According to the fellow running my group therapy, California is in such dire financial straits that the federal government needs to bail them out. I had not heard of this. He rattled off something from the internet that seemed to support his comment.
However, I could not find anything like what he read to me.
Newsom signs $2.8B Medicaid bailout despite Republican attacks (The Hill)
California Gov. Gavin Newsom (D) signed legislation to close a $2.8 billion Medicaid funding gap despite Republicans in his state pushing back.
On Monday, Newsom signed legislation to close the budget gap in the state’s Medicaid services to ensure coverage for 15 million people through June. It’s part of California’s plan to fix the $6.2 billion gap in the state’s Medicaid budget after the state launched an expansion to give all low-income adults coverage regardless of their immigration status, The Associated Press reported.
The AP noted that the expansion is already costing more than was initially projected and could force Newsom and other Democrats to reevaluate.
State Rep. Carl DeMaio (R) said in a post online that he was officially requesting an investigation into the “Medi-Cal scandal.” Medi-Cal is the name of the state’s Medicaid program.
“He’s bankrupted the program by giving $10B in free healthcare to illegal immigrants—and there’s strong evidence he illegally tried to get federal Medicaid reimbursements,” DeMaio said on the social platform X.
California high speed rail needs $7B bailout, could lose federal funds (David Tangipa) which sent me to California high speed rail needs $7B bailout, could lose federal funds (The Center Square).
California’s $35 billion high speed rail project for its sparsely populated Central Valley requires at least a $7 billion bailout to be done by 2033.
The Trump administration is investigating federal funding of the project, and a bill in Congress could end further federal funding for the project entirely.
“There is a funding gap of roughly $7 billion for completing the Merced-to-Bakersfield segment,” wrote the state-funded Legislative Analyst’s Office. “Other factors could drive growth in the project’s funding gap, including: (1) potential loss of federal funds, such as those that have not yet been obligated; (2) inflation and other construction cost increases; (3) uncertainty related to assumed future [state Greenhouse Gas Reduction Fund] revenues.”
The LAO also noted the California High Speed Rail Authority Office of the Inspector General said, “HSRA needs to secure funds to meet most of its identified funding gap before June 2026 to avoid negative impacts on the Merced-to-Bakersfield segment schedule.”
The Trump administration’s Secretary of Transportation Sean Duffy cited the new shortfall in a X post highlighting the status of the state’s long-delayed Los Angeles to San Francisco train, which was approved by voters in 2008 at a cost of $33 billion.
Duffy said that of $15 billion spent on the project thus far, $2.5 billion was from federal funding and that $4 billion in “unspent federal money is under review.” He also said “zero high-speed track” has been laid and that the total cost for the LA-SF line “has soared to over $100B with no expected completion date.”
California Defaults On $18.5 Billion Debt, Leaving State Businesses Holding The Bag (Hoover Institution, 2023)
Little did California businesses know that they were cosigners on the state’s nearly $20 billion loan from the federal government that was used to cover California’s unemployment fund shortfall during the COVID pandemic. This ugly truth became apparent when the state recently decided to stop making payments on this loan. When a state defaults on its federal unemployment insurance loan, federal law requires that the state’s businesses repay the loan.
What makes this default even more egregious is that the stone-age-era IT system of the state’s Employment and Development Department (EDD) opened the floodgates to bad actors, permitting more than $30 billion in fraudulent unemployment claims during the pandemic. Those receiving fraudulent payments include incarcerated felons, a person impersonating a one-year-old, and a person impersonating Senator Dianne Feinstein. A single residential address received checks for around 60 separate individuals filing from that address.
This could have been avoided with a competent EDD. But this department’s performance has been deficient for decades, and California businesses, many of which are struggling, are left paying for blatant and costly mistakes that should and could have been solved years ago.
With an unpaid federal unemployment insurance loan, the federal government raises the unemployment insurance tax immediately by 0.3 percent on each business within the state, and an additional 0.3 percent each year after that until the loan is fully repaid. The normal federal unemployment insurance tax rate is 0.6 percent per year, which means that California businesses will be paying several multiples of the normal federal tax rate before the loan is retired.
