The state of California

[Levett]

http://www.bloomberg.com/apps/news?pid= ... refer=home

Might this have anything to do with living beyond one's means? Bob U.

[Richard123]

Yes Bob, it has EVERYTHING to do with living beyond one's means.

Richard123

[chaz]

It might. Good post.

[richard]

A major problem for California is that for every dollar its citizens send to the federal government, they only get about $0.75 back. Being a major exporter of funds to other states is largely the cause of their budget problems, and why some other states can claim to be in good shape.

[TheEternalVortex]

Without a building, couriers will have to drive cartons of files from one judge’s house to the next before they can meet somewhere to rule, Sills said.

I think it's time they started using the "Internet". I know it's new and untested, but the benefits seem worth it, don't they?

[Kenster1]

http://online.wsj.com/article/SB1229543 ... 08_mostpop

More California Towns Face Bankruptcy

RIO VISTA, Calif. -- California may soon have more bankrupt towns on its hands.

The city of Vallejo, Calif., gained national attention earlier this year by filing for Chapter 9 bankruptcy protection. Now, two neighbors are fighting to avoid the same fate, as the state's economic crisis spreads.

Isleton and Rio Vista, small towns roughly 50 miles northeast of San Francisco, say they have begun consulting with bankruptcy lawyers as they draw up plans to deal with their mounting budget crises. The towns' leaders say they hope to avoid bankruptcy, but concede the move may eventually be their only option.

"We're strapped for cash and by the end of March or early April we may not have enough money to pay for payroll," says Hector De La Rosa, Rio Vista's city manager.

California's troubled towns can't expect much help from the state. A state board voted Wednesday to shut off $3.8 billion in financing to hundreds of infrastructure projects to preserve cash, as the nation's most populous state struggles under a budget deficit that officials say could balloon to more than $40 billion over the next two years.

"California's fiscal house is burning down," State Treasurer Bill Lockyer said in a statement.

[Valuethinker]

http://www.bloomberg.com/apps/news?pid= ... refer=home

Might this have anything to do with living beyond one's means? Bob U.

The requirement of 2/3rds majority to pass any funding bill has interesting consequences--- it's a game theory classic.

The threat to a member of the legislative is that they will be defeated in the primary, usually by a candidate further to the left (or right) in the direction of the party.

There are actually very few competitive seats in the general election.

So the minority party in California has every incentive to refuse to cooperate, in the hopes of landing the majority party in the soup. Hence, no cooperation on funding bills.

Couple that with fiscal straightjackets enforced by popular referendum: from 3 Strikes through to Proposition 13. Which cripple the state's spending and tax raising powers.

The governor is elected by a recall vote on the previous occupant, and blows a huge hole in the budget by cancelling motor vehicle license fees-- hence a big part of the current imbroglio.

The latest version of this is that the legislature will abolish a bunch of user fees, pass a 'tax neutral' budget, and then reinstate the user fees to balance the budget. This makes a nonsense of any rational democratic procedure, but it's how things are done in CA.

[Speedy]

The requirement of 2/3rds majority to pass any funding bill has interesting consequences--- it's a game theory classic.

This state constitutional requirement was put in place decades ago with the intent of controlling spending. Analysts, much smarter than I, argue that this requirement has become one of the biggest problems because in order to pass a budget, many legislators must be "bought off" with pork as there is no other way to ever get a 2/3 vote on a budget.

Couple that with the huge export of tax dollars to other states via the federal income tax, Prop 13 which has severely limited property taxes for both homeowners and corporations, and there is a real problem. Not to mention the huge commitments by state and local agencies to public pension plans.

Anyway, it is not easy to pass a constitutional amendment (especially if you don't try), reverse Prop 13 (especially if you don't try) or contain the public pension load on the budget(especially if you don't try).

Of course, the downturn in the economy is not the governor's fault, but he has had some time to tackle the fundamental problems of the state budget, and has not really tried as far as I can tell. Not sure he's any worse than the last governor, but he had a stronger position from which to try to do something and really hasn't accomplished much in my view.

