CA state budget goes off the cliff

December 12, 2012 - By admin

Mayflower moving truck - wikipediaDec. 12, 2012

By Chriss Street

California State Controller John Chiang announced that total State revenue for the month of November 2012 fell $806.8 million, or 10.8 percent, below budget.  Democrats thought they could hammer “the rich” by convincing voters to pass Proposition 30 to create the highest state income tax in the nation.

But it now appears that high income earners have already “voted with their feet” by moving themselves and their businesses out of state, resulting in a shortfall of more than $1 billion in corporate and income taxes last month and the beginning of a new financial crisis.

Passage of Prop. 30 set off euphoria and expectations of higher spending for public employees.  The California Teachers’ Association trumpeted:

“California students and working families won a clear victory today as voters clearly demonstrated their willingness to invest in our public schools and colleges and also rejected a deceptive ballot measure aimed at silencing educators, other workers and their unions.” 

State bureaucrats immediately ramped up deficit spending far beyond the $6 billion annual tax increase, with the Departments of Health Services and Developmental Services increasing this month’s spending by more than $1 billion versus last year.  The lower tax collection and higher spending drove the state’s deficit after the tax increase to $2.7 billion for the first 5 months of the 2012-13 fiscal year, which began on July 1.  Chiang reported:

“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. 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.”

The improved “cash liquidity” Chaing referred to turns out to be $24.9 billion of debt!

Wealthy people fleeing?

During the election campaign, Gov. Jerry Brown and his pro-tax coalition had the California Board of Equalization request a report from the Stanford Center on Poverty and Inequality, which claimed to have looked at state tax records and found no risk of the super-rich leaving.  Based on their access to California state income tax records from 1992 to 2009, the researchers concluded that millionaire migration is a myth by anti-tax advocates and “other factors, such as personal and business contacts, seem to weigh more heavily in deciding where to live.

The study’s authors, Stanford’s Cristobal Young, an assistant professor of sociology, and Princeton’s Charles Varner, a doctoral candidate in sociology, expounded that the temporary nature of high earnings may help explain why the additional taxes didn’t cause a noticeable flight of millionaires.  Top income tax payers seem to fall into and out of the millionaire income bracket as their income rises and falls across the million-dollar mark from year to year.

Personal connections weigh more heavily than tax rates in deciding where to live and “people are tied to states for different reasons,” Young said.  “They don’t want to take their kids out of school; they want to stay connected with friends, with families … with business contacts.  People crowd together, from Silicon Valley to New York City, because of the returns associated with collaboration.”  The findings dispel the “market metaphor,” in which states advertise low tax rates in a competition to woo high-income individuals. “This is a poor representation of how people decide where to live.”

Young added that looking at the tax flight issue only scratches the surface of state financial woes. “People need to think about the depth of California’s budget problems,” he said.  “I think there’s much, much bigger things to worry about than this issue of tax flight because it’s really hard to find any evidence of it…. I hope people hear, listen to and absorb what the evidence says on this issue,” Young said.

Following the tax increase victory, Reuters News Service published: “Super-rich flight from California? Not so fast” to reassure that there would be very little risk that wealthy Californians would depart for income tax free Nevada, Washington and Texas.  Although “some Silicon Valley business owners had expressed interest in a move after California’s top rate was raised by 29 percent to 13.3 percent…business groups from the Beverly Hills Chamber of Commerce to the tech industry policy group TechNet backed the tax, and the state Chamber of Commerce took no position.”

As panic is spreading that goosing taxes on the rich may have created enough “tax flight” that California will actually collect less from taxes, there was welcome news that a business had committed to opening in the state.  Executives of the 99 Cents Only Stores Inc. proclaimed they would be opening a new location in Beverly Hills on formerly posh Rodeo Drive.

John Chiang, November 2012 state finances

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Comments(52)
  1. Kevin says:

    As predicted! Study history – – when taxes are raised, revenue goes down. When taxes are lowered revenue goes up. There is no revenue problem in Leftifornia there is a spending problem because programmed increases will always leave a deficit no matter how much revenue is collected.

