<p>The DJIA was 42 at the low during the depression. The stock market closed at 8990 yesterday.</p>
<p>[Dow</a> Jones Industrial Average (1900 - Present Monthly) - StockCharts.com](<a href=“http://stockcharts.com/charts/historical/djia1900.html]Dow”>http://stockcharts.com/charts/historical/djia1900.html)</p>
<p>I like how my state has been dealing with these issues for years, yet it’s only news when it hits California ;)</p>
<p>Lumine, what state is that?</p>
<p>Sakky- Even sharing a small fraction of Berkeley’s rich endowment would be a great help to fellow California colleges struggling financially today. A lot more potential help could come from sharing the mega-rich endowments of Stanford and USC. These staggering multi-billion dollar endowments have been growing tax-free, at the expense of the public, and they could fix the current hardship on public colleges until California solves its financial mess. Share, quit hoarding. Why not use the money to benefit deserving students of California? The money exists, and the senate finance committee needs to help. As our new President, strongly supported by Californians, says: “let’s spread the wealth because its good for everybody.”</p>
<p>^I think HYPS should spread the wealth since it graduated a lot of people that are contributing to this financial mess. They are the ones that are hoarding lots of money.</p>
<p>I really wish that CA state schools had more money. For example, I really want to go to Sonoma State Univerisity, and although it may be “cheap”, it still costs thousands of dollars. It would be nice if the state schools had more money to give for financial need, and more money to cordinate things for their students.</p>
<p>We3–let me give you just a quick overview of the reasons for the economic crisis we now are in, some of which you know, some of which you apparently don’t know:</p>
<p>(1) They were many mortgages sold to people–both those who were able to pay and those who weren’t able to pay.</p>
<p>(2) As the value of homes fell, some of the people who took out mortgages that depended upon constantly rising home values couldn’t afford to pay, and others–as the values fell and the amount of their mortgages exceeded the values the homes were worth, decided not to pay, but rather to simply “walk away” from their mortgages–and the homes they covered. All evidence to date suggests that there are many more mortgages that fall into this second category (“underwater mortgages”) than the first (poor credit risks).</p>
<p>(3) Home mortgage markets used to be held by the bank that made the loans until they were paid off—but nowadays, banks spread their risk on individual mortages by selling portions–or often a large percentage of the loans they make–to other banks. This is a process called “securitization”.</p>
<p>(4) Originally, banks purchased these loans from one another freely–and at almost no discount. But as more and more of these loans turned out to be from people who had no intent or ability to repay, the banks asked for some kind of “insurance” for the loans they purchased.</p>
<p>(5) Investment banks and insurance companies (like Bear Stears, Lehmann Brothers, and AIG) started offering something called a “Credit Default Swap” (CDO) which was essentially an insurance policy promising to pay if the loan went bad. These credit default swaps were illegal to sell prior to 2000 (well, actually they were legal until 1932, then outlawed, then legalized again in 2000). The legislation doing this was “hidden” in a bill that was over 300 pages long and that was passed unanimously by both houses of Congress (the lame duck Congress of 2000) right before they adjourned. This was all covered recently in an edition of CBS’ show, 60 minutes.</p>
<p>(6) Credit default swaps, unlike regular insurance policies, have nothing to back them. They are like selling “naked” options. The theory of the people issuing them was that they would never have to pay, since housing prices would always go up–if not in the short term, at least in the long term–and therefore these people would always get their money back by taking over the mortgages. The estimate is that there were over 62 TRILLION dollars of credit default swaps sold between 2000 and the beginning of 2008. The reason for the large amount is that the commissions on these were great–and selling these allowed the mortgage “securitization” market to explode-- increasing commissions for everybody: the mortgage lenders, the realtors, the investment banks, and the insurance companies.</p>
<p>(7) When the banks who lost money on mortgages asked that their credit default swaps be “cashed in”, guess what? The people issuing them couldn’t pay;–surprise, surprise. Many of these companies went broke (Bear Stearns, Lehmann Brothers, Merrill Lynch) and some were either sold or bailed out by the government right before going broke (Goldman Sachs, Morgan Stanley, AIG).</p>
<p>(8) Once banks realized that they were holding worthless mortgages, and worthless CDOs, and once they realized that the new ones being offered were also worthless, they decided to stop buying. The result–no money changing hands between banks–and therefore no banks with money to loan to customers. Banks needed all the money they had (and then some) to meet their regulatory capital requirements.</p>
<p>Why do I mention all this? I do so because it explains why the primary reasons for budget problems in California (and internationally). These financial problems are not related to:</p>
<p>(1) High income California taxpayers migrating to other states
(2) Illegal aliens who are “sucking up” state educational resources
(3) Spanish mortgage lenders offering loans to low-income people in Stockton or San Bernardino
(4) Hostility in CA to extraction industries and logging
(5) CA’s opposition to building things like nuclear power plants or things like under-performing wind farms
(6) CA’s high minimum wage laws that make the state have incredibly high inflation, resulting in people being taxed at the federal level at a high bracket relative to their class.