Oh well, California has been a boom and bust state for my whole life so I guess I shouldn't expect it to change just because I'm retired now.

Regards,
Bill

[bengt]

A major problem for California is that for every dollar its citizens send to the federal government, they only get about $0.75 back.

People who earn more, pay more taxes, and salaries in California are higher than in many other places, so that's why they send more money to uncle Sam. That is certainly not a reason for the mess in California.

The reason for the mess is that politicians spend too much taxpayer's money. Basically, the three main reasons are:
- Public parasites (aka unions, public officials) are too powerful resulting in excessive pensions & benefits, see Detroit/UAW),
- the insistence that illegals immigrants must be supported at any cost (in hospitals, prisons, education, welfare, housing).
- political luxury spending programs (billions for stem cell "research" , train lines nobody uses, boutique gasoline etc)

Solving the budget problem is technically easy but politically impossible so the massive disaster/bankruptcy is looming. Federal Govt will eventually bail out CA (perhaps because of some convenient excuse, such as minor earthquake).

[richard]

A major problem for California is that for every dollar its citizens send to the federal government, they only get about $0.75 back.

People who earn more, pay more taxes, and salaries in California are higher than in many other places, so that's why they send more money to uncle Sam. That is certainly not a reason for the mess in California.

The problem is not that they send money to the feds. The problem is that they don't get enough back.

If other states were not leeching off California, Cal wouldn't have budget problems.

[chaz]

Without a building, couriers will have to drive cartons of files from one judge’s house to the next before they can meet somewhere to rule, Sills said.

I think it's time they started using the "Internet". I know it's new and untested, but the benefits seem worth it, don't they?

Some judges have tried experimenting with paperless files, but it never seemed to catch on. Part of the problem is lack of security and lack of tech support and lack of equipment. Yet lawyers are bringing their own laptops into trial courts. Maybe it will catch on in the next century.

[Paladin]

A major problem for California is that for every dollar its citizens send to the federal government, they only get about $0.75 back.

People who earn more, pay more taxes, and salaries in California are higher than in many other places, so that's why they send more money to uncle Sam. That is certainly not a reason for the mess in California.

You forgot one thing. Everything costs more in CA from toothpaste to gasoline to housing. Hence the higher salaries.

[cosimdm]

Having lived in California for 30+ years, here is my take on the problem. The legislature is responsible to no one because of the way the state redistricts its legislative districts. Since this benefits the incumbents , who are Democrats, there is no check on state spending. For example, a illegal immigrant can cross the border and come to California, go directly to a hospital, and get free organ transplants, dialysis, cosmetic mole removals, etc. and many elective procedures done which are classified as "emergencies". Isn't everything an emergency to someone? The docs who work in county or state clinics want to see everything done as it means more money and jobs for them. ( I have first hand knowledge of this)
The state and county employees unions have better pay and benefits than many private workers. In addition, they can't be fired if they make a mistake, or if they commit malfeasance on the job.: (see all LA Times articles about the scandals at the LA County ML King Hospital.). Once when I was practicing law I went into a county office in Santa Clara County to look up some information. I was there for 25 minutes, during which time the front desk receptionist talked on the phone the whole time to a girlfriend. It was not her break. She was relieved to start her break as I was leaving.
Another time our we did not renew our dog's license and informed the County of Santa Clara in writing he had died. Three years later, we came home from a two week vacation to find a series of threatening letters at our door from the county dog officers, saying if we did not buy a license for our dog, we would be prosecuted to the full extent of the law. I had to appeal to our County Supervisor directly to get them to stop.
In a recent conversation with the head of a school district, the gentleman told me it took at least $100,000 and a year of his effort to get rid of a bad teacher.
It is employees like these that waste the state's money, but since they are all protected by unions, nothing can be done.