  2. Rob McMillin says:

    Let’s not be too hasty here. Sales tax rates don’t go up until the new year, and while income tax rates have been pushed up retroactive to Jan. 1, 2012, the reality is also that most of that delta won’t be paid until January, 2013, since wealthy payers tend also to be quarterly payers. If the January, 2013 receipts are down, look out.

    For the record, this tax hike will not generate nearly the levels of revenue its proponents believe, even ignoring possible “tax flight”. While the Democrats say publicly not to be pursuing more tax hikes, these claims have no credibility.

  3. Rex the Wonder Dog! says:

    If the January, 2013 receipts are down, look out.
    =
    They Rae down from CURRENT projections by 5%, we don’t need to wait another month…..

  4. Dyspeptic says:

    Hey, the lower take from higher tax rates doesn’t really matter anyway. Like King Barack say’s, it’s about fairness. We all want to be fair don’t we?

  5. Hondo says:

    It’s not so much that rich people may or may not leave. It’s that investment dollars, both from Californian people and form out of state, are either leaving the state or not being spent here. California people with enough money to invest will be spending the money where it is taxed less and where the returns are higher. That can’t be in Kalifornia. Investment money from out of state will not be coming here.
    Many people will stay. But it is the super rich (where we get most of our taxes) who can move to low tax Florida and “vacation” here. Ask La Bron James.
    Also, businesses will not move to this high tax, high regulation state. That means all of their well paid employees will be living and paying taxes in another state.
    Like I said before, you only have to look at states who have recently raised taxes to see it doesn’t raise revenue. Illinois, Connecticut, and Kali(09) have recently raised taxes and still have deficits.
    The liberals may win the elections but they ain’t getting the money. There is no more left to steal.
    Hondo…….

  6. BobA says:

    Rob McMillin:

    It’s a load of bull crap and a two-faced lie when democrats say they aren’t publicly pursuing more tax hikes. What is more likely the truth is that in the privacy of their offices and closed conference rooms, out of the reach of cameras and microphones, democrats are always mentally masturbating themselves and getting their jollies off thinking up new ways to leverage taxes on the citizens of “Taxifornia”.

    Taxes is the democrats pornography. There is no mitigating that kind of mental depravity as long as they have a super majority in the state legislature.

  7. Sean Morham says:

    2014 will be the tipping point. By that time, it will be obvious that the tax rates raised are shockingly (of course) inadequate for the size of the state’s spending appetite. Button down the hatches! A new election will be on the horizon, but Holy S*&T, the Supreme Leader in Washington schemes a rescue plan. Oh Baby, we will as well be getting hints of the Fiscal Stench that is the California impact of “Supreme Leadercare” Health Services.

  8. Eyeamok says:

    So the FACTS just proved without ANY doubt that the Budget they submitted was FRAUDULENT, Where are the Lawsuits demanding that Every Member of the Legislature GIVE BACK THEIR PAY as Required by the Proposition we passed?? Where is the AG?? They all BELONG IN PRISON for FRAUD and deswerve to have ALL their ASSETS SEIZED to cover THEIR FRAUD on WE the TAXPAYERS.

  9. Dyspeptic says:

    “democrats are always mentally masturbating themselves and getting their jollies off thinking up new ways to leverage taxes on the citizens of “Taxifornia”.”

    Won’t they go blind if they keep doing that? :-)

  10. BobA says:

    Dyspeptic:

    Yes but so what? Democrats don’t care. Blind crippled or crazy, the power to tax is one continuous orgasmic to them and a powerful disincentive for them to stop.

  11. Ex-Californian says:

    Its getting to that point in California to where there are more takers than makers. Get out while you can or become a working tax paying mule for the lazy pretending to be destitute.

