This is what I don't understand. California is in massive debt. Now they have a surplus, but instead of paying it off, they are going to put it in a slush fund?
How does this make sense.....
And just out of curiosity, how did they end up with a surplus?
Ok maybe I can put it in a way you can understand.
First you need to understand the meaning of the words deficit and debt. They don't mean the same thing.
A deficit is when you add all expenses and all revenues. If there's revenue left over you have a surplus. If there's more expenses than revenues, you have a deficit. That is you spent more than you had. At the end of the accounting cycle that deficit is added to the debt.
Here's the part that might help you understand this.
You get a paycheck. You pay your bills and have some left over. The next time you are paid you have that excess left over from your last paycheck. You put that excess in the bank for a rainy day.
Meanwhile you still have a mortgage on your house that is scheduled to last up to 30 years. Which is debt.
Meanwhile you still have a 10 thousand owed on your car that is scheduled to last up to 5 years. Which is debt.
You still have your debt but you don't have a deficit and you have saved something for an emergency if it arrises.
Yeah, that was difficult or not.
I am well aware of the difference.
My point was if you are going to go through the effort to balance a budget and have a surplus, because of the debts you have... wouldn't paying off those debts be a big part of the plan? Perhaps even a bigger part than having a slush fund?
We've already established that if there is a rainy day, California has no problem borrowing money. It's not like they are a private citizen who can't borrow because their credit score sucks, and if they don't have a rainy day fund, they will end up homeless.
Why was getting the budget in order, and having a surplus important? Why did they even try to have a surplus?
You want to know why? Because in 2009, California was in such bad shape, they actually requested a Federal Bailout.
Point being..... you need a rainy day fund, for any crisis that pops up.
The debt....... *IS*.... the crisis.
California now owes... what $1.3 Trillion in debt?
California’s Total State and Local Debt Totals $1.3 Trillion | California Policy Center
The rainy day is here, now.
And I find it baffling that people support having a surplus all the time, and claim to support fiscal responsibility, but then the moment they have success in the budget, they move to see what they can use the money for, instead of dealing with the issue that caused the need for the money to begin with.
This is what was so mind boggling about the 1999-2000, budget surplus years.
We might as well have never had a surplus. It served zero purpose.
If you go look at the national debt, from 1997 to 2001, there was never a year where the national debt went down.
Why? Because every time we had a surplus, people found things to do with it. So why have a surplus? If you spend all the surplus, and keep growing the debt year over year.... what was the point?
Supposedly, from 2014 to 2015, the California debt decreased by $3 Billion, from $424B to $421B. But we have nothing but estimates for 2016 and 2017.
The estimates are that from 2016 to 2018, the debt has magically remained absolutely steady at $421B.
We don't even know if these numbers are absolutely correct.
But if they are, that means CA has been running a surplus for almost 3 years, and hasn't paid off a dime of it's debt in at least the last two years, and this year isn't looking good either.
So why have a surplus? You have a huge debt crisis, to the point of bankruptcy or bailout..... work hard to balance your budget and get a surplus going... and now haven't accomplished anything with the crisis.
This is pathetic. When I was in debt, I sent every spare dime, to pay off the debt. That is why I am 100% debt free today. I owe no one, anywhere, anything. If I lose my job, no one is going to bother me. I have no bills to pay, beyond utilities.
Why? Because I got by budget under control, and didn't waste my surplus money. I paid off my debts.
California is going to go through another down turn in the economy, and be right back into a budget crisis... because they are squandering this opportunity to pay off their debts.