[Paladin]

Having lived in California for 30+ years, here is my take on the problem. The legislature is responsible to no one because of the way the state redistricts its legislative districts. Since this benefits the incumbents , who are Democrats, there is no check on state spending. For example, a illegal immigrant can cross the border and come to California, go directly to a hospital, and get free organ transplants, dialysis, cosmetic mole removals, etc. and many elective procedures done which are classified as "emergencies". Isn't everything an emergency to someone? The docs who work in county or state clinics want to see everything done as it means more money and jobs for them. ( I have first hand knowledge of this)
The state and county employees unions have better pay and benefits than many private workers. In addition, they can't be fired if they make a mistake, or if they commit malfeasance on the job.: (see all LA Times articles about the scandals at the LA County ML King Hospital.). Once when I was practicing law I went into a county office in Santa Clara County to look up some information. I was there for 25 minutes, during which time the front desk receptionist talked on the phone the whole time to a girlfriend. It was not her break. She was relieved to start her break as I was leaving.
Another time our we did not renew our dog's license and informed the County of Santa Clara in writing he had died. Three years later, we came home from a two week vacation to find a series of threatening letters at our door from the county dog officers, saying if we did not buy a license for our dog, we would be prosecuted to the full extent of the law. I had to appeal to our County Supervisor directly to get them to stop.
In a recent conversation with the head of a school district, the gentleman told me it took at least $100,000 and a year of his effort to get rid of a bad teacher.
It is employees like these that waste the state's money, but since they are all protected by unions, nothing can be done.

I also live in CA. I wonder if these things are different in other states?

[grumel]

Here is a boring idear that does not involve to deny elementary healthcare or let indivudals fight alone against a well organised monopolist with all his structural advantages:

Raise taxes.

[expat]

Raise taxes.

No thank you.

We already have some of the highest income, sales and gasoline taxes in the country. We don't have a revenue problem, we have a spending a problem.

[stan1]

Raise taxes.

No thank you.

We already have some of the highest income, sales and gasoline taxes in the country. We don't have a revenue problem, we have a spending a problem.

Its so simple. You should all run for office. :roll:

Laws, referendums, and constitutional amendments make it virtually impossible to raise taxes in California. Everyone wants to cut spending except the spending that they benefit from. Its the "I want my kid to be in a class with only 19 other kids, but put those other kids in a class with 39 other kids" view. The state really has no choice but to go bankrupt.

I think its about time to lock the thread, eh?

[Paladin]

Raise taxes.

No thank you.

We already have some of the highest income, sales and gasoline taxes in the country. We don't have a revenue problem, we have a spending a problem.

Thank you expat! I could not agree more. It is purely a spending problem. I believe spending is up about 20% since the current governor was elected although the responsibility can certainly be attributed to the politicians as well.

Does anyone know of a source that outlines where the revenue for the states comes from? e.g. state taxes, sales taxes, federal etc. and a breakdown by state.

I'd like to understand how WA and OR can maintain their infrastructure and services whereas CA cannot.

[Paladin]

Raise taxes.

No thank you.

We already have some of the highest income, sales and gasoline taxes in the country. We don't have a revenue problem, we have a spending a problem.

Its so simple. You should all run for office. :roll:

Laws, referendums, and constitutional amendments make it virtually impossible to raise taxes in California. Everyone wants to cut spending except the spending that they benefit from. Its the "I want my kid to be in a class with only 19 other kids, but put those other kids in a class with 39 other kids" view. The state really has no choice but to go bankrupt.

I think its about time to lock the thread, eh?

You can't be serious about the state declaring bankruptcy!

Perhaps it is time to move my CA muni funds to national.

[epilnk]

I think its about time to lock the thread, eh?

I certainly hope not. I have quite a bit of CA munis, and have been wondering whether my state's precarious financial position is a reason to reconsider my AA. So I am very very interested in discussions of where our funding issues come from, though that sort of conversation can't help but crisscross political boundaries.

Linda

[Leif]

I just listened to a local TV program were they said the reason for the foot dragging is to get a bail out from Obama. He could well be right, particularly with some of the infrastructure projects mentioned in the article. Until then I expect more of the same, paper over the problem and kick it down the road. I've sold my CA Muni bond funds (at a loss) and now only hold CA money market funds.

[yobria]

A note on illegal immigrants: They may consume services, but they're doing virtually every piece of dirty, back breaking work in this state, from picking fruit to washing dishes to plucking chickens to moving furniture.

