I do not want to suggest that the state of New York is on the verge of going broke. But as I have said on more than one occasion, numbers do not lie.

But if recent events mean anything, then it is very safe to say that the Empire State is on very shaky financial footing – to say the least.

The state had recently delayed paying some $2.5 billion (that’s with a B, folks) in bills as a so-called way to stave off insolvency, although all that does is make things worse, beginning around August and September. And this comes from State Budget Director Robert Megna. This would be the third time since December 2009 that New York has withheld funds.

Here are some of the numbers which, if you live in New York, might make you see red:

• The state’s general fund, which counts everything but federal aid and some specific revenues, ran in the red by some $500-600 million dollars.
• The state borrowed from other funds, including the short-term investment fund; about $1.5 billion of the withheld funds must be paid to the schools in June, with the rest to be paid in July.
• Governor David Paterson’s $135 billion budget has yet to be enacted by the state Legislature, although it was due on April 1.
• The state of New York is currently $9.2 billion in the red; the longer the Legislature argues over where cost savings come from, the time window for realizing savings will shrink.

Then you have to factor in what New York is going to do in regards to its layoff plans as they’re waiting to see how many state employees opt to take early retirement, a source of savings.

No matter what the end game is for the State Legislature, one thing is almost certain: Paterson’s successor will more than likely inherit the financial mess that the state is currently in as it appears that time is not on their side.

At the risk of sounding partisan here, it’s going to take a Republican to slowly get the state of New York out of its financial dire straits. And it would behoove them to take a page out of the playbook of New Jersey governor Chris Christie.

The state where I live, California, is around $27 billion or so in the red. And the State Legislature here? All they seem to do is agree to disagree on financial matters and Governor Schwarzenegger seems to be riding out the storm until his successor assumes office in late 2010.

But the bottom line is that New York needs to get on financial solid ground a ssoon as humanly possible. Otherwise, they will be the East Coast’s version of California – and one California is enough.

Pity the California taxpayers.

They are afflicted with the nation’s highest sales and gasoline taxes, and a particularly punishing income tax. And still “progressives” both inside and outside the state claim that California’s budget crisis — a looming deficit of $18 billion — is the result of too little tax revenue. (This deficit figure doesn’t include the state’s pension liabilities totaling a stunning half-trillion dollars.) As if devoid of economic rationality, state legislators have introduced more than a dozen proposals this year to hike taxes even higher — on top of the $12.5 billion tax increase imposed last year. They’re looking to legalize marijuana in order to tax it at $50 an ounce.

The politicians advocating “revenue enhancements” are drawing political cover from public employee unions and groups such as the California Budget Project, which manipulates data to convince taxpayers that government just isn’t big enough. But California’s once vibrant economy is buckling under the weight of existing taxes, costly regulation and a government bureaucracy reminiscent of Red Square.

One of every 62 households in the state has been hit with a foreclosure filing so far this year. That’s 216,000 families facing the loss of their home. Thousands of children forced from the familiar into the unknown. Neighbors disappeared and communities pockmarked with vacant houses. And through it all, there persists the Sacramento chant for more taxpayer dollars.

The folks at the California Budget Project employ a slick statistical sleight of hand to produce what amounts to their cornerstone argument for higher taxes. The group’s March report, titled The Top Ten Budget Myths … and the Truth, asserts that “General Fund spending is $21.5 billion below the baseline level projected by the Legislative Analyst’s Office in 2004.”

But as noted on the organization’s own Web site, “If the results don’t make sense, something is wrong.” Indeed. It matters not a whit whether current spending exceeds or falls short of 2004 projections. Budget forecasts are notoriously inaccurate. What really matters is how government spending correlates to inflation and population growth. On that score, the Golden State has been patently profligate.

Throughout the last decade, with the sole exception of a single year, state spending far exceeded population growth and inflation (as calculated from the Consumer Price Index).  As noted in Rich States, Poor States, an annual index of state competitiveness published by the American Legislative Exchange Council, California’s state budget ballooned from $75 billion to $99 billion between 2003 and 2007 — a 31 percent increase in just four years. And in the decade between 1997 and 2007, state and local spending combined increased a whopping 54.9 percent.

Given the current state of the state, it’s all too obvious that high taxes and excessive government spending have depressed economic growth and job creation, forcing residents to flee the state in search of opportunities elsewhere. With a net domestic population outflow of more than 1.4 million people, California may not gain a new congressional seat following the 2010 Census — for the first time since it gained statehood in 1850. Ironically, the desperate hordes of the Dust Bowl adopted the motto “California or Bust” for their trek to what was then the Promised Land. Today, in contrast, those fleeing the state have been gone bust from California’s high taxes and big government. Meanwhile, states that don’t levy personal income taxes, such as Nevada and Florida, experienced population growth of 41.1 percent and 19 percent respectively in the past decade.

