Tech Is on Fire, But California Is Getting Burned - Rodney Johnson/HSDent

To say that the tech sector of the market is on fire is an understatement.  With companies like LinkedIn, Groupon, Zynga, and Facebook dominating the IPO headlines, each without a tangible product and multiples that would make any analyst blush, there is no doubt that “the way forward” seems to point to the West Coast.  So how is the 21st Century gold rush treating the great state of California?  Not so well, when viewed from the standpoint of state finances.

The booming business of tech companies might lead one to conclude that California should be on the mend, but the numbers tell a different story.  The newly elected Jerry Brown, a re-tread governor from the 70s, passed a budget that was seemingly $3-4 billion short on revenue until the assumptions were changed to close the gap.  Six months later, the Legislative Accounting Office (LAO) has issued a report that shows the state is running approximately $3 billion behind for this fiscal year.  Who knew?  Unfortunately, the forecast for next fiscal year, July 1, 2012 through June 30, 2013, gets worse.  In addition to lower revenue, the state has to pay back the $2 billion of funds that it stole, er, “borrowed through force,” from the cities of California to close the budget gap of 2009.  The shortfall for next year appears to be in the $10 billion range.  That’s going to hurt.

If the state of California is a barometer of where the US is headed, then the budgetary front is dim at best.