CALIFORNIA

[rffrydr]

The world's fifth largest economy in budgetary shambles:

http://topics.latimes.com/politics/people/arnold-schwarzenegger


Prohibition, may show a way out :

http://www.latimes.com/news/local/la-me-medical-marijuana3-2009jun03,0,2392842.story
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

It was way worse here in '92. So much was concentrated here in So. Cal.--so much was structural . Manufacturing crumbled and CMBS set the standard by which the big american investment bank would NOT be judged again. The european banks continue to take the hit on this score.

Like, China, a large segment of our marginal labour force can simply "go back."
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

California's unemployment rate hits a staggering 11.9% (a new post World War II high):

http://www.latimes.com/business/la-fi-caljobs22-2009aug22,0,6343107.story

[rffrydr]

Calpers in no position to relieve state pension woes:


http://www.cnbc.com/id/32050489
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Killing the goose that has been laying the golden eggs:
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California's Crisis Hits Its Prized Universities

By KEVIN O'LEARY / LOS ANGELES Kevin O'leary / Los Angeles – Sat Jul 18, 8:20 pm ET
California's crisis continues while Gov. Arnold Schwarzenegger and legislative leaders inch slowly toward agreement on the deep cuts necessary to close California's massive $26 billion budget shortfall. Now, even as the state continues to pay its bills with IOUs, the University of California, the nation's leading public university, is being forced to cut its budget by $813 million - or 20%. It is highly unlikely that these cuts will be reduced by a budget agreement in Sacramento.

UC Berkeley will see recruitment of faculty drop from the normal 100 positions a year to 10. At 28,000-student UC San Diego, also ranked with Berkeley and UCLA among the world's top 20 research universities, recruitment has been halted. More than 300 UC scientists have issued a white paper warning Schwarzenegger that the sharp reduction endangers the 10-campus system's position as the premier public university in the United States and could have a negative impact on California's future economic growth. According to UC officials, the cut in state funding brings the "amount of state investment in the University down to $2.4 billion - exactly where it was in real dollars a decade ago." During the same time period, spending on state prisons has more than doubled to $11 billion. (Read a story about the struggle to find a way out of California's budget crisis.)

The UC Board of Regents on Thursday approved an emergency budget plan that would force 80% of the system's 180,000 employees to take unpaid furloughs of 11 to 26 days over the next year. UC President Mark Yudof said the furlough plan was preferable to layoffs in an enormous system that includes five medical centers, three national laboratories, and 225,000 graduate and undergraduate students. UC officials have yet to secure agreement on the furlough plan from the unions that represent 35% of university employees. (See pictures of the career of California's first lady Maria Shriver.)

But furloughs will only cover approximately a quarter of the UC deficit. The rest will come from a 10% increase in tuition, debt refinancing and dramatic budget cuts at the individual UC campuses, as testimony to the Board of Regents from the systems chancellors revealed on Wednesday. At UC Berkeley, according to Chancellor Robert Birgenau, campus libraries will be closed on Saturdays and no longer stay open 24 hours during final exams (a long-time campus tradition). He said UC is "the only university among our competitors whose faculty are taking a furlough," adding that faculty salaries already lag some "$25,000 behind our peers." In the past, even with this gap, UC Berkeley has been able to entice top faculty to leave Harvard and Yale for the Bay Area. The UC System as a whole has won 55 Nobel Prizes.

The retrenchment at the individual campuses will mean fewer student jobs, few teaching assistants, a virtual elimination of lecturers who often teach up to 30% of the undergraduate classes in some departments, and the risk that top faculty will flee for more lucrative - and stable - ivory towers.

At UCLA, the campus is projecting 165 fewer courses for the fall quarter, a 10% drop compared to fall 2008, Chancellor Gene Block said. There will be larger classes, which are expected to exceed an average of 60 students each. "We've already seen a 20% increase in the average class size over the last three years, due to increases in student enrollment not covered by state support," Block explained. At UC San Diego, Chancellor Marye Anne Fox said, "Our student-faculty ratio is so high that students may not be able to graduate on time."

In Sacramento, Schwarzenegger and Republican legislators have blocked all attempts by Democrats to cover any portion of the current $26 billion state shortfall with a tax increase. Tuition has more than doubled at the University of California in the last decade, rising to more than $8,700 for in-state students in fall 2009. Many of the state budget cuts being negotiated behind closed doors in Sacramento will primarily affect the poor and working class - health coverage for the poor and the CalWORKs welfare-to-work program, for example. But the severe funding reductions to the public schools and to the state university system - not only the University of California but also hundreds of thousands of students attending the 23-campus Cal State University system and the community college system - will strike California's large middle class in a fundamental way.

In a July 9 "Open Letter to UC alumni and friends," Richard Blum, the Regents' immediate past chair, Russell Gould, the current chair, Sherry Lansing, the vice chair, and UC President Yudof wrote, "The UC model - providing universal access to a top-notch, low-cost education and research of the highest caliber - continues to be studied around the globe among those who would emulate its success. And yet, this model has been increasingly abandoned at home by a state government responsible for its core funding."

