The Kahli-fornia GREAT DEPRESSION of the Early 21st Century

Discussion in 'Archive: The Senate Floor' started by ekimnotslar, Apr 23, 2010.

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  1. ekimnotslar Jedi Knight

    Member Since:
    Jan 24, 2007
    star 3
    Please note the following fluid, disputable, but most current BAD MATH facts in current circulation as of April 21st, 2010:

    #1. The California State Deficit for the next fiscal year starting July 2010-2011, is somewhere around $20 Billion. That is roughly TWICE as bad as last budget year 2009-2010 (which was $8-$9 Billion, give or take a BILLION dollars). This coming California state budget battle will be the worst in our state?s history. Potential state layoffs approach 5000-10,000 state workers. The legislature refuses to address current numbers until June, after a number of state elections because several seats are contested that could be negatively impacted by deep cuts before the elections. We will likely get a state budget late, approaching August, and it will be a knock-down, drag-out fight to preserve programs that will be completely eliminated because there is NO money. Sacramento County will probably lay-off between 600-1000 workers, depending upon their final decision end of this June.

    #2. The Sacramento County Deficit for the next fiscal year starting July 2010-2011, is somewhere in the vicinity of $166.5 Million, but can hit $209 Million factoring loss of matching federal and state funding for programs we cut. That is BEYOND TWICE as bad as our last budget year 2009-2010 (which was $80 Million, but county had to add another $14 Million this February to balance it until this July). Whatever the County decides, the State can and will (it did last year) scoop their big hand in and raid county and city coffers to balance the state budget. Last year they only took set aside redevelopment money. But much of the state and local fat was trimmed last year. Much of what remains is muscle (employees) and bone (infrastructure and programs). That means deeeeeeep cuts to services and layoffs.

    #3. The most current housing market study shows that the top FOUR states with home foreclosures are holding approximately 70% of empty foreclosed homes OFF THE MLS listing market. Yes, California is at the top of that foreclosure list. This means when you shop for a home now, you are only seeing 30% of available homes. The 70% in hiding are part of what is now referred to as ?the shadow housing market?. I kid you not. Google it, and follow that trail. When the Sac Bee printed on the front page of the daily on April 21st, ?Sacramento-area foreclosures decline?, I am concerned that they are concealing SO MUCH OF THE ICEBERG that we are about to hit. How long can banks hold onto homes before the dam bursts and all of them are dumped on the market? I know it would be painful for them to just put them all on the market because all of our housing values would plummet, but fellow Californians, fellow Americans, this market manipulation is a very large part of what got us all into this mess in the first place!

    #4. In 2008, 1.2 MILLION existing ?interest-only? financed homes were REFINANCED on the interest-only scheme for another 4 years. That means that in 2012, 1.2 MILLION interest-only loans will come due for full monthly payment. Translation: 1.2 million Californians will have to pay twice as much per month (or more?) to maintain their home loan. This is a giant foreclosure bubble that no-one wants to talk about, but it is a BIG storm on the horizon.

    #5. This July, Sacramento County will be forced by law to reduce or devalue commercial property tax values by 50%. That means, Sacramento County will collect HALF the revenue it used to from local commercial property owners. Unknown fiscal impact, but probably significant deficit hit for the 2011-2012 Sacramento County fiscal year.

    #6. Unemployment is currently 13.1% in Sacramento Region, and over 12% for California overall. After ALL the budget cuts this summer 2010 (starting in July for Sacramento County), I predict that we could see unemployment approaching 20% by the end of THIS YEAR. When government workers get laid off from medium to high paying jobs, they don?t spend money at local stores and restaurants, don?t use local services (limousines, caterers, etc.) and
  2. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    California is one of the world's biggest economies, and its state problems are proportionally larger than those of other states. But other states, I know most about Illinois, are in similar holes.

    I've argued that we're going to need another round of Federal bailouts of states, which in the current political climate is going to be very problematic, or we're going to have to essentially let a number of state governments default on their debt.

    This problem is also echoed in the EU with Greece's current fiscal woes and controversy around the extent to which the EU will bail them out.

    Low and others have argued too that one of the things we probably desperately need nationwide is lots and lots of foreclosures. We need more foreclosures rather than wave after wave of programs to subsidize home buying and keep people in homes that they fundamentally can't afford. Families in homes they can't afford need to move out and find housing that they can afford. There's a lot of delaying the inevitable going on.

    So, I don't see a serious economic recovery in progress. For good or bad, the federal stimulus and bailout programs have worked to make the economy, in the immediate term, look a lot healthier than it really is. Banks are now earning huge profits from free money they've borrowed directly from the Fed/Treasury.

    The unemployment picture is not really improving, and new home sales are dependent directly on stimulus. Add to that energy prices. Oil and commodity prices will continue to trend up as long as it looks like there's still some life in the global economy. Eventually, gas prices will start to hurt consumers again.

