Monday, May 14, 2012

The more things change...


Unless you've been living under a rock, you know that the state of California is in some dire fiscal circumstances and word came down on Friday that things are not getting any better. In the news:

California's tax revenue plummeted in July, missing expectations by nearly $539 million and raising fears that deep education cuts will be needed to keep the state budget balanced.

The bad news, announced Tuesday, came less than two months after Gov. Jerry Brown and state lawmakers patched together a budget on the assumption that a budding economic recovery would produce a $4-billion revenue windfall. Those hopes are now fading.

The plunge occurred before the recent Wall Street gyrations that wiped away many of the year's stock-market gains. If the economy remains sluggish and the $4 billion does not materialize, cuts in public schools, universities, libraries, child care, and services for the elderly and frail will automatically take effect.

"Every drop in revenues puts us closer to the drastic trigger cuts that could be imposed next year," state Controller John Chiang said in a statement accompanying his July revenue report.

Oops. Our bad. The linked article above is from August of last year.

And how did we get into that particular mess? From June of last year:

Abandoning negotiations with Republican lawmakers, Gov. Jerry Brown struck a deal with Democrats for a budget that assumes billions of dollars in fresh revenue — but could lead to major service cuts if the money doesn't materialize.

The proposal, which Democrats said they would pass as soon as Tuesday, does not include the renewed tax hikes that the governor had been pushing to put before voters. But it does contain some charges that Democrats believe they can legally raise without GOP support.

$11 billion worth of fresh revenue to be precise. And since Brown and the Sacto Democrats gave no specifics of where this unanticipated revenue was going to come from, you would not be wrong in assuming it was to be delivered on the backs of unicorns bounding over rainbows.

So, when you paper over budgets with hapless and laughable gimmickry, it should come as no big surprise that this is where we currently are:

California’s budget deficit has swelled to $16 billion after tax collections trailed projections amid the tepid economic recovery, Governor Jerry Brown said in a comment on his Twitter post.

The shortfall has widened from the $9.2 billion Brown estimated in January, after lawmakers resisted the Democrat’s call for cost cuts, the federal government blocked other reductions and April income-tax revenue missed budget forecasts by $2 billion. On May 14, he’s set to unveil a revised spending plan and to say how he would erase the gap.

Brown, 74, set out an initial budget in January with $92.6 billion in spending for fiscal 2013, which begins in July. That plan stripped more than $4 billion from health and welfare programs while relying on higher income and sales taxes. The levy increases will go before voters in November. If rejected, schools will lose $4.8 billion midway through the year.

“We are still recovering from the worst recession since the 1930s,” Brown said in a YouTube video cited on his Twitter post. “Tax receipts are coming lower than expected and the federal government and the courts have blocked us from making billions of necessary budget reductions. The result is that we are now facing a $16 billion deficit.”

First of all, we aren't aware of the degree and purpose of federal meddling in California's budget matters so if anyone has any details, please feel free to share.

The ballot initiative Brown is pushing would raise the sales tax, already the highest in the nation from 7.25 to 7.5 and would also raise taxes on those making over $250,000 and would raise taxes on those making over $1 million from 10.3 to 13.3, the highest in the land.

In a state hobbled by a bad economy and horrible self-induced economic/regulatory policy that is driving businesses and rich people out of the state, it is baffling to us how piling on more bad economic policy in way of taxing consumers and the rich and their businesses is going to balance the books.

In the face of all evidence to the contrary, we are seeing the rigid ideology of statist tax and spenders at work here in California. They simply cannot bring themselves to think and act in any other manner.

1 comment:

K T Cat said...

As productive people leave, the state becomes a deeper and deeper blue. I think we still have a long way to go.