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Is California Going Bankrupt?

Updated on December 26, 2014

Is The Golden State Losing It's Shine?

I read an interesting news release today that forebodingly declared that California may well be on its way to bankruptcy - which would be unprecedented, to say the least.

"The State of California will run out of money within two months, forcing Governor Arnold Schwarzenegger to start settling bills and paying employees by issuing "IOU" notes, his chief financial officer has revealed."

This could happen in as little as 2 months - which if you think about it is unheard of - a whole state going BANKRUPT? Especially a prosperous state like California? The likelihood of this seems impossible, but if we look back at the last few months, some pretty unbelievable things have been happening all around us - Wall Street breaking down, a 700 billion dollar bailout bill by the federal government, prominent banks closing and going bankrupt - then the ensuing scams and scandals taking place across the United States. So perhaps there is something to this after all. If California is indeed on the brink of insolvency - what would this mean for the average Californian? What would this mean for the United States and the world at large?"

"It sure seems like California is insolvent. Just today we heard that Arnold Schwarzenegger contacted Hank Paulson to let him know that the State is having liquidity problems (see pdf) and needs help. California ranks as the world’s 9th largest economy with a population of over 30 million people, so this is quite worrying." (from Oct. 2008)

Yikes, we are the worlds 9th largest economy??? Eeeeeee.....

California - Could we go Bankrupt?

The city of Vallejo went bankrupt in California a couple years ago. Is is possible that the whole state of California could face bankruptcy in the future?
The city of Vallejo went bankrupt in California a couple years ago. Is is possible that the whole state of California could face bankruptcy in the future? | Source

Born and Raised in California

I've lived in California all my life - born and raised in the San Francisco Bay Area. I've seen many highs - and many lows - as the dot com days boomed then exploded. I remember when people were making outlandish offers to buy the only house available - paying sometimes $80,000 and more above the asking price just to get a rundown 2 bedroom house - and now, a few years later, I'm watching as some of these same houses are going into foreclosure, with no one to buy them now. There were days when no one wanted to take that $10 an hour job at In and Out Burger....and now you'd be lucky to get a job at all - and if you do, you'll probably be competing with ex network engineers to flip burgers.

What an odd odd thing to be witnessing....and now I suppose the next thing may be Bankruptcy?

The thought of my state going bankrupt is absolutely shocking, to say the least. The thought of our multi-cultural diverse state running out of money seems impossible - or is it?

"California's fiscal house is burning down," State Treasurer Bill Lockyer said in a statement." (from The Wall Street Journal - Dec. 18th)

Burning Down? Doesn't sound very reassuring, does it?

City of Vallejo, Ca. Goes Bankrupt - State Next?

"The city of Vallejo, Calif., gained national attention earlier this year by filing for Chapter 9 bankruptcy protection. Now, two neighbors are fighting to avoid the same fate, as the state's economic crisis spreads."

Everyone remembers the shocking news of just a few months ago when the city of Vallejo here in California declared bankruptcy. Now I've got to ponder.... will we soon be hearing that the whole state of California is declaring bankruptcy too? Is this going to be another bombshell that lands in our email box one day like the bailout bill did? Not being a financial guru, I don't know exactly what the ramifications of this will be - but they are surely not good.

And I'm extremely suspicious that the mainstream media is not talking much about this - just bits and pieces of information from what I can glean - much like the lead-up to the events that preceded the financial meltdown we are now experiencing globally.

My suspicions say that something is rotten in Denmark............ or should I say in California?

UPDATE FEB. 1, 2012 (Yes we are right back where we were 3 years ago):

"If anyone is tired of the daily European soap opera with surrealistic tragicomic overtones, they can simply shift their gaze to the 8th largest economy in the world: the insolvent state of California, whose controller just told legislators has just over a month worth of cash left. From the Sacramento Bee: "California will run out of cash by early March if the state does not take swift action to find $3.3 billion through payment delays and borrowing, according to a letter state Controller John Chiang sent to state lawmakers today. The announcement is surprising since lawmakers previously believed the state had enough cash to last through the fiscal year that ends in June." ....uh, oops?" from

(Dorsi Diaz is a freelance writer and blogger in the SF Bay Area)

Poll on California Bankruptcy - What Do You Think?

Do You Think California is Going Bankrupt?

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  • profile image

    LOUISE 5 years ago


  • Dorsi profile image

    Dorsi Diaz 6 years ago from The San Francisco Bay Area

    @doodle) Yes that's sad because we have a lot of beautiful parks here. I had heard they needed to close some. Thanks for coming by and reading.

