California goes broke, halts $3.5 billion in payments

I said many, many times that the U.S. is broke.

Things are much, much worse than you have been told.

This will be the ‘Greatest Depression’.


California, the eighth largest economy in the world, is broke.

“People are going to be hurt starting today,” said Hallye Jordan, speaking on behalf of the state Controller. “There’s no money.”

Since state legislators failed to meet an end of January deadline on an agreement to make up for California’s $40 billion budget gap, residents won’t be getting their state tax rebates, scholarships to Cal Grant college will go unpaid, vendors invoices will remain uncollected and county social services will cease.

At least, temporarily. Services and payments will resume once state legislators come to an agreement on the budget.

“This time, there are real-world consequences,” said H.D. Palmer, spokesman for the California Department of Finance, in a report by KCRA in Sacramento. “Because we have not been able to get to a budget agreement, payments aren’t going to be made.”

“This is an issue of fairness,” said Assemblyman Ted Gaines, R-Roseville, in the KCRA report. “It hurts hardworking families the most. Refunds, in fact, will stimulate the economy, and taxpayers need their money.”

“Included are $515 million in payments to the state’s vendors and $280 million to help people with developmental disabilities. Other public assistance agencies will be left waiting for hundreds of millions of dollars,” reports CNN. “Other public assistance agencies will be left waiting for hundreds of millions of dollars.”

“I see the will during the negotiations even though these are very, very tough things that we talk about, where we go into areas that we have never, ever dreamt of going into and trying to solve,” said Governor Arnold Schwarzenegger. “So you will be very surprised when the whole thing is done. We’re still not there yet. There is still a lot of work that needs to be done but we are moving slowly forward with this process.”

“If there is no deal by Friday, state government workers will take their first furlough day,” reports the San Diego Union Tribune. “Schwarzenegger has ordered state employees to take two days off a month without pay through June 2010 to save about $1.4 billion.”

Read moreCalifornia goes broke, halts $3.5 billion in payments

California will run out of cash within days – Schwarzenegger

Source: San Jose Mercury News

Posted: 01/26/2009 08:00:00 PM PST

Deadline is real: 5 days to fix California’s budget

Five days are left to cut a deal on the state budget. If not, on Sunday, California, the world’s eighth-largest economy, will become the world’s biggest deadbeat.

Related article: California prepares to stop paying bills (WorldNetDaily)

Having raided every state fund and borrowed the max, the state will start issuing IOUs. College students won’t get Cal Grants. Counties will borrow from reserves to cover social services. State contractors won’t get paid, and taxpayers won’t get refunds. The state already has shut down billions of dollars worth of construction projects. By April, as bills mount up, California, for all practical purposes, will stop functioning as a state.

It’s shameful that things have come this far, but there’s still time to stop things from getting worse – if enough Republicans, at least three in the Assembly and three in the Senate, agree to balance severe cuts to state services with new or higher taxes. Doing so, however, will risk retribution from the rabid right of their party.

All is not totally bleak. House Democrats’ version of President Barack Obama’s $825 billion stimulus includes $10 billion in immediate relief to California, in Medicaid payments for the poor and education aid. That would lop off a quarter of California’s $40 billion deficit. It pays to have friends, like House Speaker Nancy Pelosi, in high places.

But $10 billion won’t necessarily translate into fewer cuts or taxes. Gov. Arnold Schwarzenegger’s proposed budget included $10 billion in phantom solutions: an improbable $5 billion in borrowing against future lottery proceeds and $5 billion in money shifting that’s probably unconstitutional.

So $30 billion in hard choices remains regardless – and less than a week to make them.


Source: Bloomberg

Schwarzenegger Says Deal Is Close as Cash Runs Short


Governor Arnold Schwarzenegger of California attends the inauguration ceremony of U.S. President Barack Obama at the Capitol in Washington on Jan. 20, 2009. Photographer: Ken Cedeno/Bloomberg News

Jan. 26 (Bloomberg) — California Governor Arnold Schwarzenegger said legislative leaders are closing in on an agreement to eliminate the $42 billion budget shortfall threatening to leave the state out of cash as soon as next week.

