Despite Liberal Claims of a Burgeoning Economy, California is Heading for Fiscal Cliff

Elder Patriot – California Democrats spiked the ball just a tad early following the draconian tax increases Governor Jerry Brown ushered through the state legislature.

Of course as any first year econ student could tell you, higher taxes had nothing to do with spurring the growth of California’s economy.  Absent California’s tech sector’s explosive performance over the past few years California would’ve had nothing to brag about.

Those higher taxes did result in higher revenues, and even some short-term operating surpluses, but like every liberal dominated governmental entity before, they over spent during the good times and are facing an economic armageddon now that the good times are about to stop rolling.

While it’s true that California Gov. Jerry Brown faced a state in dire financial straits when he took office in 2011, and he successfully pushed through a budget fix that included tax increases and spending cuts to higher education and social programs, the urge to splurge on sanctuary status for illegals has guaranteed that the benefits are going to be short lived.

Now nearly 8 years later, California is facing the deleterious effects of a potential trade war between the U.S. and China that threatens tens of thousands of jobs in the state.

Another fiscal pitfall comes from California’s tax system, that is heavily reliant on income taxes for most of its revenues.  That makes it especially vulnerable during times when the economy or stock market turn down.

There’s also the state pension funds that, similar to social security, isn’t figured into the operating budget and whose unfunded liabilities dwarf the $9 Billion surplus that came through the highest in the nation taxes.

Five years into Brown’s term, in August of 2016, the California Political Review ran this headline:

“Actuaries: Real CalPERS Unfunded Liability is $946 Billion—When Will it Collapse?”

The article went on to say that “the $946 billion is based on a 3.723% return—when the real return was .61%–so $946 billion is a low ball number.”

In an earlier article, the CPR reported, “Money manager John Mauldin looked at CalSTRS. Worst case, to be actually solvent he calculated CalSTRS requires an additional $30 billion per year starting now.”

That annual $30B shortfall is only marginally more than the amount California is spending “providing education, health care, law enforcement, and social and government services to illegal aliens and their dependents costs.”  

Californians were spending $25.3 billion per year when the Federation for American Immigration Reform compiled its report mid-year 2014.  That amount has increased significantly over the ensuing 4.5 years as the illegal immigrant population continues to grow.

To prevent an immediate collapse of the pensions funds, the leftists running California decided to reduce pension benefits by 60% overnight, essentially placing illegal aliens over the citizens of the state.

Now things are shaping up to go from bad to very bad.

Because of the state’s high cost of living, high housing costs in particular, and onerous taxes, middle class workers have been leaving the state in increasing numbers over the past few years.  Net outward migration now tops 150,000 people per year.

Making the crisis even worse for California is that the net migration has also hit Silicon Valley. There were more people leaving Silicon Valley and moving out of state than there were people arriving. Polls find that 46% of the people intend to leave – up from 34% only two years earlier.

While California is experiencing growth among one important demographic – the highly educated and wealthy – they do not forecast to be much help in propping up revenue projections in the near term.

Unlike the middle class whose earnings are almost entirely subject to taxes, those in the higher economic demos will be experiencing paper losses – significant paper losses – in 2018.  

Oh, and for all those liberals who were thumping their chests, check this out map from the Mercatus Center:

Now overlay it on this electoral map:

Libs, take note:


Of the ten most indebted states nine voted for Hillary Clinton.  On the other hand, the 12 most fiscally responsible states all voted for Donald Trump.