The California state budget has been bleeding red ink for years but this most recent report released by the state controller highlights the alarming fact that there is no fix for the Golden State’s finances; taxes can’t be raised high enough nor can the budget be slashed deeply enough to fix their massive deficit:
State Controller John Chiang today released his monthly report covering California’s cash balance, receipts and disbursements in November 2012, showing total revenues were $806.8 million below (-10.8 percent) projections contained in the 2012-13 State budget.
“November’s disappointing revenues stand in stark contrast to recent news that California is leading the nation in job growth, has significantly improved its cash liquidity to pay bills, and even long-distressed home values are starting to inch upward,” said Chiang. “This serves as a sobering reminder that, while the economy is expanding, it is doing so at a slow and uneven pace that will require the State to exercise care and discipline in how its fiscal affairs are managed in the coming year.”
Personal income taxes in the month of November were down $842.5 million (-19.0 percent). Some of the tax revenue associated with Facebook shares came in during the month of October, while budget planners had projected receiving those funds in November.
Corporate taxes were down for the month, coming in $187.8 million below (-213.4 percent) projections. A portion of this drop was due to higher than expected corporate tax refunds going out in the month of November. Totals for sales taxes were up $99 million (3.8 percent).
The State ended the last fiscal year with a cash deficit of $9.6 billion. As of November 30, that cash deficit totaled $24.9 billion and is being covered with $14.9 billion of internal borrowing (temporary loans from special funds), and $10 billion of external borrowing.
Could it be that the state is spending too much? A revelation:
The difference between actual and estimated numbers is larger on the spending side. For the first five months of the fiscal year spanning July through November, actu-al disbursements exceeded projections by $2.2 billion, or 4.9%. Education and health care accounted for the majority of the difference. Spending on general state operations was less than expected.
The shortfall of revenues and excess of spending mean that the overall variance from estimates has equaled about $2.7 billion in Fiscal Year 2012-13.
They’re $25 billion in debt and still spending money like the world really is going to end December 21. Year to date, they are spending 5% more than projected and taking in 2.6% less than expected. How long can they continue that without the whole rotten edifice collapsing?
Voters recently approved a massive tax increase on the wealthy and it will be interesting to see if revenue projections from that increase match actual receipts. The state thinks it will get $6 billion a year from the tax, raising the rate for those making over $250,000 to 12.5% If not, California will go even deeper in the red and eventually be forced to seek some sort of bail out from Washington.
How can corporate tax revenues be down 213.4%? The most anything can decrease is 100%. If tax receipts fall from $5 billion to $0, the change is -100%.
113.4% paid out in subsidies to Green Industries.
Snarkieness aside, the reduction in revenue was 213% of the projected reduction. Its not the way I would have stated it but Chiang (if the figures are actually his and not a reporter paraphrasing the actual press release) is not a real genius.
I don’t have a PhD in economics, but let me step out to the back yard at 3:00 in the morning, fire a shotgun into the air, and see whether a dead duck lands at my feet, okay?
California will continue to squander more than it squeezes out of its serfs until it cons the entire nation into bailing it out. Here’s another wild shot in the dark: New York and Illinois won’t be far behind California.
In the end they will stop looking for new ways to tax income and look for new ways to tax wealth. First stop is to raise property taxes. Without any check on the democrats it will be an easy step to change the constitution (ie prop 13) without an new ballot proposition.
Look for protestations from moonbeam et al about being forced to do this blah blah blah by greedy business and republicans. Next is the 401K’s and IRA’s, a bank account tax, a cash withdrawal tax, futher increases in sales taxes and excise taxes.
When there is literally no money left to hand out to their constituancies, no privately held wealth and no productive people left to tax they will turn on themselves. Sound familiar? Its the story of Soviet Union and its being repeated here now. Thanks Jerry, thanks Diane, thanks Nancy, thanks Gray, thanks SEIU, you have all ruined paradise.
That was bad enough, but do they have to prance around being so [fill in the blank] proud of their accomplishment?
– and the Burton-Brown Machine.
Silicon Valley, Hollywood, Major defense industries, oil resources (current, and more historically), tourism, nice weather, etc, etc–bailing out California is just a non-starter. No other state has its advantages, and no other state should have to pay for California’s mismanagement, or it’s citizens’ inability to understand the mutually-conflicting nature of their desires, policy-wise.
A bailout of California is a legitimate grounds.
Along those lines–in 2005 or so, there was a movement, of which Schwarzenegger was a part, saying that California did not receive its fair share from the Federal government, because more money left the state via returned, by whatever figures they figured such things. A LA Times columnist was flogging the issue, in particular.
