the deficit will be an astonishing $42 billion by June 2010 unless legislators agree on solutions.
2009
Feb. 19, 2009: A budget deal is reached and Schwarzenegger signs a new $86.4 billion spending plan that bridges the $42 billion gap through June 2010. But the plan relies on $6 billion worth of adjustments that require voter approval in a May 19 special election.
March 14, 2009: Declining revenue creates a new $8 billion shortfall.
May 15, 2009: Schwarzenegger says the state’s deficit could grow to $21.3 billion through June 2010 if voters reject his budget-related ballot measures on May 19, which they do.
May 22, 2009: The deficit is projected at $24.3 billion through June 2010.
June 30, 2009: The state Legislature misses a midnight deadline to erase the deficit by the end of the 2008-09 fiscal year.
July 1, 2009: The deficit grows to $26.3 billion due to lost savings in the fiscal year that ended a day earlier. Schwarzenegger declares a third fiscal emergency.
July 2, 2009: State Controller John Chiang begins issuing IOUs to prevent the state from running out of cash by July 28. It is the second time the state has issued IOUs since the Great Depression.
July 24, 2009: Lawmakers approve budget revisions to eliminate a $23 billion deficit, including about $15 billion in cuts to education, health and human services and $8 billion in accounting maneuvers and borrowing. The deficit number was reduced from previous estimates.
Sept. 3, 2009: Chiang halts IOUs. California issued $2.6 billion worth of IOUs in the two months they were needed.
Nov. 18, 2009: The Legislative Analyst’s Office projects that California will face a $20.7 billion deficit through June 2011. The problem stems from a $6.3 billion hole in the current year, plus spending cuts that never happened, court rulings blocking some cuts and other unrealistic assumptions. The LAO tells the governor and the Legislature they should begin work on the problem immediately.
2010
Jan. 8, 2010: Schwarzenegger calls a fiscal emergency to force the Legislature into a special session to deal with the deficit.
Feb. 22, 2010: The Legislature trims $2.8 billion from current year spending, but those trims include fund shifts and other solutions. Schwarzenegger had pushed lawmakers to cut current spending by $8.9 billion.
Mar. 11, 2010: The special session ends with only a few hundred million dollars in solutions to the $20 billion deficit. Schwarzenegger vetoes about $2.2 billion worth of solutions lawmakers had passed, claiming they are “not real.”
July 1, 2010: The fiscal year begins without a spending plan for California as lawmakers are unable to agree on how to deal with the crisis. The state stops payments to vendors, some employees and some schools and local governments.
Oct. 8, 2010: Lawmakers and the governor enact an $86.5 billion spending plan for California, a record-breaking 100 days after the beginning of the fiscal year.
Nov. 10, 2010: The Legislative Analyst’s Office projects that California will have a $25.4 billion deficit through June 2012. The deficit includes a $6 billion hole in the budget approved in October. Much of the current-year problem can be traced to the unrealistic assumptions about federal assistance, along with overestimates of the value of cuts made to areas like prison inmate health care.
Nov. 11, 2010: Schwarzenegger says he will declare yet another fiscal emergency and says he will call another special session of the Legislature on Dec. 6, when a new Legislature is sworn into office.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/16/BAE11GCCV2.DTL#ixzz15aLAP1nS
About Peter Serrano