Californians cannot find work anymore.

California’s unemployment rate jumped nearly a full percentage point from November to December, settling at 9.3 percent, the highest rate in 15 years.

Only a year earlier, in December 2007, unemployment was 5.9 percent, according to twin surveys by the California Employment Development Department.

My guess would be that double-digit unemployment is on the way by next month, February at the latest.  Because the greatest problem with state government is that the tax structure is too closely tied to a boom-and-bust economic cycle, with no stable revenue sources (2/3 just enforces that insanity), less jobs means less income tax revenue, so watch that commonly cited $41.8 billion dollar budget deficit number to expand greatly.  So a lot of money from that State Fiscal Stabilization Fund will just fill the hole between assumed revenues and reality.  Then people who are trying to count on any money source are going to get an IOU in the mail instead of their tax refund.

We.  Are.  Screwed.

The economic recovery that is currently being bandied about in Congress, particularly in the House, would deliver $4.5 billion dollars for infrastructure projects to California.  That’s 10% of overall infrastructure spending, which is in line with our population, but the overall pot for infrastructure is too small nationwide, and that kind of relief is not enough to make a dent in the budget nightmare.  The fact that money for tax cuts designed to snare Republican votes is crowding out infrastructure spending and job creation contributes to this, but the other problem is the deteriorating nature of our infrastructure, which could cost half a trillion dollars to fix properly.  All that money doesn’t have to come from the Feds, but with the bond markets unwilling to deliver for California until a budget solution is made, $4.5 billion over two years is a drop in the bucket, and the problem will grow worse.  This shows why floating bonds is a horrible way to fund government.

The report cites California’s dependence on bond financing as a chief reason the state can’t meet its infrastructure financing needs. California has increasingly used borrowing through state general obligation bonds to finance infrastructure projects. But the need for infrastructure investment far exceeds the capacity of these bonds, according to the report, Paying for Infrastructure: California’s Choices. Years of declining investment have left the state with crumbling classrooms, congested roads, and an aging levee network that puts many homes and businesses in harm’s way. Problems in the government bond market are making it more difficult to sell the bonds already authorized, and in the long term, large projected budget shortfalls will limit the state’s ability to rely on these bonds to meet California’s future needs.

We can of course see this right now, and the effects are widespread.  With the bond markets frozen, environmental projects all over the state have to be shut down, having a very real impact on the environment and public health.  Forget the more innovative projects we’d all like to see strengthened with fiscal investment – like the growth of the solar industry and even wave harvesting, the type of green jobs that can save our economy – we’re not even going to be able to clean the ocean this year.

If swimmers in Santa Monica Bay bump into trash or bacteria this summer, one culprit will be California’s budget impasse.

Hundreds of millions of dollars worth of voter-approved projects have been halted because of the state’s financial problems. That includes $12 million that the Santa Monica Bay Restoration Commission was counting on to prevent dirty storm water and filthy runoff from draining into the bay.

“People expect to be able to enjoy the beach and not come home sick,” said state Sen. Fran Pavley (D-Agoura Hills), chairwoman of the state Senate Water and Natural Resources Committee.

The money freeze has immobilized construction of new biking trails along the Santa Ana River in San Bernardino and Orange counties. It has stopped plans to tear down the Matilija Dam in Ventura County and restore the sediment-filled Matilija reservoir. It has impeded efforts to boost the populations of salmon and steelhead trout off the coast of Los Angeles and Ventura counties.

These are not small inconveniences.  A new report from Brigham Young University scientists shows that cleaner air, for example, has a direct effect on increasing the lifespan of a population.  There is a cost to bad borrowing.  If we can’t fund infrastructure, the ports and the oceans don’t get cleaned.  Smog reduction projects may shutter.  The air gets dirtier.  And you die three years earlier.

California’s delegation needs to push for General Fund relief in the recovery package, as well as federal guarantees for our municipal bonds, which would frankly jump-start projects faster than anything.  If it’s good enough for the banks, it should be good enough for California.

UPDATE: OK, the CBPP has a more comprehensive report, and the numbers are much more in line with current needs.  They predict that California will get $11.1 billion in increased Medi-Cal spending, and $7.8 billion from a new State Fiscal Stabilization Fund, in addition to the infrastructure spending.  That approaches $20 billion over the next two fiscal years.

Now THAT’S better.

Jim Sanders reports that tax increases are on the table for the Yacht Party, but only with additional long-sought concessions.  This actually is a shift because taxes weren’t even on the table before, but not much of one.

