Bankrupt (hotel) California?

Society Pakistan & World Affairs
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Reports are saying New York is next?

Jobs terminated as California goes bankrupt

Political stalemate on $12bn deficit forces Schwarzenegger to sack thousands of workers By Guy Adams in Los Angeles

Wednesday, 18 February 200
EPA

California Governor Arnold Schwarzenegger is struggling to prevent his administration from running out of money
Arnold Schwarzenegger has sent redundancy notices to 20,000 government employees and shut down California’s last remaining public works projects yesterday, as state politicians failed to pass a budget that will prevent his administration from running out of money.

The Governor of California, who is spending billions more each month than he can raise in taxes, has insufficient funds left to settle outstanding bills and is days away from being forced to start issuing “IOU” notes to creditors and civil servants.
The state senate has been unable to agree on a package of tax increases that will stave off bankruptcy. The administration is currently operating at a loss of $12bn (£8.4bn) a year – a figure that is rising exponentially and will hit $42bn next year.
Late on Monday night, with a proposed budget one vote short of the two-thirds majority it needs to pass, exhausted senators were sent home to sleep. They were ordered back to the chamber at 10am yesterday, and told that no one would be allowed to leave before a deal was reached.
“Bring a toothbrush,” the senate president Darrell Steinberg advised them. “I will not allow anyone to go home to resume their lives, or any other kind of normal business.”
Politicians had already spent the entire weekend in Sacramento trying to break the gridlock, with sometimes surreal results: at one point on Saturday, they were forced to surrender car keys to security guards, to ensure that no one took advantage of a short toilet break to run away. The tortured nature of proceedings, in the face of looming crisis, leaves California, one of the world’s wealthiest regions, on the brink of becoming the first state in US history to be declared insolvent.
Civil servants are already being forced to take two unpaid days off a month, while billions of dollars in income tax repayments have been frozen. State prisons are so underfunded that a court last week ordered the release of 55,000 inmates to ease overcrowding.
Maintenance work on California’s infrastructure has all but ceased – the last 275 projects will be halted this week – and the state’s falling credit-rating, has made it tricky for Mr Schwarzenegger to tide himself over by borrowing funds on Wall Street.
The crisis highlights the particular pressures that the economic crisis has wrought on a region where mass immigration places a disproportionate strain on public schools, prisons and hospitals. California has America’s second highest foreclosure rate after Nevada, with one in every 173 homes receiving a repossession notice last month. Income tax revenues are in steep decline, with unemployment at 9.3 percent. Though Governor Schwarzenegger has faced public criticism, he has only limited ability to manage finances thanks to California’s obsession with “direct democracy” in which small interest groups can enact laws by electoral “proposition”.
Property tax has been frozen for many homeowners since a proposition passed in the late 1970s. A separate measure, introduced in the 1980s, means that income tax cannot be raised without the agreement of two-thirds of the state’s lawmakers.
Meanwhile, previous borrowing means that roughly 10 per cent of all California’s cash is required to service its debt. A raft of other ballot measures control spending, meaning that only a quarter of Mr Schwarzenegger’s spending is considered “discretionary.” The rest has been “earmarked” for a particular cause.
The result is political gridlock. A minority of Republicans at the state senate and assembly, most of whom were elected on the back of “anti-tax” pledges, are able to block tax rises – while the majority of Democrats refuse to countenance spending cuts.

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No way new york can be next. Yes NY state is also struggling but not that close to be called bankrupt in future. Governor Jefferson who took over after the prostitute scandal of ex-Governor is marked as a competent person among all the politicians.

Here is what NYtimes is saying about california situation:

http://www.nytimes.com/2009/02/17/us/17cali.html?_r=1&scp=1&sq=bankrupt%20california&st=cse