“We are getting closer and closer,” he said during a press conference. “We’re getting there, but it will still take a few more days to get there.”

Schwarzenegger, a Republican, told reporters in Sacramento the state won’t have enough money to pay for all of its bills “within the next week or 10 days.” With that in mind, Schwarzenegger said he and lawmakers were working.

Read moreCalifornia will run out of cash within days – Schwarzenegger

California controller to suspend tax refunds, welfare checks, student grants

“The suspension of payments is the latest radical move by officials to help keep the state from running out of cash as Gov. Arnold Schwarzenegger and the Legislature battle over how to avoid insolvency.”


John Chiang announces that his office will suspend $3.7 billion in payments owed to Californians starting Feb. 1, because with no budget in place the state lacks sufficient cash to pay its bills.

Reporting from Sacramento — The state will suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, Controller John Chiang announced Friday.

Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state’s nearly $42-billion budget deficit. More than half of those payments are tax refunds.

The controller said the suspended payments could be rolled into IOUs if California still lacks sufficient cash to pay its bills come March or April.

“It pains me to pull this trigger,” Chiang said at a news conference in his office. “But it is an action that is critically necessary.”

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.

Read moreCalifornia controller to suspend tax refunds, welfare checks, student grants

Global Economic Crisis Accelerating

UK jobless rise of 40000 in a week just ‘tip of the iceberg’ (Telegraph)

Schwarzenegger Says Deficit has ‘Incapacitated’ State (Bloomberg):
Jan. 15 (Bloomberg) — Governor Arnold Schwarzenegger said California has been so “incapacitated” by a fiscal crisis that threatens to leave it unable to pay bills within weeks that the only issue he and lawmakers must consider is how to fix it.

Charter misses $74 mln in debt interest payments (Reuters):
NEW YORK, Jan 15 (Reuters) – Charter Communications, the fourth largest U.S. cable operator, said on Thursday it missed interest payments of $73.7 million as it continues to negotiate a debt restructuring with bondholders.
The company said it has until Feb. 15 to make the payment and avoid default, which could push it into bankruptcy.

ECB cuts rates by 50 points to 2% (Financial Times):
Eurozone interest rates fell by half a percentage point to their lowest in more than three years on Thursday as the European Central Bank said that it expected the recession to deepen and signalled that borrowing costs could fall further.
Jean-Claude Trichet, ECB president, warned that growth forecasts published only last month would have to be revised downwards in a sign of the ferocity of the downturn.

Pfizer May Fire 2,400, One-Third of U.S. Sales Force (Bloomberg):
Jan. 15 (Bloomberg) — Pfizer Inc., the world’s biggest drugmaker, may fire almost a third of its U.S. sales force, or as many as 2,400 workers, in a plan under consideration by senior management, people familiar with the discussions said.h the discussions said.

JPMorgan chief says 2009 will be bleak (Financial Times):
The US financial and economic crisis will worsen this year as hard-hit consumers default on credit cards and other loans, Jamie Dimon, chief executive of JPMorgan Chase, has predicted in an interview with the Financial Times.

JPMorgan Profit Drops 76 Percent on Asset Writedowns (Bloomberg)

Yet another blow to the US newspaper industry (Guardian)

Aircraft industry shocked by view from ground (Financial Times)

Airbus forecasts ‘very challenging’ year (Financial Times):
Airbus on Thursday said its new commercial aircraft orders had fallen sharply last year, as the European aerospace group forecast “a very challenging year” for the industry in 2009. Net new orders fell by 42 per cent last year to 777, from a record 1,341 won in 2007.

Irish government fears IMF intervention (Guardian)

Ireland plans drastic cuts to prevent debt crisis (Telegraph):
Ireland is to demand pay cuts for civil servants and public employees to prevent the budget deficit soaring to 12pc of gross domestic product by next year – becoming the first country in the eurozone to resort to 1930s-style wage deflation to claw back competitiveness.

