The letter business raises a smile or two. But the outlook for California looks desperate from this side of the pond. I've been doing a bit of research, and things do not look too rosy for the worlds 9th largest economy.have come up with the following pessimistic view point.
After Schwarzenegger signed the current year’s budget in September, the financial deficit has ballooned. Since then, the governer has called lawmakers into three special sessions and twice declared fiscal emergencies. On Jan. 7, he vetoed the only plan that has reached his desk from those special sessions.
Schwarzenegger’s fellow Republicans have blocked his proposal to raise taxes, which requires a two- thirds majority vote. And as the Democrats control both chambers of the Legislature,and are not too keen on spending cuts, things are at a bit of an impasse. .
Schwarzenegger had proposed a mix of spending cuts, tax increases and borrowing, as well as an economic stimulus package, efforts to curb home foreclosures and streamline government operations. But now, apparently, state finance officials are preparing to withhold payments to thousands of vendors and say they will likely have to issue IOUs to people who are expecting tax refunds.
To conserve cash, Schwarzenegger has ordered state offices shut for two days a month and all workers to take two days of unpaid leave each month. The impasse forced a state panel on Dec. 18 to halt funding for $3.8 billion of construction on schools, roads and other public works, a decision officials said might cost tens of thousands of jobs. “So now the bulldozers are silent. The nail guns are still. The cement trucks are parked,” Schwarzenegger said. “This disruption has stopped work on levees, schools, roads, everything. It has thrown thousands and thousands of people out of work at a time when our unemployment rate is rising.”
California, the biggest borrower in the municipal market, shares with Louisiana the lowest credit ratings among the states because of perennial fiscal shortfalls and legislative gridlock. It is rated A+ by Standard & Poor’s and Fitch Ratings, the fifth-highest grade, and an equivalent A1 at Moody’s Investors Service.
Are things really that bad over there?
?