And when I considered the number of defense bases in the state, as well as the number of defense contractors, I wasn’t having any of it. So I wrote the columnist, asking if Californians only considered money spent on the Armed Forces as benefiting Californians if it was spent in the state–otherwise Californians derived no value from such expenditures, or from the service of military members– unless they were domiciled in-state. Likewise, I wondered if Californians should be banned from parks such as Yellowstone, since obviously spending money on such things was only considered valuable to Californians if they directly recieved the money, in-state.
He sent back a nice dissembling retreat (“oh, I wasn’t really saying it was a valid argument”, which was bull, since he obviously didn’t realize I had been keeping tabs on him flogging the issue for some time before I finally got fed up). I did notice I never heard that argument ever trotted out again.
For some reason, after that, I started thinking Californians might be in it for themselves, not really concerned about the things necessary for the entire commonweal, and that they might have an entitlement mentality.
– Almost all the Times’ columnists wrote and still write that way.
hey, what’s the problem here? The 2012 election put this sort of nitpicking republican nose-scratching problem to rest, once and for all.
Somebody will have to print some money and then squeeze it out of the rich guy who has been exploiting everybody else from the dawn of eternity.
This is how Obama economics makes life better for everybody except for the rich guy somewhere who doesn’t deserve to be rich anyway, unless he’s John Kerry, or Al Gore, or Obama, or well, you know.
Why do we obsess about this when the solution is so easy.
California gave the Democrat party unfettered control over the state. Let them burn.
I think I can tell you why the California Dems are behaving the way they are. They used public money to build the vote generator that won them their supermajorities. There will come a time (fairly soon) when they have given the bondholders all the haircuts they can, cut pensions and benefits as far as they can and still won’t have the money to fund the army of freeloaders they have created. Then the fun begins. They are scared. That’s all, just scared. They saw that guy who shot up the Las Vegas Social Security office because after moving to Nevada his California stipend was cut off. And multiplied him by maybe 250,000.
There is a lot of income recognition going on right now because of the possibility of higher taxes across the board next year so this may temporarily boost revenues to states like CA next year when the tax man has to be paid for the prior year.
I live in CA and have adjusted to the higher taxes by decreasing both my income and the long hours that I would normally work to get the higher salary. It’s just not worth it to work so hard and have such a large percent taken away by the State. Governor Brown is an idiot if he thinks that people like me are going to work harder so he can spend our money. Also, for the first time, my extended family (some of whom have lived here for >50 years) is thinking of moving en masse to Texas because of the tax situation here in CA.
I suspect there are a lot of people like me who are getting fed up with the Socialist Republic of California.
Texas is their next piggy bank.
California will not be receiving a bailout as long as the Republicans control the House. Republicans have no incentive to rape red states to save California. There are no votes in it for them. Taking money from solvent states to bailout out California will in no way prevent a California collapse from damaging the economy. It will only spread the pain to others. The Republicans will gladly let the blue states burn to the ground.
#10 tdiinva
While I would be more than happy to see the Blue states burn to the ground, and would gladly throw an extra log or two on California and Illinois; you are placing faith where it is not warranted. We have not had a Constitutional budget for 4 years, two of which where we have had a Republican House. We are not going to have a budget for at least another year according to the Senate. At every encounter with the Left, the Institutional Republicans have given new dimensions to the words “craven” and “coward”.
They are going to stand up against the Left and not bail out every Leftist constituency out there? Have they opened an account at “Vertebrae ‘R’ Us”?
I can see this group of lop-eared duds rolling over. But they may not have to. Consider the possibility of the Federal Reserve buying state and local bonds the way that they do Treasuries. And consider the leverage that the Federal government would have if State “A”, which is favored by the regime gets its bonds bought, and State “B” which is not favored by the regime is not.
We do live in interesting times.
Subotai Bahadur
The $800M Nov. budget shortfall publicized by the CA state controller is only an estimate, and is likely nowhere close to reality. The state of California is running an annual budget deficit of over $10B, currently has a debt of over $50B, and has unfunded pension/healthcare liabilities exceeding $500B.
To make matters worse, the dim-witted voters in California just chose to raise the income tax rates on the few remaining state residents that actually pay any income taxes.
Lastly, the federal government should follow California’s lead when it comes to income tax rates. California has a minimum annual state income tax for businesses of $800, regardless of whether the business generated a profit or not. Imagine if all 150M+ adults in the US were required to pay a minimum federal tax of $2000 per year? The Democrats would never win another election.
The $800 tax minimum is on Incorporated businesses such as S Corp., not all businesses. Sole proprietorships are not included in that.
I am a property owner in California and certainly expect property taxes to rise while people are least able to pay the increase.
But, other than that and the State income taxes they have already increased, I expect the State Government to do very little “Heavy Lifting”!
California, New York, Illinois, and Michigan absolutely expect Obama to bail them out. They mean too many votes to the Democrats. Just watch and see!
Let It Burn, but first repeal the Hollywood tax cuts.