  12. Ex-Californian says:

    Hondo says:
    December 12, 2012 at 2:07 pm
    It’s not so much that rich people may or may not leave. It’s that investment dollars, both from Californian people and form out of state, are either leaving the state or not being spent here. California people with enough money to invest will be spending the money where it is taxed less and where the returns are higher. That can’t be in Kalifornia. Investment money from out of state will not be coming here.
    Many people will stay. But it is the super rich (where we get most of our taxes) who can move to low tax Florida and “vacation” here. Ask La Bron James.
    Also, businesses will not move to this high tax, high regulation state. That means all of their well paid employees will be living and paying taxes in another state.
    Like I said before, you only have to look at states who have recently raised taxes to see it doesn’t raise revenue. Illinois, Connecticut, and Kali(09) have recently raised taxes and still have deficits.
    The liberals may win the elections but they ain’t getting the money. There is no more left to steal.
    Hondo……. Hondo, I moved out of California 11 months ago and dump 70k into the Georgia economy. It felt good knowing California did not get one red cent of my investment !! :)

  13. SeeSaw says:

    What a bunch of crybabies! If you hate California so much, be our guests–just move.

  14. dyspeptic says:

    @ SEESAW

    That’s Mr. Crybaby to you sister!

    Pack N Ship!

  15. NTHEOC says:

    I agree with with you seesaw!!! What a bunch of whiny little babies,booooohooooowhaaaaaaaaa!!!!!!! I think they should all migrate to Michigan and get raped the way they like it!!!!!

  16. BobA says:

    SeeSaw:

    I was born and raised in California and except for the years I spent on work assignments in foreign countries around the world, I’ve live in California all my life so spare me the lecture. I love California but I don’t like what the politicians are doing to it.

    If you think everything is fine and rising taxes, illegal immigration, rising crime rates and a plethora of other maladies that plague’s this state is not a problem then you should content yourself and be happy with the way things are going.

    Much to the dismay of liberals, free speech cuts both ways and until free speech is abolished, those of us who see things differently from you still have the right to speak our minds –much to your dismay.

  17. NTHEOC says:

    Prop 13 ruined California, as soon as we abolish this unfair deal the sooner we get back on track!!!! Mark my words,prop 13 is done and we are coming for it!!!!!

  18. BobA says:

    Ex-Californian:

    Other than property tax & sales tax, I don’t pay the same kinds of taxes most people pay so I’m sticking around for a while for nostalgic reasons.

    Besides, how will California support itself if folks like me pull our investments in municipal bonds (which, by the way, is tax free income) and walk away? Try as they may, there aren’t enough people in this state with enough income to tax away to pay for everything!!!

  19. Rex the Wonder Dog! says:

    NTHEOC says:
    I think they should all migrate to Michigan and get raped the way they like it!!!!!

    =
    What in the hell are you speaking of ntheoc?????

  20. The Africanized Swarm of Ted Steele System says:

    I think NTHEOC may be correct!

  21. Rex the Wonder Dog! says:

    NTHEOC says:
    Prop 13 ruined California,
    ==
    Tax revenue went UP after 13 passed, as the pols raised “fees” on anthing and everything under the sun, so 13 didn’t do anything, it just shifted the tax burden to other areas, under the guise of “fees”.

  22. BobA says:

    NTHEOC:

    Yeah, right. And all taxes in California are to low so let’s jack them up too.
    The politicians would have more money to spend if prop 13 was done away with AND the income tax was raised 6-8% across the board along with another 3% increase in the sales tax.

    They shouldn’t stop there though. People should be taxed for the number of miles they drive and all public roads and highways should be toll roads. And there’s plenty of money to be made if the state installs carbon meters in all residential and commercial properties and charge for excess carbon emissions to clean up the environment and “help the children”.

    And while we’re at it, since the ICE engine is the worst thing ever invented by man, the yearly vehicle registration fees should be at least 10% of the blue-book value of the automobile (e.g., on a $20,000 car, the DMV registration fee would be $2000 dollars).

    With a little creative thinking, there is all sorts of untapped of revenues that the state can squeeze out of “Taxifornia” citizens.

    Cash, grass or ass; nobody lives in California for free.

  23. Ex-Californian says:

    NTHEOC says:
    “I think they should all migrate to Michigan and get raped the way they like it!!!!!” LOL !!! The mentality of the sheeple culture.

  24. Ex-Californian says:

    SeeSaw says:
    December 12, 2012 at 8:26 pm
    “What a bunch of crybabies! If you hate California so much, be our guests–just move.” I have moved and HIGHLY recommend it ! Gas here is under $3 I run my central heat and air day and night and my city bill which includes, Electric-Water-Sewer-Garbage is between $205 and $290 a month. Property taxes $440 a year. SeeSaw trust me…..I am far from being a cry baby, I couldn’t be happier !

