California Faces $42 Billion Shortfall

(CBS)  The shine is off the Golden State. The bruising national recession, plus a political stalemate in Sacramento have left California with a whopping $42 billion budget shortfall.

Gov. Arnold Schwarzenegger has called it a fiscal emergency.

"Our economy is crying out for relief," he said. "We are running out of cash by February."

The country's biggest state soon won't have money to pay its bills - things like highway maintenance - or fund its schools or other critical services.

Californians expecting a state tax refund have been told they might get IOUs instead. State workers may be forced on unpaid furloughs, effectively cutting their pay by 10 percent.

"Ten percent is somebody's car payment, or their gas bill," said state employee Crystal Johnson. "Please stop picking on us. We do your work and we're good employees."

California may be facing the worst budget crisis, but it's not alone. Thirty-seven other states face gaping budget shortfalls this year. In Iowa, schools are taking a hit. In Kentucky, library hours have been cut. The governor of Minnesota says cuts in state services are "inevitable" to close a $5 billion state deficit.

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See a map showing the extent of budget shortfalls in every U.S. state.

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All 50 states are required to balance their budgets, but California is one of only three requiring a two-thirds majority in the legislature to approve any tax increase. Republicans in the legislature have sworn not to raise taxes. Democrats say the problem is too big to solve with budget cuts alone.

It all should sound familiar to Schwarzenegger. He swept into office on a wave of voter discontent when his predecessor, democrat Gray Davis, failed to pass a budget. Schwarzenegger promised to fix the political impasse and cut taxes, especially the much-loathed vehicle tax, which he bid "Hasta la vista, baby," at a jubilant public ceremony.

Five years later, the deficit has mushroomed and Schwarzenegger now says new taxes are necessary - maybe even that despised car tax.

"This is a critical time in California's history," Schwarzenegger said recently. And on that, all sides can agree.

My wife and I lived in California for several years. We are both professionals (engineers, actually) and made quite good money. However, when we left, we were paying well over $1000/month in state income taxes and $8000/year in property taxes. For this, we had a small house in the bay area. We sold this house two years ago (thankfully, before the crash) and moved to Texas. We pay no income taxes, have a much nicer home, and enjoy a much cheaper cost of living (low gasoline, food prices, etc.).

The fact of the matter is that the middle class in California is getting squeezed. The state, every year is in a fiscal emergency and every year it just squeezes a little harder. It isn''t my problem to fund every liberal do-gooder program, to solve global warming, and make life fair. I just want to get by, pay my bills, and put my kids through college. That is way easier to do in Texas. So, the middle and upper middle class is being incentized to leave California.

Who is John Galt?

[igotitdidu]

I doubt if public assistance was the cause of any of this but since you have to blame, let''s blame it on those who receive public assistance. Some of you would never take the blame for anything because if you''re white your right. What about the housing market in Calif, a big bubble burst, talk about the governor being an actor first not a politician, do you really think he knew what the hell he was doing? He''s the Terminator and he is doing a good job of terminating CA. The people of CA voted for him and you got what you wanted- a republican governor who has brought CA to it knees. The blame can only be placed on the shoulders of those who run the state, not the people in it.

[bloggirrl]

This whole time I was beginning to think that I was the only one thinking that California is turning into one giant waste of land.

I mean, how can I be earning an income of 86,000 a year, get married, have two children and by the time they are preschool aged and I am ready to go back to work, not only are there NO jobs here in SoCal, but I can''t even get one paying minimum wage and let''s not even bring up the fact that more than half of the jobs that are listed are REQUIRING that the applicant be bilingual English/Spanish. What the hell is that?

Can you please tell me why everyone here shouldn''t at the least learn to speak English to be a citizen?
My point, everyone has fought so hard for minority rights and no discrimination for the Spanish speaking, well shouldn''t we have the same rights? Why can I not get a job because I only speak English? Isn''t that the same thing? Oh, and by the way do you know how much I paid in taxes to California as a single woman making 86,000.00 a year. But now when I need work I can''t get any until I become bilingual.

Trust me, the first chance I see, or job I find that is as far away from California as I can get, I will be on the first plane out of here. How does Arnold say it "Hasta la vista, baby".

[brianp55]

No mas free medical care for illegals.

[perk235]

After a year or so of this, there will be nothing to redistribute, so we will all be broke.
Hurray, hurray, hurray!!!
Posted by Platteman at 09:19 PM : Jan 04, 2009
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Too late, we''re already broke before Obama can take the oath.

Over $60 TRILLION in deregulated derivatives, much less over $8 TRILLION borrowed for bailouts that included million dollar bonuses to management.

[lucasnico]

What does any state in the US expect when they continue to hand out public assistance like candy, as if it''''s anyone''''s RIGHT in this country to be taken care of contributing little back to society. They pay little in taxes to their states and then the states wonder why they are broke. Hello???

Posted by lisarzep

where are your facts?? come on, state them.

[perk235]

Remember, as California goes, so goes the rest of the nation, eventually. I think we should withhold the visceral remarks until we see how our own states fare in the next 2 years or more.

The $8.5 TRILLION used so far should shore up individual bank accounts and states/municipal budgets instead of private institutions. Did you hear how they don''t have a clue on how the banks are using the billions of bailout money?

Top ten states for unemployment: MICHIGAN (9.6%), RHODE ISLAND (9.3%), CALIFORNIA (8.4%), SOUTH CAROLINA (8.4%), OREGON (8.1%, DISTRICT OF COLUMBIA (8%), NEVADA (8%), NORTH CAROLINA (7.9%), GEORGIA (7.5%), ALASKA (7.3%).

[inhaled_not]

LET CALIFORNIA FAIL!!!!

[alanw1077]

Yeah. We''re out of money in CA. And that is why we approved the billion-dollar bullet train bill 2 months ago, right? Gotta have that bullet train!!!
California liberals, all idiots who think money grows on avocado trees and grapevines.

[payasyougo]

Most companies in the financial position that California are in would lay of at least 10% across the board.

I''m sure California, like any other state (read: self serving entity) will demand tax increases must pass or libraries will close, garbage collection will be halted and old ladies will be thrown out on the streets.

At what point will the people get back control of their government (that would be a government that does the bidding of the people instead of what the government wants)?