California -- America's first failed state?

Interesting comparison of a low-tax state, Texas - and a high tax state, California.
http://www.latimes.com/news/opinion/la-oe-voegli1-2009nov01,0,825554.story

These judgments are not based on drive-by sociology. According to a report issued earlier this year by the consulting firm McKinsey & Co., Texas students "are, on average, one to two years of learning ahead of California students of the same age," even though per-pupil expenditures on public school students are 12% higher in California. The details of the Census Bureau data show that Texas not only spends its citizens' dollars more effectively than California but emphasizes priorities that are more broadly beneficial. Per capita spending on transportation was 5.9% lower in California, and highway expenditures in particular were 9.5% lower, a discovery both plausible and infuriating to any Los Angeles commuter losing the will to live while sitting in yet another freeway traffic jam.

In what respects, then, does California "excel"? California's state and local government employees were the best compensated in America, according to the Census Bureau data for 2006. And the latest posting on the website of the California Foundation for Fiscal Responsibility shows 9,223 former civil servants and educators receiving pensions worth more than $100,000 a year from California's public retirement funds. The "dues" paid by taxpayers in order to belong to Club California purchase benefits that, increasingly, are enjoyed by the staff instead of the members.

None of this happens by accident. California's interlocking directorate of government employee unions, issue activists, careerists and campaign contributors has become increasingly aggressive and adept at using rhetoric extolling public benefits for all to deliver targeted advantages to itself. As a result, the political reality of the high-benefit/high-tax model is that its public goods are, increasingly, neither public nor good. Instead, the beneficiaries are the providers of the public services, and certain favored or connected constituencies, rather than the general population.

 

Here's another fun little snippet.

http://online.wSportsJournalists.com/article/SB125814283469047497.html
As of July 2009, California's budget shortfall was 49.3% of its general funds. States have considered drastic options to fill such gaps.

"I looked as hard as I could at how states could declare bankruptcy," said Michael Genest, director of the California Department of Finance who is stepping down at the end of the year. "I literally looked at the federal constitution to see if there was a way for states to return to territory status."

 

When you add up all the debt, it could equal half a trillion dollars.

http://www.sacbee.com/capitolandcalifornia/story/2355706.html

Lockyer's warning pertained to the state's "general obligation debt," which currently stands at $59 billion, and there are an additional $50-plus billion in general obligation bonds that have not yet been sold. The biggest chunks of debt, however, are the unfunded obligations for pensions and health care of retired public employees.

The latest annual pension report from the state controller covers 2006, when the unfunded liability was $64 billion. But since then, state and local pension funds have lost at least $150 billion on investments, so a reasonable estimate of today's unfunded liability is $200-plus billion. A state commission, meanwhile, says the state-local liability for retiree health care is about $100 billion.

No one keeps complete data on local government general obligation debt, but it appears to be roughly the same as the state's, perhaps $50 billion, plus several billion dollars in debt incurred by local redevelopment agencies.

There are tens of billions in specialized state debt, such as veteran home loan bonds, "securitization" of tobacco lawsuit proceeds, and budget deficit bonds.

The interest that must be paid on all that state and local debt is probably an additional $100 billion, so we're already talking about well over $500 billion.

Then there are the off-the-books debts incurred to paper over years of state budget deficits, such as speeding up tax collections that will have to be refunded later, postponing periodic payments to schools, making promises to schools about levels of future financing, borrowing money from special funds and taking local government funds that must be repaid later.

The state's unemployment insurance fund, meanwhile, is about $7 billion in the red, and that deficit is expected to more than double in the next year and quadruple by the end of 2011. The state has been borrowing from the federal government, but sooner or later it will have to repay the feds, probably by taxing employers.

Conservatively, then, California is probably more than $600 billion in debt. Perhaps we shouldn't sweat another $11.1 billion. Or perhaps it will be the straw that breaks our back.

 

Prediction: Florida will be right behind California.

 

Just curious (and too lazy to roll through the pages):

Poin, do you live here in California?

 

U.S. states defaulted on their debts numerous times in the pre-Civil War era. It was kind of a scam, back when we were an "emerging market." It could happen again. Governments are not going to stop providing services, because their customers won't let them.
Also Poin, you might want to take a more complete survey of economic and social indicators before favorably comparing Texas to other states. Educational outcomes, health outcomes, poverty, child poverty -- all among the worst in the country.
Running a government is easy when you don't give a shit about human suffering.

 

Of course.

 

Walk along Los Angeles that isn't bordering the ocean. It's a third world country. Schools, crime, poverty. Jobs.
You want your kid to go to Belmont High School, in the heart of downtown?

 

So just kick all the problems down the road as far as you can until it all implodes. Hey, why not?

 

We've been doing that as a country for several decades now.

 

And we'll be right where California is soon enough.

 

Not to threadjack this thing, but anybody think the GM CEO announcement was really bizarre?

Michigan/Ohio has got to be trembling in its boots - even more so - after that.