California Controller John Chiang released this week his update on state finances after the April tax collection. In a word, they numbers are ugly. In contrast to 2011 where revenues were about $600 million below expected, the actual revenues are substantially below those in the budget that Gov. Jerry Brown and the Democrat-dominated Legislature approved last year.
Total revenues to date were $3.5 billion short of the budget estimates with the bulk being a $2.7 billion shortfall in personal income tax. Given California’s abnormal reliance on high-income earners in this category, it doesn’t bode well for budget time which will come in June.
The governor and his finance department will release their May revision to the January budget next week. It likely will not be pretty.
Particularly at risk in the governor’s giant dice roll is kindergarten through community college funding. His January budget held that funding largely intact, based upon the passage of his temporary increase in the sales tax (one-quarter percent) and income tax on higher earners. Voters will not decide that until the November ballot, assuming it qualifies which is likely.
With the Pleasanton school board due to send formal layoff notices to teachers next week, you’ll note the stunning disconnect between the state that provides the revenue and the elected locals that must make budget decisions six months before they know precisely what they have to deal with.
PLEASE BE SURE you’ve swallowed your coffee before continuing to read.
Steven Malanga reported in the Saturday, April 28 edition of the Wall Street Journal about the retirement train wreck that is facing states for public employees.
He cited California, which—in many cases—faces billions in unfunded liabilities, both for pensions and for retiree health care that too many entities have simply been paying from operating funds.
But, if you really want to get sick, consider the president’s home state of Illinois. In 2010, under Democrat Governor Pat Quinn, the Legislature passed a law that required cities to raise their pension contributions using property tax revenues, but forbid any additional contributions from public employees.
One experienced public finance official has estimated that a homeowner currently paying $3,000 in property taxes could see that bill soar to $4,400 simply to cover the pension costs without any concurrent sacrifice/payment from the public employees.
Talk about being in the pocket of public employee unions. Sadly, it’s not far removed from much of Sacramento and those with a “D” after their name.