Budget Deficit after SVB Collapse (sales, loans, how much)

[TheseGoTo11]

California already has a $25B budget deficit due to the slow tech economy, and it's about to get worse with the SVB collapse. The Bay Area is 20% of the population but 40% of California tax receipts, so how much higher do you think the state budget deficit will go?

[Thekdog]

If depositors are kept whole I'm not sure it'll make a big difference

[blameyourself]

Originally Posted by TheseGoTo11

California already has a $25B budget deficit due to the slow tech economy, and it's about to get worse with the SVB collapse. The Bay Area is 20% of the population but 40% of California tax receipts, so how much higher do you think the state budget deficit will go?

Cool story bro. So how will a deficit or surplus impact the average Joe?

I know if I were to dig out an old Economics book, Keynesian theory would say that budget deficits are actually good during down cycles (which we are now in). On the other hand, surpluses are better during prosperous times. Seems like CA has it right and states like Texas are backward on this one.

Personally, I can't recall a time when either a surplus or deficit has impacted my everyday life.

[moguldreamer]

Originally Posted by TheseGoTo11

California already has a $25B budget deficit due to the slow tech economy...

Incorrect.

It is due to ridiculous overspending.

[njbiodude]

Originally Posted by blameyourself

Cool story bro. So how will a deficit or surplus impact the average Joe?

I know if I were to dig out an old Economics book, Keynesian theory would say that budget deficits are actually good during down cycles (which we are now in). On the other hand, surpluses are better during prosperous times. Seems like CA has it right and states like Texas are backward on this one.

Personally, I can't recall a time when either a surplus or deficit has impacted my everyday life.

The whole biotech and tech startup scene in the Bay Area is going to see huge (at least temporary) changes from this.

A family friend works at a company that banked with Silicon Valley Bank. A relative of mine works at a company that had some money in there too. Definitely both were over 250k in deposits. They may lose money forever. Some smaller companies are likely not going to be able to make payroll and some are trying to take out loans to do so.

Many (most?) small to midsize Bay Area tech and especially biotech companies have been running deficits every year due to cheap investor money for the last decade + due to a low interest rate environment. Extra money used by these companies was simply re-invested in R&D and other functions with the assumption the companies will be “profitable” later.

I see a lot of startup failures directly or indirectly from this and tons of Bay Area layoffs. Even if a company doesn’t lose money directly it’s going to be much, much harder to raise frivolous venture capital for a while.

After 2008 I was living in the East Coast most of the year. I do remember some cutbacks to public sector employees. I think high schools in some areas started doing online classes one day a week to save on staff salaries etc due to budget cuts. Police in some areas had cuts and went bat$hit crazy giving out tickets to raise revenue.

[AnythingOutdoors]

Originally Posted by blameyourself

Cool story bro. So how will a deficit or surplus impact the average Joe?

I know if I were to dig out an old Economics book, Keynesian theory would say that budget deficits are actually good during down cycles (which we are now in). On the other hand, surpluses are better during prosperous times. Seems like CA has it right and states like Texas are backward on this one.

Personally, I can't recall a time when either a surplus or deficit has impacted my everyday life.

US states don't control the money supply, they can't just print more money like the Fed. There's a limit to how much CA can borrow.

My wife was a teacher in CA. Budget deficits (state and local) often resulted in teacher layoffs.

School districts often make up for funding shortfalls with bond measures (e.g. higher property taxes, if they pass).

State and local agencies have to make funding cuts, which means less services and a reduced safety net.

[2sleepy]

Originally Posted by AnythingOutdoors

US states don't control the money supply, they can't just print more money like the Fed. There's a limit to how much CA can borrow.

My wife was a teacher in CA. Budget deficits (state and local) often resulted in teacher layoffs.

School districts often make up for funding shortfalls with bond measures (e.g. higher property taxes, if they pass).

State and local agencies have to make funding cuts, which means less services and a reduced safety net.

In California bond measures can't be used to make up for funding shortfalls, only for repair, construction or replacement of school facilities

[blameyourself]

Originally Posted by AnythingOutdoors

US states don't control the money supply, they can't just print more money like the Fed. There's a limit to how much CA can borrow.

My wife was a teacher in CA. Budget deficits (state and local) often resulted in teacher layoffs.

School districts often make up for funding shortfalls with bond measures (e.g. higher property taxes, if they pass).

State and local agencies have to make funding cuts, which means less services and a reduced safety net.

Hmmmm?

Are we heading for a recession? That's certainly a topic up for debate.

If we are I'm pretty sure raising taxes isn't the remedy for getting out of it. I don't believe Congress has done that since at least WWII.

In the event Economists do call it a recession....

Is Medicaid still exempt from being impacted during recessions? I'm pretty sure it is.

People still getting Social Security during recessions?

Do property taxes in California increase during recessions as you claim? I'm thinking not. Didn't people actually get a reduction during the pandemic (Prop 8)? Should we move the goal posts back and say that home values will not decrease now?

I know sales and use tax rate decreased by 1% from 2009 to 2011.

What else you got? Will I wait in line longer at DMV or can I just do that stuff on the internet?

How long has the Federal Government been in a deficit? Shouldn't the country be on its last legs right now?

I constantly hear the bashers on here say California overspends. If that's the case, wouldn't a spending cut make sense if the budget is bloated?

Texas supposedly has a nice surplus. Will my property taxes go down (not looking likely but we'll see)? What will I notice now that the state is rich when I drive to work every day and go to the store.

[AnythingOutdoors]

Originally Posted by 2sleepy

In California bond measures can't be used to make up for funding shortfalls, only for repair, construction or replacement of school facilities

Correct. But in practice districts shift funding in response to deficits, cutting maintenance and other facilities costs from the general fund and then rely on bonds to backfill later. For affluent areas that can get bonds passed this means higher property taxes. Lower income areas have more difficulty passing bonds, resulting in poor facilities.

The main point per this thread is that state and local deficits aren't good because these entities are very limited in how they can respond to shortfalls.

[blameyourself]

The vast majority of people will see virtually no change in their lifestyle regardless if a state is in a deficit or a surplus, despite the people that want to obsess with this. It's simply another thread started by an OP with a history of regurgitating talking points. Threads like these are fun though to reference back when people talk out of both sides of their mouths or make erroneous claims (which is often the case).