[HenryTo]

California's budget talks fail yet again:
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Talks fail to break California budget impasse
Thu Jul 16, 2009 7:25am EDT

SACRAMENTO, California (Reuters) - California Governor Arnold Schwarzenegger and lawmakers failed on Wednesday night to agree to balance the state's budget by closing a $26.3 billion deficit, but officials said talks would continue.

The budget talks, which have lasted weeks, have stalled over a part of the governor's plan to suspend a law on school funding, Karen Bass, the speaker of the state assembly, and California Senate President Darrell Steinberg told reporters.

The legislature's two top Democrats said budget talks would resume on Thursday.

Schwarzenegger, a Republican, had said earlier on Wednesday he was hopeful a deal to resolve the lengthy budget crisis was near and might be reached by the end of the day.

"There's no nastiness in the discussions, no blowups," he said at a press conference. "There's none of that, so I think we have a good shot of getting the budget done today."

The state government began its fiscal year on July 1 facing a historic budget gap and a severe cash crisis.

California, which would be the world's eighth largest economy if it were an independent nation, has issued IOUs to vendors as well as taxpayers owed refunds to save cash for servicing of state bonds and other priorities payments.

Among sticking points in negotiations are Schwarzenegger's demands for a budget deal including changes to rules he says will prevent fraud in welfare programs.

He has also proposed paring education spending by suspending a voter-approved measure that locks in funding levels for public schools. Democrats oppose both ideas and are especially concerned about education spending cuts.

The size of a budget reserve also is being discussed. A cash cushion may help the state sell short-term debt after a budget agreement is reached. "It's all about being able to go out to the market after this is done," Steinberg said.

State Senate Republican Leader Dennis Hollingsworth said the state could use a reserve of up to $2 billion.

California's IOU effort is also intended to calm Wall Street. Credit rating agencies have grown increasingly anxious about sagging state revenues propelled by the recession and double-digit unemployment.

Moody's Investors Service on Tuesday cut its rating on about $72 billion of the state's general obligation debt by two notches to Baa1, or three notches above speculative "junk" status. Moody's said there may be further downgrades because the risk to priority payments -- and eventually debt servicing payments to bondholders -- is rising without a budget deal.

On July 6, Fitch Ratings cut its credit rating on California to BBB, just two notches above junk level.

Democrats have conceded there will be no tax increases in a budget deal as Schwarzenegger and anti-tax Republicans in the legislature's minority have demanded and have accepted dramatic spending cuts to fill the state budget gap. "We have made very, very deep cuts," Bass said.

[rffrydr]

Of Constitutional Conventions and "Howard Jarvis moments"

http://www.latimes.com/news/local/la-me-reform14-2009jul14,0,7936694.story

That Hollywood trend started at least as far back in the early 80's when they routinely used Toronto as a more "authentic" New York. The cost saving, courtesy the loonie, were a nice surprise bonus.

When the wall fell that opened up the vast pool of cheap talent and facilities to go with them. Prague's Barrandov studios was the great "factory system" all over again. Even boutique filmmakers like the current Francis Ford Coppola will load up a van and ship it to where a better (non-Union) crew awaits.

At the same time Hollywood has developed its "international style" releasing films suitable to a pan-europe box-office rivaling our own to the point where asia or europe will even open before here.

The recession provides the cover (as the box-office is so far immune from our great recession) to finally put a nail in it. Not just union expense but govt. redtape and now you've got some real savings. Old economies don't apply anymore. The great Western Costume went bankrupt this year.

Hedge Fund money has dropped out of the game and the release slate has been greatly cut.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Hollywood abandoning California in droves:

http://www.latimes.com/business/la-fi-ct-runaway12-2009jul12,0,3440084.story?page=1

[HenryTo]

Bank of the West and Citi will continue to accept California IOUs - the former indefinitely and the latter until July 17:

http://www.latimes.com/business/la-fi-ious11-2009jul11,0,1335837.story

[rffrydr]

Marijuana tax the ace in the hole?

The case for buying muni debt here:

http://online.barrons.com/article/SB124722767914922927.html?mod=googlenews_barrons
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Securitization the recession way in an internet age:

http://www.cnbc.com/id/31775864
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Triple "BBB"

http://www.thestreet.com/story/10535603/1/california-bonds-attack-of-the-killer-bbb.html?puc=_tscrss
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Internet sales tax: the bale of straw that breaks the camel?

Taxing Amazon

Published: July 6 2009 15:09 | Last updated: July 6 2009 15:21

Representation has brought with it plenty of taxation. There are hundreds of authorities in the US with the right to levy taxes, from one-road towns up to the Federal government. And as the recession prompts revenue shortfalls, states in particular are looking for fresh fruit to squeeze, with online retailers appearing particularly juicy.