    Also, there's still billions out there in bad home equity debt and consumer credit. Taken as a whole, it will take states like California a decade or longer to claw their way back into solvency, if indeed it ever happens.
  3. Mr44 VIP

    Member Since:
    May 21, 2002
    star 6
    At least California is no Illinois with regard to its financial savy. (or lack thereof) But on the upside, Illinoisians at least get to be distracted by a circus of a trial and reality show to boot.
  4. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    Perhaps Illinois should pilot a program that would send its politicians to jail for a short stint before they take office, just to get it out of the way.
  5. ekimnotslar Jedi Knight

    Member Since:
    Jan 24, 2007
    star 3
    Ooohhh thanks guys! I needed to get that off my chest! I don't get to talk about it at work anymore, because we are facing Lord knows how many layoffs AGAIN this July and I don't want to be "mr gloom and doom".

    To be honest, as a taxpayer (even while I am a 12 year county government employee), I think the whole thing should be FORCED to crash and reset from the true rock-bottom level. I believe this holding on to houses in a "shadow market" is deceitful and greedy on behalf of banks, and will result in a worse folly to follow when we have yet another BIGGER round of foreclosures from the biggest wave of government layoffs yet. This all makes each successive year worse until it really does bottom out.
  6. DeathStar1977 Jedi Master

    Member Since:
    Jan 31, 2003
    star 4
    Hi everyone. It's been a while and I hope everyone is doing well.

    But for how long? Solutions anyone? We in Sacramento could reeeeeeally use your help

    I also live/work in Cali.

    Either a second stimulus from the Feds or an adjustment of the first to provide state aid would help a lot. Some economists have been calling for that from the beginning.

    My understanding is that the bank bailout has come in much lower than expected, perhaps some of that could be redirected to the states.

    If not, very difficult choices are going to have to be made. We (Cali) already have high taxes and any more increases (our sales tax can be as high as 10.75%), particularly those that are regressive, could only delay the recovery.
  7. Alpha-Red Force Ghost

    Member Since:
    Apr 25, 2004
    star 5
    I read something a while back that mentioned that Proposition 13 along with the initiative process was what's wrecking California's budget, and that no other state has this combination. I forgot, how does this work again? Are people voting for more state projects and then not letting the legislature tax them for it?
  8. Lowbacca_1977 Force Ghost

    Member Since:
    Jun 28, 2006
    star 6
    There's a factor of that, but what is also ignored is that, say, in the last 5 years the budget problems have worsened....
    In 2004-2005, the general fund state revenues were $77.3 billion.

    In 2009-2010, the general fund state revenues were $89.5 billion. Just accounting for inflation would be $87.3 billion.

    So revenues have increased faster than inflation, but spending, generally, has yet to really be addressed. I'll try to crunch numbers more thoroughly later.
  9. shanerjedi Jedi Master

    Member Since:
    Mar 17, 2010
    star 4
    One would like to say there was another way but unfortunately it's not that way. I agree with Lowie. These short term fixes are merely keeping people into housing when they otherwise would be good, solid renters.

    Completely anecdotal, but I have an uncle who has lived in California since 1976. He first lived in the SF/Bay area in the 70's/80's, then in the Palm Springs area since 1990.

    He is leaving California this Summer and moving to Utah or Colorado. He's had it with high taxes, illegal immigration, budget crises, and just the overall mess that has come to define California politics. So he's packing up, taking a loss on some of his properties in that state, and getting out of it completely.

    This is a guy who helped develop the Embarcadero Ctr. in downtown San Fran. He was a dedicated Californian I thought for life.

    But people are reassessing. They're not the only game in town anymore.




  10. Lowbacca_1977 Force Ghost

    Member Since:
    Jun 28, 2006
    star 6
    Well, not even necessarily that. The greater issue is that real estate in California costs way more than it should. It's outpaced the increase in value that was the national average, and so the problem is, moreso, that by supporting the high prices, you're pricing people OUT of home ownership and preventing corrections in value to leading to housing prices in California dropping, which would mean people could get the same size houses they currently have, but for cheaper, so that it doesn't require such a huge percentage of someone's budget. It's a bubble whose time has come to burst and drop in value so that people can be able to afford houses. The drop we've already seen has allowed a large number of people I know to be able to become first time homeowners here, because the prices have dropped to become more affordable.

    This has been going on for the last several years. It's not just anecdotal, it's statistical. More anecdotal, my dad has had many companies he used to do business with shut down and leave the state as well, because businesses have been doing the same migration out as people have. It's something that really isn't discussed here because there's a bit of a refusal to note that Americans are moving out of California more than they're moving in.

    This is a guy who helped develop the Embarcadero Ctr. in downtown San Fran. He was a dedicated Californian I thought for life.

