We are not happy about any of these taxes either, but as we keep saying, until we stop caving to the Correctional Officers Union and the prison industry, we’ll keep running into these problems again and again.

If Arnold can’t get any of these proposals through the legislature, we would not blame him one bit if he gave us all the finger and took a job with President-Elect Barry O.

Arnold explains himself:

“In the six weeks since I signed our last budget, the mortgage crisis has deepened, unemployment has increased and the stock market has lost almost 20 percent of its value,” Schwarzenegger told a news conference. “We have drastic problems that require drastic and immediate action – we must stop the bleeding right now.”

Here’s the tax increases the Governor is Proposing:

Starting Jan 1, 2009, a three year 1 1/2 % sales tax hike for three years.  In three years the rate will return to 5%.  Yeah, right.  When Arnold proposed this last August, not one Republican legislator would go along with him.  Now that the election is over, he thinks that now the election is over, he thinks he has a better shot.

Starting March 1st, a permanent tax on amusement park admissions and sporting events.

Starting January 1, 2009 – The “nickel-a-drink-tax” an extra 5 cent tax on purchases on shots, a bottle or can of beer beer, and a glass of wine.

Starting Jan 1, 2009 an “oil severance tax”  – if you drill baby drill in California you gotta kick back 9.9% of the gross value to the state.

Starting Feb. 1, 2009, previously untaxed services like appliance repair, furniture repair, vehicle repair, golf and veterinarian services” will be taxed at the new “temporary” 6.5% rate.  We like how they tried to sneak “golf” in there between “vehicle repair” and “veterinarian services” hoping that nobody would notice.

An increase in the vehicle registration fee!  HEY! didn’t Arnold get elected the first time by cutting this fee?  Times have changed…starting February 1, 2009 the Gov. wants to increase it by $12.

Spending Cuts, Parole Reform, Foreclosure Relief

• $4.5 billion in school spending cuts, $2.5 billion from elementary and high schools.
• Gradual increase in unemployment insurance rates charged to employers, lowering benefits to recipients, and more stringent eligibility requirements.
• Speeding up public work projects to jumpstart jobs.   Hospital construction was specifically mentioned.
• State payments to elderly blind and disabled cut to federal minimums.  Welfare and Medi-Cal cutbacks. OUCH.
• a “reform” of parole process to ease prison overcrowding.  Interesting! Especially in light of the failure of Prop. 5 and the passage of Prop. 9!
• Arnold gets on the Obama train with a 90-day stay of foreclosures applicable to lenders who are not working with borrowers to stay in their homes.

Stay tuned to see how much of this gets through the legislature.

There are two separate problems. First, there’s the short-term revenue problem. Second, there’s the budget shortfall.

The Short-Term Revenue Problem

Every October, state revenue dips and California usually runs out of cash.  We never notice it because the state gets short term bank loans which are paid back once income picks up.  These loans are called “short-term bonds.” These “short-term bonds” may sound fancy, but they’re no different than the payday loan you get at the you get at the check cashing place next to the donuts-and-$1 Chinese-food store.

The problem this year is that banks aren’t in the money-loaning-mood, not even to a good customer like California.

Last week, Gov. Schwarzenegger gave the feds a heads up that if the banks don’t come through, we may need to borrow $7 billion from the federal government to get us through the rest of the year. Congress is in even less of a money-loaning-mood than the banks, and by all accounts the feds aren’t going to pony up the $7 billion.

If California does not get the loan, the state runs out of cash on October 29.

What happens when the State runs out of cash?  Nothing good (more on that in the coming days).

The Budget Shortfall

Whether we get the $7 billion loan or not, there’s still the problem of funding the 85-day-late $103 billion budget we passed a couple of weeks back.  State Controller John Chiang just unleashed this blast of press-release sunshine:

“The first quarter of the fiscal year has just ended, and we already are short $1.1 billion. Revenues are deteriorating faster than expected, and September’s cash flows send strong signals that the recently-enacted budget is more out of balance than we feared.”

The Sac Bee reports that this $1.1 billion shortfall could become a $5 billion shortfall by the end of the fiscal year and by June 2010, we’ll be $18 billion short.

Want more good news? Earlier this week,  a federal court ordered California to increase the spending on health care for prisoners by $3 billion — payable by July 1, 2009. This is only the first installment of a multi-year $8 billion plan.  (Yes, prisons.  This is a serious public health, legal, and moral issue so before you go all cowboy-justice-let-’em-rot on me, read this article).   Of course, we could solve this problem by releasing non-violent prisoners (more on that, and Prop. 5, in the next days and weeks).

Bottom line:  By Summer ’09, California will be unable to pay for $8 billion in state program and services (the $5 billion we’re already short + the $3 billion in prison health care).  By June ’10, California will be unable to pay for $23 billion in state programs in services (the projected $18 billion shortfall + $5 billion in prison health care).

Other Problems

Here’s another bit of advice: If you did something to piss off your boss, you better go apologize. The State unemployment fund is running out of money: Says the Sac Bee:

With California’s unemployment rate surging to a 12-year high, the state’s unemployment insurance fund is paying out as much as $27 million in benefits a day – and it could be $500 million in the red by January, officials warned Tuesday.

But the housing crisis is getting fixed, right? Nope. 1300 Californians are still losing their homes every day.