  • doodlebugs profile image

    doodlebugs 6 years ago from Southwest

    On our trip to CA last month I was shocked to see so many parks with "closed" notices. Hopefully the state can resolve its difficulties.

  • Dorsi profile image

    Dorsi Diaz 6 years ago from The San Francisco Bay Area

    @Jack) Thanks for reading and the comment. That is a lot to be paid for retirement but we also need to remember the tremendous risks our policeman and firefighters take every day they work.

  • profile image

    Jack 6 years ago

    Cops & Firemen in CA get, roughly, $100,000 in wages annually. That doesn't include their benefit costs.

    Then, at age 50, they are allowed to retire with 90% of their highest wage AND cost of living increases each year.

    Yep. While the vast majority of California citizens earn just $56,000, the average cop and firemen are RETIRING with permanent, lifetime public pensions of $90,000 annually. And the supervisors and managers are literally getting pensions of over $200,000 annually.

    The public employees and the criminal government cities, counties, and state have fully abused the public. And they literally sneer at us when we call them greedy.

  • Dorsi profile image

    Dorsi Diaz 6 years ago from The San Francisco Bay Area

    Kentucky Citizen) I don't know what the answer is to California's crisis is. We just seem to be going around in circles. Maybe with some new governing things will get better...

  • profile image

    Kentucky Citizen 6 years ago

    If the U S Congress bails out California, they will trigger hyperinflation nationwide. The U S Economy will go down with California.

  • Dorsi profile image

    Dorsi Diaz 7 years ago from The San Francisco Bay Area

    scla) Yes that is the perfect word for California's economy - fragile. Many cuts from all sorts of places and programs. Many of my friends and family have been affected. Thanks for stopping by and reading.

  • scla profile image

    scla 7 years ago from Southern California

    California's economy does still appear to be in a very fragile state. Reducing the states budget appears to be at the forefront. Among the things that I have noticed are state employees being forced to take days, teachers getting pay cuts, and of course lay offs. This is all of course in an effort to cut the state's costs.

  • Dorsi profile image

    Dorsi Diaz 7 years ago from The San Francisco Bay Area

    Updates) As I see it many states are still in trouble, Ca. one of them. Cutbacks, high rates of unemployment and general unrest due to the state of our national economy, which is not doing well despite what you may read in the MSM.

  • profile image

    Updates 7 years ago

    This hub was written over a year ago. Is CA going bankrupt or not? Lots of people keep talking about how states are going to go bankrupt but I don't see it happening. What's going on?

  • Dorsi profile image

    Dorsi Diaz 7 years ago from The San Francisco Bay Area

    Thanks everyone who came by and read.

    California Economy) I agree with all that you have said. Making changes is never easy - it takes time and cooperation. All I know is this still isn't solved and I wonder what's next???

  • profile image

    California Economy 7 years ago

    California needs to make some serious decisions, but unfortunately we have this new ilk of politicians, unlike 50 or so years ago when those who ran the govt were dedicated public servants. Now we have those who only care about being reelected, about keeping their donors happy thereby getting more money into their warchests, and about scoring political points.

    But then again we are the ones voting these guys into office.

    We need to decide on priorities and cut spending on programs and raise taxes on some. But both of those decisions are not going to be made by the type of politicians we have running the govt.

  • profile image

    colt 7 years ago

    Who cares if California is going bankrupt? Y'all should have known it was going to happen sooner or later. No one can afford a two bedroom house for five hundred thousand dollars. No one can afford all the taxes your state has. Plus everything cost more in California....your state's greed and your ways of living has finally caught up with you. Many of the foreclosures happening in California are caused by people taking loans they would have never been able to pay back (example: HOUSES, cars, boats, cloths). Now you can no longer brag that you live in California because your all broke and your state is falling apart like a set of dominoes.

  • profile image

    johnny 7 years ago

    How many can you handle? Eventually nobody wants to work and all the welfare comes to an end. Government produces nothing... Uneducated illegals just don't get it...

  • profile image

    marihnat 8 years ago

    What is happening in California is what is going to happen in the country. This state gives everything away free, is too liberal and now they are paying the price. Pay attention people, If Obama and the Democrates get their way this same thing is going to happen to the country as a whole. California is the prime example as to why all these progams that are being proposed will bankrupt this country.

  • profile image

    xiroh 8 years ago

    At the end of the day, I truly hope that california survives. But, if I does not, I hope that those who have made california what it is are NOT allowed to leave the sinking ship they themselves have created. Eventually, siphoning off of other states and other countries comes back to haunt you. It's the same story with the federal government. The reason so many are going under is because they were unconcerned for anyone but themselves.

  • mcstir profile image

    mcstir 8 years ago

    I guess you aren't talking about the "Emerald Triangle" area of California where the average household income is $500,000.00 per annum at harvest time!

