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Thread: California has projected budget surplus

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    Default California has projected budget surplus

    California governor Jerry Brown's budget plan projects $98.5 billion in revenues and transfers and plans spending of $97.7 billion, according to the proposal published on the state Department of Finance website.

    That would leave a surplus of $851 million, in addition to a projected $785 million surplus for the current fiscal year, which ends in June, allowing the state to put $1 billion toward a rainy day fund.

    http://news.yahoo.com/governor-brown...141509838.html

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    Default Re: California has projected budget surplus

    Let's wait and see what actually happens to Gov. Browns PROJECTED tax revenues versus actual tax revenues collected, shall we ? As is typical, those that ignore the Austrian school principles will project that businesses and people will simply accept higher tax rates and keep earning and spending money as usual without 'reactions'. There are too many non-mainstream media reports of businesses and high earning residents LEAVING California to think that the Gov's projections will turn out to be anywhere near accurate.

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    Default Re: California has projected budget surplus

    Quote Originally Posted by Melonie View Post
    Let's wait and see what actually happens to Gov. Browns PROJECTED tax revenues versus actual tax revenues collected, shall we ? As is typical, those that ignore the Austrian school principles will project that businesses and people will simply accept higher tax rates and keep earning and spending money as usual without 'reactions'. There are too many non-mainstream media reports of businesses and high earning residents LEAVING California to think that the Gov's projections will turn out to be anywhere near accurate.
    Ha Ha Austrian economics, text books used by Luddites who don't have a clue about money, debt and inflation. The model that has gotten consistently wrong about everything will suddenly predict its first human behavior. I guess the newly minted millionaires from Facebook would want to move to Texas and build a startup there to save a couple of bucks while throwing away opportunities to make the next million.

    Make no mistake, by design there will be five nut cases who will make such irrational decisions purely based on ideology. But, when there ass is on fire (see John McAfee) they'll come running back to places where you know they'll actually get things like freedom, opportunities and awesome weather for a couple of bucks.

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    Default Re: California has projected budget surplus

    oops, speak of the devil !!! It appears that Moody's rating service is going to force California to do some 'minor recalculations' regarding their state / local gov't worker pension contributions ... only an extra 1.4 BILLION dollars worth per year !!!!


    (snip)"The California Public Policy Center (“CPPC”) just released a report analyzing the impact of the Moody’s new policy on six Northern California counties (Alameda, Contra Costa, Marin, Mendocino, San Mateo, and Sonoma). Their conclusion is that when the new rules are applied, the annual cost of pensions will increase from the equivalent of about 50% to 100% of these counties’ net property tax income. With the state running new deficits after already raising state income taxes to the highest level in the nation, Californian homeowners should be prepared for their politicians to try to overturn Proposition 13 that for 35 years has limited California property tax rate increases.

    Given that California has only 11% of the U.S. population, but issues 20% of all of the nationwide municipal bond volume, Moody’s warned they would be re-assessing the financial condition of all California counties and cities "to reflect the new fiscal realities and the governmental practices". Moody’s that a greater share of municipal bankruptcies are expected to come from California. California State Treasurer’s office tried to reassure the public by calling the Moody’s warning "a little hyperbolic" and stating that "No city's going to blithely skip into bankruptcy court to avoid its obligations." But today over 50 of 482 California cities have declared a “Financial Crisis” and have considered filing for Chapter 9 municipal bankruptcy.

    CPPC’s analysis used data from the most recent county Actuarial Valuations to produce four core restatements of solvency – total pension debt, unfunded pension debt, government normal yearly contributions, and amortization payments of unfunded pension. CPPC determined that for the four adjustments Moody’s is expected to make – two would have very significant impact on county solvency:

    ■First, pension debt would be adjusted using a high-grade long term corporate bond rate (5.5% for 2010-2011) instead of a Pension Fund’s target rate of return (7.75% more or less)

    ■Second, government payments to Pension Funds would be adjusted to reflect the lower discount rate, the need to fully fund pensions by the time employees retire, and a 17 year level-dollar amortization of unfunded pensions.

    In their Actuarial Valuations, the counties claim they have conservatively banked 78% of their pension liabilities in cash and securities, leaving only $4 billion in under-funding. But with the Moody’s adjustments will increase the unfunded pension obligations by $6 billion, balloon the unfunded liability to $10.2 billion and the cash and securities funding down to a speculative level of 58%.

    At a 78% funding level, the six counties are only required to contribute 29% of their payroll, or about $640 million, to fund their pension plans each year. But under the new Moody’s formula that will drive down their funding level to 58%, the counties required annual pension cost will sky-rocket to 63% of payroll, or $1.4 billion per year!

    California has run huge budget deficits for the last decade. Recently voters passed Proposition 30 as a $6 billion state income tax increase on top earners in hopes of rescuing schools by balancing the state budget. But according to the California State Controller’s just released December financial statement, state spending is $900 million over budget and state tax revenue is at least $360 million under budget.