February 17, 2009
** California, Almost Broke, Nears Brink **

By JENNIFER STEINHAUER
LOS ANGELES — The state of California — its deficits ballooning, its lawmakers intransigent and its governor apparently bereft of allies or influence — appears headed off the fiscal rails.
Since the fall, when lawmakers began trying to attack the gaps in the $143 billion budget that their earlier plan had not addressed, the state has fallen into deeper financial straits, with more bad news coming daily from Sacramento. The state, nearly out of cash, has laid off scores of workers and put hundreds more on unpaid furloughs. It has stopped paying counties and issuing income tax refunds and halted thousands of infrastructure projects.
Twenty-thousand layoff notices will go out on Tuesday morning, Matt David, the communications director for Gov. Arnold Schwarzenegger, said Monday night. “In the absence of a budget we need to realize this savings and the process takes six months,” Mr. David said.
After negotiating nonstop from Saturday afternoon until late Sunday night on a series of budget bills that would have closed a projected $41 billion deficit, state lawmakers failed to get enough votes to close the deal and adjourned. They returned to the Capitol on Monday morning and labored into the evening but still failed to reach a deal. They planned to reconvene at 10 a.m. Tuesday to go at it again.
California has also lost access to much of the credit markets, nearly unheard of among state municipal bond issuers. Recently, Standard & Poor’s downgraded the state’s bond rating to the lowest in the nation.
California’s woes will almost certainly leave a jagged fiscal scar on the nation’s most populous state, an outgrowth of the financial triptych of above-average unemployment, high foreclosure rates and plummeting tax revenues, and the state’s unusual budgeting practices.
“No other state is in the kind of crisis that California is in,” said Iris J. Lav, the deputy director of the Center on Budget and Policy Priorities, a liberal research group in Washington.
The roots of California’s inability to address its budget woes are statutory and political. The state, unlike most others, requires a two-thirds majority vote in the Legislature to pass budgets and tax increases. And its process for creating voter initiatives hamstrings the budget process by directing money for some programs while depriving others of cash.
In a Legislature dominated by Democrats, some of whom lean far to the left, leaders have been unable to gather enough support from Republican lawmakers, who tend on average to be more conservative than the majority of California’s Republican voters and have unequivocally opposed all tax increases.
And then there is Governor Schwarzenegger, whose budget woes far outweigh those of his predecessor, Gray Davis, whom he drummed from office in a 2003 recall that stemmed from the state’s fiscal problems at the time. The governor has failed to muster votes among lawmakers in his own party, whom he often opposes on ideological grounds, resulting in more scorn from Democrats.
Furthermore, Republican leaders in the Senate and the Assembly who have agreed to get on board with a plan have been unable to persuade a few key lawmakers to join them. The package needs at least three Republican votes in each house, to join with the 51 Democrats in the Assembly and the 24 Democrats in the Senate.
For months Republicans have vowed not to raise taxes, which in California means no increase in either the sales, gas or personal income tax.
“It is a dramatic time,” said Darrell Steinberg, the State Senate’s president pro tempore. “The solvency of the state is on the line. It is really quite a system where the fate of the state rests upon the shoulders of a couple of members of a minority party. The system frankly needs to be changed.”
In the meantime, drivers are met with “closed” signs at Department of Motor Vehicles offices two days a month, environmental programs are left unattended, piles of dirt mark where highway lanes are to be built to ease the state’s infamous traffic congestion, school systems mull layoffs and counties prepare to sue the state for nonpayment of bills.
Last week, Mr. Schwarzenegger and the four legislative leaders concurred on a series of bills that included $15.1 billion in budget cuts, $14.4 billion in tax increases and $11.4 billion in borrowing, much of it subject to voter approval.
The Senate Republican leader, Dave Cogdill, said he thought he had all the votes needed to get the deal done in each house. But on Sunday, two Republican senators — Dave Cox, who was originally thought to be the last vote needed, and Abel Maldonado, whom Mr. Schwarzenegger had been able to woo into voting against his party in the past — said they would reject the plan.
Democrats, who had already given into Republicans’ long-held dreams of large tax cuts for small businesses and for some of the entertainment industry and a proposed $10,000 tax break for first-time home buyers, balked at Mr. Maldonado’s request that the Legislature tuck a bill into the package that would allow voters to cross party lines in primaries.
“I think with an open primary, we would have good government that would do the people’s work,” Mr. Maldonado said.
Sunday evening ended in frustration and exhaustion for lawmakers, who returned to work on Monday facing the state’s uncertain future.
“My boss will continue to work toward a responsible budget solution,” said Mr. Cogdill’s spokeswoman, Sabrina Lockhart. “There are real risks and real consequences for not passing a budget.”

Timepass- December 2012
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Why can't NY be next? Is NY state not seeing many bankruptcies/foreclosures? I believe NY must've been hit harder due to financial powerhouses becoming financial rat-houses, homes losing values etc.

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The bankruptcies or foreclosures are everywhere. As long as the management of taxes go fine , everything will be ok. California is running into bankruptcy due to poor management. Otherwise it is full of natural resources, has silicon valley and what not.
I'll try to find a link to validate my point but this is something what I know already.

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**Now there will be 20,000 California State Employees....................

All saying I'LL be BACK!...............to to Mr Terminator.............:)
**