  25. Ex-Californian says:

    I believe the cry babies here are either city/state workers or Entitlement moochers. The tax funded free ride off the backs of the hard working is over, We are leaving for greener pastures, Time to face reality.

  26. BobA says:

    Ex-Californian:

    When you’ve suckled on a government teat for as long as those people have, your view of reality gets distorted to the point where your idea of normal is a womb to the tomb government teat to wet nurse you through the adversities of life.

    God forbid should you be asked to pry your lips from the government teat and do something useful and constructive with your life. It’s time to sour the milk.

  27. SeeSaw says:

    Oh, of course those public services you receive are made possible for you by people just laying on the couch.

    You are all disgusting! Look around–all we see on the news, every day are gangs committing armed robberies while shooting the minimum-wage earning clerks, and mentally challenged people killing their whole families and random individuals who did them no harm. Of course, those committing this everyday carnage are all public employees!

    You idiots need to get in your cars and take off. You do no good here for the good citizens of CA.

  28. The Africanized Swarm of Ted Steele System says:

    My God BobA– you remain a broken record. It’s dull. Why don’t you run for something and lower the salaries of the workers you always rag on? Isn’t that what a grown up patriot would do?

    In the mean time– please show some gratitude when you piggishly gobble up more than your share of gov services!

    Teddy

  29. BobA says:

    SeeSaw:

    You’re harping on the wrong things. Public employees are not the problem: it’s the politicians. Most public employees serve a useful and vital function. No one (at least I don’t) begrudge them their salaries.

    It’s the overpaid public managers and administrators who are the problem. They spend & spend and run up the deficit with almost nothing to show in return but bigger salaries for themselves.

    For example: ever notice that on almost all public works projects, a significant percentage of the allocated funding is spent on advertizing campaigns and consultants who do study after study to no end before even on shovel hits the ground? Once the project is eventually completed, they pat themselves on the back and give themselves pay raises. That is just one of the many examples of how the government wastes our money.

    I for one do not make the the mistake of lumping all public employees together. That’s is inherently unfair, short-sighted and judging the whole without looking at the parts that make up the whole. It’s akin to calling your car a piece of crap just because it has a flat tire and a tail light that is out.

    Public employees are caught between a rock and a hard place. That being the politicians who spend freely with “other people’s money” and John & Jane Q public who has to ante up more & more of the meager income to finance the profligate spending habits of the politicians.

    That my friend, can not go on forever. There are real & practical limits to how much people can afford to pay for big government. Instead of asking us to leave, maybe you should examine the reasons why we’re ready to leave California in the first place.

    You can’t stand on the bow of a sinking ship and call all those who are jumping overboard and abandoning ship cowards without asking yourself why are they doing it.

  30. Ex-Californian says:

    BobA Says:”You can’t stand on the bow of a sinking ship and call all those who are jumping overboard and abandoning ship cowards without asking yourself why are they doing it.” BINGO !!!! Nicely put BobA !!!!

  31. jimmydeeoc says:

    BobA:

    “Most public employees serve a (SOMEWHAT) useful and (OCCASIONALLY) vital function.”

    Though I might point out we would get far more bang for our buck if many of these “vital functions” were performed by the private sector.

    “No one (at least I don’t) begrudge them their salaries.”

    Salaries, no. Obscene pensions, yes.

  32. The Africanized Swarm of Ted Steele System says:

    I love watching choir preaching blog posting time wasters!

  33. BobA says:

    jimmydeeoc:

    Pensions? Yes. Public employees pensions are obscene. They should pay into a 401k plan or some such similar retirement plan. If the government wants to match them dollar for dollar fro every dollar they contribute towards their own retirement, that’s fine by me.

    Nothing is free in life and that should apply to government employee pensions also.

  34. jimmydeeoc says:

    It’s not choir preaching, Teddy.

    It’s simply Mr Math, and he’s giving a lecture.

    Pay close attention. He’s known to give pop quizzes. Be prepared.

