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Here’s a pretty good pair of graphics that show just how unsustainable California public sector finances have become over the last couple of years.
Outgoing Governor Arnold Schwarzenegger had a few words to go along with the pictures in this WSJ op-ed where the charts were spotted, but the words don’t seem necessary.
U.S. investors with assets in seven or more figures are not feeling nearly as chipper about the domestic state of affairs as they were over the last year or so, that is, when stock prices were generally rising. Reuters reports on how their mood has soured.
The Spectrem millionaire investor confidence index fell to its lowest level in more than a year in August as wealthy U.S. investors worried about politics and unemployment, according to Spectrem Group.
The Spectrem Millionaire Investor Confidence Index fell 11 points in August to -18, its lowest level since June 2009, when it fell a record 18 points to -20 shortly after the S&P 500 index hit a 12-year low.
The move returns the index to mildly bearish territory after 12 straight months in neutral.
The Chicago-based consulting firm, which specializes in affluent and retirement markets, defines neutral as between -10 and +10 in the index, which ranges from -100 to +100.
“The millionaires’ decline is particularly troubling since it suggests millionaires, typically more sophisticated than the broader affluent population, are reverting to a bearish frame of mind,” said George Walper, president of Spectrem Group.
As you might expect, it’s not the high unemployment rate and the increasingly slim chance that the lives of their children will be better than their own that is increasingly bothering the well heeled-crowd. It’s more the double whammy of a stock market slide about to extend into its fifth month and the prospect of paying higher taxes in the years ahead that have combined to lower their expectations of the future.
Here’s what looks to be one of the better films about the financial crisis – INSIDE JOB – from Academy Award nominated filmmaker Charles Ferguson, narrated by Matt Damon.
Favorite line: “These people are risk takers, they’re impulsive. You see a lot of cocaine use, prostitution” and don’t miss another smackdown of Hubris Incarnate with a Fatter Wallet (Frederic Mishkin) at about the 1:35 mark.
A quick check of the California budget crisis reveals that the state will not make scheduled payments to the public schools and county governments totaling a few billion dollars and that they’re getting ready to issue IOUs again. Details are in this LA Times report:
California’s top fiscal officials Monday ordered the deferral of $2.5 billion in payments to the state’s public schools next month to conserve cash and stave off the need to begin issuing IOUs.The state’s budget is 54 days late, and that delay has stretched the state’s depleted treasury to the breaking point. Issuance of scrip could come within weeks.
The deferral announced Monday “was not taken lightly,” state Controller John Chiang, Treasurer Bill Lockyer and Department of Finance Director Ana Matosantos wrote in a joint letter to the Legislature.
…
State officials acknowledged the added hardship. “The lack of a state budget is levying additional fiscal stress on schools … deferral of state payments will further exacerbate the situation,” Chiang, Lockyer and Matosantos wrote.Fiscal officials also ordered that a $400-million payment to counties be delayed; $700 million in county funds were pushed off in July.
The latest skipped payments to counties and schools must be repaid within 90 days, said H.D. Palmer, a spokesman for the Department of Finance.
Apparently these moves were expected, but they came a bit earlier than most officials were thinking. Furloughs are back, thanks to a recent court ruling that upheld Governor Arnold Schwarzenegger’s order and it’s just another typical late-summer in the Golden State.
The Economist reports on the rising rate of personal bankruptcy filings since sweeping new laws were enacted back in 2005, right around the time the housing bubble was fully inflated.
One could argue that this is yet another case of U.S. government policy “pulling demand forward”, that is, demand on the part of U.S. consumers to more easily wiggle out of debts that they owe. At The Economist they note, “The data suggest that an older trend is reasserting itself. This could be more bad news for America—or it could just mean that creative destruction is alive and well.” Bet on the former, not the latter.
The graphic below from this CNN/Money story should make clear one of the many reasons why, in recent years, we have moved from California to Oregon and then on to Montana.
State income taxes in Oregon are quite high (in the top two or three as I recall) and, while it costs practically nothing to register your car, property taxes are expensive in some counties. Here in Montana, motor vehicle taxes are surprisingly high but, from what I’ve seen, property taxes are very reasonable. I’ll let you know about state income tax next year.
By Tim Iacono, Since 2005
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