I see a lot of homeless people asking for change on my way to work. They're the ones that consume the most services in my city, while producing nothing. Not a single one has a foreign accent.

Nick

[chaser]

Of course, the downturn in the economy is not the governor's fault, but he has had some time to tackle the fundamental problems of the state budget, and has not really tried as far as I can tell. Not sure he's any worse than the last governor, but he had a stronger position from which to try to do something and really hasn't accomplished much in my view.

Actually, to be fair to the current governor, he did try to fix some of the fundamental problems some time after the first crisis. This included various things as imposing limits on how much spending could increase in a year based on multi-year running average tax intakes, gerrymandering reform, and some things that really pissed on the state employee unions. When the legislature rejected all his proposals, he took it directly to the people in referendums. But this was after we have already had a series of special elections which had gotten quite expensive and the people were getting really sick of them. He lost every single referendum that election and he was forced to back off. It was a political disaster for him.

He is actually now in the position to say, 'I told you so', but he hasn't really done so.

[YDNAL]

For example, a illegal immigrant can cross the border and come to California, go directly to a hospital, and get free organ transplants, dialysis, cosmetic mole removals, etc. and many elective procedures done which are classified as "emergencies".

A note on illegal immigrants: They may consume services, but they're doing virtually every piece of dirty, back breaking work in this state, from picking fruit to washing dishes to plucking chickens to moving furniture.

I see a lot of homeless people asking for change on my way to work. They're the ones that consume the most services in my city, while producing nothing. Not a single one has a foreign accent.

Nick

I am glad that Nick has also posted on a misconception - not unique to California.
- Immigrants in the workforce receive the lowest pay for jobs that no one else wants - jobs without benefits.
- Conversely, entitlement programs are a huge drain on GNP. For instance Medicaid, jointly funded by the States and Fed Govt and managed by the States, became the largest entitlement program by 2006. The number of people receiving Medicaid and food stamps soared by 50% from 2000-2006. Medicaid had 53 million recipients; 25 million people getting food stamps.

Source: Department of Health and Human Services

I'll try to salvage the thread by adding that, without a balanced budget, California has significant issues to stay in business and State munis look unappealing. :roll:

[Levett]

Paladin,

I found this link on state revenue sources. You'll have to burrow into individual links. "State Revenues and Expenditures" is probably the one you want. Very revealing info IMHO.

http://www.taxpolicycenter.org/taxfacts ... ?Docid=493

Bob U.

Edit: the issue of "bankruptcy" is certainly out there for public discussion. http://www.creditwritedowns.com/2008/10 ... krupt.html

[kramer]

I am a perpetual traveler. Within a year after my retirement, I carefully and legally established residency in a different state than California, the state in which I had lived for the last 25 years or so. Between the high income taxes, the draconian residency rules (can be unreasonably liable for state income tax for working overseas), and the fact that a law was almost passed that would have caused my private health insurance rates to soar, I carefully switched my state of residency, something that I did not really want to do. But I just did not want to have the cost and the risk of being a California resident anymore. I am so happy now about my decision and I almost can't imagine why I didn't make the change even sooner.

Per capita government expenditure in California continues to soar.

Kramer

[Jack]

I found this link on state revenue sources. You'll have to burrow into individual links. "State Revenues and Expenditures" is probably the one you want. Very revealing info IMHO.

http://www.taxpolicycenter.org/taxfacts ... ?Docid=493

Bob U.

Interesting data. It turns out that California is only number 14 in total taxes (state and local) as a percentage of personal income, barely in the top third. Number 1 is Wyoming, number 2 is New York and number 3 is Alaska. The national average is 11.6% and California is 12.1%. California doesn't appear to be an exceptionally high tax state.

[White Coat Investor]

I found this link on state revenue sources. You'll have to burrow into individual links. "State Revenues and Expenditures" is probably the one you want. Very revealing info IMHO.

http://www.taxpolicycenter.org/taxfacts ... ?Docid=493

Bob U.

Interesting data. It turns out that California is only number 14 in total taxes (state and local) as a percentage of personal income, barely in the top third. Number 1 is Wyoming, number 2 is New York and number 3 is Alaska. The national average is 11.6% and California is 12.1%. California doesn't appear to be an exceptionally high tax state.