(7) High crime levels which leads CA to export criminals to other states’ facilities.----->CA govt expenditure to other states instead of CA
(8)Illegal immigration problem that leads to CA’s highly abused welfare programs.
(9)CA gun laws discourages law abiding citizens from purchasing guns and gun related paraphernalia. One form of state revenues are from fees and registration of guns. Few gun shops means fewer businesses/business, means fewer tax revenues</p>
<p>While one of the items on your list above does have a major effect on California educational costs (item 2), it affects only elementary through high school costs and has no effect on the university systems. It does have a minor effect on community colleges, due to their need to provide remedial education for those unfit to enter the university system directly upon high school graduation. </p>
<p>As far as the rest of your list, I find nothing on your list being of any consequence to the current 62 trillion dollar international crisis we are facing–or affecting the California educational problems or overall tax revenues to any great extent–but rather I find these to be merely a list of personal complaints–some/possibly most with an unfounded basis.</p>
<p>For example, you mention California gun laws discouraging citizens from purchasing guns. What are you talking about? A UC study conducted a few years back showed that there were over 200,000 handgun sales alone every year in California–and that there are more guns in California than there are adults. (The same is true for the entire country). </p>
<p>And you mention crime increasing, yet statistics show that crime has actually decreased in California about 25% since 1988, despite the population increasing by about 15%-- [California</a> Crime Rates 1960 - 2007](<a href=“http://www.disastercenter.com/crime/cacrime.htm]California”>California Crime Rates 1960 to 2019)</p>
<p>And what high inflation–inflation in California is less than 3% per year?</p>
<p>And you make it sound like Schwarzenegger is opposed to nuclear energy in California, but he has come out strongly in favor of nuclear power:
[McClatchy</a> Washington Bureau | 11/03/2008 | Is more nuclear energy in California’s future?](<a href=“http://www.mcclatchydc.com/107/story/55159.html]McClatchy”>http://www.mcclatchydc.com/107/story/55159.html)</p>
<p>Lastly, the purpose of this thread was to highlight the problems facing the California university systems–and to provide advice to students. It was not designed to be a place for arguing personal political opinions. Therefore, I would ask that both you and I keep the thread on-topic and take our personal political philosophies and any discussion of them to a blog designed for that purpose (of which there are many). With this in mind, I have attempted to minimize giving my personal opinions above, but instead have attempted to focus on the causes of the current California economic problems–and the resulting affect on the California university system. I’m sure you will do the same.</p>
<p>the democrats are to blame for this. they were for complete non-regulation of banks.</p>
<p>The Black Lantern–Thanks for keeping the thread politics-free and on-topic–(sarcasm).</p>
<p>Even though I defended the Republican governor above, let me state for the record that your comment shows your total lack of understanding of the problem–and its causes. There is blame on both sides–for example, Phil Gramm, McCain’s closest economic advisor led deregulation efforts in the US Senate for the past 10 years–but yes, Clinton was the one that signed this–even though it was primarily a Republican supported measure.</p>
<p>P.S. Look, the election is over–can people please get over it and stop posting political stuff on every single website everywhere? It appears that our President and President-elect are working in a joint fashion to try and solve the problems–can’t we follow their example and try to work together also?</p>
<p>Calcruzer that was a great summary of the mortgage mess we find ourselves in now, and certainly the housing crisis in California has exacerbated the budget crises here which in turn affects funds available for public K-12 and higher education in the state.</p>
<p>However, in my view it’s not the primary reason for the current budget crisis. State tax revenues in California come basically from three sources: the sales tax, the property tax and the personal income tax. The sales tax base is highly volatile, in part because it excludes services and in part due to the growing importance of (non-taxed) internet sales. Property tax revenues have taken a hit due to the decline in property values state-wide as noted above. Personal income tax revenues have dropped due to rising unemployment. Most importantly (I believe) is the drop-off in revenues from personal income tax on stock options and capital gains. Lower revenue from capital gains taxes is the major factor in the decline in General Fund Revenues. </p>
<p>On the spending side, two issues immediately come to mind: voter initiatives limit the state’s spending flexibility, and the lack of will in the legislature to reign in spending during flush times.</p>
