The Fiscal Truth about California

Texas is leading most of these categories (except of course VC funding...) for the last 2 years. Winds are turning. California isn't going anywhere, but they probably wont be the cats meow for the next 10 years.

That said the problem with this article is it basically uses Silicon Valley to prop up the rest of the state. Yes there's a lot of VC money in California, yes tech companies choose to have their headquarters here and yes that pumps up the overall GDP. But that doesn't negate all the other problems we have.

As anyone knows you can make a ton of money and it doesn't matter if you spend more than you make. Right now California is doing just that to the tune of $20 billion a year.

Beyond that he is using twisted numbers. For example he uses the Tax Foundation's tax burden index but the Tax Foundation themselves say that isn't a valid comparison metric because that calculation doesn't include local taxes and...

“some states accomplish at the local level what other states accomplish at the state level, so a degree of comparability is lost as a result.”

He also uses a lot of first level thinking. Like justifying the high pay given to public sector employees by quoting the high cost of living but not asking why there's such a high cost of living. Or saying how Google, Apple and Facebook all choose not to move from California without mentioning they've all chosen to build their data centers elsewhere.

Like I said people do make this out to be more than it is. You never hear about Texas' equally sizable budget deficit for example. But that doesn't change the fact that things are bad.

I don't know if the VC data includes angel investment. And, while I'm sure it's a much smaller amount in terms of total dollar figures, there have been several hundred startups funded in the Valley this year.

Granted, most of those will fail, but if even 20-30 of them succeed (10% success rate), that will be a huge boom to the California economy.

Not only that, but we're going to be seeing a number of really interesting exits/huge acquisitions in the next few years: Facebook, Twitter, Yelp, Linkedin, Zynga et all... If 2 out of those 5 goes IPO, that will add tens of billions of dollars to the economy.

Companies like Google, Apple, Cisco, Intel, etc... are all doing quite well.

Nation wide, companies have an estimate of $1.4 Trillion dollars of cash on hand, and they really don't want to hire. but, as soon as the economy starts to rebound, they are going to be interested in growing fast, and merger and acquisitions are typically one of the fastest ways to do that. $1.4 Trillion buys a lot of small recently funded startups.

No, I think California is going to be doing just fine in the next few years.

I have a feeling both sides spin this issue for their own purposes. Things like total VC dollars spent take on new meaning once you realize that VCs are trending to invest in much larger companies using much bigger investments. Then the question becomes: where are all the big companies that VCs might invest in located? Which isn't the same question as: where are all the startups located?

CEO Magazine voted California the worst state to operate in. California has hundreds of thousands more people leaving than arriving. Numerous politicians from all parties have commented on what a basket-case it is. The two states have the worst credit rating? Illinois and California.

Those are also facts.

As for me, who knows? Who cares? My gut feeling says that there's a lot spin on both sides. I don't have a dog in this fight, so I'm more than happy no matter how it turns out. I'll just sit back and see what happens. I _do_ know that if the California-will-default crowd is correct, its not like it will be a secret. It will be a long drawn-out affair, will all sorts of accounting tricks, yelling at each other, voter referendums, and budget crises that just continue to get worse.

Kind of like we're seeing now.

Examples: "No money to give raises to state workers, cops and teachers." Solution to get contracts signed: Richer pensions, bigger benefits

"Crime is out of control. Drugs are bad. Rural economies are collapsing from de-industrialization." Solution: Build prisons.

"We're enlightened and want the poor to get better healthcare." Solution: Spend more on Medicaid. (In New York, pass the bill down to the county while you're at it)

"The Mayor can't afford a 7% raise to the Police and Fire Departments. The arbitrator will give them 6% that we can't afford if we go to arbitration." Solution: Allow employees to bank unlimited sick time that gets paid out at retirement and free healthcare for life.

Hopefully a crisis will fix things.