I'm a little skeptical of your data and couldn't find your reference on the link cited. Alaska is 3rd highest? Without a sales tax or an income tax? Especially if you add in the permanent fund dividend and the fact that the state receives back much more federal tax than its inhabitants pay. I'm having a hard time buying it. Property tax in Anchorage is only ~1%. Perhaps the corporations are paying tons of tax up there, don't know. Maybe it isn't the best, but the 3rd highest? No way.

[kramer]

California ranked fourth in spending per capita in the year 2006. See:

http://www.taxfoundation.org/research/s ... g-20080604

The first and third ranked states were Alaska and Wyoming, respectively, which have no income taxes and get a great deal of their income from mineral rights distributed across small populations. Alaska also has no sales tax. The second ranked state in per capita spending is high tax New York.

Kramer

[schwarm]

I'm a little skeptical of your data and couldn't find your reference on the link cited. Alaska is 3rd highest? Without a sales tax or an income tax? Especially if you add in the permanent fund dividend and the fact that the state receives back much more federal tax than its inhabitants pay. I'm having a hard time buying it. Property tax in Anchorage is only ~1%. Perhaps the corporations are paying tons of tax up there, don't know. Maybe it isn't the best, but the 3rd highest? No way.

Alaska probably gets their revenue from taxes on oil production, and Wyoming from coal production. Since both have low populations, the per capita effect is large.

[jegallup]

Valuethinker has it right, in my opinion, when he points out that Prop 13 is a huge problem: it makes no sense for two people with identical properties to pay different property taxes on them, merely because one person bought his before the other. Whether property taxes are a good way to finance government is a separate question.

The east coast media always enjoy their schadenfreude about California's woes, and overlook the fact that, because the state is so big in terms of population, everything population-related about it is big too, including budgets and budget shortfalls.

Requiring a super-majority to raise taxes is a huge problem too.

Everyone excluding Schwarzenegger knew that sooner or later he'd be up against the same insurmountable problems Davis faced.

[schwarm]

- Conversely, entitlement programs are a huge drain on GNP. For instance Medicaid, jointly funded by the States and Fed Govt and managed by the States, became the largest entitlement program by 2006. The number of people receiving Medicaid and food stamps soared by 50% from 2000-2006. Medicaid had 53 million recipients; 25 million people getting food stamps.

FWIW, I believe that the the largest group on Medicaid are children.

[dbphd]

I've lived in CA all my 72 years, so I've seen vast changes in the state. I think there is a bit of truth in most of the posts here, but I think the adoption of Proposition 13 is the principal culprit. Proposition 13 served to move the tax base from large businesses that rarely move to home owners who move on an average of every 7 years. Had the purpose of the proposition really been to relieve senior home owners, the proposition would have been very different and targeted at homeowners above a certain age.

Of course spending could be trimmed, but I suspect only around the edges, and with little fiscal effectiveness. Those of us who have witnessed unbridled growth in the more populous regions of the state deplore it. But what are you to do? It is a nice place to live. Our solution has been to retire to Montecito, a small town adjacent to Santa Barbara where growth is less a factor, but I do cringe every time there is a sunny Rose Parade or Bowl, because I can imagine folks in the mid-west saying to themselves that they are not living through another winter.

db

[grumel]

Large businesses have a hard time to move their production, but it easy for them to move their profits with simple accounting tricks to some Irish office with 5 people.

[Jack]

I'm a little skeptical of your data and couldn't find your reference on the link cited. Alaska is 3rd highest? Without a sales tax or an income tax? Especially if you add in the permanent fund dividend and the fact that the state receives back much more federal tax than its inhabitants pay. I'm having a hard time buying it. Property tax in Anchorage is only ~1%. Perhaps the corporations are paying tons of tax up there, don't know. Maybe it isn't the best, but the 3rd highest? No way.

