You won’t get much argument here that the budget “plan” has a few holes. Beyond the fact that the plan hinges on getting $1B+ for a state worker’s compensation fund that seems unrealistically optimistic, there is a bunch of borrowing and gimmicks in the deal that will leave us vulnerable in coming budget years. My guess? We’ll be back talking about the budget in October or so.
But, a report by the credit rating agency Moody’s puts a specific number on it: $15 Billion.
The plan signed by Gov. Arnold Schwarzenegger this week to balance the state’s budget could leave California facing shortfalls in future years of more than $15 billion, according to an analysis released Thursday by a major Wall Street credit rating firm.
Moody’s also criticized California’s plan to take more than $1 billion from counties’ redevelopment agencies this year to help close its $24 billion deficit, saying that could jeopardize those agencies’ credit ratings.(SF Ch ronicle 7/31/09)
Such a number wouldn’t really shock anybody in Sacramento either. After all, there were a slew of stories after the signing of the deal stating this exact notion of the deal not actually closing any big budget gap. Besides the fact that the deal was full of gimmicks, there’s also the fact that California’s economy is still struggling, and the massive cuts in state spending will only amplify the problems we already have. Problems like the continued busting of the housing bubble.
About 1 in 10 Californians with a home loan is now in default, and there’s growing evidence that the mortgage meltdown is spreading to commercial real estate.
The home mortgage delinquency rate — the percentage of borrowers who have missed several payments and are in the first stage of foreclosure — climbed in June to 9.5% in California and 9.9% in Los Angeles County, according to First American CoreLogic.(LA Times 7/31/09)
And furthermore, the rate of foreclosures in the region most affected by the state budget cuts, the Sacramento area, is also shooting up. We still have a ways to go before we get through this economic mess. And the Hooverism of the latest budget deal only exacerbates these problems.