California voters denied the state legislature on raising taxes to close budget gap for next year. (Full article click) Snippets from article below.
California is looking at a budget deficit projected at more than $24 billion when the new fiscal year starts in July. That is more than one-quarter of the state's general fund.
The governor's cutbacks could include ending the state's main welfare program for the poor, eliminating health coverage for about 1.5 million poor children, halting cash grants for about 77,000 college students, shortening the school year by seven days, laying off thousands of state workers and teachers, slashing money for state parks and releasing thousands of prisoners before their sentences are finished.
In the near term, the huge cuts that are about to hit will probably affect nearly every one of the state's 38 million residents. Schwarzenegger's latest budget proposal, for example, would eliminate health care coverage for more than 2 million people, about 1.5 million of them children, said Anthony Wright, executive director of Health Access California.
Of course, as you can read above, the politicians are assaulting the very bottom of the economic ladder, rather than taking away benefits from the over compensated. This better be just a political game to grandstand against the budget cuts. For meaningful and progressive change, the state must cut union benefits and cut salaries.
This is, after all a deflationary collapse, and business needs to get more money for the service performed.
If the government cuts the very bottom, you better have a gun and an alarm system, for the society will get mean very quick.
"I understand that these cuts are very painful and they affect real lives," Schwarzenegger said. "This is the harsh reality and the reality that we face. Sacramento is not Washington — we cannot print our own money. We can only spend what we have."
In a way California DOES print its own money, in the form of state bonds. However those interest rates don't enjoy the same downward pressure as federal notes, since people expect California may fail. (Reality: USA on a federal level does have issues)
I would like to see is a pie chart of the total California budget of how much is spent as a direct benefit to citizens vs state employee benefits. Unions in the public sector have been destroyed, culminating with the bankruptcy of GM and GM pensions under pressure. Next up California needs to eliminate 100K pensions and other excessive publicly funded benefits. And CA budget issues doesn't taking into account the eventual reality of the California pension fund shortfall. Don't look at the government pension insurance fund, its completely underwater, and this party is just getting started.
This is the situation I predicted, Federal government would spend it's money on banks and not have enough capacity to help out the states or pensions.
See Mish's comments and Karl of Market Ticker.