Monday, August 06, 2012

Blue State Ransacking: "The fiscal mayhem has only begun."

The perfect Democrat Utopia of California -- governed by loopy environmentalists, public sector unions and La Raza -- is melting down as we speak. One editorial board in Southern California goes so far as to call the state's economic policies "Fiscal Ransacking":

Californians fill ... special funds, which are separate from the state’s general fund, through fees dedicated to specific programs. The fee on bottled drinks, for example, goes toward the cost of recycling bottles and cans. These special funds account for a sizable share of state spending: $39.4 billion this fiscal year, compared to the $91.3 billion general fund budget.

A hidden stash of special fund money does signal a disturbing fiscal carelessness. But a report issued last week by the Department of Finance also suggests recklessness in the handling of this money. The document shows that the state’s general fund owes $4.3 billion to hundreds of special funds across state government. Four years ago, the general fund owed only $749 million to the special funds, but the borrowing snowballed as the economy melted.

So the billions in special fund borrowing the state eventually has to repay, for example, includes $40 million to the Oil Spill Response Trust Fund, $139 million to the Vehicle Inspection and Repair Fund and $350 million to the State Court Facilities Construction Fund. The state also has to repay hundreds of millions of dollars legislators have grabbed in recent years from a variety of transportation special funds...

...Since 2011, the state has borrowed $616 million from a disability insurance fund — dollars from a payroll tax on California workers — to make interest payments to the federal government. The state required a federal loan to pay unemployment benefits, because the state’s unemployment insurance fund has a $10 billion deficit. The Legislature helped create that mess in 2001 by boosting unemployment benefits without providing any way to fund the higher costs.

Borrowing to cover ongoing expenses is a pathway to insolvency, and a sign of political — if not actual — bankruptcy. Ransacking specially funded programs and hoping the economy improves is not a workable plan.

It gets worse. Much worse.

California, Illinois, New Jersey and New York are even securitizing their future tax revenue—that is, not merely borrowing with bonds that must be serviced but selling their projected tax collections to investors. So to "balance" their budgets today, they're making it far harder to correct them in the future and locking in higher tax rates. Even Greece doesn't do that.

The message of the Ravitch-Volcker report is that some large portion of the states are replicating the dysfunctions of Washington—adding to entitlements that crowd out priorities like schools and bridges, and then concealing the real danger when they're not ignoring it. State and local governments now spend $2.5 trillion, and rising. Without 49 more Scott Walkers, the fiscal mayhem has only begun.

What do California, Illinois, New Jersey and New York have in common? They've suffered for decades under craven Democrat governance.

Vote accordingly in November. It may be your last chance.

Related: Great News: ex-World Bank Official Says United States Debt Has Finally Achieved "Death Spiral" Status.

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