California budget “surplus”? …Nope, not so much.

posted at 8:11 pm on April 14, 2014 by Erika Johnsen

As I mentioned last week, it looks like California Gov. Jerry Brown isn’t going to have to put up too much of a fight to secure his fourth term in the state’s executive office — but one of the biggest signs of the success of his governorship to which he’s constantly pointing for his campaign is a basically fake budget “surplus” of a few billion dollars and an ostensibly “balanced budget” that he supposedly engineered. As David Crane at Bloomberg aptly notes, the state’s progressive Democratic coalition is less about responsible governance than it is about some tricky accounting methods that are in no way an honest portrayal of the state’s tremendously problematic long-term fiscal and economic outlook:

Similarly, Brown is using cash-based budgeting to underreport the cost of an employee benefit — retiree health care — by $3 billion. The governor could have chosen to report the expense at its full size, but to do that under cash-based budgeting, he would have had to actually contribute $3 billion in cash to a retiree health-care trust fund.

That’s exactly what governors are supposed to do. Retiree health-care expenses, like pensions, are supposed to be pre-funded in order to protect future generations from having to pick up an earlier generation’s costs. But Brown chose not to do so, making his budget look rosier than it is. This shortchanges future generations, which will have less money for their own services because they will have to pay off the skipped costs.

Businesses aren’t permitted to use cash-based budgeting. Instead, they must accrue expenses whether paid or not. During Brown’s current term in office, his budgets will ignore more than $12 billion in retiree health-care costs. …

Brown’s budget this year also ignores more than $3 billion in required contributions to the state teacher pension fund. It’s the largest “skipped” pension contribution in the country and continues a pattern that has led the fund to build up an $80 billion deficit accruing zero-coupon interest at 7.5 percent a year.

As Crane notes, spending on state services like welfare, universities, and parks is down by more than 20 percent from 2007, while spending on liabilities like employee salaries, pensions, retiree health care, debt service, and Medicaid is up by 20 percent, and the state is in reality nowhere near to a “balanced budget” — despite the simultaneous increase in revenue Brown has actually engineered with the voter-approved Proposition 30 tax increase in 2012.

And speaking of those recently heightened taxes those oh-so-egalitarian Californians are now paying, J.D. Tucille at Reason points out a poll from last month reporting that most Californians think they’re paying too much in taxes — but they’re generally still in favor of soaking the rich still more. How glorious.

The results come in a wide-ranging poll (PDF) conducted last month by the Public Policy Institute of California. Asked, “Overall, how fair do you think our present state and local tax system is—would you say it is very fair, moderately fair, not too fair, or not at all fair?” 3 percent said “very fair” and 47 percent answered “moderately fair.” The results were consistent across income groups, with 53 percent of those making over $80,000 agreeing with the 49 percent of Californians earning under $40,000 that the tax system is just swell.

Of those polled, 51 percent also said corporations should pay higher taxes and 63 percent called for raising the top income tax rate on the state’s wealthiest residents.

But if Californians agree that the other guy should get it in the neck, they’re all ready for a little mercy on their own behalf. Fifty-six percent of those making less than $40,000 say they’re paying more than they should, 59 percent of those making between $40,000 and $80,000 agree, and 64 percent of those earning over $80,000 chime in with a “ditto.”


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If private companies use the same accounting principles as governments do, someone goes to jail.

rbj on April 14, 2014 at 8:22 PM

Split California into pieces. The commies get the south, the conservatives get the north.

birdwatcher on April 14, 2014 at 8:23 PM

I live in California and it’s a question of what will sink this state first…an earthquake or the Dems.

Dems are odds on favorites.

dirtseller on April 14, 2014 at 8:24 PM

Calling Jake-the-Goose. You were saying earlier today that Cali is “booming”.

Seems….not so much.

Bitter Clinger on April 14, 2014 at 8:25 PM

Split California into pieces. The commies get the south, the conservatives get the north.

birdwatcher on April 14, 2014 at 8:23 PM

The south is the more conservative of the two sides. Actually, the eastern portion of the state is the most conservative but if we give the west to the commies we won’t be able to use the beaches.

dirtseller on April 14, 2014 at 8:25 PM

But if Californians agree that the other guy should get it in the neck

And when the producer class says adios, the parasites which exponentially outnumber them will be totally screwed.