The GOP caucus realizes a tax hike will be part of any budget pact but could support it only if agreement were reached on permanent program cuts, a hard spending cap and other issues, lawmakers said.

“The reforms have to be there,” said Assemblyman Anthony Adams, R-Hesperia.

“(We must be able) to tell constituents, ‘Look, we had to raise taxes, we had to go forward, but we’ve fundamentally altered the way in which Sacramento is going to be budgeted – and we will not have these problems again because of it,'” Adams said.

Obviously the wavering from business groups who are frightened by the prospect of the state’s looming insolvency is driving this.  But let’s take a look at what the Yacht Party wants as an exchange for their support on taxes, which would probably be regressive ones like sales tax hikes instead of the progressive tax solutions needed like eliminating loopholes for businesses and upping the top marginal rates on the wealthy.

They want a spending cap.  They’ve wanted it for some time.  In fact, it already EXISTS, and it has for 30 years.  But the Yacht Party wants tighter restrictions.  The CBP blog has provided a chart showing what they really want.

The chart shows how much state spending would have had to been cut in the past decade to comply with the kind of cap that Republicans have offered in the past.

Our analyses found that such a cap would have limited total state spending in 2008-09 to $39.7 billion below actual budgeted levels. The General Fund’s share of the necessary reductions would be $31.2 billion. What would it take to cut $31.2 billion out of the General Fund budget? Eliminating all General Fund support for higher education; the judiciary; child support services; health care services; resources – including fire protection; and environmental protection. Maybe that’s why the campaign to modify California’s original cap was led by then-Governor George Deukmejian, then California Chamber of Commerce president Kirk West, and then-California Taxpayers Association president Larry McCarthy.

So the price exacted for revenue increases is an end to basically every service California provides.  At that point, who needs the revenue increases?

Of course, the Yacht Party would have to get voter approval for a spending cap, so it’s a gamble for them.  But this movement should not be confused with a serious desire to actually serve the needs of a struggling citizenry.

Democratic legislative leaders are in Washington today arguing for increased stimulus money for California.  I’ve been arguing that this is required for some time, and hopefully it will be done in such a way that a) it can be applied to the General Fund deficit (so far Arnold has not asked for budget relief in that way) and b) it can be used without up-front money that will be matched, because the cash crisis limits our ability to do that.

However, there is something else that the Obama Administration can do right away to help the bottom line of the state and its citizens, and that is deal with the crisis in the housing market here.  It’s no secret that California is one of the hardest-hit states by foreclosures; in Stanislaus County, for example, 9 percent of all houses and condos in the county have been foreclosed upon, a staggering figure.  That’s almost $4 billion dollars worth of foreclosures in Stanislaus alone.  In larger counties like San Bernardino and Riverside, you can see how this foreclosure crisis affects new housing starts (there are a glut of cheaper foreclosed homes on the market) and thusly unemployment figures.

Only four years ago, Riverside and nearby San Bernardino, often called the Inland Empire, were California’s economic powerhouse, accounting for more than a fifth of the state’s new jobs. Today, unemployment reigns in the sprawling region east of Los Angeles. The 9.5 percent jobless rate in the two counties matches Detroit’s as the highest of any major metropolitan area in the U.S.

Although there was a surge in construction employment in the U.S., and about a 50% increase in California (as a percent of total employment), construction employment doubled (as a percent of total employment) in the Inland Empire […]

With the housing bust, the percent construction employment has declined sharply and the unemployment rate has risen to almost 10%. Is it any surprise that jobless rate in the Inland Empire matches Detroit’s as the highest of any major metropolitan area in the U.S.?

Nobody is calling on the federal government to prop up a sick housing market that will not see a broad recovery for a while.  But foreclosures have a disruptive effect on the greater economy.  They hurt property values, they hurt banks, and they hurt employment.  The crisis is only slated to grow if nothing is done, with homeowners of every income class affected.  And so foreclosure aid would be a major boost to California, and it can be done both quickly and effectively.  By pledging that $100 billion from the TARP program will go to limit foreclosures, Obama has already begun this effort.  Ted Lieu thinks that the Obama Administration understands the nature of the problem. (over)

Time is of the essence. I commend the incoming Obama Administration for pledging up to $100 billion from the Troubled Assets Relief Program (TARP) to help distressed homeowners stay in their homes. In California, which has the highest number of foreclosures in the nation, we experience one foreclosure filing every 30 seconds to 1 minute. The TARP funds, which the U.S. Senate recently released, should be immediately put to use to rescue homeowners from foreclosure. Our economic recovery will not begin until we slow down the astronomical rate of foreclosures and stabilize the housing market.

