By The Numbers: Who Goes Bankrupt First, lllinois or California?

We occasionally do a post under the theme “by the numbers” where we take real world numbers to show how delusional and ignorant the American politician can be in the face of numbers that tell a different story that he or she is telling. To see previous posts under this theme, just enter “by the numbers” in the search box above.

1) A few posts ago we made the case that Illinois would be the first state government to go into bankruptcy. But according to a recent article on the Epoch Times website, California may still be able to sneak past Illinois and become the first state government to go bankrupt:

• While the governor of the state is hyping the estimate that this year’s California state government budget will have a revenue surplus of $20.6 billion, the state still has only $100.1 billion in assets to cover a whopping $369.9 billion in bills and unfunded liabilities.
• According to the Truth In Accounting organization, these future bills include $102 billion of unfunded pension benefit liabilities and more than $107 billion in unfunded retiree healthcare for former state government workers.
• With about 30 million adults living in the state, every one of those state residents would have to write a check for almost $7,000 to cover just these two buckets of future bills, assuming the buckets do not get any larger, which is highly unlikely.
• This $7,000 is on top of some of the highest tax rates in the country.
• Despite claiming that the state government has a budget surplus of over $20 billion, Shelia A. Weinberg, founder and CEO of the Truth in Accounting organization says not so fast, saying that the state needs, ”$270 billion to pay its bills, including unfunded pensions and retiree health care promises.”
• In total, “Unless pension and retirees’ health care benefits are renegotiated, each taxpayer will be burdened with paying $22,000 in taxes in the future without receiving any services or benefits.”
• And finally, according to Ms. Weinberg: “the state is drowning in debt.” 
• The CalPERS organization, which is responsible for funding state government workers’ pensions, has about $365 billion in assets, which leaves it $139 billion short of meeting its future fiscal obligations, this according to the Wall Street Journal.
• As you can see, if there actually is a $20 billion surplus in the state government’s financials, it is a mere pittance needed to cover the future bills and unfunded state government liabilities and promises.
• Or as Ms. Weinberg would say: “Touting a surplus is similar to me claiming I have a surplus because I think I will earn more than I spend next year, but not mentioning I have huge amounts of credit card debt.”
• Despite these outrageously bad financial conditions the state government recently decided to pay $98,000,000 a year to provide free medical care to 90,000 illegal immigrants.

Given how highly taxed Californians are already taxed, driving more and more taxpayers out of the state, raising taxes even more would drive more people out of the state and probably reduce, rather than increase tax revenue, and thus, the fiscal death spiral starts. 

2) But California is not alone in having a lot of unfunded future pension liabilities:

• Across the country, only about 72.5% of all pension liabilities are funded and covered.
• Back in the year 2000, on average pensions were funded properly at about 100% in total.
• And this continued shortfall in funding future pension liabilities in the past ten years has been in the midst of a long economic growth period, imagine what happens when the next recession hits.

3) Back to Illinois for a minute, numbers from a March 25, 2019 Wall Street Journal article shows how bad off the state’s financials are:

• The state faces a $3.2 billion tax revenue shortfall in the next fiscal year.
• In addition, it has about $8 billion in unpaid bills on its books.
• Depending on how you measure unfunded pensions liabilities, the shortfall estimate ranges from $133 billion to $250 billion.
• If the shortfall is as high as $250 billion, then every one of the state’s 12.7 million residents would have to write a check for about $19,700 to cover the shortfall, thus, a family of four would have to write a check for almost $80,000.
• The state has seen its population decrease 157,000 people since just 2013, despite other states around Illinois having seen population growth, as residents and businesses leave to find less onerous taxation and business regulations.
• Since the third largest city in Illinois, Rockford has a little less than 150,000 residents, the 157,000 people who left the state since 2013 would represent the entire third largest city in the state moving out and taking a few residents from neighboring towns with it.
• Moody’s Bond rating service has the state rated on notch above junk bond status, which will make it more and more difficult for the state to raise money via bond sales.
• According to Adam Schuster of the Illinois Policy Institute: “As a state we are someone who is limping from paycheck to paycheck and relying on high interest payday loans.”

Yes, Illinois is still in the lead when it comes to which state will go bankrupt first, the numbers are pathetic and getting worse. And higher taxes is NOT going to fix the problem.

4) Back to California for a moment and another aspect of their poor numbers:

• The homeless population in the county of los Angeles has jumped 12% in just the past year while the homeless population inside the LA city limits has jumped 16% in just the past year.
• The county now has the highest outdoor homeless population in the country, 58,936.
• The homeless population in San Francisco jumped 17% in the past year.
• At just under 130,000 homeless Americans, the state has the highest homeless population in the country.
• The city government and county government will spend over $1 billion this fiscal year to try and get a handle on the homeless problem with the county increasing its homeless budget by 15% in the next fiscal year.

Look, I am sensitive to someone who is homeless. In California especially it is probably not their fault as politicians have implemented idiotic and restrictive housing policies that have minimized the amount of affordable housing in the state.

But maybe the southern California politicians need to take a fresh look at the problem which keeps getting larger and larger despite tax rates and homeless budgets that keep getting larger and larger without a solution. Higher and higher taxes that do not resolve a growing problem, the numbers do not lie.

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http://www.reason.com
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http://www.bankruptingamerica.org
http://www.conventionofstates.com
http://www.youtube.com/watch?v=08j0sYUOb5w