If anyone doubted scale of crisis, work even halts in Dubai on world’s tallest tower (Scotsman)

Hedge funds ‘encourage bankruptcies’ for profit (Guardian)

Spain’s Debt Costs Rise at Bond Sale After S&P Alert (Bloomberg)

Banks gird for commercial property collapse (FinancialWeek):
Some of the biggest financial institutions have huge, potentially troublesome commercial real estate stakes, Standard & Poors data shows. Based on information in their most recent financial reports, Citigroup and Barclays each had more than $20 billion worth of commercial mortgage-related investments. Merrill Lynch, acquired by Bank of America last year, had some $19.7 billion in such investments, according to S&P.

California will run out of money in February

The State of California will run out of money within two months, forcing Governor Arnold Schwarzenegger to start settling bills and paying employees by issuing “IOU” notes, his chief financial officer has revealed.

John Chiang, the state controller, admitted on Monday that a spiralling budget crisis, which has left California spending billions of dollars more each month than it can raise in taxes, will see his coffers run dry some time in mid-February.

Read moreCalifornia will run out of money in February

Official says California could be broke in 2 months

SACRAMENTO, Calif. (AP) – California’s chief financial officer warned Monday that the state would run out of money in about two months as hopes of a Christmas budget compromise melted into political finger-pointing by the end of the day.

Republican Gov. Arnold Schwarzenegger began the day on a cheerful note, suggesting that negotiations with Democratic leaders could lead to a budget deal as early as this week to help close the $42 billion shortfall that is projected through June 2010.

“Yesterday we sat there for hours and we worked through it step by step and we made some great progress,” the governor said during a morning news conference in Los Angeles. “So we feel like if we do that two more times like that, I think we can get there … before Christmas Eve or Christmas Day.”

The thaw didn’t last long, as legislative leaders later in the day criticized Schwarzenegger and indicated their work was done until the start of the new year.

The governor faulted lawmakers for “failing to take real action” in addressing the state’s budget deficit but said he will continue working with them on a solution that includes spending cuts, new revenue and an economic stimulus plan.

Assembly Speaker Karen Bass responded by suggesting the governor should sign an $18 billion package Democrats sent to him last week containing both cuts and tax increases.

“The single biggest roadblock to having construction on the 405 (freeway) move forward is Arnold Schwarzenegger,” said Bass, a Los Angeles Democrat.

Read moreOfficial says California could be broke in 2 months

Schwarzenegger Orders Unpaid Leave for State Workers

Dec. 19 (Bloomberg) — California Governor Arnold Schwarzenegger today ordered all state workers to take two days of unpaid leave each month to conserve money amid a record budget deficit and a legislative impasse over how to fix it.

The furloughs will begin in February and will last through June 2010, Schwarzenegger said in an executive order. He also ordered all departments to cut 10 percent of their workforce costs, through firings if necessary.

“Every California family and business has been forced to cut back during these difficult economic times, and state government cannot be exempt from similar belt tightening,” Schwarzenegger said in a letter to state workers.

Read moreSchwarzenegger Orders Unpaid Leave for State Workers

Interview with Peter Schiff (12/13/08)

1 of 2

Source: YouTube

Read moreInterview with Peter Schiff (12/13/08)

Schwarzenegger: California faces financial Armageddon unless lawmakers take decisive action

California’s budget deficit this year has ballooned to nearly $15 billion, Gov. Arnold Schwarzenegger said Wednesday, warning that the state faces “financial Armageddon” unless lawmakers take decisive action.

The projection of a $14.8 billion gap at the end of the fiscal year in June surfaced just a month after the governor announced an $11.2 billion shortfall, and the deteriorating economy is likely to make the problem even worse next year, Schwarzenegger said.

Without action this year, the state could be staring at a deficit as great as $40 billion by June 2010, an administration official said. Schwarzenegger is expected to share the bad news with legislative leaders in a budget negotiating meeting today.

“If we don’t put aside our ideological differences and negotiate to solve this problem, we’ll be heading toward our financial Armageddon,” Schwarzenegger said at a hastily called news conference at the state Capitol.