Internet sales are subject to local sales taxes. The problem is if the retailer has no local physical presence. Then it is up to the consumer to declare and pay the relevant duty – an unenforceable nonsense, with a University of Tennessee report estimating that $9bn of potential taxes will go uncollected in 2010. So last year New York passed a law with Washington-based Amazon, the largest online retailer, in mind. It forces companies using local affiliates – websites paid a commission for referral sales – to collect local sales taxes. Amazon is challenging the statue’s constitutionality, but the law has so far been upheld by the courts.

Amazon is complying in New York, but last week chose to ditch affiliates in Rhode Island rather than live with similar new legislation. Now, however, California is among states proposing similar moves, suggesting an inevitable spread of tax-gathering obligations.

Such rules would place a heavy administrative burden on online operations, large and small. A simplified national solution would be preferable, and noises have been made at congressional level. Either way, online-only retailers such as Amazon are likely to see their sales prices rise relative to bricks-and-mortar competitors. At most, that would only cut sales growth rates by a couple of percentage points. But Amazon stock, up two-thirds so far this year, trades on a heroic 40 times prospective earnings. It is not priced for any moderation inspired by the meddling of politicians.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Looks like there's a good chance California will raise taxes to close its budget gap:
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California governor signals key budget concession
Sat Jul 4, 2009 3:56pm EDT

* Schwarzenegger sees possible compromise
* Says budget talks moving fast (Refiles to insert dropped word "deficit" in 3rd paragraph)

By Jim Christie

SAN FRANCISCO, July 4 (Reuters) - Governor Arnold Schwarzenegger, optimistic California can finish its budget negotiations in a few days, is willing to reconsider his proposed cuts to education in hopes of averting a cash crisis, the San Francisco Chronicle said on Saturday.

A compromise between the Republican governor and Democratic lawmakers may help clear the way for an agreement on an overdue state budget and avert a cash crisis for the government of the most populous U.S. state. California already is issuing billions of dollars in "IOUs" and, without a deal, is on track to run out of cash this month.

The San Francisco Chronicle reported that Schwarzenegger, in a Friday meeting with its editorial board, said he would be willing to reconsider his proposal to help reduce California's $26.3 billion budget deficit with cuts to school spending that would require suspension of constitutional rules on education expenditures.

"We are not stuck ... about the suspension," Schwarzenegger said during the meeting. "We've got to analyze all this."

He said budget negotiations are moving fast. "I think if we continue this way we can get this done in the next few days," he said.

Backing off on education spending cuts would go a long way with Democrats who control the state legislature.

On Thursday Democrats said they would no longer hold out for increasing taxes to help raise revenues to fill the budget gap. That was a major concession to Schwarzenegger and Republican lawmakers, who had opposed tax hikes and pressed for balancing the state's books with deep spending cuts.

That helped Republicans gain confidence that a budget deal could be reached soon.

"I think there is at least a 50-50 chance that we'll find a solution that is acceptable to all parties within a week," Assembly Republican Leader Sam Blakeslee said.

Democrats see backing off on education spending cuts as an important concession by Schwarzenegger.

"While taxes may be off the table, education cuts also have to be off the table," Democratic state Senator Leland Yee told Reuters.

GRIM REVENUE OUTLOOK

Lawmakers failed to agree on balancing the state's budget on Tuesday and the state government began its fiscal year on Wednesday without a spending plan in place.

In response, state finance officials began issuing "IOUs" in lieu of payments for tax refunds owed to taxpayers to preserve cash from higher prior payments, including payments to investors holding the state's debt. They warned that local agencies overseeing health programs and a variety of recipients of state financial aid, including the disabled and college students, could be in line for IOUs.
The state controller plans to issue more than $3 billion this month in registered warrants promising payments if Schwarzenegger and lawmakers fail to agree on a budget.

California is experiencing a severe revenue downturn as a result of the recession, rising unemployment and the lengthy housing downturn that will leave the state's government with an austere budget. It likely will force additional spending cuts throughout the fiscal year.

"The reality is that the revenues are not looking good," Yee said. "We just simply don't have the money to keep up the pace of services we're providing."

California finance officials hope a budget deal is reached soon so they can stop their IOU effort, which aims to reassure the municipal debt market that the state will honor its bond payments ahead of nearly all other obligations.

Finance officials also want to reassure the market in anticipation of having to sell short-term debt for cash-flow purposes once a budget deal is reached.

California's budget turmoil has made Wall Street nervous. Standard & Poor's warned in a statement on Wednesday that if California's budget is not settled soon, the state's A-credit rating, already the lowest of any of the 50 states, is at risk of falling.

[rffrydr]

http://sev.prnewswire.com/banking-financial-services/20090701/CL3850901072009-1.html
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

http://sev.prnewswire.com/banking-financial-services/20090701/CL3850901072009-1.html
_________________
Today is the Tomorrow you worried about Yesterday!