The numbers are based on total taxes, most of which come from oil and mineral companies. It turns out that Alaska is not only a spend thrift state, in that is has the highest spending per capita, but it is the closest we have to a socialist welfare state that gets almost all of its revenue from private companies and distributes it to its citizens. For example, Alaska puts a $25 tax on each barrel of oil that is taken from federal (not state) land and shipped to the lower 48. So the lower 48 are really paying for Alaska's services. In addition, Alaska receives the highest federal funding per capita, getting 2.25 times as much from the feds as the residents of California per capita. The state of Alaska could not survive without all the welfare it receives from the lower 48.

[Paladin]

Paladin,

I found this link on state revenue sources. You'll have to burrow into individual links. "State Revenues and Expenditures" is probably the one you want. Very revealing info IMHO.

http://www.taxpolicycenter.org/taxfacts ... ?Docid=493

Bob U.

Edit: the issue of "bankruptcy" is certainly out there for public discussion. http://www.creditwritedowns.com/2008/10 ... krupt.html

Bob U,

Thank you. It will take me some time to go through all this.

http://www.taxpolicycenter.org/taxfacts ... opic3id=92

is interesting.

[stan1]

As for investing in CA munis, I think anyone who has a high percentage of assets in munis should diversify. I'm sure there are still some retired people who have 40%, 60% or even more of their non-real estate assets in CA munis based on advice from well intentioned financial advisors seeking to minimize taxes. I think anyone who is in this situation should consider adding more CDs. Pay the relatively small amount of tax on the interest to get FDIC insurance and reduce the risk of a default "black swan".

[yobria]

Interesting data. It turns out that California is only number 14 in total taxes (state and local) as a percentage of personal income, barely in the top third. Number 1 is Wyoming, number 2 is New York and number 3 is Alaska. The national average is 11.6% and California is 12.1%. California doesn't appear to be an exceptionally high tax state.

But keep in mind California has the 11th highest median per capita income (per Wikipedia). So if it were spending the same $ per capita as other states, its state spending per capita should be lower than all but ten other states.

Nick

[cosmos]

A note on illegal immigrants: They may consume services, but they're doing virtually every piece of dirty, back breaking work in this state, from picking fruit to washing dishes to plucking chickens to moving furniture.

I see a lot of homeless people asking for change on my way to work. They're the ones that consume the most services in my city, while producing nothing. Not a single one has a foreign accent.

Nick

some of our homeless do "speak in toungues" though...

and i am with you on that front, the amount of govt sponsored food programs and such is staggering compared to other large cities i have lived in previously. i would not be surprised if they are advertising it as a sort of "homeless retirement" community in other areas. i saw a similar thing when i was younger and took alot of greyhound busses in the northeast. in one PA town they had fliers up directing homeless for some cash and a free bus ticket to NYC--one way of course.

what is the solution? more taxes on the productive citizens to be wasted on those producing nothing? more private charity groups aimed at the homeless specifically? soylent green? i don't know.

i will say this though, nothing upsets me more than seeing the amount of aid/welfare sent to Israel and other foreign governements and programs when it should be directed right here at home.

starving kids in africa? i don't care. take a look around appalachia sometime and tell me the difference.

oh yeah, and merry christmas

[MrsDoverSharp]

I think what Carey McWilliams wrote in the 1940's still holds true today: California grows so fast that the State Government has never really stabilized.

Every year California adds population equivalent to a Vermont, every 10 years population equivalent to an Indiana, and ever 20 years California adds the equivalent of a Pennsylvania, the 6th most populous State.

The growing pains and whipsaws of public opinion through the initiative process from Prop. 13 and numerous other Props that designate spending requirements add together and make the place fiscal and planning anarchy.

It is easy to trivialize and blame on `a spending problem' or a `revenue problem'. Perhaps the biggest problem is denigration of everyone who rolls up their sleeves and tries to fix it... and I am thinking about Gray Davis and Arnold Schwarzenegger.

[allsop]

A note on illegal immigrants: They may consume services, but they're doing virtually every piece of dirty, back breaking work in this state, from picking fruit to washing dishes to plucking chickens to moving furniture.

I see a lot of homeless people asking for change on my way to work. They're the ones that consume the most services in my city, while producing nothing. Not a single one has a foreign accent.