Read moreSchwarzenegger: California faces financial Armageddon unless lawmakers take decisive action

Schwarzenegger Calls Fiscal Emergency in California

The US are broke. The Dow Jones lost 7.7% today. This is going to get much worse.
_________________________________________________________________________


Arnold Schwarzenegger, governor of California, speaks during a news conference in Sacramento, California, on Nov. 6, 2008. Photographer: Ken James/Bloomberg News

Dec. 1 (Bloomberg) — California Governor Arnold Schwarzenegger, saying his state is going broke, declared a fiscal emergency and ordered the incoming class of lawmakers into a special session to fix a widening $11 billion deficit.

Schwarzenegger, a 61-year-old Republican, wants lawmakers to raise taxes and cut spending to narrow the gap that is projected to swell to $28 billion over the next 18 months. He invoked powers granted him in 2004 to declare a fiscal emergency, which gives the Legislature 45 days to plug the shortfall. If they fail to find a solution in that time, they are barred from doing any other legislative work until they do.

“Without immediate action, our state is heading for fiscal disaster,” Schwarzenegger told reporters today in Los Angeles. “I’ve had to make tough choices that I wish I didn’t have to make, and I know this is a terrible time to raise taxes, but it’s also a terrible time to make cuts to very important programs. But in an emergency like this, we have to take quick action to avoid even worse problems, even if they include decisions that we don’t like.”

Read moreSchwarzenegger Calls Fiscal Emergency in California

Three wildfires ring Los Angeles

California wildfires wreak havoc


Aerial footage of fires across northern Los Angeles

Three separate wildfires in southern California have destroyed hundreds of homes and forced thousands of people to flee the fast-moving flames.

The fires, to the north, north-west and south of Los Angeles have burnt through dry brush and forest in the suburban canyonlands around the city.

California’s governor has declared states of emergency in Orange, Los Angeles and Santa Barbara counties.

A drop in the wind force has given some relief to the hard-pressed fire crews.

The largest of the fires is in the northern Los Angeles suburb of Sylmar, up against the canyons of the Angeles National Forest.

See map of the California fires

Ten-thousand people were ordered to evacuate their homes as the flames raced through the Oakridge Mobile Home Park late on Friday, destroying about 500 of the structures.

Firefighters were braving 50ft flame lengths as they swept across the mobile homes
Los Angeles Fire Captain Steve Ruda
In pictures: Los Angeles wildfire

“We have never lost in recent times anything close to this number [of homes],” said Los Angeles Mayor Antonio Villaraigosa.

He blamed the spread of the fire on “absolutely atrocious” winds of up to 80 mph (130 km/h) that pushed the fire out of the forests and into the suburbs, jumping wide highways in the process.

“It was an absolute firestorm,” said Los Angeles Fire Department Captain Steve Ruda of the Oakridge blaze.

“Firefighters were braving 50ft flame lengths as they swept across the mobile homes,” he told the Reuters news agency, adding that heat from the flames had melted his firefighters’ hoses to the road.

The Sylmar fire has burnt through 8,000 acres (3,200 hectares) since it broke out late on Friday. Fire officials said it was 20% contained as of late Saturday.

About 2,000 firefighters are using aircraft, helicopters and bulldozers to beat the flames back from populated areas.

Pillars of smoke

Meanwhile, more than 12,000 people were ordered to leave their homes in Orange County, in the south of the Los Angeles urban sprawl, as another fire flared up early on Saturday in the communities of Yorba Linda and Corona.

That fire has so far scorched 2,000 acres (800 hectares) and damaged or destroyed about 100 homes or other buildings.

Read moreThree wildfires ring Los Angeles

California to cut water deliveries to cities, farms

SACRAMENTO, Calif. – California said Thursday that it plans to cut water deliveries to their second-lowest level ever next year, raising the prospect of rationing for cities and less planting by farmers.

The Department of Water Resources projects that it will deliver just 15 percent of the amount that local water agencies throughout California request every year.

Since the first State Water Project deliveries were made in 1962, the only time less water was promised was in 1993, but heavy precipitation that year ultimately allowed agencies to receive their full requests.

The reservoirs that are most crucial to the state’s water delivery system are at their lowest levels since 1977, after two years of dry weather and court-ordered restrictions on water pumping out of the Sacramento-San Joaquin Delta. This year, water agencies received just 35 percent of the water they requested.

Farmers in the Central Valley say they’ll be forced to fallow fields, while cities from the San Francisco Bay area to San Diego might have to require residents to ration water.

