Locator: 48531CALIFORNIA.
Updates
March 20, 2025: link here.
Original Post
Biggest economic story on my mind right now? California's
budget. By this summer, this may be the #1 financial story among states.
California has very little wiggle room. It already has highest tax
rates; highest energy costs; highest Medicaid (Medi-Cal) costs. And an
unfriendly administration.
Link here.
California has taken these steps to balance the budget:
- first, unprecedented, Governor Newsom proposed a two-year budget instead of the usual one-year budget which allows him to forecast rosy tax receipts two years out to cover the huge unexpected deficit now being forecast;
- to get to a balanced budget, even with that sleight of hand(s), Governor Newsom told the state lawmakers last week that the state needed a $3.4 billion loan to make "critical payments for Medi-Cal," as California calls Medicaid;
- well, that turned out to be a bit of smoke and mirrors; if he got the loan inserted into the spending bill, it would be easy to simply raise that loan to the amount really needed; and,
- that came this week -- it turns out the state needs $6.2 billion for "critical Medi-Cal. payments.
Governor Newsom is blaming it on two things:
- high prescription costs; and,
- uninsured illegal immigrants
The "high prescription costs" is bogus. That's been a problem for decades. Nothing new here.
The problem is really about uninsured illegal immigrants -- 12 million of them, most of whom come first to Texas, and then spread out to friendly states (such as California) / sanctuary cities (such as San Francisco and Los Angeles). And, yes, uninsured illegal immigrants are prescribed high-cost pharmaceuticals just as those high-cost pharmaceuticals are prescribed for insured folks.
To me, it doesn't matter. I have no dog in this fight. I don't live in California.
But I find it fascinating to see how Governor Newsom gets out of this one.
Population of California: 40 million.
Medi-Cal critical payments loan: $6.2 billion.
$6.2 billion / 16 million households = $400 / household. Or about $1 / day / household. Easily manageable.
Warren Buffett's company holds about $350 billion in cash. $6.2 billion / $350 billion = 1.8%.
By the way, on another note, there is an obvious way to end that phenomenon of sanctuary cities.