Nick

some of our homeless do "speak in toungues" though...

and i am with you on that front, the amount of govt sponsored food programs and such is staggering compared to other large cities i have lived in previously. i would not be surprised if they are advertising it as a sort of "homeless retirement" community in other areas. i saw a similar thing when i was younger and took alot of greyhound busses in the northeast. in one PA town they had fliers up directing homeless for some cash and a free bus ticket to NYC--one way of course.

what is the solution? more taxes on the productive citizens to be wasted on those producing nothing? more private charity groups aimed at the homeless specifically? soylent green? i don't know.

i will say this though, nothing upsets me more than seeing the amount of aid/welfare sent to Israel and other foreign governements and programs when it should be directed right here at home.

starving kids in africa? i don't care. take a look around appalachia sometime and tell me the difference.

oh yeah, and merry christmas

Oh yeah, none of the above is against the forum "rules". Of course, the very act of writing this post is "political" and not an approved statement.

[Index Fan]

This is what happens when politicians promise more spending and the people in their infinite wisdom return said politicians to office again and again.

Our system of governance- spending huge amounts of money we don't have, and increasing that spending year after year- is literally bankrupt.

Giving the government less to spend is the only way to stop the hemorrhaging. Then choices must be made how to spend the money government does receive.

Less money is less power. That's a hard sell to the money addicts that we call politicians. It has to be a grassroots effort to stop this. If it doesn't stop, we get what we deserve.

[ilan1h]

As for investing in CA munis, I think anyone who has a high percentage of assets in munis should diversify. I'm sure there are still some retired people who have 40%, 60% or even more of their non-real estate assets in CA munis based on advice from well intentioned financial advisors seeking to minimize taxes. I think anyone who is in this situation should consider adding more CDs. Pay the relatively small amount of tax on the interest to get FDIC insurance and reduce the risk of a default "black swan".

Going from munis to CD's would be a big step down in terms of returns. For example, a 4% double tax free muni would have a tax equivalent yield of over 7%. CD's are now at about 4.5%. That's 50% less return on your money. Furthermore, if you have a large amount of money in munis you would have to spread it around in multiple CD's to get the money protected. I'm not sure that all this is warranted at this time.

[allsop]

This is what happens when politicians promise more spending and the people in their infinite wisdom return said politicians to office again and again.

Our system of governance- spending huge amounts of money we don't have, and increasing that spending year after year- is literally bankrupt.

Giving the government less to spend is the only way to stop the hemorrhaging. Then choices must be made how to spend the money government does receive.

Less money is less power. That's a hard sell to the money addicts that we call politicians. It has to be a grassroots effort to stop this. If it doesn't stop, we get what we deserve.

I could give you some health statistics with regards to how it is in Europe, but one moderator warned me in a PM that giving verifiable facts are "political". Another one said that lying is not against the forum rules (even though it is racist, my addition), so I rest my case.

[bengt]

Here is a good description of the (depressing) state of CA and NY.

http://www.thedailybeast.com/blogs-and- ... k-go-bust/

But government budgets have become a beast that is almost impossible to tame. Paterson announced a hard line hiring freeze in July, only to find out in October that 31,684 new employees had been added to the state payroll..

The city of Vallejo—population 120,000—declared bankruptcy earlier this year because it was locked into spending 74 percent of its $80 million general fund budget on public-safety salaries. Police captains were entitled to receive $306,000 annually in pay and benefits, while 21 firefighters earned more than $200,000 a year, including overtime. After five years on the job, all were entitled to lifetime health benefits.

In a preview of political fights to come, both New York State and California budgets are being crippled by outsized public sector union pension obligations that are now coming due in a perfect storm—a combination of an aging population, a declining tax base, and a fiscal crisis.
The average state and local government employee now makes 46 percent more in combined salary and benefits than their private sector counter-parts, according to the Employee Benefit Research Institute—including 128 percent more on health care and 162 percent more on retirement benefits. New York City, for example, not only spends 10 times more on pensions than it did ten years ago, it now spends more on pensions and benefits for firefighters than it does on firefighters' salaries.