<p>This is a cycle that has repeated itself twice in the past decade. It’s like watching a train wreck, and the sad thing is that education is in the direct path.</p>
<p>vballmom,</p>
<p>Thanks for a great summary (and on-topic) post.</p>
<p>I agree with you analysis of the problems on the spending side. I was attempting to show, however, that as far as incoming revenues, a declining in overall economy is affecting all of the three major sources you mention: sales taxes, personal income taxes, and property taxes.</p>
<p>As the economic activity decreases statewide, sales taxes and personal income taxes fall in turn;–and as housing values fall, property taxes are negatively impacted. </p>
<p>As you point out, the lack of flexibility on how spending is allocated, and the amounts spent year-to-year do not automatically fluctuate with the economic activity. That is, as you explained, there is no effort made to be able to balance revenues with spending by creating “rainy-day” funds during good times. As a result, there is always a demand for spending cuts when times get tough (as is happening now).</p>
<p>BrianaGrace-I agree with you. But SSU is a great school and they give the students excellent bang for their buck. I get the strong feeling the only reason they’re imposing the 16-unit cap is because they’re being forced to.</p>
<p>veryspoiledgirl-</p>
<p>I am an architecture major at a community colleges which program is better than some 4 years. I am sure my CC is in the top 5 of transferring students to UC’s and CSU’s as well. There are only 8 accredited schools in the state(more than any other state). My first choice like many is SLO or Pomona, and at 18k a year and the best architecture school on the west its hard to beat the value. Accepted transfer GPA 2 fall semesters ago was 3.4. I have that GPA now but in the worst timing because last semester it was 3.6 and expected to rise along with falling acceptances rates. So I’m left with 3 choices in CA which don’t have any other major except that which also means no more volleyball, clubs, or a real college experience. Now I’m left looking out of state to places such as Colorado and Arizona which I got into but at the expense of a hefty 38k first year.</p>
<p>From yesterday’s news meeting: Transcript: Media Teleconference 11/17/08
CSU Leaders Discuss Budget and Systemwide Impaction <a href=“http://www.calstate.edu/executive/multimedia/2008/campusimpaction08_transcript.shtml;[/url]”>http://www.calstate.edu/executive/multimedia/2008/campusimpaction08_transcript.shtml;</a> not pretty at all.</p>
<p>At around 17:30 in that audio clip the gentleman says, “we will accept all fully eligible community college students with 60 or more credited hours and an AA we will accept those students”. I don’t understand I got my AA last year I have 80 transferable units(more than they will take) I have all IGETC requirements and requirements outlined on assist.org for my specific major which has the all of my architecture classes articulate with SLO and Pomona. 3.4 GPA and I gave up my entire summer working 40 hours a week work at an architecture firm. And unlike most freshmen H.S. students who go to one of the 2 CSU’s that have architecture programs I’m certain this is what I want to do with my life and I’m being basically held back from my dreams.</p>
<p>Vballplayer, there is no reason to think that you will not get in with your statistics. Remember that the universities will look at not just your GPA but will take your extracuriculars into consideration as well as all other parts of your statement. Please don’t give up and please apply to as many schools that have your major as possible (including some “safe” schools).</p>
<p><a href=“2”>quote</a> Illegal aliens who are “sucking up” state educational resources
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<p>I am still looking for evidence that illegal immigrants really do ‘suck up’ state educational resource, to the point that they actually take more resources than they provide through taxes (yes, most illegal immigrants do pay taxes) and through expanding economic growth. </p>
<p>Let’s face it. Illegal immigrants come here to work. Only a tiny minority of them camp out on welfare, because they aren’t eligible for many welfare payments anyway. Illegal immigrants almost certainly have a superior work ethic than do most Americans, and that’s why they are willing to take jobs that most Americans won’t do, like picking fruit in the Central Valley and cleaning houses of rich people. Yet that contributes to expanded economic growth and hence greater state revenues. Since the illegal immigrants do contribute to state revenues, I don’t think it is unfair that they get some of it back through education for their children. {Put another way, do you really want these kids to grow up in the country and not be educated?}</p>