The unemployment rate in California hit 12.6 percent in the first quarter of 2010 — third worst in the nation. That’s 2.3 million men and women without a paycheck — 40 percent of them for more than six months. Unpaid bills pile up on the dining room table. Tension surges in every checkout line. Hopes and dreams dim as bank accounts dwindle.

Nonetheless, public sector employees are grousing about their compensation despite earning far more than their private sector counterparts still lucky enough to be employed. So rich are civil service benefits, in fact, that California’s pension obligations have increased 2,000 percent in the past decade.

Ever higher taxes can’t possibly remedy the problem if the problem is ever more spending. Families and businesses simply can’t keep up. And wresting more and more and more money from taxpayers to feed government necessarily means starving California’s economy of consumer trade and investment.

More than 19,000 small businesses in California filed for bankruptcy last year, an increase of 81 percent in the 12 months ending Sept. 30, 2009. The entrepreneurial spirit extinguished. Generations of sweat equity lost. Engines of the economy stalled.

Nonetheless, proponents of “revenue enhancement” claim that insufficient tax revenues rather than unchecked spending are to blame for California’s deficit. In fact, state revenues have grown consistently in recent years, and remain higher than a decade ago despite a dip in 2009. A dip caused, in part, by a lack of private sector growth. Too few people gainfully employed. Too much government redistribution of people’s wealth.

California’s top marginal personal income tax rate is among the highest in the nation, at 10.55 percent. The amount of that income consumed by government actually increased by a whopping 31 precent, from $3,506.79 in 2000 to $4,606.46 in 2008.

If higher taxes and government “stimulus” truly drive prosperity as progressives claim, California would not rank as an economic basket case, at present. For the past two decades, higher taxes and bigger government have been the norm, with predictably disastrous results. Unless the load is lifted from California taxpayers, yet more thousands will lose their homes and jobs and savings, and another million and a half residents will go elsewhere to pursue their dreams.

California is famous the world over for its entertainment industry. But the days of fiscal fantasy must come to an end. It is well past the time to forego budgetary gimmicks and quick fixes in favor of real tax and spending reforms.

To illustrate how bad the national economy is, New York’s cash reserve is dwindling quickly, and the state faces a crisis if it doesn’t address its budget woes soon.

If the government can’t reach a budget agreement by Dec. 31, the state’s cash reserve will total only $36 million, and that’s only if the state dips to the bottom of its emergency reserve; New York’s budget deficit totals $3.2 billion.

Democratic Gov. David Paterson has urged the legislature to deal with the gap. But with public support for him virtually non-existent, his words carry little, if any weight.

On the bright side, New York’s legislature is famous for waiting until the last minute to address budget problems. So many legislators and outside experts predict the government will act before it’s too late. In addition, Wall Street bonuses are paid in January, and the state will receive withholding tax revenue from those payments.

But given the lack of progress in negotiations so far, state officials are readying for a cash crisis. Some government services may have to shut down if no action is taken.

“Unless we act, New York will run out of money, even after we delay payments to schools and local governments,” Patterson said in a web cast Tuesday. “This is an unprecedented fiscal emergency.”

Credit rating agency Moody’s Investors Service wrote in a report last week, “The next three months will be critical to the state’s credit rating.” Moody’s analyst Emily Raimes told The New York Times:

 “If they solve them [the budget deficits] with one-time measures, that’s going to increase the gaps in future years, and at some point they get so large it becomes difficult to solve them.”

California is in even worse shape than New York. The Golden State’s budget deficit will soar to $20.7 billion over the next 18 months, according to a new report from the nonpartisan Legislative Analyst’s Office.

That’s nearly triple the estimate of just four months ago, and the office says $20 billion deficits will likely be the norm for years.

Just when you would have thought that you heard the last regarding the banking industry, Massachusetts blowhard – no wise cracks  LOL – Barney Frank had to bring them back from the dead.

If I remember correctly, there was resolution regarding lenders and homeowners who had difficulties in keeping their mortgages current.  For whatever reason, Frank has decided to put the fear of Congress into the banks, threatening the banks with the revival of legislation that would allow bankruptcy judges to write down a person’s monthly mortgage payment if the number of loan modifications remained low.  Frank went even further.

Frank, who is chairman of the House Financial Services Committee, also said that his committee would not consider any further legislation to help banks lend unless – according to Frank – there’s a significant increase in mortgage modifications.

All of this in the wake of a deal struck between Timothy “Turbotax” Geithner and two dozen mortgage companies; the agreement calls for a goal of adjusting approximately 500,000 loans by November 1.  This seems to leave a lot of uncertainty in the grand scheme of things.

You absolutely have to consider that of those targetd 500,000 mortgage holders, how many of them have no business getting modifications on their mortgages?  I am willing to bet you that there’s a good percentage of them who will eventually default, which is never a good sign.

I also wonder as to why Barney Frank is all of a sudden deciding to invoke this crap on these mortgage companies, banks and other lenders.  They’re trying to reverse what Freddie Mac and Fannie Mae started – which is that they made some pretty questionable loans, at the behest of Congress.  And Frank is trying to mess things up.  By the way, this is the same lawmaker who initiated the Freddie and Fannie mess.