Read moreCalifornia to cut water deliveries to cities, farms

Fed May See Companies, States as Next Crisis Fronts

Oct. 6 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke may find the next fronts of the financial crisis to be just as chilling as last month’s downfall of Wall Street titans: its spread to corporate America and state and local governments.

Companies from Goodyear Tire & Rubber Co. and Duke Energy Corp. to Gannett Co. and Caterpillar Inc. are being forced to tap emergency credit lines or pay more to borrow as investors flee even firms with few links to the subprime-mortgage debacle. California Governor Arnold Schwarzenegger says his and other states may need emergency federal loans as funding dries up.

A cash crunch on Main Street would endanger companies’ basic functions — paying suppliers, making payrolls and rolling over debt. The widening of the crisis suggests that Bernanke and Treasury Secretary Henry Paulson may have further fires to put out even as the Treasury sets up the $700 billion financial- industry rescue plan approved last week.

Read moreFed May See Companies, States as Next Crisis Fronts

Governor plans to slash state workers’ pay to the federal minimum

Gov. Arnold Schwarzenegger plans next week to slash the pay of more than 200,000 state workers to the federal minimum of $6.55 per hour to help ease the state’s budget crisis, according to a draft executive order obtained by The Chronicle on Wednesday.

The governor also will order an end to overtime pay for all but critical services, a freeze on state hiring and the immediate layoff of nearly 22,000 temporary, seasonal and student workers.

“As a result of the late state budget, there is a real and substantial risk that the state will have insufficient cash to pay for state expenditures,” the executive order states.

Read moreGovernor plans to slash state workers’ pay to the federal minimum

California faces water rationing due to drought

Californians could face mandatory water rationing unless they drastically reduce consumption because of a state-wide water crisis, governor Arnold Schwarzenegger has said.

The warning came as he declared the first official drought in California in 17 years, citing two years of arid conditions that threaten the state’s massive agriculture industry and increase the risk of wildfires such as those that destroyed 1,500 homes last October.


Kern River in California is dry and is expected to remain so

The governor called for a state-wide reduction of 20 per cent and issued an executive order commanding water officials to direct supplies to the driest areas, help districts conserve and aid stricken farmers who have already suffered huge losses.

Mr Schwarzenegger said mandatory restrictions could follow if residents and water authorities failed to make cutbacks and another dry winter ensued.

“We must recognise the severity of the crisis that we face,” the Republican governor said.

California has never resorted to statewide water rationing to cope with shortages. Since the last drought, however, its population has shot up as water supplies have decreased.

The governor himself does not have the authority to impose statewide rationing but the Department of Water Resources could slash water supplies to local authorities, who in turn would have to enforce limits.

Some regions already impose rationing with the threat of punitive measures for violators and many areas have appealed for conservation. Restrictions on outdoor water use, such as bans on washing cars or driveways, are in force in some cities along with orders stopping restaurants from automatically serving drinking water.

This week, Los Angeles approved a fleet of “drought busters” to patrol residential areas and enforce a ban on some types of outdoor water use. More districts are expected to impose limits of some kind as the long, hot days of summer loom.

This spring, the driest on record, follows two years of below average rainfall. The situation has been exacerbated by reduced mountain snow packs, which normally provide much of the state’s supply, and a court order limiting the amount of water that can be taken from a key river delta to protect a threatened fish.

“We’re suffering the perfect storm, if you will,” said Timothy Quinn, executive director of the Association of California Water Agencies.

The prospect of cuts alarmed some sectors of the business community who feared it could harm productivity and increase the chance of full-blown recession.

Read moreCalifornia faces water rationing due to drought

Comments on U.S. climate change bill

WASHINGTON – President George W. Bush on Monday slammed a bill on combating climate change being debated by the U.S. Senate this week. Here are some comments from Bush and other prominent U.S. politicians on the bill:

PRESIDENT GEORGE W. BUSH: “Today, the Senate is debating a bill called the Warner-Lieberman bill which would impose roughly $6 trillion of new costs on the American economy. There’s a much better way to address the environment than imposing these costs on the job creators which will ultimately have to be borne by American consumers.

