California 50 days from government meltdown

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

AFP/Getty Images/File

California has 50 days until the government melts down under the pressure of the $24.3 billion budget gap. That according to the state’s controller, John Chiang. And the problem isn’t getting any better. State revenues were off nearly 18% in May the state was off an additional billion dollars from the current budget. Schwarzenegger has publicly refused to take a high-interest, last-minute loan saying that the financing charges would cripple the state going forward. Without deep cuts the government may simply run out of money as early as late July. Schwarzenegger has said that he would rather see the government shut down then be held hostage by a crushing loan to close the gap.

While Californians like myself have had to suffer through tax increases in all sorts of areas (including a ridiculous sales tax) the revenues continue to fall sharply as property values crater and businesses fold under the economic pressure of the housing-fueled meltdown. This points to the conundrum that law makers are facing. There are no sources of revenue to prop up the spending levels that were fueled by the burgeoning housing market. Reluctant to make the needed cuts to get a balanced budget, the legislature is instead steering the state towards bankruptcy.

From Reuters and Yahoo:

California’s government risks a financial “meltdown” within 50 days in light of its weakening May revenues unless Governor Arnold Schwarzenegger and lawmakers quickly plug a $24.3 billion budget gap, the state’s controller said on Wednesday.

Underscoring the severity of California’s cash crisis, Controller John Chiang, who has previously warned the state’s government risks running out of cash without a budget deal, said revenues in May fell by $1.14 billon, or 17.7 percent, from a year earlier.

Additionally, the revenues of the government of the most populous U.S. state fell short of estimates in Schwarzenegger’s budget plan by $827 million, Chiang said.

He warned California’s state government is speeding toward a financial disaster unless officials act urgently to balance its books.

“Without immediate solutions from the governor and legislature, we are less than 50 days away from a meltdown of state government,” Chiang said in a statement.

Image credit: AFP/Getty Images/File