Sunday, January 24, 2010

The California Politician Split Personality Poster Boy

State Controller John Chiang is the perfect reflection of California politics. This month he has offered both optimistic statements about the State General Fund and almost catastrophic predictions.

In other words, he supports both those in denial and those in fear for the State of California. His is the poster boy of the current California Politician Split Personality.

On January 7 his office released the December 2009 financial statement and a summary analysis. In the news release accompanying these two documents we were offered this meaningless statement:

“December receipts showed signs of improvement, but the State continues to face tremendous fiscal challenges,” said Chiang. “At best, this is the beginning of a long and gradual recovery.”

Within the summary analyis section labeled "What The Numbers Tell Us" he provided us with this Hallmark Card language:

California’s economy is beginning to see rays of sunshine through the clouds that loomed heavy over the State for more than two years. This can be seen in the State’s revenues, which improved again in December.

On the same day, he told KPIX veteran newsman Hank Plante that the State General Fund deficit could likely reach $35 billion (to put this in perspective in 2008 the General Fund revenues were $98 billion).

Four days later he joined State Treasurer Bill Lockyer and Finance Director Ana Matosantos in a statement that read:

California will have the cash resources necessary to repay the revenue anticipation notes on schedule in May and June. To execute its normal cash flow borrowing this summer, the state will need not only budget solutions, but cash solutions as well.

As California's finance team, our three offices will continue to work together to ensure California has sufficient cash resources to meet its constitutional and legal obligations.

Friday, just 15 days after issuing his Hallmark Card monthly report and 11 days after the joint statement, he sent a letter to the Governor and Legislative leaders stating:

...On April 1, the State will be in the red by $197 million, and our resources to pay bills are not expected to return to safe levels until April 21.

Barring any unforeseen circumstances, such as a spike in expenditures or precipitous decline in revenues, $2.7 billion in cash solutions are necessary to avoid a cash shortage in the current fiscal year.

Attached to his letter was this graph.

Notice the blue line - the one that shows what happens if the Legislature were to actually adopt a budget resembling the Governor's proposal which essentially was been rejected by the Democratic majority as it was being announced.

(What's missing is information with regard to cash is the increase in delinquent property tax payments and how that might affect the State's school funding obligations. But hey, those numbers are on the books of 58 counties and no one wants to look at the whole picture.)

What Chiang offers are projection numbers that tell us the State General Fund is a few calendar quarters away from complete devastation. Unfortunately, this latter information reflects the truth except for those who live in some fantasy virtual California that hasn't lost 1.2 million jobs since November 2007. That includes the public face of most California politicians who are in full "running for office" mode.

At some point someone in an elected statewide office is going to have to acknowledge the State of California entered a bare bones period in 2008.

In the meantime, the Legislature's most recent action - urged by the Governor - is to submit to the voters a proposed new General Fund supported $11.1 billion bond issue to provide low cost water to the corporate farmers and the corporate land developers of California. And right now, Legislative hearings are being held which will determine if the State should proceed to sell $9.95 billion in state bonds to fund the initial cost to build a high speed rail project.

Oh, and among the states, California, now has the worst-in-the-nation credit rating.

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