The non-partisan Institute for Truth in Accounting has released its latest report on California (PDF), and it makes grim reading indeed. Not only is California so deep in debt that default or bankruptcy might seem a blessed relief, it appears the accounting gnomes in Sacramento have been engaging in the MSU Method of Accounting. Yup, they're Making Stuff Up again.
Among other such inabilities of these accountants to use their calculators and spreadsheets accurately, the report found $81 billion in off-balance sheet retirement liabilities in the 2009 financial report. That bears repeating. The official report neglected to include $81 billion in pension liabilities. Apparently, the gnomes preemptively decided that such trifling sums were scarcely worth bothering about and separated them from the budget itself. While I'm sure political considerations and calculation were the furthest things from their minds when they misplaced that $81 billion, more suspicious types might suspect the entire thing is a deliberate fraud upon and misrepresentation to the taxpayers.
Such 'accounting' is what Enron was doing before it collapsed or what big banks are allowed to do now. They simply MSU and decide what they want their assets and liabilities to be, without fussing with all that tedious GAAP (Generally Accepted Accounting Practices) stuff. GAAP is for the little people, not for states or large banks, apparently.
It gets worse. California, says the report, has only $109 billion in available assets to pay an expected $303 billion of bills and pensions as they come due. The legislature routinely ignores pension payments as being part of the budget and is only setting aside 57 cents for each dollar due. Like Enron, California can only MSU for so long before the inevitable reality hangover comes.
In other perky news, Business Insider notes there has been no economic recovery in California, and that this is dragging down the rest of the country. California normally leads the way in recovery from recessions, but not this time. The unemployment rate is still among the highest in the nation and there appears precious little that will change that any time soon.
If you like fisticuffs, you're going to love 2011. One of the worst fears of liberals is that Republicans will use the economic crisis as a pretext to break public unions. Well, they can fear no more, because that's precisely what is going to happen. Republicans will press plans to allow states to file for bankruptcy, which will allow for existing union and pension plan agreements to be renegotiated or voided. Pass the brass knuckles, please. This is going to be Death Match 2011.
So, eat, drink, and be merry on New Year's Eve! The hangover will be along soon enough.