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State and local governments are about to fade into nothing. The report last night that California is projecting a $54 billion shortfall hasn't had traction anyw

State and local governments are about to fade into nothing. The report last night that California is projecting a $54 billion shortfall hasn't had traction anywhere. Note they spent years building up a $20 billion rainy day fund. [1] This is serious, because the cuts they are going to be forced to take are incredible: > Required funding for K-12 schools and community colleges will shrink by $18.3 billion, under Proposition 98’s constitutional calculation. That’s more than twice the $8.3 billion California spent out of its general fund last year on its university systems. And even that article doesn't mention CalPERS, which is almost assuredly going start hitting its limits where it requires local governments to contribute a whole bunch more along with a bunch of other really bad stuff. The public pensions/unions are the single powerful lobby in the state. I'm betting California isn't even the worst, and I'm also betting the shortfall will be yet higher. I really do hope I'm wrong. [1] Coronavirus blows a $54 billion hole in California’s budget. Here are the “jaw-dropping” numbers Projected deficit nearly three times Rainy Day Fund https://www.mercurynews.com/2020/05/07/california-budget-to-take-54-3-billion-coronavirus-hit/ https://www.mercurynews.com/2020/05/07/california-budget-to-...

caterama 6y ago
Do you have a feel for how this compares with other states?
- TheCoelacanth 6y ago
  Many states are going to be in even worse shape.
- bmm6o 6y ago
  Some of the (suspected and unstated) motivations for states deciding to "reopen" against medical advice is that it allows the state to get people their off unemployment rolls. This is going to be a huge factor that varies state-to-state.
sjg007 6y ago
The Feds could, you know, do something to help.
- beamatronic 6y ago
  But this is exactly what Republicans want. Shrink government spending.
  - generalpass 6y ago
    Well, that's what they tell their constituents. In practice, they increase budgets, run deficits, and increase debt every year.
  - anm89 6y ago
    Federal budget figures over the last 5 presidencies (and many other similar figures) say otherwise.
  - sumedh 6y ago
    They do the exact opposite when they are in power though.
- generalpass 6y ago
  This is even harder than it sounds, for reasons good and bad. If anyone is still bothering to follow the Constitution, the funds have to be distributed across the states, so you can't just give California only some funds. It is also politically infeasible to give just California funds, most especially because a whole bunch of states don't want to pay for the other states. Even if it gets passed that, this is the kind of spending that is virtually guaranteed to increase consumer price inflation, which is a far worse problem than state budget shortfalls.
  - elipsey 6y ago
    >> this is the kind of spending that is virtually guaranteed to increase consumer price inflation Why would this kind of spending increase CPI more than other kinds of bailout spending, and what kind of spending might it be? I guess TARP, QE, corporate bonds, etc., are buying things that consumers don't directly buy very much, so those programs didn't apparently cause lots of inflation of CPI indexed things. So what would this be buying instead? Could the fed buy things like municiple bonds, or maybe other debts assumed at the state level to provide liquidity and keep interest rates/ratings under control? I don't see consumers caring as much about the price of municiple bonds, for example, as food or houses or cars. I am a rank initiate in this area, so if I'm missing something I'd like to know more.
bigtechdataeng 6y ago
Let’s hold off on the idea that the California government is going to fade into nothing. From the linked article: “However, the report concludes that the projected deficit as a percent of general fund spending “is modestly smaller than the budget deficits faced by the state in 2003 and in 2009,” Also, I suspect there are a lot of Californians right now who trust their state leadership a more than federal leadership. (I am one of those people.)
- generalpass 6y ago
  I don't remember the details offhand, but there was that amendment that passed since then which changes what the state can do when it runs deficits. Both of those recession deficits were after years of economic decline. This economic decline is less than 8 weeks old. I was hyperbolic, but I'm not sure by how much. What we haven't seen yet is that Fauci and others have stated there will be regional lockdowns when there are "outbreaks". I suspect that as soon as the business community sees this, many more will just close up permanently, even if they aren't in the locked down regions because many can't survive another lockdown and are risking almost everything to open up now.
- deleted 6y ago
  [deleted]

caterama 6y ago

Do you have a feel for how this compares with other states?

TheCoelacanth 6y ago
Many states are going to be in even worse shape.
bmm6o 6y ago
Some of the (suspected and unstated) motivations for states deciding to "reopen" against medical advice is that it allows the state to get people their off unemployment rolls. This is going to be a huge factor that varies state-to-state.

sjg007 6y ago

The Feds could, you know, do something to help.

beamatronic 6y ago
But this is exactly what Republicans want. Shrink government spending.
- generalpass 6y ago
  Well, that's what they tell their constituents. In practice, they increase budgets, run deficits, and increase debt every year.
- anm89 6y ago
  Federal budget figures over the last 5 presidencies (and many other similar figures) say otherwise.
- sumedh 6y ago
  They do the exact opposite when they are in power though.
generalpass 6y ago
This is even harder than it sounds, for reasons good and bad. If anyone is still bothering to follow the Constitution, the funds have to be distributed across the states, so you can't just give California only some funds. It is also politically infeasible to give just California funds, most especially because a whole bunch of states don't want to pay for the other states. Even if it gets passed that, this is the kind of spending that is virtually guaranteed to increase consumer price inflation, which is a far worse problem than state budget shortfalls.
- elipsey 6y ago
  >> this is the kind of spending that is virtually guaranteed to increase consumer price inflation Why would this kind of spending increase CPI more than other kinds of bailout spending, and what kind of spending might it be? I guess TARP, QE, corporate bonds, etc., are buying things that consumers don't directly buy very much, so those programs didn't apparently cause lots of inflation of CPI indexed things. So what would this be buying instead? Could the fed buy things like municiple bonds, or maybe other debts assumed at the state level to provide liquidity and keep interest rates/ratings under control? I don't see consumers caring as much about the price of municiple bonds, for example, as food or houses or cars. I am a rank initiate in this area, so if I'm missing something I'd like to know more.

bigtechdataeng 6y ago

Let’s hold off on the idea that the California government is going to fade into nothing. From the linked article: “However, the report concludes that the projected deficit as a percent of general fund spending “is modestly smaller than the budget deficits faced by the state in 2003 and in 2009,” Also, I suspect there are a lot of Californians right now who trust their state leadership a more than federal leadership. (I am one of those people.)

generalpass 6y ago
I don't remember the details offhand, but there was that amendment that passed since then which changes what the state can do when it runs deficits. Both of those recession deficits were after years of economic decline. This economic decline is less than 8 weeks old. I was hyperbolic, but I'm not sure by how much. What we haven't seen yet is that Fauci and others have stated there will be regional lockdowns when there are "outbreaks". I suspect that as soon as the business community sees this, many more will just close up permanently, even if they aren't in the locked down regions because many can't survive another lockdown and are risking almost everything to open up now.
deleted 6y ago
[deleted]