CALIFORNIA EXISTENTIAL CRISIS
AMERICAN REPUBLIC NEWS
12-10-23 Update
By Chriss W. Street: CEO New California State
The non-partisan California Legislative Analyst Office just acknowledged the State of
California business model has collapsed. After projecting $14 billion in deficits for the
next two years in May, the LAO now projects the State of California faces $100 billion
deficit over the next 18 months and $187 billion over the next four and a half years.
The financial press is calling the grim alert a shocking surprise, but the New California
State movement that seeks to split the state in half has been issuing similar estimates
for several years. The warning signs of an existential crisis has been brewing include
California unable to issue a timely audited financial statement since 2018, over 1
million residents leaving the state, and collecting lower taxes after raising tax rates.
California since 2021 has burned down $97 billion of reserves to about $26 billion at
the end of November, and is running $4 billion of negative cash flow per month. The
liberal California Legislature also recently passed a law that limits its local school
districts to holding a maximum 3% budget reserve, about 10 days of funding.
The real culprit for the accelerating crisis is the end of the globalist boom that began
in California 45-years ago with the Proposition 13 Tax Revolt that catapulted former
Governor Ronald Reagan to the White House. President Reagan slashed the 87%
capital gains tax rate to 27%, kicking off the greatest venture capital boom in history.
California as the center for information technology and communications consistently
received 40% of global venture capital investments. Hoping to make spectacular
capital gains by taking venture companies public, investors poured about $160 billion
into 7,400 mostly start-up California companies in 2021.
California’s venture boom is credited with driving state personal income to grow by
13.5 times since 1978. But the biggest sector to benefit from the VC boom was the
State of California budget that grew 18.5 times from $18 billion to $235 billion.
But the Legislative Analyst now reports that the pace of California companies going
public has shriveled by over 80 percent from 2021. With corporate and personal
capital gains taxes and related spending averaging about one third of California
revenues, it should be no surprise California revenues are down by 25%
New California State predicts that the current California venture capital bust is already
morphing into a serious recession that will further hammer state revenues. The LAO
forecast assumes revenues begin to grow in 2024, but they warn a recession would
eviscerate California revenue by another $30 billion per year.