  • jcorkern profile image

    jcorkern 8 years ago from Wonderland

    Here is the real deal, whn CA announces it has gone under (it already has because it's out going is more than it's income) then when these services stop, and no money is flowing, populations will move to other states and start a snowball effect. Florida just announced last week that traffic fines will go up to account for lost tax revenue, so here comes the police state so that "government" can sustain itself.

    This will then flow through all states. The trend forcasters who predicted this, like gerald celente say this is the "Greatest Depression" because this one will make the last great depression look like a sunday picnic.

    We will soon be in the same or worse situation than Russia was when it collapsed.

    Buy food now or stand in a government breadline later.

  • bgpappa profile image

    bgpappa 8 years ago from Sacramento, California

    I don't believe the problem is the illegal aliens. Instead, I beleive the problem lies in the initiatives that we pass every time there is an election. Each election cycle, bond measures and initiatives are passed that mandate that the State Government must spend a certain amount of money on specific items. The money is taken out of the general fund and cannot be spent on anything else. This limits the amount of discretionary money the legislature and the government have to spend. It also limits what can be cut. Therefore, there is a substantial amount of tax revenue that is spent each year before budgets can be done and priorities can be set. Our government has very little to deal with and this is why we can't pass a budget. The problem lies in the initiative process which takes the decisions out of the hands of our elected representatives.

  • profile image

    yokalyan 8 years ago

    Shocking. hard time but still can't digest.

  • profile image

    Buggerlite 8 years ago

    Dorsi-I think the illegals are what everyone was referring to as the problem- not hard working legal immigrants.

  • Camping Dan profile image

    Camping Dan 8 years ago

    California may be the only state talking about it but you know there are others in the same boat. I know several states have empty unemployment benefits accounts and they continue to write checks for an ever expanding amount of people. Do not get me wrong I do want these folks to be taken care of, I am just saying the states are not taking care of the money they have.

  • Dorsi profile image

    Dorsi Diaz 8 years ago from The San Francisco Bay Area

    In all fairness to immigrants, I live among them, go to church with them and eat with them. My grandparents were "immigrants" too, from Scotland and Ireland. Immigrants are what our nation is made of.

    An important observation I've made since moving back to my hometown: Many of these immigrants live together in harmony, you don't see cops going to there houses breaking up fights. They send their children to school immaculately dressed and clean. They stand in long lines in the morning along the street to get a decent wage. They work very very hard from what I have observed. Perhaps some of us "Americans" could learn a thing or two from them.

    "Illegals" are another matter. They should be made to pay taxes, learn English ,contribute to the system and not be handed "handouts". I don't agree with printing up government documents in several languages to accommodate people who don't want to take the time to learn the language of the country they have decided to call home.

    Just my 2 cents on the matter.

  • profile image

    John 8 years ago

    CA is a "handout" state, immigrants know this and tell all their friends and family to come. American dummy works hard, takes home less & less so that some immigrant can keep havin babies and get more welfare, CA deserves this, it was just a matter of time.

  • profile image

    Brian 8 years ago

    I will say it, Califonia's problem is illiegals. All the politicians say we need them for workers, and they are a vital part of the economy. I say that slavery was outlawed years ago. They get away with being slaves because they pay a tiny ammount of money and make it legal.

    As far as the liablities in California, public assistance and free loading illegal alliens are draining the money outa there. They should put a state trooper in every hospital and turn the illegals away. Im sorry, the state cannot afford it.

    IF they go on buisness as usual they will raise taxes until every tax payer leaves the state and all that is left is illegals and pot heads. Checkmate for Califonia.

    Oh and if you have to live on welfare with two jobs to make ends meet, maybe you should move to diffferent state. Duh!!!!! I wouldn't put up with that crap. People should be able to make it in their own.

  • Amanda Severn profile image

    Amanda Severn 8 years ago from UK

    This makes depressing reading Dorsi. This year is unfolding like a gothic novel. There's too much uncertainty, and governments are afraid to make too much of things in case they spark riots, but of course we're already having protests here in Europe. Scary days.

  • Dorsi profile image

    Dorsi Diaz 8 years ago from The San Francisco Bay Area

    Apparently Ca. has not quite run out of money yet - we are a few days away. So it looks like families on GA will get money this month, but next month, who knows?

  • themarla profile image

    themarla 8 years ago from Fresno, CA

    Schwarzenegger's multi-trillion dollar scheme and so-called "water shortage" is behind the downfall of CA. See this link:

  • profile image

    sandra rinck 8 years ago

    I don't know Dorsi, I'm down here in San Diego...with all those people collecting welfare...I have no idea what will happen. As I really hate to say this but it might be apperant and true, but once they stop giving welfare, we might see a dramatic decrease in our Mexican population. - I know, don't hit me but it is true- it is sad but come on.

