Taxable Talk

October is usually a good month for California collections (of taxes). After all, it’s the extension deadline and many residents send more money to Sacramento. This month, though, revenues were $810 million below budget; the deficit year to date is somewhere between $1.5 billion and $1.7 billion.

That deficit is just for four months. Projected for a full year, that’s a nearly $5 billion budget deficit.

As I’ve mentioned in the past, the solution is to make California a more business friendly state so that businesses have a reason to be in the Bronze Golden State. Instead, it’s state employees who get raises while the people are threatened by the Governor with higher taxes.

My budget ideas would have no chance of passing in Sacramento, but are simple and to the point:

1. End redundant state agencies.
2. Cut unnecessary state agencies.
3. End public employee unions.
4. Eliminate defined benefit pensions for state employees.
5. Have a two-year term of the Legislature where the legislature is required to cut 20% of state regulations and or laws.
6. Cut state tax rates by 5%. (I am not stating that California’s top income tax bracket should be reduced from 9.3% to 4.3%; rather, that it should be reduced by 5%: From 9.3% to 8.85%.)

I’ve written about the redundant and unnecessary state agencies in the past. I’ll be posting on the other ideas in the next couple of weeks.

California needs to face reality: The state is broke. Radical change is necessary. It won’t be pretty to many but the state can’t continue to spend money it doesn’t have.

September revenue in California came in at a bit more than $300 million under forecast. That brings the fiscal year to somewhere between $700 and $800 million below forecast. (The California Controller’s office and the California Finance Department use slightly different numbers, so the exact shortfall number varies between the departments.)

No matter, if we take $700 million for three months and project that out for twelve months, you get $2.8 billion under forecast. As the Bloomberg article I linked to notes, automatics spending cuts in California are almost certain to happen.

The problems the Bronze Golden State face can be summed up simply in that the state hasn’t found a regulation that they don’t like and a tax they don’t want. Add in a recession nationally (no matter if the pundits haven’t officially called it a recession, the public is acting as if it is a recession) and neither businesses nor individuals want to spend money or do anything else that increases California collections.

California should, of course, cut regulations and make the state more business friendly. Unfortunately, that has as much chance as it snowing in Irvine today.

A good juxtaposition with this is that Governor Jerry Brown signed the so-called “Dream Act” into law. This law will consider illegal immigrants in California state residents and allow them to enter California state colleges and universities and pay resident rates (which are less than non-resident rates). That will, of course, increase the costs to the universities and increase the state’s deficit.

Just over one week ago, I wrote that California tax collections in August exceeded the budget. It turns out that California Controller John Chiang apparently had $75 million of insurance tax in August that was actually received in September. Thus, California revenues were under projections in August by $65 million.

Well, California is only $596 million under budget. What else could California do to help its cause? (My next post will deal with that.)

California revenues slightly surpassed budgeted amounts in August. Revenues were ahead of plan by $134.9 million. For the 2011-2012 fiscal year, revenues remain $403.8 million below estimates.

The good news, though is just slight. The budget counted on $4 billion of revenues that would magically appear. The chance of that happening is slight. Far more likely will be a revenue shortfall when the year is over.

Still, California politicians and state bureaucrats will take any good news. Now, if they could only use alchemy to make money….