These tax-payer sponsored paychecks cannot be renegotiated in tough times to balance a budget. They can only go up, never down.

Come to think of this: Public sector benefits is a massive Ponzi scheme. It cannot continue forever. Tax rates can only go to 100% and Govt can only confiscate assets once.

[Apprentice_941]

As a teacher in the California's largest school district - the LAUSD - I see first hand how a colossal amount of state money is wasted on sinecure positions that have nothing to do with what goes on in the classroom.

The Los Angeles Unified School District has become a Gravy Train with Biscuit Wheels for private contractors, paper pushing bureaucrats, and 'teachers' who don't really like working with children who instead work their way up into the bloated administration as soon as they pass the test.

[White Coat Investor]

The numbers are based on total taxes, most of which come from oil and mineral companies. It turns out that Alaska is not only a spend thrift state, in that is has the highest spending per capita, but it is the closest we have to a socialist welfare state that gets almost all of its revenue from private companies and distributes it to its citizens. For example, Alaska puts a $25 tax on each barrel of oil that is taken from federal (not state) land and shipped to the lower 48. So the lower 48 are really paying for Alaska's services. In addition, Alaska receives the highest federal funding per capita, getting 2.25 times as much from the feds as the residents of California per capita. The state of Alaska could not survive without all the welfare it receives from the lower 48.

In Alaska, the oil and mineral companies are rightfully viewed as "outsiders", as nearly all their profits leave the state. So, naturally, like with room taxes in Vegas and rental car taxes in most states, it is seen as a way to increase revenue without actually taxing the inhabitants of the state. Seems like a good way to get re-elected to me.

As far as lots of federal money coming into the state, you'll have to talk to your senators and representatives about that. Alaska's delegation (at least until recently) was composed of expert pork-barrelers. But even without that, the Federal government has a great deal of land and resources in Alaska, and the population is quite low, so you'd expect a rather high per-capita federal spending rate.

Speaking of federal land in Alaska, that is kind of a touchy subject to Alaskans.

The population of Alaska was small in 1959 when it became a state - barely over 225,000 (c. 45,000 Native). Congress did not think that such a small population could generate enough tax dollars to pay for state government. Therefore Congress included two measures in the statehood act to help pay for the new state. The first involved federal land in Alaska. Sixty percent of the land in Alaska - 225 million acres - was set aside as federal land. By the first measure, the federal government gave to Alaska 90% of the profits from mineral lease sales on the federal land in Alaska. Oil is one of the most important minerals in Alaska, and to this day wherever oil or gas leases are sold for exploration or development on federal land, 90% of the revenue is given to Alaska.

http://www.akhistorycourse.org/articles ... ?artID=138

The second measure also involved land. In the statehood act Congress said that Alaska could select 104 million acres (28% of the total land in Alaska) from the unreserved and unoccupied land in the state for its own; the federal government would transfer the title of this land to the state. . Congress assumed that as the state's land became economically valuable, through development or settlement, the state could earn enough revenue from it to fund state government. This has almost come true because of the discovery of North America's largest oil deposit at Prudhoe Bay in 1967, and because of the way the state taxes the production of that oil.

Many Alaskans are still trying to figure out what gives the federal government the right to 72% of the land. Much of this land has been put into parks, preserves and made much of Alaskan wealth off-limits to development.

Without doubt, it'll always be a unique place, culturally, economically, and politically. But its citizens certainly don't feel a large tax burden, there's no doubt about that.

[On Approach]

Sixty percent of the land in Alaska - 225 million acres - was set aside as federal land.

86.1% of Nevada is controlled by the Federal government - many Nevadans feel the same way as Alaskans. Nowadays, though, so much of the population is centered in Clark County, and most of them know (or care) little about the rest of the state.

[jsnbrnd]

You can't be serious about the state declaring bankruptcy!
Perhaps it is time to move my CA muni funds to national.

Yes, it is. Why take a higher risk than necessary?

[jsnbrnd]

I've sold my CA Muni bond funds (at a loss) and now only hold CA money market funds.

I wouldn't even hold those.