  35. BobA says:

    jimmydeeoc:

    Teddy still has to use his toes to count past ten. He’d much rather crap in his hands and throw it at the spectators that visit the zoo where he’s caged. Much like what he does here in this forum. Don’t demean yourself by responding to him.

  36. SeeSaw says:

    Well Bob, the managers, administrators, and elected officials are not in unions! You can’t blame both groups at the same time. I love CA and will fight tooth and nail to save it–not whine, and whine, and whine about its condition, like the rest of you. I am a law abiding citizen and I do not have a lavish pension–one that I earned. I am doing my part. Why don’t you and your cohorts buckle down and do everthing the oposite of bad-mouthing my state! Have some respect for the CEO of the state–the Governor.

  37. The Africanized Swarm of Ted Steele System says:

    Jimmy— Is Mr. Math giving a lecture? Or are Mr and Mrs Blog Poster just spouting the talking points? I wonder sometimes. Everyone agrees we need the pension reform we just got. But 401k’s are no way for workers to live out their golden years……..

    BobA— Do you want me to respond to you? Would that feel good? here ya go—- mmmmmmmmmm

  38. BobA says:

    SeeSaw:

    I would gladly oblige you with a counter argument if your comment was indeed factual about what I said in my last comment. However, you infer things I never said. Therefore I can not argue against an assumption that is not based in facts.

    By the way, I respect the office of governor but I don’t respect the current occupier of that office. And for the record: Hitler, Stalin, Mao, Saddam Hussein and others all hard their supporters and cheerleaders too.

    You’ll have to pardon me if I don’t cheer or support the political party that is driving this state into the ground and until the law changes, it is not yet a crime to voice an opinion in defiance of the edicts of the democrat party.

  39. BobA says:

    No Ted. But even a broken clock is right twice a day and sometimes you are right. It’s there rest of the time that you are wrong that exasperates the rest of us in this forum.

    But you’re a good man who means well and you’re funny so don’t go anywhere. Just because I lampoon you a lot doesn’t mean I don’t like you.

  40. Rex the Wonder Dog! says:

    When you’ve suckled on a government teat for as long as those people have, your view of reality gets distorted to the point where your idea of normal is a womb to the tomb government teat to wet nurse you through the adversities of life.

    You just described seessaw…….and teddy…and teddy’s sock puppets ;)

  41. Rex the Wonder Dog! says:

    The Africanized Swarm of Ted Steele System says:
    My God BobA– you remain a broken record. It’s dull.

    Oh the irony!!!!!!!!!!!!!!!!! Pot, meet kettle :)

  42. Rex the Wonder Dog! says:

    jimmydeeoc says:
    It’s not choir preaching, Teddy.
    It’s simply Mr Math, and he’s giving a lecture.
    Pay close attention. He’s known to give pop quizzes. Be prepared.

    You just asked the impossible, Teddy has the brain power of an untrainec circus shimp.

    BobA says:
    Teddy still has to use his toes to count past ten. He’d much rather crap in his hands and throw it at the spectators that visit the zoo where he’s caged. Much like what he does here in this forum.

    So true!!!!

    The Moron Swarm of Ted Steele amd the Sock Puppets says:
    Jimmy— Is Mr. Math giving a lecture? Or are Mr and Mrs Blog Poster just spouting the talking points? I wonder sometimes. Everyone agrees we need the pension reform we just got. But 401k’s are no way for workers to live out their golden years

    Errrr…right Teddy steals, so you GED edcuated gov clowns can “retire” at age 50 with $5-$10 million pensions…..great philosophy there lil buddy !!!!!!

    But you’re a good man who means well and you’re funny so don’t go anywhere. Just because I lampoon you a lot doesn’t mean I don’t like you.
    I agree, I like yoi Teddy, don’t lerave, even though you caused OCObserver to get booted.

  43. Everybody's doing it says:

    “What a bunch of crybabies! If you hate California so much, be our guests–just move.”

    We’re trying, we’re trying. It’s a precarious move, need a little more appreciation of our property, hopefully it will happen before the communist come and make us servants on our own land.

  44. The Africanized Swarm of Ted Steele System says:

    BobA said….

