D Day in California: 7/01/09, the Day the Cash Died
As far as I am aware, WC Varones and his crew of merry bloggers are the only ones in what I consider to be my "inner blogging circle" who understand what is happening here at homebase. Anyone else out there in California? I see you fuckers Googling "tax refund delays" and "California default" so now is the time to speak up, reach out, and figure out how in the hell we are going to get our state to turn things around. Hate to break it to you kids but we are in one hell of a mess right now and obviously our state legislators aren't going to be much help.
I'm going down with the ship so Arnie can suck it. He'll bail before I do; this is the place I chose as home over 10 years ago when I was just a starry-eyed smidiot teenager from Wisconsin and I'm not about to let a little financial crisis change that. Just sayin.
The state of California must pass a budget by tomorrow or its credit rating could tumble to junk status. Both Moody's and Standard & Poor's have warned the state of a multinotch downgrade if the state fails to approve a budget.
California currently has an A2 rating, the lowest of any state. Governor Arnold Schwarzenegger needs to close a $24.3 billion budget deficit and has threatened to cut essential services if a budget agreement cannot be reached.
On Wednesday, July 1, California Controller John Chiang will begin to pay bills with IOUs because he will run out of cash if the legislature doesn't deal with the deficit for the coming fiscal year. Fitch Ratings downgraded California's general obligations Friday to single-A-minus from single-A, citing "the magnitude of the state's financial and institutional challenges and persistent economic and revenue weakening."
George Friedlander, Morgan Stanley Smith Barney muni analyst, warned that while he can't conceive of an outright default on California municipal bonds, he recommends "some diversification out-of-state" for holders of the state's paper. He added that a disorderly disruption of California's finances could spread beyond munis, affecting all risk assets and the dollar. Investors are nervous and after what they went through last year, could sell first and ask questions later.
The California legislature is deadlocked over the state's budget. Democrats want to raise taxes, while Republicans want to cut entitlement spending. The state's budget deficit for 2010 is expected to be 20 percent of its general fund budget or more than $20 billion. As California's bond rating drops, the harder it will be for the state to finance public works projects because it will become prohibitively more expensive to do so.
The state's bond rating is not the only one at risk. The California State Teachers' Retirement System, the second-largest U.S. public pension, may face a lower credit rating as well. S&P told the pension system its credit rating could be cut.
S&P's rating criteria limits a pension fund rating to be no more than three levels higher than the general obligation creditworthiness of the governmental sponsor of the pension fund. As a result, if California's A rating were lowered, the teachers' pension fund's AA rating would also fall, S&P said in a statement.
You guys know me if you read me, normally I could give a rat's ass either way but somehow I have a feeling that this might turn out to be slightly more than I usually LOL at with my flippant "oh well" attitude. I am genuinely concerned that we might not be able to pull this one off - and what does that mean for my state? My beloved Muni? My crappy apartment in the Inner Richmond? My office? My child's public school education?
What next? Really, I am asking you, dear reader: what next? I'm not leaving home so anything else that you might come up with is totally game. I know you aren't used to seeing this side of me, despite Fed shenanigans and bailouts and the continually diminished "personal freedoms" of Americans but frankly I am saddened by this and not entirely sure what to say.
Speechless? Jr Deputy Accountant?
Yup. I live here, people. My 6 year old lives here. I have spent nearly my entire adult life as a San Franciscan and know little beyond this 7x7 plot of land I call home.
So? Where do we go from here? The ocean I guess... Not much else to do...