A Very Brief History of California State Budget Crises

Yes, folks, crises is not an error. It is the plural of crisis. Just since 1992 there have been 3. In 1992 the state funds ran so low that the state employees were issued warrants instead of paychecks. Banks honored the warrants and redeemed them later with a 5% premium. It took 2 months for the legislature to pass a budget.

In 2002, thanks to California's kinda sorta deregulation of the electricity market, there was another crisis. The legislature assumed the competition that(snicker snicker ha ha)deregulation brought would hold prices down until 2 weeks after Heck froze over. So they put a cap on how much electric companies could charge consumers. Yes, the politicos in Sacramento put a limit (AKA regulation) on how much electricity providers could charge their customers. They never thought that inflation would nudge prices up, that developing countries (India, China for example) would not want more oil for their expanding energy needs or anything else would drive prices for electricity production up. In other words, the legislature did not do much thinking at all when they set up this "deregulated" electricity market. When real life kicked in, California's electric suppliers were forced (by legislative fiat of course!!) to pay more for electricity then they were allowed to charge consumers. This brought on rolling brownouts and the recall of Governor Gray Davis.

Now, Arnold Schwarzenegger is Governor and dealing with the same problem. The state of California spends more money than it takes in. If California was a nation onto itself separate from the USA, it would be somewhere between the 5th and 10 largest economy worldwide based on gross domestic product. How does a state with a gross domestic product larger than lots of nations end up with such a deficit that a budget emergency needs to be declared and the state stops paying its bills ??!!! Truth is much,much stranger than fiction.