California, like most of the other states, has a bevy of problems/issues making the possibility of economic recovery look dimmer and dimmer each day.
One thing that does separate California from the rest - besides its huge economy (about the eighth largest in the world) - is the dark and expanding cloud representing “unfunded liabilities.” These are currently estimated to be somewhere between $100 billion and $650 billion-plus. In other words, that’s money the state doesn’t have yet will be obligated to pay out. (And let’s not forget - unlike the federal government, states can’t print money they don’t have.)
Most of these unfunded liabilities are (state) public employee pensions and benefits, long-promised to hundreds of thousands of retirees and their survivors. Promised by law.
So what is a state like California to do?
Calls have been going out, near and far, for the governor and legislature to cut spending. But the truth is, the huge Democratic majority - and chief executive - are beholden to so many groups benefiting from entitlement programs and what can be considered “earmarks” of sorts, that any cutting that’s being done is superficial...at best. (Governor Jerry Brown is pushing a tax increase on coming special ballot in June, which if passed will cement California’s claim as the most-taxed state in the nation. The money will help pay-down the annual debt - about $25 billion - but it won’t make a dent in the unfunded liabilities column.)
Reason has a new piece up, “Farewell, My Lovely: How public pensions killed progressive California,” which explains why all the planning, light-handed cutting and increased taxation aren’t the true solutions to the state’s fiscal woes.
If California ever has any hope of digging out of the mess it’s now in, everyone is going to have to feel the pinch...make sacrifices. Even groups the Democratic party is beholden to.
“As 72-year-old Jerry Brown enters his second governorship, he has an agenda to match that power, with visions even greater than those that haunted his two-term administration of the 1970s and ’80s: building 20,000 megawatts of renewable power, laying a new high-speed rail network that will connect the state’s major cities, forging a statewide infrastructure for alternative energy, hiring thousands of green employees,” author Tim Cavanaugh, writes at Reason. “The new governor’s environmental agenda is ambitious, untenably expensive, and indelibly popular with voters and lawmakers. Yet when Brown looks out on Democrat-controlled California, he seems less like Caesar at the Rubicon than Wojciech Jaruzelski at the Gdansk Shipyard. Brown is champion of a workers’ party with monopoly control, yet all his plans are being derailed by a labor movement nobody can harness.”
And therein lies the problem.
Especially the public employees unions.
Read the whole article here.
Bonus graphic: If you don't live in California, you can see (from the chart below) how your state's fiscal situation stacks-up against the Golden State's.