California Crash

It’s no secret – California is in crisis. The state is facing a $20 billion budget gap while the deficit continues to grow without any end in sight. The state legislature has been struggling to find solutions to the problem but has been unable to agree on most issues.

Adrian Moore, vice president of research at the Reason Foundation, sat down with Varney & Company to discuss the many issues facing the state and how the legislature could possibly fill the budget gabs.

“Not a lot has changed in the fundamental dynamics up in Sacramento so we could be stuck in this loop for awhile,” said Moore. “Basically the revenue that we anticipate coming in this year is about the same as we had in 2004, so the worst case scenario is we have to cut back to where we were in 2004.”

“They have to realize that they’ve [state legislature] got to quit doing things that prevent the creation of jobs and they have to find some way to balance this budget,” added Moore.

California’s unemployment sits at 12.3% – one of the highest in the U.S. and the highest in the state since World War II. That’s on top of an 81% increase in small business bankruptcies in the past year.

At the heart of the issue for California is the state’s spending. While the state government has yet to approve the 2010-2011 budget – the 2009-2010 was approved at a total of $110 billion. While that’s down 7% from the previous year it is still clear that more budget cuts need to be made.

And the type of spending culture in California has people asking questions. It was revealed that the Los Angeles County supervisors’ discretionary spending totaled $3.4 million per year. While this example is a local one, this kind of spending can be found across the state.

Prosecutors are now investigating the supervisors’ spending packages.