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Struggling Golden State turns to austerity

Taking a deep breath, California's most powerful man strode to a lectern and unveiled the fiscal policy that he hopes will keep America's most populous state from falling into bankruptcy.

"You name it," he declared, "and we've got to cut it!"

It wasn't the most nuanced announcement. But this is no time for subtlety. After years watching his state fall deeper and deeper into the red, Governor Jerry Brown used a gloomy press conference this week to unveil what aides described as the ultimate in austerity budgets.

Welfare payments, healthcare for the poor, and benefits for elderly and disabled Californians will be immediately slashed by around $8.3bn (e6.5bn), which equates to roughly 17pc of Mr Brown's entire discretionary budget. And state offices, which employ roughly 200,000 people, will switch to a four-day, 38-hour work week.


The proposals came days after it emerged that the Golden State, which has 11pc unemployment, has a projected annual deficit of $16bn, far higher than the $9bn predicted in January. Its total debt is now around $40bn, giving it the lowest credit rating of any US state in recent history and prompting fears of a Greek-style crisis.

Things may get worse before they get better. If voters fail to approve a series of tax rises at November's election, Mr Brown said a further $6bn of cuts will immediately be triggered, mostly targeting California's education system and reducing the school year by three weeks.

This year, even with Mr Brown's latest round of cuts, the state will spend roughly $91bn but only raise $83bn. If allowed to continue, it could find itself unable even to service existing debts in a matter of months.

"California has been living beyond its means," Mr Brown said. "The USA and its federal government is living beyond its means. Well, there has to be a balance and a day of reckoning."

Fixing the crisis has eluded successive governors, including Mr Brown's predecessor Arnold Schwarzenegger. (© Independent News Service)

Irish Independent