Back in California

I have been back in California for a couple of days.  It is definitely a treat to soak up the sun and I love the cool nights.  7:30am runs when it is 65 degrees out are fantastic.  Being back is a reminder the recession and its fallout are far from over.  California and her run away budget and more recently, run away deficit, are causing ulsers in Sacramento.  A $26.3 billion hole in the state budget cannot be ignored.

How to close that hole is the problem politicians have been tackling for the last weeks.  The deal apparently struck in the last 24 hours involves cutting CalWorks, hiking vehicle fees, taxing oil extraction, cutting school spending and releasing up to 27,000 inmates from the prison system.  (If you want to try and fix the budget hole yourself, try right here)

This is not fun to watch.  California in 2006 had the 8th largest economy in the world and now is struggling mightily to pay her debts.  I am far from a respected economist or politician but I can safely suggest to every other state (and individual) that if they want to take anything away from the California experience it is this:  fiscally responsible budgeting is a must.  I have a couple of common sense suggestions to make.  First, California would do great if she would save a set portion of her budget permanently for use in times like this.  Only a small percentage is required.

Second, locking yourself into deals with any organization, be it a union contract or a road deal, that could imperil you in tight fiscal times is bad for any organization.  California is only exasperating her problems now because she is forced to pay her workers less, taking more taxes out of the system.  Solving those debts will be the most difficult and it is very likely contracts will be broken or bent severely.  For example, there is talk of taking money from the school system but guaranteeing it would be returned in a few years.  Bad idea!  It will be years before the economy turns around.  Recessions end within a year or so but typically take more than 4 or 5 to return to previous productivity levels.

My only hope is we get out of this mess and we learn our lessons.  I do not have an answer to this problem nor is there a magic pill.  Just as many businesses are doing California needs to bite the bullet and make some serious cuts, whether they are specific programs or across the board reductions.  I would recommend it be a combination of both.


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