The hell with Mexico. We need to build an electric fence between CA and AZ, NV and OR.

Lanceman on April 14, 2014 at 8:34 PM

There are clearly things more enjoyable than watching rats in a cage devour each other.
But not many.

Good luck, California. You deserve yourselves.

orangemtl on April 14, 2014 at 8:35 PM

I live in northern Cal, which I like to call ” rebel held territory “.

It’s wonderful to think that his state could someday split, but the odds of that happening? Slim to none.

As of now, a conservative, tax paying citizen has zero representation in this state government. The Marxists are in a feeding frenzy in Sacramento. Our republicans that are in office might as well be featured on milk cartons.

The good news is that we will soon have a high speed rail from L.A. Bakersfield to San Fran. Visalia. A ticket will only be double the airfare between the two cities.

The shooting war can’t start soon enough, and it almost did in Nevada last week.

Exninja on April 14, 2014 at 8:42 PM

Wow, do we have some dumb a$$ voters here in CA.

OccamsRazor on April 14, 2014 at 8:42 PM

Let’s just let in more “immigrants”!
That’ll fix it.

LeftCoastRight on April 14, 2014 at 8:45 PM

HotAir continue to ignore that a Dem controlled legislature has put California in the black under Jerry Brown.
 
libfreeordie on January 26, 2014 at 5:29 PM

rogerb on April 14, 2014 at 8:47 PM

Ca economy is actually doing good now. The budget deficients are actually gone. Democrats magically did this by cutting the budget and increasing taxes.
 
Ric on October 12, 2013 at 10:02 PM

rogerb on April 14, 2014 at 8:48 PM

Yes the state has bloated unions and welfare programs but no one is producing serious forecasts that place any doubt on multi-billion budget surpluses in 3-6 years out.
 
bayam on February 19, 2013 at 7:16 PM

rogerb on April 14, 2014 at 8:49 PM

HotAir continue to ignore that a Dem controlled legislature has put California in the black under Jerry Brown.

libfreeordie on January 26, 2014 at 5:29 PM

rogerb on April 14, 2014 at 8:47 PM

Do you have any Urbane Effetist? I believe he lives in Sillycone Valley.

Lanceman on April 14, 2014 at 8:52 PM

Split California into pieces. The commies get the south, the conservatives get the north.

birdwatcher on April 14, 2014 at 8:23 PM

San Francisco and Oakland are in the north.

bw222 on April 14, 2014 at 8:53 PM

Calling Jake-the-Goose. You were saying earlier today that Cali is “booming”.

Seems….not so much.

Bitter Clinger on April 14, 2014 at 8:25 PM

Jake talks a good game, but when you look closely, it’s mostly BS.

bw222 on April 14, 2014 at 8:54 PM

California’s slow, inevitable implosion is due completely to liberal folly. When the day of reckoning finally arrives, they will have no one to blame but themselves. Should they come to the federal taxpayers for a bailout, tell them to pound sand.

rmkdbq on April 14, 2014 at 8:57 PM

Those Rogerb quotes above are hilarious. Makes me wonder–when was the last time a Democratic controlled legislature of the nation or a large, populous state actually produced a relatively honest budget? Think about it–congress, California, IL, and NY–not exactly your financial paragons of responsibility.
And when will our resident trolls wake up and smell the um, coffee?

Doc Holliday on April 14, 2014 at 8:58 PM

when was the last time a Democratic controlled legislature of the nation or a large, populous state actually produced a relatively honest budget?
Doc Holliday on April 14, 2014 at 8:58 PM

]

BWAHAHAHAHAHAHAAAAAAAA!!!!!!!!

Oh. Try NEVER!

Lanceman on April 14, 2014 at 9:03 PM

Do you have any Urbane Effetist? I believe he lives in Sillycone Valley.
 