    “But you’re a good man who means well and you’re funny so don’t go anywhere. Just because I lampoon you a lot doesn’t mean I don’t like you.”

    Ahh gee BobA—-niiiiiiiiiiiiiice….mmmmmmm….I like you too……

  45. BobA says:

    Everybody’s doing it:

    SeeSaw’s heart is in the right place and means well and I applaud her. But, I don’t think she gets people’s frustration with the way things are going in California. This state’s problems may not have been fully visited upon her yet but it will in time.

    Many have seen what is happening in all it’s stark naked ugliness and have left already or have contingency plans to leave before the state gets hopelessly desperate. Keep in mind that a government that is big enough to give you everything you want is also big enough to take everything you have.

    The SS California is sinking and the captain and crew are trying to right the ship by punching holes in the ship’s hull below the waterline. Many of us prefer the comfort of a far off life boat as we watch the ship slip beneath the surface.

  46. Rex the Wonder Dog! says:

    The Africanized Swarm of Ted Steele System says:

    Ahh gee BobA—-niiiiiiiiiiiiiice….mmmmmmm….I like you too……
    ==
    I thought we were friends, depsite all the itmes you made me cry from your abuse…… ;) no love for the rotti????

    Oh well, seesaw stilll shows the love for a loyal rotti :)

  47. BobA says:

    Rex:

    Teddy’s a little unhinged and weird but otherwise he’s cool. But SeeSaw on the other hand, comes in with guns blazing and ready to smack down anyone who dares to get a little testy with her!

  48. baldrad says:

    Goin’ to Texas—–big, beautiful, and still free by comparison. Palm trees too–and plenty of beautiful coastline. Great place to move your business. Moved the business out of Kalifornia, and I’ve never looked back (still get love letters from Hitler’s offspring at the Calif. Board of Equalization, tho’—LOL).

    “TEXAS”—Chris Rea (YouTube)……….great song……..

  49. BobA says:

    baldrad:

    Congratulations on escaping the commie prison work camp known as California. I hope and pray that you and other refugees from California start an underground railroad to liberate the rest of us who wish to flee the People’s Republic of California.

    Ignore the KoolAid drinkers in this forum who criticize you for fleeing their commie paradise. Misery loves company –and your tax dollars!!

  50. The Ted Steele System says:

    BobA— Seesaw is ok—- she knows her stuff, the facts and is very reasonable——I delight in her frank revelations of pure light. Often, while reading her posts, I hear a gentle breeze rustling the leaves of the very tall trees.

  51. baldrad says:

    BobA–we are getting that underground railroad together as we speak…..we have complete plans for diverting those endless platoons of Cap’n KlinkS…..not that difficult–they get up late and go to bed early, while the PRODUCERS like you are plotting your exit 24/7………

    Don’t forget–California is the state that thinks it can tax an airline just for flying OVER it (they lost that one in court). Cali also thinks it can tax us ex-pats just for THINKING about the hell we left. The only time we think about it, tho’, is when they try to correspond, with one of their made-up extortion letters.

    Somehow the dummies at the clerk level don’t realize they’re wasting their time–they think we want to come back or something, LOL. Their fat-ass bosses at the top just want to make “work” for ‘em, I guess.

    The buildings in downtown Sac, with a redundancy of pathetic idiots slopping at the public trough, should be turned into low rent housing–THAT would actually carry out the time-proven real estate axiom of “highest and best use”, LMFAO.

    Carry on in your valient resistance, but liberate yourselves in due course….

  52. BobA says:

    baldrad:

    Financial wise, I’m immune to most of the onerous taxes here in the People’s Republic of “Taifornia” so you might say that I’m a freedom fighter fighting to help replace the ‘T’ in Taxifornia with a ‘C’. I do have an exit plan but it hasn’t come to that yet.

    There are signs everywhere that financial implosion is inevitable in the once golden state because the recent round of tax increase has had the opposite effect as we all knew it would.

    Unfortunately, that will not deter the state’s leaders who see more taxes as the only solution to their spending addiction. It is not mere speculation to suggest that there will be another round of tax increase proposals in the coming months.

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