“I urge the Congress to be very careful about running up enormous costs for future generations of Americans. We’ll work with the Congress, but the idea of a huge spending bill fueled by taxes (sic) increases isn’t the right way to proceed.”

SEN. BARBARA BOXER, CALIFORNIA DEMOCRAT AND CHAIR OF ENVIRONMENT AND PUBLIC WORKS COMMITTEE: “Just when we finally have a chance to get off of Big Oil and foreign oil, you can count on the Bush administration to fight us every step of the way.

CALIFORNIA’S REPUBLICAN GOV. ARNOLD SCHWARZENEGGER: “Last year was one of the warmest on record … Climate change does not pause as Congress deliberates the proper way to address the challenge. I urge you and you and your colleagues in the Senate to work together for passage of a bill that, combined with the leadership of states such as California, can help form a truly national climate change strategy.”

AL GORE, FORMER VICE PRESIDENT AND NOBEL PEACE LAUREATE: “… We have the first global warming bill in history that is comprehensive, bipartisan and that enjoys support across the country — from labor and agriculture to the business and the environmental communities. Of course the bill needs to be stronger, but it’s vital that Congress begin to act. While it’s important that people change their light bulbs, it’s even more important that we change the laws.”

BILL KOVACS, U.S. CHAMBER OF COMMERCE: “What is currently drafted just isn’t realistic. Among the bill’s many flaws, the business community recognizes that the necessary technologies aren’t currently available to meet the demands of the bill. So while we reduce use of fossil fuels, what energy sources do we use to run the economy until we develop and deploy the new technologies?

TOM COCHRAN, U.S. CONFERENCE OF MAYORS: “This is a critical time for our nation as we continue to seek solutions for our growing energy crisis and to confront fully the growing global climate change challenge. This new initiative will not only help transform America’s cities, but is a critical part of any successful national effort to reduce carbon emissions.”

Mon Jun 2, 2008 3:54pm EDT

Source: Reuters

San Francisco introduces Carbon Tax

The Bay Area Air Quality Management District’s board of directors on Wednesday approved new rules to charge businesses a fee for the pollution they emit.

The group’s board of directors voted 15-1 on unprecedented new rules that will impose fees on factories, power plants, oil refineries and other businesses that emit carbon dioxide and other heat-trapping gases.

The agency, which regulates air pollution in the nine-county Bay Area, will be the first in the country to charge companies fees based on their greenhouse gas emissions, experts say. The new rules will take effect July 1.

The modest fee — 4.4 cents per ton of carbon dioxide — probably won’t be enough to force companies to reduce their emissions, but backers say it sets an important precedent in combating climate change and could serve as a model for regional air districts nationwide.

Read moreSan Francisco introduces Carbon Tax

Governor Schwarzenegger Backed Immoral Sex Pheromone Spraying Continues…

Government’s Pesticide Experiment Program
The California Department of Food and Agriculture’s own doctor acknowledges, in court documents, that the aerial application of this chemical has not been tested. Let me repeat this so you understand, chemicals are being sprayed on young children, nursing mother’s, people with asthma, lung problems, heart problems, the elderly, the disabled, the homeless and the chemically sensitive – and this chemical formulation has NEVER been tested on even a piece of dirt, let alone, humans.”
…….

…..” For example: on the label for BHT it says (in big letters) “Do not inhale this product. Dangerous to respiratory health.“…

…”One infant in the City of Monterey nearly died from inhalation of the experimental biochemical, and now has permanent lung damage. Dozens of women in cities throughout the Monterey Peninsula are reporting problems with their reproductive systems after exposure to the pesticide, including: sudden, severe and irregular menstrual cycles, extreme cases of tender and swollen breasts, and the recurrence of menopause symptoms in older women. Other side effects of both Checkmate OLR-F and Checkmate LBAM-F include: asthma and sudden breathing difficulties, chest pain, vomiting, lethargy, fatigue, and extreme mood swings. Some people have coughed up blood and have gotten bloody noses from Checkmate exposure.”….

Read moreGovernor Schwarzenegger Backed Immoral Sex Pheromone Spraying Continues…