    But people are reassessing. They're not the only game in town anymore.




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  11. ekimnotslar Jedi Knight

    Member Since:
    Jan 24, 2007
    star 3
    I am concerned that what got us into this mess is going to come back to haunt us ten-fold. The housing market was the driver on this run-away math, and the housing market-crash got banks lots of money to bail them out. I believe the feds were wise to help the banks. However, examining all the influences upon the housing market in Kahli-fornia (Arnold made much of his foundational wealth by investing his movie profits in REAL ESTATE, bye the way :cool:), I am afraid the banks are handling this in a way that will eventually explode in their (and unfortunately OUR) faces.

    If you google "shadow housing market", you will see that banks are holding around 70% of available homes OFF THE MARKET, to keep housing prices from plummeting anymore and further devaluing homes. Unfortunately, I am afraid the new "foreclosure slowing" bubble is going to pop when California state and local government lays-off tens of thousands of tenured employees (teachers, cops, middle managers, front line workers in CPS and tons of other critical jobs). I believe they will ALL lose their homes, because all the hi paying jobs these folks are used to are gone now. There will simply be no way they can make their house payments, and they will have to walk away from their homes.

    I fear we will see (for the first time in this state's history) a mass EXODOUS of Californians, forced to leave because their are no hi paying jobs. They will leave another round of empty foreclosed homes. That means even LESS local government revenue. I know cuts save money initially, but the loss of income and property tax revenue will CONTINUE TO BE STAGGERING, I fear.

    I do not believe the California economy has hit rock bottom, and I think we have another 2 years at least of "HAMMER TIME". Especially if Meg Whitman gets elected- she wants to slash government worker jobs like noone ever has. Her ebay mogulness is gonna break California's back, in order to try to save the system. Maybe that needs to be done to "right the ship", but it is really gonna hurt if you live in California.
  12. shanerjedi Jedi Master

    Member Since:
    Mar 17, 2010
    star 4
    And you want to stop that from happening by keeping government, and thus taxes, at their current levels? The taxpayers are the ones who are leaving your state.

    You will find a government apparatus with a quickly shrinking tax base to draw from. Thus, taxes will increase to continue benefits for entrenched public employees, accelerating the exodus.

    Whitman sounds like a sound, rational option. And so I expect her to lose. California is too far gone to stave off financial meltdown IMHO.

    edit on a positive note: maybe post meltdown I will finally be able to afford that home in Sausalito I've wanted for so long? [face_mischief]


  13. Lowbacca_1977 Force Ghost

    Member Since:
    Jun 28, 2006
    star 6
    It's already happening. At least among U.S. citizens, more moved out of California than into it. I think birthrate and international immigration are the only factors that are keeping population growth in the positive now.
  14. shanerjedi Jedi Master

    Member Since:
    Mar 17, 2010
    star 4
    It's a sad state of affairs in a once great state that the argument of the high paying jobs to be lost are said to be ones in the public sector.

  15. ekimnotslar Jedi Knight

    Member Since:
    Jan 24, 2007
    star 3
    Actually, google "bank of america repo", and use BofA's repo listing to see if you may ALREADY be able to afford a Sausalito home (most of those homes are NOT on the MLS). My wife and I are looking at investment properties now, and even homes near the ocean in ... shhhhh[face_shhh] ... the Big Island of Hawaii :eek: . And homes are only gonna get cheaper (yes, even mine).

    Regarding government shrinking in Cali, I work for a northern California county, and I'm telling ya we need to cut, cut, cut. The best way to correct all of this is to shrink government (EVERYTHING, even sacred cows like public safety where I work). That means layoffs, and it hurts everybody. But we aint gettin outta this without deep cuts, so let's go ahead and embrace the horror and get it over with. If you got bad cancer, you go all-out and remove as much as necessary to save you. That is what Cali has to do to save itself, and the people of California. And it is gonna hurt. Bad. :_|
  16. ekimnotslar Jedi Knight

    Member Since:
    Jan 24, 2007
    star 3
  17. ekimnotslar Jedi Knight

    Member Since:
    Jan 24, 2007
    star 3
  18. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    In Illinois it's going to be all about ratcheting down pension plans for state employees. Difficult thing to do without having the seniors descend on Springfield with the pitchforks and the torches (nicely tucked into the front baskets of their motorized scooter chairs of course).
  19. shanerjedi Jedi Master

    Member Since:
    Mar 17, 2010
    star 4
    Jabba, your scooter comments just reminded me of that Seinfeld episode! [face_laugh]

    ekimnotslar, I agree that needs to be done at all levels of government, but I'm not as optimistic as you. I tend to think things will get much worse before they even start the fiscal austerity measures necessary to revive Cali. That's why I said it was too late for Cali. It's too late to avoid hitting bottom IMHO, but it doesn't mean things are over. Far from it. In fact, as I noted about Sausalito, there will be people who may move to the state who never were able to before because of the high housing prices in many areas.

