Budget hoax in Sacramento

Fraudulent is the claim that California’s budget for 2013-2014 is balanced.

For the coming fiscal year, Gov. Jerry Brown, a Democrat, is predicting a surplus of $1.2 billion. The Legislative Analyst’s Office, an independent agency, says the surplus is $4.6 billion. Temporarily, the budget is balanced. However, the budget does not contain information about the huge sums of money that California owes.

The State Teacher’s Retirement System (STRS) wants $4.5 billion a year in extra money. STRS wants more funds to compensate for low returns on its investments. If STRS does not generate an annual return of 7.5% on its investment portfolio, California taxpayers have to make up the difference. Some state officials estimate that there are $64 billion in unfunded pension liabilities for teachers’ pensions.

California owes the federal government over $10 billion for unemployment insurance.

Dan Walters, a columnist for the Sacramento Bee, estimates that California’s total unfunded liabilities are between $500 billion and $1 trillion.

California desperately needs tax reform. Currently, the state is heavily dependent on revenue gained from personal income and capital gains taxes. For the last 18 months, various stock markets have shown gains, aiding California’s budget situation. If there were a stock market decline or a recession (or both), the state would have a deficit, not a surplus.

California should structure its tax system so that state income is not so dependent on the performance of stock markets and on high levels of employment.

California can encourage job growth by lowering the state’s sales tax, now the highest in the nation. The state also has the highest top personal income-tax bracket in the nation: 13.3%. California’s corporate income tax is the seventh highest in the nation.

With a huge tax burden, investment in new jobs, factories, and farms will fall short of potential, resulting in jobs going to other states or countries.

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Comments

  1. Barbara Rowlan Wong says

    I am returning to live in California after living in Texas the past eleven years. As a retired California professor I’ve enjoyed no income tax in Texas and will begin paying income tax again when I return. My biggest concern is property tax. I’ve also enjoyed a reduced rate of property tax in Texas. I’m trying to decide if I can really afford to live in California again and need to know if the State has a program for Seniors property tax.
    Regards
    Barbara

    • says

      Good luck. Californians fed up with confiscatory taxes may want to consider Vancouver, WA. No income tax in WA, and no sales tax in Oregon, just across the river in Portland.

  2. Kris Hunt says

    The problems created by lying about the state of the state budget is that workers start asking for (and getting raises) when the real financial problems still exist.

    • Tough Love says

      With a Defined Benefit (DB) Pension structure, every raise exacerbates the existing Pension funding problem.

      Future raises should be contingent on FIRST hard freezing all DB Plans fr ALL Current workers. The DB Plans should be replaced for the FUTURE service of CURRENT workers with a Defined Contribution (401K-style) Plan with a MODEST Taxpayer “match” of 3-5% of base pay, with is what Private Sector workers typically get from their employers.

    • rootvg says

      Kris, that’s absolutely true.

      No one cares. Why? Those people run the state. They own this place. I don’t like it and you don’t like it but that’s how it is.

      Over the past several years there’s been talk of a California fiscal bankruptcy…which will never happen, never be allowed to happen. Too many folks worldwide are exposed in various ways to California bonds. Even if there were a Republican in the White House and Republican majorities in Congress it STILL wouldn’t happen.

      It wouldn’t happen anyway. As long as millions of people keep moving here from all over the world to eat our food, drink our wine, attend our elite universities and indulge whatever fantasies they have, it just won’t happen.

  3. Robert Vadeilar says

    Politicians an administrators in general haven’t a clue about economics. The handling of the current worldwide economic crisis is a prime example. Given the widespread incompetence in economic matters, politicians and administrators should turn to professional economic crisis specialists, as already happens in the US. For example, the Orlando Bisegna Index, specialists in the economic crisis, maybe it could be a solution.

  4. Tough Love says

    Quoting ….”California desperately needs tax reform. ”

    NO. What CA DESPERATELY needs is to either:

    (a) hard freeze the Defined Benefit Plans for ALL CURRENT Public Sector workers (ZERO future growth) and replace then for Future Service with a 401k-style Defined Contribution with a MODEST taxpayer match (of 3-5% of base pay) which is TYPICAL of what Private Sector Taxpayers get from their employers, or if that is not possible AFTER trying all possible ways to do so,

    (b) Keep the DB Plans but MATERIALLY reduce the FUTURE Service pension accrual rate for all CURRENT workers by AT LEAST 50% …. and even after doing so, they would STILL be greater than the pensions afforded granted 90+% of Private Sector Taxpayers.
    ___________________________________
    There are NO “solutions” to the financial tsunami heading CA’s way that do neither of the above.

    • rootvg says

      Of course there’s a solution.

      The Chinese will end up footing the bill, at least in part. So many of them are already here…it’s inevitable. We’re living off of them as it is.

      A lot of this has been baked into the cake for years. Just what do you think is driving the residential property market?

      Answer? Chinese money.