So great, California has a budget deal, which means vendors will get paid in cash again. The real credit goes to the White House, actually, which never blinked or hinted that the state would get a bailout. Between that and CIT, that’s two non-bailouts in a row.
But California is in a world of hurt. For one things, the state is releasing 27,000 prisoners, which may not do much, except guarantee lifetime employment to the state’s awful talk-radio blowhards (just imagine the fury when one of those 27,000 ends up killing someone).
And the “fix” isn’t even a fix. California is like CIT (CIT) and that all it’s done is kick the ball down the road:
WSJ: After the cuts and the drawdowns from cities and counties, the plan addresses what remains of the deficit with one-time fixes and accounting maneuvers that economists said don’t solve the state’s long-term problems. One such gimmick involves pushing state-worker paychecks from June 2010 to July 2010, which is in the next fiscal year.
“The budget is a pure Band-aid,” said Mr. Noll, the Stanford economist. “It just transfers the problem to next year.”
The $26 billion shortfall — in a $92 billion general-fund budget running through June 2010 — comes after the state took measures in February to close most of a $42 billion gap for fiscal years 2009 and 2010. In all, assuming lawmakers approve the latest budget deal, the state will have dealt with a cumulative gap of about $60 billion for the two fiscal years.
In the short term, some struggling cities and counties may be forced to consider bankruptcy as the state draws on their coffers. Home foreclosures likely will rise slightly as school districts lay off teachers and hundreds of thousands of state workers lose 14% of their paychecks through three-day-a-month furloughs.
And this is in our biggest, and arguably still most dynamic state. Second stimulus here we come (well, just as soon as we pass healthcare).
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