George Rebane
For the last years I have been telling RR readers that California was heading toward becoming a ward of the federal government – in short, federalized (e.g. here). As with many major and momentous changes, I believe this was apparent to anyone who had a facility with arithmetic, and understood the basics of how wealth is produced. It turns out that such skills are at a premium, hence we bloggers do provide some modicum of early warning and added value to the received wisdom from the mainstream (and lamestream) media.
One of these major media outlets in California is, of course, the LA Times. And the worthies down there are finally starting to put things together. In their 4aug11 issue they report –
The dirty little secret is that California’s current state budget is not $85.9 billion, the size of the much-debated, deficit-plagued general fund. You’ve got to add in the special funds ($34.2 billion) — much of them fed by fees dedicated for specific purposes — plus bond money ($9.4 billion). That totals $129.5 billion, but it still ignores federal dollars.
The real state budget includes an additional $79.2 billion in federal largesse, representing 38% of total state spending. This brings the grand total to $208.7 billion.
So the state of California is getting a nearly $209-billion spending program while putting up less than $130 billion itself.
So that is how far things have progressed. The state’s socialists still crow in satisfaction that California sends more dollars to Washington than we get back. While that is true, we must remember that those dollars are sent there under extreme duress (aka at gunpoint).
And what really seals our fate is that every one of those federal dollars comes back with an ‘owner’s manual’ telling us exactly how it should be disposed of and/or spent. The only leeway that the feds have left for us in Sacramento is the ability to continue hurting ourselves in every imaginable way possible. And this our legislature and governor are doing with a relish as they proudly demonstrate California’s “leadership” in how a state can mismanage its affairs. Soon Washington will even take that away from us and assume our comprehensive mismanagement from across the country.
Please stay tuned. (H/T to RR reader for the link.)
[update] A reader just emailed me the following story in the 3aug11 City Journal on the federally funded California high speed rail boondoggle. Such screw-ups in policy and execution continue bathing California, and this is just one of many examples illustrating the points made above of how two levels of government collide in costly incompetence.
And reader georgef (see his comment below) emails that –
… this is the “plain language” version of the new GASB-35 (Download GASB-35 Plain Language 7-28-11 Pension Accounting and Financial Reporting) standard. The previous drafts have been circulated for years; you can see the compromises necessary to get this result.
The discount rate topic is probably beyond the average reader but it is the essence of this level analysis. The actual upper limit of a pension cannot be predicted due to spiking, use of unused vacation, and sick time which boost the last year of a retroactive calculation.
The triggering event will be the required disclosure of GASB-35 amounts about the same time as the federal financing is reduced. The ability to borrow will be very limited.
That this California debt can only be handled by the feds – either by hopeless lending or destroying the dollar – should give some pause to those readers who consider it hyperbolic that California is already federalized.
rebanesruminations.com 
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