Jul 20 2009
IOUs and still no budget
There is still no budget. IOUs are being issued, and banks have stopped accepting them. The SEC has declared that California’s IOUs are tradeable, and there is a pretty large market for trading the IOUs for cash.
There was supposed to be meetings on Sunday, yesterday, about the budget. But there was a problem with the schedules of the Big Five (leaders of both parties from both houses and the Governor) and the meeting didn’t happen. Just out of curiosity - what were the events that interfered with budget negotiations? Fundraisers? It is not like this budget and the fiscal situations are the biggest problem currently in California. What else could these people have to be doing besides fixing the budget? Obviously they had something more important than doing their jobs, otherwise they would’ve been at the meetings.
It should come as no surprise that there is no budget yet. Once the deadline to prevent IOUs from being issued was blown, and since there hasn’t been a major public backlash against the Legislature and Governor, it was expected that they would take their time crafting a budget deal. The hope was that in crafting the deal there would be real reforms to help solve the problem. However, from the few details that have leaked, that is unlikely.
From the few details that have leaked it seems as if the budget deal will involve some cuts, and then some theft of money from local governments. It cannot be called borrowing, because there is no good plan to pay back the money. Instead, it is an outright theft. Education will have to take another $680 million hit - although that is nothing compared to the billions of dollars they get in funding.
Maybe the whole proposal will come out soon, but chances are it will be mid-week or later when the new budget deal comes out. Expect to see a lot of accounting gimicks and borrowing in the deal.