Strategic direction is of the essence. The haphazard strategy of the Bush Administration’s use of the initial $350 billion in TARP funds resulted in the following: more foreclosures, less market confidence, and zero benefits for the ordinary citizen. How does giving yet another $20 billion to Bank of America so it can complete its purchase of Merrill Lynch’s brokerage arm help anyone on Main Street? Answer: it doesn’t. The only people this TARP money under the Bush Administration has been helping have been Wall Street firms. It is time for change and January 20th cannot come soon enough.

State efforts are of the essence. Helping our economy recover will require the combined efforts of both state and federal resources. In California, I introduced the California Foreclosure Prevention Act to provide immediate foreclosure relief. This Act imposes a foreclosure moratorium, but allows lenders to avoid the moratorium if they have a comprehensive loan modification program designed to keep people in their homes. Swift passage of this Act will complement and enhance proposed federal efforts. We need action and we need it now.”

However, more needs to be done.  Earlier this month, Democratic Senators got Citigroup on board for what is known as “cramdown” legislation, which would allow bankruptcy judges to restructure mortgages that would give homeowners the ability to pay them.  The lenders take a haircut but it’s a better situation for them than foreclosure, and those who get to keep their homes can continue to contribute to the economy.  It’s a great idea and a major step toward reforming the hideous 2005 bankruptcy bill.  Yet despite supporting it, Obama’s team doesn’t want to include this reform in the economic recovery package, which I think is a mistake.

President-elect Obama and his advisers are resisting attempts to include a provision in the economic stimulus bill backed by congressional Democrats that would allow bankruptcy judges to shrink mortgages.

In a hastily convened Democratic Caucus meeting last week, Obama economics adviser Jason Furman made it clear to lawmakers that Obama thinks the so-called “cramdown” provision would cost GOP votes and endanger bipartisan support in the Senate.

He committed to dealing with the issue after the bill passes, as did House Speaker Nancy Pelosi (D-Calif.).

Lead supporters of the cramdown provision say the time to deal with the issue is now. Rep. Jerrold Nadler (D-N.Y.) said it’s worth losing some Republican support to help homeowners.

“I would take that risk,” Nadler said. “I don’t think you’re going to get a lot of Republican votes anyway.”

This is absolutely correct by Nadler, and risking a few votes on the margins is no reason not to limit foreclosures now.  There is an urgency here, because each foreclosure hurts the housing market more and makes it less liable to recover quickly.  We cannot wait a few months for the sake of political expediency.  Cramdown needs to happen fast, particularly for us in California.

I just heard Will.I.Am on NPR talking about education cuts in California.  The budget crisis has gone mainstream.  And once everyone gets the news that tax refunds, welfare checks and student grants will be suspended because the state is out of cash, a whole lot of other people might get some awareness as well.  The dirty little secret about “liberal bastion” California is that we are not a civically engaged people, generally speaking.  The budget has been in “crisis” for decades but not enough Californians have mustered up the interest in it.  We have right-wing astroturf movements that play to base emotion, but not really citizen’s movements that ask for basic fairness.  Californians are 45th in the country in volunteering, 44th in attending community meetings and 45th in working on community problems.  Chalk it up to traffic or self-absorption or what have you, but the general take is that Californians don’t see much beyond what is in front of them.  IOUs would change that.  Well, maybe.  It depends on if the banks will accept them, which is still being negotiated.

The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the elderly, blind and disabled; and $13 million in grants for college students.

Even if a budget agreement is reached by the end of this month, tax refunds and other payments could remain temporarily frozen. Chiang said a budget deal may not generate cash quickly enough to resume them immediately […]

State officials have already designed an IOU template, Chiang said, and have been negotiating with banks over whether taxpayers could cash or deposit them if they are issued. The state could be forced to pay as much as 5% interest on delayed tax refunds if they are not paid by the end of May, Chiang said.

The last time the state issued such IOUs — the only time since the Great Depression — was in 1992.

In other words, the only way this delayed tax refund is going to work is if it causes MORE debt for the state.  But let’s go back to 1992.  This was the last big recession in the country, and California again found itself unable to pay its bills.  Tell me again how the budget problems aren’t structural.  Anyway, the state issued about $350 million in IOUs that year, about 15% of what is being prepared today.  The process was not smooth:

IOUs have caused headaches for the state in the past. California issued $350 million worth of IOUs to 100,000 recipients in 1992 during a budget impasse between then Gov. Pete Wilson and the Legislature.