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<p>Just think of the second-order effects of what you are saying. What if you really did force Berkeley (and Stanford and USC) to ‘spread their wealth’ around to the other schools? Then obviously the alumni of those schools would immediately stop donating to them. People donate to their alma maters because they want to help them. Why should people donate to Berkeley if that money might end up being ‘shared’ with some other school that they have no connection to whatsoever? Hence, in the long term, you would just end up greatly hurting future students at those schools.</p>
<p>College endowments are really like charitable funds. In fact, that’s why they are tax-free. Yet charities have no obligation to help only people in their state. Nobody is proposing that the Gates Foundation be forced to ‘share’ its $39 bn endowment with the people in Washington State, despite the fact that that endowment is larger than any school in the world, even Harvard’s. Yet the Gates endowment is still allowed to accumulate tax-free.</p>
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<p>I think this analogy is not apropos. Obama has never once proposed that nonprofits be forced to relinquish some of their endowments. Heck, it would be political suicide for him to do so. Morever, Obama’s notion of ‘spreading the wealth around’ would apply only to your future gains in wealth, not your current wealth. Those who are already wealthy are free to keep it. To take existing wealth away would truly be socialist.</p>
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<p>That’s where I have to fundamentally disagree with Obama. It’s not good for everybody to ‘spread the wealth around’ by increasing marginal tax rates on the top brackets, because doing so decreases incentives for the most economically productive (and therefore highest earning) members of our society, and therefore reduces overall economic growth. At the risk of channeling Joe the Plumber, we should be encouraging people to want to earn as much as possible and hence expand the economy, and you don’t do that by increasing marginal tax rates. For example, a higher marginal top bracket decreases my incentives to study hard to put myself through med-school to become a physician, because after all of that work, I would have to pay a higher tax rate. We want to encourage people to study hard, work hard, and be entrepreneurial. {Note, we obviously don’t want people to engage in fraudulent behavior such as what many mortgage brokers and investment bankers apparently did, but that’s really a question of regulation and law enforcement, not taxation per se.} “Spreading the wealth” by increasing tax rates simply discourages people from generating that wealth in the first place, and hence is bad for everybody. Poor people do not benefit from lower economic growth, in fact, they are the ones who would be hurt the most. {Think of it this way: the poor in this country are still richer than the middle class in most other countries.} </p>
<p>Now, to be fair, the Republicans don’t have it right either. What Obama should have said is that higher tax rates on the rich may be needed not because spreading the wealth is good for everybody (because it isn’t), but because high deficits are also bad for overall economic growth. Obama wants to find a way to pay for tax refunds for most people without increasing the deficit by too much, and so that’s why he proposed tax increases on the top earners. That would have been an intellectually honest position (and, frankly, a more honest position than McCain’s). </p>
<p>Nevertheless, the point is that we should refrain from class warfare. Rich people becoming richer are not responsible for poor people becoming poorer. Or, put another way, it’s not Stanford’s, USC’s, or Berkeley’s fault that the other colleges in California don’t have any money. Hence, it’s not their obligation to bail them out.</p>
<p>Sakky,</p>
<p>Thanks for your thorough explanations. </p>
<p>Just as a note, there have been some studies that show that medical costs and law enforcment costs are extremely high in all counties along the Mexican border, resulting in the bankruptcy of many STATE or privately funded hospitals and an inability to pay for the local sheriffs/police needed in these locations. These studies also showed that there were significant STATE educational expenses incurred. Here’s a study actually done by the Congressional Budget Office </p>
<p><a href=“http://www.cbo.gov/ftpdocs/87xx/doc8711/12-6-Immigration.pdf[/url]”>http://www.cbo.gov/ftpdocs/87xx/doc8711/12-6-Immigration.pdf</a></p>
<p>The studies you refer to show that the incoming FEDERAL tax revenues from illegal immigrants wages outweighs the additional STATE costs incurred. None of the studies I saw argued that state revenues from illegal immigrants were greater than state costs spent on them.</p>
<p>Since there are only limited programs in place to reimburse states from federal tax revenues to offset the difference in revenue streams, and since none of them covered the costs incurred in total, the states do suffer–which is why I was agreeing that illegal immigration would affect overall state revenues for education–although primarily at the high school and elementary school levels, not at the college level.</p>