    Not in anyways saying I think this is justice cause it aint, it's just scary. Govna has been talking about this for a while, where have you been? lol. He started declaring that we were going bankrupt even before the market crash.

    Maybe higher taxes would help but us Californian's know that we get the crap taxed out of us already to pay for stupid crap ( I never vote for...) but it is what it is, maybe people will come to there sences and help instead of trying to hold on to the lifestyle that has screwed us....In a lot of ways your right Misha.

    I have been waiting for anyone to just say..."hey what about the people who rent cause they can't buy a home". We are getting raped out here and we don't have a choice.

    I dunno, that is all I have to say...

  • Misha profile image

    Misha 8 years ago from DC Area

    Yes Dorsi,

    I won't be surprised a tiny bit when this happens. In fact, the whole country of USA is ready to go bankrupt - yet it can't, cause there is no such law.

    You guys can't afford your lifestyle - but insist on keeping it...

    Not you personally Dorsi of course, but you as a country...

    And you just elected the president which will try to keep this lifestyle as long as he can. Not his fault though, it is democracy, hence this is what majority wants...

    Sorry for the harsh words, but the sooner you realize what is going on, the sooner you are able to fix it :)

  • Dorsi profile image

    Dorsi Diaz 8 years ago from The San Francisco Bay Area

    Yes the latest news is that welfare assistance to families will not be available in Feb. unless the budget get balanced before then. I wonder when they plan on telling the people this will affect? Maybe they are waiting till the last minute, as to not cause widespread panic in the hopes they can come up with a solution. Can you imagine what's going to happen when all of a sudden families that were expecting money have no money at the last minute? I am very very concerned about this.

    There are families that are barely surviving, working at a job which doesn't pay them enough - so they get subsidized from welfare in the form of cash aid. There are a lot of these families that are just barely getting by as it is, even with a job. The minimum wage is not going to even pay your rent around here ( the SF Bay Area) What is needed is more affordable housing in the Bay Area and around the country.

  • pricelessway profile image

    Lola Stoney 8 years ago from United Kingdom

    Yes, these are really dark times. I have family in California, I’ll post this to them.

    I hope there is a way out of this.

  • Constant Walker profile image

    Constant Walker 8 years ago from Springfield, Oregon

    I just saw in the paper yesterday that California is suspending college loans, welfare payments and... something else, can't remember. Dark times!

  • bgamall profile image

    Gary Anderson 8 years ago from Las Vegas, Nevada

    Did you see my hub on the iou's? There is more pain to come. Could be an Obama bailout but we will see.

  • RGraf profile image

    Rebecca Graf 8 years ago from Wisconsin

    You always think that governments are beyond these situations. Makes one really think hard on such matters.

  • profile image

    Erick Smart 8 years ago

    I have to admit this does not surprise me at all. It seems that California was known as the welfare state long before there was economic problems. This puts a major drain on the rest of the citizens especially when combined with the water issues the state faces. It is only natural that as unemployment is going up the state is finding it cannot take anymore.

  • JoeM profile image

    JoeM 8 years ago

    In California we need to raise taxes or stop providing so many services to the people living here. That is the only way - but people will not want the government to raise taxes or reduce services so no politician will have the testicular fortitude to do it. Stupid democratic republic thingy we live in.

  • profile image

    misbehave411 8 years ago


  • Citizen of Earth profile image

    Citizen of Earth 8 years ago

    Yes indeed, it's now official. California is about to go broke. These are tough times.

  • profile image 8 years ago

    Well if they are going Bankrupt,I can't figure out why the Gov.gave the State employees Xmas eve and New Years eve off with pay,unless he wants the State too go Bankrupt to prove something to the State Senate for not giving him the money needed to operate with.

  • Jerilee Wei profile image

    Jerilee Wei 8 years ago from United States

    As a former native Californian, I saw it coming years ago. What was it that the Eagles sang, "call some place paradise, kiss it good-bye?" Actually, California is not the only state on the verge of collapse, Florida is right behind them, along with Ohio and a few others. My heart has cried for the California I knew as a girl for a long time. I'm afraid of more tears to come. Great hub!

  • SoulFlow profile image

    SoulFlow 8 years ago from San Francisco Bay Area

    Wow That is quite traumatizing!

  • jenster profile image

    jenster 8 years ago from Bay Area

    wow....that is crazy stuff girl...keep me posted....still dont get this stuff but enoy reading it.

    hugs jen