A four-year legal battle ensued after some workers had trouble cashing them. The dispute was settled in 1996 with some state workers getting paid time off for the inconvenience they experienced.

Beth Mills, a spokeswoman for the California Bankers Association, said individual banks statewide haven’t decided yet whether they will accept the state IOUs this time.

Banks are barely willing to lend money, I just don’t think they’re going to be interested in accepting $2.3 billion in IOUs when the process was so difficult last time, and there is more uncertainty in the financial markets now.  And even if they do, it will not be uniform across all banks, and customers are going to have varying experiences.  

The State of the State speech that nobody watched proved the need for fundamental reform, but it generated barely a blip among non-elites.  Having trouble cashing your disabled mom’s assistance payment, that’s a whole different story.  Not to mention the fact that the continued erosion of jobs and the 5,300 public works projects that have been delayed by the state will create a lot of angry and idle minds.  Of course, the cautionary part of this is that the 1992 IOUs did not lead to structural reform.  However, we all can agree that this is a much bigger problem.

Pitchforks and torches may be at a premium.  And while it’s hard to write a new Constitution in a riot, something needs to shake up this decayed and dysfunctional system.

Bipartisan death cultists love to tell us that the real problem in California is that gerrymandered seats lead to extremists of both sides in safe elections, and that no opposition can win in such a rigged game.  Thanks to the Swing State Project and some dedicated individuals who have done the work, we can now pronounce that myth dead.  Completely dead.

Volunteers processed county-level information to come up with the Obama/McCain split in virtually all California Congressional districts.  Fresno, Madera, San Joaquin, Santa Clara and Ventura counties have yet to release the county-level data, so we’re missing a few districts, but hopefully that information is forthcoming.  What we can already view, the data for 43 of the 53 districts, is stunning.

Obama won 34 of those 43 districts, including 7 held by Republicans.  He just missed in CA-46 (McCain was under 50% and the spread was less than 5,000 votes).  Also, seven of the 10 currently unknown districts are held by Democrats, and I’ll bet CA-24 goes blue as well, or at least close to it.  I think we can say that Barack Obama won or was extremely competitive in 43 of the 53 Congressional districts in the state.  Here are the 7 GOP-held districts where Obama won:

CA-03 (Lungren): Obama +1,600 votes

CA-25 (McKeon): Obama +3,000 votes

CA-26 (Dreier): Obama +12,000 votes

CA-44 (Calvert): Obama +2,500 votes

CA-45 (Bono Mack): Obama +13,000 votes

CA-48 (Campbell): Obama +2,500 votes

CA-50 (Bilbray): Obama +14,000 votes

The data I’ve wanted is the downticket ballot dropoff stats, and now we have them.  I’ll list it for these seven key districts, plus CA-46 (Rohrabacher), which Obama nearly won.  These are rough estimates of the total number of votes in the Presidential contest and the Congressional contest for each district:

CA-03 Presidential 336K votes; Congressional 314K votes

CA-25 Pres. 271K, Cong. 250K

CA-26 Pres. 292K, Cong. 267K

CA-44 Pres. 269K, Cong. 253K

CA-45 Pres. 276K, Cong, 266K

CA-46 Pres. 303K, Cong. 285K

CA-48 Pres. 330K, Cong. 308K

CA-50 Pres. 329K, Cong. 313K

Though it may have made a small difference at the margins, the ballot dropoff is relatively small, actually, and to be expected to a certain extent.  Some people are just going to come out for the Presidential election, on both sides.

But what is indisputable from these numbers is that Democrats can win in California in virtually every district, even when they are “hopelessly” gerrymandered.  The shifts from 2004 to 2008 are quite incredible and represent a realignment.  In ’04 Kerry lost CA-03 58-41.  Obama won.  Kerry lost CA-25 59-40.  Obama won.  Kerry lost CA-26 55-44.  Obama won 51-47.  Etc.  You can check the numbers for yourself.

There’s only one Congressional candidate who outperformed the top of the ticket and that’s Charlie Brown.  Obama lost CA-04 54-44.  Therefore it’s untrue that, even in unfriendly areas, there is no Democrat that can make a race competitive.  The right Democrat can win in any seat in California.  And I think the numbers would bear this out in the Assembly and Senate as well.

The “hopelessly gerrymandered” line is an excuse.  An excuse used by elites who are pretty happy with the status quo and don’t want the crazy libs having a working majority in the legislature.  An excuse used by those in Washington who don’t want to spend money on expensive California races.  It’s a pernicious excuse because it restricts progress and leads us to the brink of crisis.  But it’s an excuse, nonetheless.