    There may be a silver lining.
  20. ekimnotslar Jedi Knight

    Member Since:
    Jan 24, 2007
    star 3
    Oh boy. I am gonna definitely give myself away as a rebel now. I am in public safety here, and our retirement is 3%@50. It is great, and you can really milk the system if you stick around for 33 years- You can actually retire and get paid more NOT working than working. If you start at age 21, you can work until 50 (29 years) and still make more than working because it's retirement money and taxation is different. And, before last years economic crisis, retired guys cud even return and make like $25k a year working part time as a retired annuitant. So, most cops would retired and come back and double dip. It was good for the department because they saved money on benefits, and the retired guys made more per hour because less withholdings. Yeah!

    Uh-oh, turns out my great retirement is NOT SUSTAINABLE. Not enuf employee contribution. So now we are back to earlier point about compensation for government workers far exceeds private sector. The quickest solution to the retirement adjustment is (forgive me all my fellow governement workers) ... go deep with layoffs to rectify as much of the imbalance as they can to restore wut you promised the people who already retired (yes, even if it means I get laid off with 12 years of service). And then significantly change the system for ALL NEW EMPLOYEES. Fix it next budget year, or NOW, if you will. Our county has the chance to do that now, but we'll see if they got the guts.
  21. Jabbadabbado Manager Emeritus

    Member Since:
    Mar 19, 1999
    star 7
    No, they do not have the guts. Pension rights battles will bring down entire state governments. No one is desperate enough yet to take it on, particularly if there's an opportunity for additional Federal bailouts, the way the EU is trying to strike a balance between a massive bailout for Greece and imposing austerity measures. How deeply is Greece going to cut into its own flesh when it knows that the EU absolutely cannot let them go down and leave the Euro regime?

    Ultimately state employee pensions will lose out to angry taxpayers faced with the possibility of tripling or quadrupling of their state income tax.

    I saw one analysis suggesting that balancing the Illinois budget at current spending levels would require an 8% personal income tax. Not an 8% increase. An 8% tax. That would basically bring about the End of Days in Illinois in terms of upending state politics.
  22. ekimnotslar Jedi Knight

    Member Since:
    Jan 24, 2007
    star 3
    Wow. I actually agree with you: I also believe things WILL get much worse for us, Shanerjedi [face_worried] . I think we need to cut everything drastically this year (and next year too, if still really short revenue) to expedite the drop to the TRUE bottom, so we don't have to keep dragging this out. We need to reset all the property prices to a rock bottom, reset everybodies pay and retirement benefits (we can still honor those who are "vested", and salvage things so new people coming in pay a sounder share) to reflect sanity, and face the fact the we are gonna be in a full-blown depression starting this Fall.

    The silver lining is that we will all be better off with realistic home values, and a chance to renew the business world with less cumbersom regulations, etc. We cut DEEP, sink more, then flood the economy with FED relief money (1/2 of the original allocations have NOT been spent), reduce government labor costs, and restart with a fresh perspective.
  23. Mr44 VIP

    Member Since:
    May 21, 2002
    star 6
    Ultimately state employee pensions will lose out to angry taxpayers faced with the possibility of tripling or quadrupling of their state income tax.

    Jabba, I'm not sure if you are aware, but state pensions are mentioned specifically in the IL state Constitution:

    ARTICLE XIII SECTION 5. PENSION AND RETIREMENT RIGHTS
    Membership in any pension or retirement system of the
    State, any unit of local government or school district, or
    any agency or instrumentality thereof, shall be an
    enforceable contractual relationship, the benefits of which
    shall not be diminished or impaired.


    Existing pensions can't be modified or reduced without first holding a Constitutional Convention. The state can only set the terms of the contract before a person is hired. That's the reason why the new pension law only applies to anyone hired after Jan 1, 2011. However, anyone in the pension system, even by 1 day can't have the terms modified.



  24. shanerjedi Jedi Master

    Member Since:
    Mar 17, 2010
    star 4
    I wouldn't be surprised if Cali had a similar measure in their Constitution.

    And pensions will continue to be the real question. We can talk about trimming government, but that's going forward.

  25. Mr44 VIP

    Member Since:
    May 21, 2002
    star 6
    Just to add, I think it's a good clause overall. It's just that for a while the teacher's union allowed for huge increases in long term salaries for soon retiring educators. Some public teachers in their last 3 years would see 30% or more increases in salaries, which in turn, increased their pensions by a quarter. The state legislature passed a law that any salary increase beyond a set amount would have to be paid by the individual school district:

    EXAMPLE HERE

    The IL teacher's union is a powerful one in IL.
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