California is not ready for the recession

Flash: California Issues $9 Billion in Debt

Did you know that California just issued $9 billion in debt? There wasn’t a press release— in fact, the announcement was buried on page seven of a report quietly posted on a website — even though this debt is larger than 95% of California’s outstanding General Obligation Bonds.
This debt takes the form of one year’s increase in unfunded pension obligations to employees of the state’s K-12 system. Last year those liabilities were $58 billion. Now they’re $67 billion. The $9 billion addition is as real as any other debt. Arguably it’s more real because, as the Stockton decisiondemonstrated, bankruptcy courts are more likely to cut bond obligations than pension obligations.
As the Chicago Public School crisis illustrates, unfunded pension obligations harm schoolchildren. This is the phenomenon French economist Thomas Piketty warns about when describing debt as “devouring” the future. Including interest, this $9 billion debt will devour more than $20 billion that would otherwise benefit schoolchildren. Looked at another way, just one year’s interest on this debt is almost as large as the expected growth in state support for education in the current budget year.
Stay tuned. More debt will be quietly issued in January when the state reports the growth in other pension obligations. In the meantime, ask yourself how such debts get created without voter approval and why the creditors who will pocket the $20 billion are allowed to finance the elections of legislators who create those obligations.

And this:

Dan Waters: When Jerry Brown returned to the governorship in 2011, he pledged to clean up the state’s finances and pay off a “wall of debt.”
Brown defined the debt rather narrowly, however, as $33 billion borrowed from banks, special funds and school aid to cover budget deficits during the Great Recession.
One of the debts that Brown omitted was the $10 billion that California borrowed from the federal government to keep unemployment checks flowing to jobless workers.
The state’s Unemployment Insurance Fund, or UIF, became insolvent in 2009 and California, like some other states, sought relief from Washington.
Recovery from that recession has been underway for nearly a half-decade, but California still has more than a million unemployed workers and is still paying out about $6 billion a year in benefits to a third of them.
The UIF is still insolvent – nearly $7 billion in the hole – and in 2012 the feds began whittling down California’s debt by raising taxes on the state’s employers, about $3 billion so far and rising, plus hundreds of millions in interest.

Then we had the 3% hit to local budgets as pension returns slowed.  And now, as Obamaare kicks in, a recession  will raise the Medical enrollment and put more burden on  the fed and state tax system.  The Kanosians have simply made the business cycle more extreme. We may not have a mild recession, the spiral has been made worse, not better.