The state’s Legislative Analyst Office predicts that repaying the loan through higher taxes on businesses is not expected until 2029 or 2030 and note that retiring the debt could take longer, depending on the state’s economic performance. A recession would almost certainly delay repayment, and the odds of a recession in the next seven years are significant.
The Right Way to Bail out California (Cato Institute, 2009)
As California’s fiscal conditions have deteriorated, Gov. Arnold Schwarzenegger has ramped up his requests for a federal bailout. While a bailout might provide some short-term relief, there is a good chance it would actually worsen California’s long-term fiscal problems. And, if a federal bailout is enacted, Congress needs to use the leverage it provides to impose fiscal discipline on California — and on any state that receives federal largesse.
Using the query "california bankrupt" came up with these results:
New California budget papers over $20 billion deficit, ignores day of reckoning(CalMatters)
When Gov. Gavin Newsom and legislative leaders were drafting a more-or-less final 2025-26 state budget last month, they were closing what they described as a $12 billion deficit, a number that the state’s media repeatedly cited.
It was the wrong number; it minimizes the state’s chronic gap between income and outgo, as the state’s official budget summary released this week confirms.
The budget projects that the state will receive $208.6 billion in general fund revenues during the fiscal year that began on July 1, but it will spend $228.4 billion, a gap just shy of $20 billion.
The $12 billion figure stems from counting a $7.1 billion diversion from one of the state’s reserve accounts as revenue — an assumption that violates common sense as well as any legitimate accounting scenario.
The more accurate figure of $20 billion is important because it squares with projections by Newsom’s Department of Finance and the Legislative Analyst’s Office that California has what’s called a “structural deficit” in the range of $10 billion to $20 billion a year.
In other words financing all of the programs and services now in state law will indefinitely cost that much more each year than the state is likely to receive in revenues.
The budget closes about a third of the $20 billion gap with an aforementioned $7.1 billion shift from the emergency reserve — money that’s supposed to be used to cushion the impact of an economic downturn or calamities such as the wildfires that devastated Los Angeles, earthquakes or destructive storms.
The deficit isn’t a genuine emergency because it resulted from irresponsible political decisions, particularly Newsom’s declaration in 2022 that the state had a $97.5 billion budget surplus and thus could afford a sharp increase in spending.
California is now the 4th largest economy in the world (Office of Gavin Newsom)
SACRAMENTO — Governor Gavin Newsom today announced that California has officially overtaken Japan to become the world’s fourth-largest economy, according to newly released data from the International Monetary Fund (IMF) and the U.S. Bureau of Economic Analysis (BEA).
Executive Summary
California Faces a $68 Billion Deficit. Largely as a result of a severe revenue decline in
2022-23, the state faces a serious budget deficit. Specifically, under the state’s current law
and policy, we estimate the Legislature will need to solve a budget problem of $68 billion in the upcoming budget process.
Unprecedented Prior-Year Revenue Shortfall Creates Unique Challenges. Typically, the
budget process does not involve large changes in revenue in the prior year (in this case, 2022-23). This is because prior-year taxes usually have been filed and associated revenues collected. Due to the state conforming to federal tax filing extensions, however, the Legislature is gaining a complete picture of 2022-23 tax collections after the fiscal year has already ended. Specifically,we estimate that 2022-23 revenue will be $26 billion below budget act estimates. This creates unique and difficult challenges—including limiting the Legislature’s options for addressing thebudget problem.
Legislature Has Multiple Tools Available to Address Budget Problem. While addressing
a deficit of this scope will be challenging, the Legislature has a number of options available todo so. In particular, the state has nearly $24 billion in reserves to address the budget problem. In addition, there are options to reduce spending on schools and community colleges that could address nearly $17 billion of the budget problem. Further adjustments to other areas of the budget, such as reductions to one-time spending, could address at least an additional $10 billion or so. These options and some others, like cost shifts, would allow the Legislature to solve most of the deficit largely without impacting the state’s core ongoing service level.
There I leave the issue. No state bankruptcy, but a deficit that the state's legislature can fix. Indiana has been in similar positions over the years. Now, I need to get back to work.
sch 8/30
No comments:
Post a Comment
Please feel free to comment