Wednesday, December 10, 2008

California running out of money - are you kidding me?



I saw headlines like this one this morning, and I can't help but wonder how this possibly makes sense.

There are poor states in the United States. There are poorer countries in the world. I can't believe that Louisiana has had to absorb Hurricane Katrina, and New York has had to absorb the collapse of the World Trade Center, yet California - with its tourist revenues; California, with the busiest ports in the country; California, with its film and entertainment industries; California, with its property values and property taxes; California, with its high vehicle registration fees and poor public transit to offer reasonable alternatives; California, with so many rich constituents in film, music, the tech sector, shipping,...California, "the state that's untouchable like Elliot Ness" (RIP Tupac), is now threatening insolvency.

If such is the case, the entire administration must be called to account for the squandering of the billions in state revenues (almost $100 billion). There are too many poorer states struggling to and figuring out how to get by to stand by and watch the state of California cry poor.

Yes, I said squander. I'm not suggesting running a state is cheap. I'm suggesting that many states would love that kind of take. And, after raking in all that cash, what do Californians have to show for it, in terms of investment in infrastructure that reduces costs down the road (speaking of roads, are their road repair bills high because there's so much commuter traffic? Hey, build a better public transit system, so people have more choice and can choose not to drive cars...hmmm, but then we'd lose some of that $5.9 billion in vehicle licensing revenues and $3.5 billion in highway user taxes which together don't cover the total $14 billion paid out for government, legislative, judicial and executive costs... ).

Perhaps California is not a sustainable environment for a large populace. Perhaps its deserts are too dry, fault lines are too unstable, brush fires to uncontainable for people to live there affordably. Perhaps we should move the coastline populations of the United States out of that coastal danger zone, so that earthquakes and hurricanes and Mississippi flooding can't continue to create costs we can't afford to pay to live nearby.

But, until that decision comes down from on high, each state's got to deal with its parameters. Other states get by with much less. If I can't pay my bills, nobody cries for me, I've got to be responsible and spend less than I earn, or better myself so I can earn more, and I have to manage my finances without the benefit of teams and departments and branches of educated financial managers, urban planners, architects, engineers, lawyers and accountants working on my situation Monday to Friday, 9-5.

For a state that has over $90 billion to work with and access to bright people to help out, I say what is said to me with my limited abilities and resources - figure it out.

Hey California, here's one more suggestion to help you out. Warren Buffet is the richest man on the planet, and has built his legacy on hardcore research. He reads annual reports to understand the difference between hype and real value, and he buys real value when it's relatively cheap. If he isn't the best at understanding, at a very deep level, how to assess value and opportunity, I don't know who is. Ask him to go through your Governor's Budget as though he were considering investing, and have him tell you why he would or would not invest in California. That will tell you what needs to be kept and enhanced, and what needs to be fixed or scrapped.



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