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May -- be harsh on California.
The -- -- that Jerry Brown says the budget deficit has disappeared.
He had an upbeat statement he says it's all thanks to new taxes and spending cuts is the first time in years no deficit.
Now this balanced budget includes lot of rosy predictions about economic growth in the future.
At exactly how much will really be saved by spending cuts I say it's a little early to celebrate.
-- -- Governor Brown has some spending increases built into this budget look at us two point seven billion extra.
-- K through twelve education.
And that 450.
Million dollars extra -- school energy efficiency projects.
Steve -- -- -- -- senior fellow at the Manhattan institute the expert on state finances.
Yeah I've been harsh on California in the path of almost any golden -- -- eight.
I'm so you gotta look more deeply at this budget because it ain't as good as it looks -- you -- he -- Well I think if a couple things first of -- California has been essentially borrowing to increase its spending and they have.
About 23 billion dollars in debt that they have to pay back.
It include -- -- a government for its.
They got 23 billion dollars we'll have more debt and that this yet -- the just budget -- facing yet.
Rick this is fresh borrowing to cover that 26 billion deficit in the past -- back 23 billion has to be repaid but yet but he's not included in this but well yes actually it is included in the -- another oversaw a lot of the money from the tax increase a lot of tax revenues.
Currently are actually going.
To basically pay back borrowings.
Against previous budgets.
So and then the second thing that's happening is California is not really reforming its spending.
So -- a projections are that a big part of the tax increases actually going to go to the fact that they have.
This pension debt they've done nothing substantial with the pensions -- give you one example.
One of them former board members of counselors David Crane California -- or.
Has basically said that about half of the money that's gonna go to schools with the new tax increase is gonna wind up in the pension fund.
Because -- is on what's.
So the money but basically you're paying more and getting less -- -- I don't care situation in California are so I'm looking at this from a distance.
And I'm seeing an upbeat presentation by the government.
Excuse -- Specific noble budget deficits.
Where out of trouble.
We'll have gotten to the budget deficits would come back from 26 billion dollar down now we might even be in the black in the near future without going into detail.
Easy and might easy easy easy is it legitimate for the governor of that state to be upbeat about -- -- all -- -- relative compare the two years ago three years ago I guess you could certainly be upbeat there's a modest recovery going on is it plain -- in the future but but not by any means because again part of what they did -- when you balance your budgets by basically borrowing money continuing to spend without.
And essentially what you've done is you've created is higher level that you have to me.
And so and so that.
Wait you know they haven't restrain their spending and anyway and the revenues off the race to -- that's -- -- but -- comfortable going to services is not a spending cuts now.
But they're cutting services because pensions and Medicaid spending and growth and things like that are taking money away from that so they cut it here but they had to put it there and this is still so it doesn't make -- -- the pension situation is just -- Eric if you.
It's the same situation -- in -- -- elected in 2011 Illinois raise taxes by eleven start -- seven billion dollars.
That two thirds of that money has disappeared into the purchases to -- about it so Illinois what as there was still have budget problems even after they raise taxes and the declared victory.
Because they didn't reform -- spending -- the money is just gone there California faces the same challenge especially with their teachers pension fund counselors very vicious.
So I feel vindicated quite.
I've been only had enough that dividend is not about me I know but -- -- the years the formally golden state -- always -- pejorative like that with the formally Golden State and -- hinted.
That some point in the future California may need help from the federal government.
-- -- -- -- -- Outside the formerly Golden State and so far is that it's not clear that California's economic.
Performance has been lagging for more than a decade or other unemployment has been hired in the nation's.
For quite a long time they now have these persistent budget problems they've done nothing about their pension system and the cost of repaying their pension system -- absent some.
Tremendous run up in the stock market.
Is extremely high and of course -- -- California cities.
Going bankrupt now we're talking about even worse things going bankrupt me so adding that these sort this law what's actually don't ya know a bit right.
Well certainly outlet and and the other thing I think he's out migration of businesses which remains a problem in California it's signaling to you know you talking about I'm glad you agree that a limited.
Excellence -- thank -- reflects up.
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