Lanceman on April 14, 2014 at 8:52 PM

 
Ha. This was the first one google gave me:
 

The problem with all this is that, under Brown, the budget hasles are being resolved, pensions are being addressed, the economy is coming back, etc.
 
urban elitist on February 20, 2014 at 9:36 PM

 
Yes, if ‘being resolved’ is a euphemism for creative bookkeeping, then yes…
 
Lanceman on February 20, 2014 at 9:42 PM

 
Please. Your perceptions are so twisted by bitter loathing that if Jerry Brown (or Barack Obama, or I) said the sky was blue, you’d sneer and call us colorblind.
 
urban elitist on February 20, 2014 at 9:53 PM

 
Your perceptions are twisted by bitter loathing, Lanceman. Maybe you should consider trying whatever perceptions the “pensions are being addressed” guys were using.

rogerb on April 14, 2014 at 9:06 PM

The hype and the facts don’t add up….unexpectedly

workingclass artist on April 14, 2014 at 9:12 PM

HA! I’m a BitterLoather! Where is BitterClinger? I wanna hang out!

Lanceman on April 14, 2014 at 9:13 PM

Their “perceptions” are altered by not-yet-legal, ahem, “consumables”. We are talking about Cali, now aren’t we?

Doc Holliday on April 14, 2014 at 9:20 PM

Yes the state has bloated unions and welfare programs but no one is producing serious forecasts that place any doubt on multi-billion budget surpluses in 3-6 years out.

bayam on February 19, 2013 at 7:16 PM

Have you seen the public employees pension liabilities? There’s a better chance of winning a PowerBall jackpot than Kalifornia having multi-billion dollar surpluses 3-6 years out. A moronic statement, even by bayam standards.

bw222 on April 14, 2014 at 9:22 PM

CA has had a remarkable period of growth over the last two years, especially in Bay Area but it remains patchy depending on your industry and location in the state. Parts of the state which weathered the early part of the recession are now in dire trouble due to water shortages and severe drought. Texans know what this means for farms and livestock industries in specific regions.

There is a long way to go for CA. It remains to be seen if Jerry has enough clout to make the structural changes needed to head off some narrow financial straights ahead but the reality is that he is the only one in CA popular enough to survive the unions turning on him when it comes time to apply the necessary fixes.

lexhamfox on April 14, 2014 at 9:27 PM

What do they do in CA? Forget about carrying articles stories about the state economy when Schwarzenegger left office?

Newtie and the Beauty on April 14, 2014 at 9:29 PM

. It remains to be seen if Jerry has enough clout to make the structural changes needed to head off some narrow financial straights ahead

lexhamfox on April 14, 2014 at 9:27 PM

You know? I read you hoping that you actually once would have something intelligent to say.
Every time I am disappointed in your willful idiocy.

You’re like every idiot convinced that obama A, knows what he’s doing on anything and B, he honestly cares about America and is not doing what he can to destroy us.

Lanceman on April 14, 2014 at 9:32 PM

Anyone find it interesting that Gov Moonbeam is using the same accounting tricks Dubya was accused of using to “hide” the true costs of the Iraq and Afghanistan wars?

Newtie and the Beauty on April 14, 2014 at 9:34 PM

The south is the more conservative of the two sides. Actually, the eastern portion of the state is the most conservative but if we give the west to the commies we won’t be able to use the beaches.

dirtseller on April 14, 2014 at 8:25 PM

Its OK, all the beaches will become Mexican shanty towns rather quickly.

riddick on April 14, 2014 at 9:35 PM

If only they could be once and for all rid of republicans, then their democrat hegemony could usher in the greatest peacetime prosperity and economic growth for the ages!

Murphy9 on April 14, 2014 at 9:51 PM

If only they could be once and for all rid of republicans, then their democrat hegemony could usher in the greatest peacetime prosperity and economic growth for the ages!

Murphy9 on April 14, 2014 at 9:51 PM

They’ve had that before. Last one was called the politburo. Honorable men, all.

Lanceman on April 14, 2014 at 9:53 PM

Anyone find it interesting that Gov Moonbeam is using the same accounting tricks Dubya was accused of using to “hide” the true costs of the Iraq and Afghanistan wars?

