California budget flunks Moody's fiscal 'stress test'

Wednesday, May 4, 2016

"One of California's largest exports is its citizens, many flocking to Texas for lower taxes and a better fiscal climate. Now, we see one of the clear reasons why.

"Texas is best prepared for a recession, while California remains dead last -- even beating out Illinois. Once again, the metrics tell the story.

"But, when will California acknowledge it needs reform? Perhaps it's time for state leaders to establish a 10-year financial plan to get our fiscal house in order?"
--Senator Moorlach (R-Costa Mesa)

Dan Walters: California budget flunks Moody's fiscal 'stress test'

Sacramento Bee
By Dan Walters
May 1, 2016  [Excerpts]

Moody’s Investor Service last month delivered what should be a sobering message about California’s vulnerability to a massive fiscal meltdown.

The credit rating organization conducted a “stress test” of the nation’s largest states. California’s state budget...scored dead last among the five most populous states (Texas was No. 1) and virtually tied with Illinois for last place among the 20 most populous.

As their incomes go up and down like yo-yos, they magnify the effects of recession, Nickelsburg continued, resulting in ever-deeper budget deficits.

The best antidote would be broad tax reform, reducing volatility by lessening dependence on income taxes from a relative few. 

A November ballot measure would extend the income surtax for an extra 12 years, making California even more dependent on volatile revenues from high-income taxpayers, while the rainy day fund inadequate buffer...perhaps 10 percent of what a truly severe recession would require.