California spends billions rebuilding burned towns. The case for calling it quits
As California’s new Gov. Gavin Newsom heads to Sacramento to make a pitch for his state’s economic future, he and his aides are working out the details for a state-run bankruptcy that won’t be easy.
The state’s biggest creditors are calling for the deal. They include about $10.8 billion in bonds, a federal loan of $3.8 billion and $800 million that the state sold to California cities for the construction of hospitals, colleges and roads.
That still leaves about $11.2 billion in debts owed by the state and its 13 counties, which would be wiped out if the deal breaks down.
“The people of California are saying, ‘Give us more time. Let us resolve this,’ ” said Stephen Bannon, Newsom’s chief of staff. “I’m not saying it won’t happen. I’m just saying I’m not saying it will, because I want to make sure that everybody is aligned. That there isn’t a deal that, you know, is unfair to the taxpayers of California.”
In the coming weeks, the governor will be reaching out to elected officials, businesses and unions to help make sure the deal is done correctly.
“But I don’t know if it’s going to happen,” Bannon said. “And I think the people of California and the taxpayers are going to have to decide to take a strong stand. Because if you don’t, this is going to go on for a long time.”
Newsom’s task is especially difficult because his state’s most generous economic development program, the California Jobs & Competitiveness Initiative, doesn’t have the power to negotiate itself, like it does in other places.
This is a crisis that affects many sectors of California, but is most pressing for its largest industries, which employ almost a third of the state’s working population.
The state needs to raise $5 billion to help those sectors. And even those who can pay the bills are in no position to do so.