Newtie and the Beauty on April 14, 2014 at 9:34 PM

A good friend of mine, whose opinion I greatly respect, thinks that was one of GWB’s greatest mistakes. It got the country comfortable with atrocious, unnecessary deficits. Half a trillion? Nah…let’s try a trillion and a half?

RedinPDRM on April 14, 2014 at 10:00 PM

Calling Jake-the-Goose. You were saying earlier today that Cali is “booming”.

Seems….not so much.

Bitter Clinger on April 14, 2014 at 8:25 PM

Yeh – just saw this – sure does counter my comments earlier in the day – no doubt about it.

That said – real estate is soaring out there – jobs are being created – but as it says – the surplus? – not so much.

I consider myself called.

jake-the-goose on April 14, 2014 at 10:10 PM

Jake talks a good game, but when you look closely, it’s mostly BS.

bw222 on April 14, 2014 at 8:54 PM

Appreciate the veiled compliment – I think?

jake-the-goose on April 14, 2014 at 10:11 PM

Your perceptions are twisted by bitter loathing, Lanceman. Maybe you should consider trying whatever perceptions the “pensions are being addressed” guys were using.

rogerb on April 14, 2014 at 9:06 PM

Perhaps they have been “addressed” to the dead letter bin to be found and delivered in 5 years hence.

kringeesmom on April 14, 2014 at 10:25 PM

You know, private sector Chief Executives would go to jail for this kind of thing.

Just sayin’.

Midas on April 14, 2014 at 10:55 PM

Notice the leftists will never accept ANY responsibility.

The ENTIRE mess in California is of liberal Democratic creation. They’ve been in full control of the legislature for years, and their control of the Governor’s Mansion was only interrupted because Gray Davis was just sooooo bad that RINO Ahnald had a shot – but governed like a “moderate” Democrat.

ALL the public employee pension problems were foisted on them by Democratic unions.

The toxic business environment and the War on Agriculture are pure leftist policy goals, achieved.

But they still won’t admit their responsibility, any more than they do with Detroit.

ALL leftists are lying filth.

Adjoran on April 14, 2014 at 11:24 PM

The liberal voters in The People’s Republik of Kalifornia are idiots.

They want a lot of state services. They just don’t want to pay for them.

GarandFan on April 14, 2014 at 11:35 PM

Old adage…figures lies and liars figure. Never more apt

jaywemm on April 14, 2014 at 11:38 PM

HA! I’m a BitterLoather! Where is BitterClinger? I wanna hang out!

Lanceman on April 14, 2014 at 9:13 PM

Didn’t see this earlier.

Welcome to the Bitter family!!

Bitter Clinger on April 15, 2014 at 9:48 AM

You know, private sector Chief Executives would go to jail for this kind of thing.

Just sayin’.

Midas on April 14, 2014 at 10:55 PM

Absolutely! I worked for a company based out of No Cal for 10 years and when the company started struggling financially they decided to not fund the 401K employees were paying into and instead using employee contributions to help keep the company afloat.

None of this was known until an employee quit and went to roll over their 401K that we became aware of what was going on. The California Labor Board got involved quickly and basically told the owner the 401K accounts had to be fully funded within the next 3 months or someone was going to jail!

Yet here we have the State doing essentially the same thing as the company I worked for did and it’s ok! It’s not ok, it’s a ponzi scheme and the last I checked a ponzi scheme is illegal and several people in the past years have gone to jail for running ponzi schemes!

As for those that are touting California’s supposed “budget surplus” they have and this supposed surplus is going to be a:

but no one is producing serious forecasts that place any doubt on multi-billion budget surpluses in 3-6 years out.

bayam on February 19, 2013 at 7:16 PM

are in denial, ignorant, or they have had the wool pulled over their eyes or all three!

I left The People’s Republic of Kalifornia 21 years ago because I couldn’t afford to buy a home despite the fact my income at the time was considered “middle class” level.

And when the producer class says adios, the parasites which exponentially outnumber them will be totally screwed.

The hell with Mexico. We need to build an electric fence between CA and AZ, NV and OR.