To go a step further, it is hardly fair to these institutions to make these modifications, knowing that the mortgage holders more than likely will file for bankruptcy.  Which automatically is a loss leader for the lenders and mortgage companies not to mention that the value of the homes automatically decrease, as a result.

I think that it is in the best interest of Frank to leave these mortgage companies and other institutions alone and let them do their job.  They cannot be effective with his interference in their business.  If there’s at least one thing to be learned by Frank’s meddling, that is this: The Federal government has absolutely no business running anything that’s within the private sector.  As it were, they do a pretty shoddy job running the government; Frank’s threats of action just simply magnify everything that is wrong with our government.

Barney, all that we ask you to do is quit your annoying meddling and leave the mortgage companies, banks and other lenders alone.  But knowing you, that perhaps is asking entirely too much.

The collective eye has been on California as they are very close to issuing IOU’s to vendors for services rendered to state agencies, along with severe cuts in some services – something I talked about yesterday.  Well California may have some company as several other states are suffering from the same financial malady with a deadline to balance their budgets.

Besides California, you can add several other states – Indiana, Pennsylvania, Mississippi and Arizona – to the financially insolvent.  All of these states are bracing for possible shutdowns this week as time is running out for lawmakers to close their billion-dollar gaps in their 2010 fiscal budgets.  How severe is all of this?

Well according to the National Conference of State Legislatures, of the 46 states whose budget year ends today, 32 of them did not have budgets passed and approved by their respective governors as of Monday afternoon.  More than likely, a good number of states will pass eleventh-hour budgets, there are at least several states that are in grave danger of becoming insolvent as of Wednesday.

Interestingly enough, since 2002, only five states have had to shut down their governments.  The aforementioned five states have their own unique set of circumstances that got them to where they are today:

• California.  State finance officials will begin issuing IOUs on Thursday if lawmakers and the governor cannot agree on a way to close a $24-billion shortfall. The IOUs would go to local governments, vendors, taxpayers and college students receiving state financial aid. California has issued such IOUs only one other time — in 1992 — since the Great Depression.
• Arizona.  While they have never missed its constitutional budget deadline, officials are battling over how to resolve a $3-billion gap. Republican lawmakers and the state’s GOP governor, Jan Brewer, fought for months over her proposal for a temporary sales tax hike to preserve some government services. In a compromise unveiled Friday, legislators agreed to ask voters to approve the tax in November. But when a key committee was unable to muster a majority Monday for the compromise bill, lawmakers began drafting resolutions that would let the government function for at least a week.
• Indiana.  The budget fight revolves around how to allocate the state’s shrinking revenues and how much of its $1.3-billion surplus fund to tap. Democrats in the state House and Senate are pushing for more spending on schools, particularly in economically troubled and urban areas. GOP legislators, on the other hand, are advocating that extra funds be directed toward charter schools and that scholarship donors to private schools be given a tax credit.Another key sticking point is whether to help bail out the Marion County Capital Improvement Board, which manages the sports and convention venues in the state’s capital. Lawmakers from outside the Indianapolis area are furious over the idea of state money being used to bridge the board’s $47-million budget deficit, rather than spent in a way that would benefit more Hoosiers. By late Monday evening, after months of debate and several budget drafts, legislators left the Statehouse with glimmers of hope that they could avoid a shutdown.

And all of this because of the national economy taking a big, collective dump.  Of which offers a “trickle-up” effect, when the smoke clears.  But on a state and national level, it all begins and ends with what happens in California; the next 24 hours will dictate where the other states are headed financially.

Man, this Big Three automaker money-grubbing act is getting real old yet Chrysler is at it again.  On Wednesday, top executives of the automaker are meeting with the Obama administration’s auto task force, discussing requests for billions in additional new loans.

Thus far, Chrysler has received from Washington $4 billion  in loans and is seeking an additional $5 billion and an alliance  with Italian automaker Fiat; the task force is currently trying to restructure Chrysler and General Motors by March 31.  If neither automaker can make a compelling case for the government, the administration has the option to pull the loans and force GM and Chrysler into bankruptcy proceedings – most likely Chapter 11.

GM has said that they could run out of money by the end of March and will need $2 billion in March and another $2.6 billion in April to remain in business.  I know I have mentioned it here and probably on one of The Republican Temple’s podcasts, but I am convinced that GM and Chrysler – and to a lesser degree Ford – need to go this on their own; in other words, sink or swim.

Both automakers suffer from a shoddy business model, make models of cars that the consumer do not necessarily want, and they made bad agreements with their respective unions.  All of these bad decisions have snowballed and now it has come to this; there is no shame in filing for Chapter 11.  There’s corporations and smaller companies that have done it – the airlines are a good example – and they came out better because of it.  Throwing taxpayers’ money to the automakers needs to stop, and it needs to stop right now.