From the Sacramento Bee:
California‘s unemployment rate climbed to 11.5 percent in May, the highest in modern record-keeping, the U.S. Department of Labor reported Friday.
The loss of another 69,000 jobs comes as a blow to the state after unemployment dipped slightly to 11.1 percent in April, according to revised figures. The California Employment Development Department said the government posted the largest job declines in the month, down by 14,200 jobs. Every other sector besides education and health services also saw losses.
California has to choose a way to erase its $24 billion budget deficit. But unlike recent examples in corporate America, default and bankruptcy can’t be on the table. Stiffing state bondholders would only destroy the state’s fragile credit and intensify future budget trouble. The Golden State’s only real option is to make big cuts now and balance its books.
Some residents have proposed that the state should declare bankruptcy a la General Motors (GMGMQ), allowing it to cut fat more easily. But there’s no bankruptcy protection available for states. Chapter 11 is for companies, and the more relevant Chapter 9 is only for municipalities and other sub-state entities.
With all the cuts that have already happened, California is still one of the highest taxed states one could live in. Now with all the budget cuts, we will be a state with the lowest benefit levels. How can the 8th largest economy in the world survive like this? I keep thinking, after the government is cut back with budget cuts, we will look like a small government state. This is ironic because the population has more democrats than republicans.
California will be bankrupt in two months! Obama and Geithner have already said they will not bailout California so we are in trouble. Here are the details from California’s Controller:
Starting July 29, California won’t have enough cash to pay its bills, state Controller John Chiang told the governor and legislative leaders today.
The state will be in the red by $317.1 million that day, Chiang wrote them in a three-page letter.
“Two days later, on July 31, our cash deficit increases to a negative $1.02 billion,” he added.
He pleaded with them to pass a balanced budget by June 15 to make it easier for the state to borrow money to cover the cash crunch.
Click here to read the letter.
The controller’s office has also prepared a graphic outlining California‘s cash outlook from July 2009 through June 2010, available here.
This was quite a shock to me, a positive one though! It’s probably a one-time dip since the State of California will be laying off many as they try to fix the $25 billion budget:
California’s unemployment rate dipped slightly to 11 percent last month, although the state lost 63,700 jobs, the federal government reported today.
The Bureau of Labor Statistics said California unemployment fell two-tenths of a point even though the state’s job loss was the highest in the country.
At 11 percent, California had the fifth-highest unemployment rate in the country. Michigan’s was first, at 12.9 percent.
Unemployment rates for Sacramento and other metropolitan areas were due to be released later today.
Megan McArdle has an article about California and if it should be allowed to fail. Here are some excerpts (I suggest you read the entire article):
There is a surprisingly sizeable blogger contingent arguing that we have to bail them out because however regrettable the events that lead here, we now have no choice. But actually, we do have a choice: we could let them go bankrupt. And we probably should.
On the other hand, I don’t really see another way out of it. If Uncle Sugar bails out California, California will not fix its problems. Perhaps you want Obama to make it fix the problems, using the same competence, power, and can-do spirit with which he has repaired all the holes in the banking and auto manufacturing sectors. But Obma is not in a good position to do this. California Democrats are a huge part of his governing coalition. All Obama can do is shovel money into the bottomless pit of California’s political system.
California will go bankrupt, muni and state debt will spike, the federal government will backstop humanitarian programs and very possibly all state and local debt, and eventually, California will figure out whether it wants higher taxes or lower spending. But we will not actually make the world a better place by enabling the lunatics in Sacramento to pretend they can have both.
Some projections for California’s economy from Governor Schwarzenegger’s budget revise today:
The outlook for the California economy is also for negative growth in 2009 followed by weak growth in 2010, and better growth in 2011:
Personal income is projected to fall 1 percent in 2009; and grow 1.4 percent in 2010, and 3.9 percent in 2011, as compared to 2.5 percent in 2008. The projected decline in personal income is the first since 1938.
Nonfarm payroll employment is forecast to fall by 3.9 percent in 2009 and 0.9 percent in 2010 and grow 1.6 percent in 2011, as compared to a 1.2‑percent decline in 2008.
Dan Walters points out what a great deal California’s college system is:
The $20-per-unit community college fee is, by far, the lowest in the nation. The $600 it costs for a year’s full load of classes in California would be more than $900 in the next-lowest state, New Mexico, and is less than one-fourth the national average of $2,700.
State university fees, $3,849 a year, are much lower than any of the other comparable state university systems and scarcely half the average of $7,516.
The University of California’s current fees, $8,027 a year, are not quite the lowest of comparable systems – University at Buffalo, N.Y., has that ranking at $6,285. But UC’s fees are nearly $2,000 below the average and just two-thirds of the most expensive school, the University of Illinois.
California’s unemployment rate rose to 10.1% in January, its highest level in a quarter century, as recession tightened its grip on the most populous U.S. state.
Looks like California wants to stay in the news after our budget fiasco. Tom Ammiano introduced a bill on Monday to legalize pot in California.
A state legislator proposed legalizing the sale of marijuana in California, saying the plan would generate more than $1 billion annually for the cash-strapped state.
What are the economic benefits and costs of legalizing pot in California?
Obama’s plan will provide some tax relief for new car buyers:
In an example provided by Mikulski’s office, a family making $100,000 a year purchasing a $23,600 Chevrolet Malibu would save about $395 in income tax.
California’s plan will increase the cost of buying a new car. Using the numbers from the above example, the vehicle license fee will go up by $118 and the sales tax will be $267 higher.
In other words, Californians will only benefit by about $10 for a new car purchase. It’s a good example of federal and state governments not aligning their economic goals. I hope the auto industry is not banking on an increase in demand from Californians.