Lanceman on April 14, 2014 at 8:34 PM

This is exactly what has been happening to Kalifornia over the last 30 years. Productive people (those that work and pay into the system) and businesses have been leaving in droves. There have been several articles written regarding this exodus and the negative economic implications it is already having and will continue to have.

As someone else stated:

That said – real estate is soaring out there – jobs are being created – but as it says – the surplus? – not so much.

I consider myself called.

jake-the-goose on April 14, 2014 at 10:10 PM

Real estate has always soared in Kalifornia, even in the worst economic times because lets face it, Kalifornia has some of the most beautiful scenery in all of the US. However as I mentioned before I was considered middle class when I lived in Kalifornia and couldn’t afford to buy a home. Eventually all that will be left in Kalifornia are rich elite people that can afford the high taxes, the high cost of living and the high housing along with the parasites that live off the system. Such a system will eventually collapse because without producers and businesses (entities that pay into the system through taxes) there won’t be enough rich elite to make up for the growing shortfall to sustain all of the state perks the parasites currently enjoy and live off of, like Lobster eating surfer dude does!

It’s simple economics/math really, if you drive out your tax base (productive people and businesses) and all you have left are a few rich elites and a growing parasitic population your economy will collapse no matter how you spin the numbers!

It couldn’t happen to a better and more deserving state, they made their beds and they should sleep in it! When their economy collapses (and it will) if they dare to ask the feds to be bailed out and their request is approved that will be the day I stop paying federal taxes! F-em!!

Liberty or Death on April 15, 2014 at 4:33 PM

real estate is soaring out there – jobs are being created – but as it says – the surplus? – not so much.

@Jake, real estate and white collar jobs are doing well here but CA continues to push manufacturing and larger corporations (except Silicon Valley and Hollyweird) out of CA on a daily basis. With snow pack ergo water non-existent this winter, farmers will go out of business. Watch how quickly fallow ag land gets rezoned residential and sold for pennies to developers…who’ll build gawd-awful tract homes 16 to an acre, thereby exacerbating the entry-level glut in small towns in CenCal. Sixteen families per acre paying property taxes is exponentially greater income than ag taxes per acre, and their water consumption conversely less than ag. So now there’s MORE property tax income flowing into Sac’s coffers, which on the surface looks to help Moonbeam balance the budget. But now that all the ag jobs are gone, where do Jose and Juanita find a job to pay their new mortgage? Oops, they lose their house, they go on entitlement plans, and we continue to see the state spiral. No manufacturing = no way to pay for unfunded pension liabilities!

Biffstir on April 15, 2014 at 4:40 PM

Liberty or Death on April 15, 2014 at 4:33 PM

Yeah, what he said! :)

Biffstir on April 15, 2014 at 4:43 PM

I love California and wish I could move back there. But that’s not going to happen, because the state is terminally sick and there’s nothing that anyone can do to fix what’s wrong.

At some point California is going to ask Congress for a bailout, and it’s up to all of us to make sure that does not happen. No bailouts for California or Illinois or the other states on the brink of failure, and no bailouts for Detroit or other failed cities.

J Baustian on April 15, 2014 at 11:13 PM

I tried to get more people to NOT for moonbeam this last time because I knew he would be even worse this time around. He destroyed Oakland which is still trying to recover. The debt is really somewhere around 35 billions and there is no “surplus” of any kind. Unfunded pensions, hidden spending not openly on the books. Yep, that is the Democrat way. Think Detroit and other Demo run states and cities and that we are getting close to every day. Can hardly wait to leave CA to the idiots. Better yet, we divide into 3 states – southern, central and northern, and Silicon Valley on its own. We in the north want a Constitutional state but I can’t say I like the name of “Jefferson” and hope we can come up with a more interesting name as we merge with a lower part of Oregon to form the new state. Let the liberals live and die in southern CA, let’s support the local farmer agriculture in the Central, and the rest of us building small business, low taxes, and a calmer life without having to support the lazy, illegals, and anyone on the dole for many generations. We have had enough – all they think about are taxes and no relief of any kind.

Roselle on April 16, 2014 at 12:20 AM