California's in trouble

They really don’t have any money.

Lawmakers are spending so much money that California could become a state without employees and still not balance its books.

Alternatively, Schwarzenegger could close every single state prison, fire the guards, release all the prisoners—plus cut off all funding for health care across the entire state—and still be billions in the hole.

Governor Schwarzenegger has described this deficit as a rock upon California’s chest that is suffocating the state.

Already Schwarzenegger has ordered most state offices to close two Fridays a month beginning in February. The unpaid days off will effectively reduce employee salaries by around 10 percent.

But the situation is now so critical that state Director of Finance Michael Genest says that in just over a week, California will be forced to defer making payments on certain state commitments. Instead, he says, “the state will have to defer or pay with ious for most of its obligations.”

What are they spending all their money on then?

Much of California’s problem stems from the fact that it is dependent on borrowing money to pay back old debt, as well as to finance new spending. To lawmakers, it was totally unexpected that lenders would ever grow shy of providing ever increasing amounts of money. Legislators somehow believed that, unlike individuals, the state could go on living beyond its means indefinitely. But now the unexpected has happened, and California’s creditors have cut it off, at least for now.

Ah.