    For the last 35 years, California politicians have been forbidden from jacking up property taxes by the 1978 voter approved Proposition 13 Initiative. The initiative has been so popular with homeowners that it has been referred to as the third rail of California politics. But as the CPPC study demonstrates, the annual cost of pensions will soon increase from the equivalent of about 50% to 100% of these counties’ net property tax income. With the state already running new deficits on top of the highest income taxes in the nation, it is my belief that California politicians will soon try to over-turn “Prop 13.”

    CHRISS STREET (snip) from


    Well, so much for California's supposed state budget surplus ! If the state wants to prevent dozens of California counties and cities from filing bankruptcy due to the greatly increased costs of pension funding, they will have no choice but to 'spend' a much greater portion of state income tax and sales tax revenues on 'kickbacks' to those counties and cities.

    I would also point out that actual California tax revenues, per the California Controller's just released December statement, were $360 million UNDER the 'rose colored' budget projection you originally posted. At the same time, California's state spending levels were $900 million OVER the same 'rose colored' budget projection. That 1.2 BILLION dollar 'gap' between propaganda and reality is enough to erase any possible California budget surplus all by itself, without factoring in the need for increased state spending to help counties and cities avoid bankruptcy filings.
    Last edited by Melonie; 01-13-2013 at 07:37 AM.

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    Default Re: California has projected budget surplus

    As I suggested in another thread, it would be helpful imho if we all observed a truce about discussing Austrian vs. Keynesian economics and tried to focus on the practical over the theoretical. Melonie and I believe in free market cpaitalism but I for one do not expect to convert any of the statists , Keynesians and socialists. Only real world experience with the failure of those philosophies will promote conversions lol.
    Just kidding.

    Everyone is fully capable of discussing Jerry Brown's allergy to simple arithmetic while leaving economic philosophy OUT of the discussion.

    Trying to keep this simple : Would the "wishful thinkers " please show us one time, just one, when Governor Dum Dum's revenue projections came close to actual collections ?
    To be fair, Ahhhnoldt wasn't much better at doing basic budget math.
    To be even more fair, Caleeforniah was NOT Number 1 in 2012 in people leaving the state. That distinction goes to Chris Christie's New Jersey.

    I'm sorry but I have to shake my head at how , just in my lifetime, two pro-business low tax states ( Cal. and N.J. ) went to the top 3 in taxing and spending.

    Last but not least, what did the Democrats in the Legislature say about this projected surplus ? They can't wait to spend it. Not a thought to retiring some of California's highest in the country debt load.
    Last edited by Eric Stoner; 02-04-2013 at 08:01 AM.

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    Default Re: California has projected budget surplus

    it would appear that California will need to do some serious projected revenue recalculations ... from


    (snip)For millionaire athletes, states with highest tax rates may not make the cut

    Is Lefty's stance on California's tax hikes a sign of things to come for millionaire athletes?

    The Golden State's new 13.3 percent income tax on top earners prompted golfer Phil Mickelson to say earlier this month he was considering a move, and according to the accountants who advise millionaire athletes, he was just saying what a lot of jocks were already thinking. Federal taxes on the top income bracket just rose by roughly 5 percent, and, while there's nothing rich athletes can do about that, they are paying attention to which states dip into their game checks — and how much they take.

    “They’re going to have an exodus of people,” said John Karaffa, president of ProSport CPA, a Virginia-based firm that represents nearly 300 professional athletes, primarily in basketball and football. “I think they’ll see some [leave California] for sure. They were already a very high tax state and it’s getting to a point where folks have to make a business decision as well as a lifestyle decision.”

    The taxes of professional athletes became incredibly complicated in the early 1990s, when aggressive state and local tax collectors began targeting them to pay non-resident income taxes. Technically, all employees who earn money for work done outside their home states have to pay non-resident taxes, but enforcement has focused on millionaire athletes with publicized work schedules to the extent is is commonly called the "jock tax." Although ballplayers can't get out of the state and local taxes they pay while on the road, where they play their home games can make a huge difference. California takes 13.3 percent on income above $1 million, but states like Florida, Nevada and Texas are among seven that take nothing.

    It adds up, says Karaffa. As tax season enters full bloom, he expects to see an uptick in the number of clients who will consider leaving California. Under a hypothetical calculation, the tax difference for a single professional athlete making roughly $10 million a year between being a resident of California versus Florida is around $800,000 annually."(snip)


    Note that the exodus of just ONE high earning athlete ... or actor ... or investor etc. will cost the state of California $800,000 per year in lost tax revenues !!! And it's extremely logical to project that the exodus of just ONE high earning athlete etc. will also cost the California economy at least that much in terms of money not spent on the purchase of goods and services from California businesses ... which in turn will further reduce California tax revenues based on falling earnings at California car dealerships, marinas, luxury stores etc.

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    Default Re: California has projected budget surplus

    The other half of the Cali story is regulations. Cali makes it very difficult, perhaps impossible, to build new heavy industry in the state. Anything that has any environmental risk at all is unlikely to get the necessary permits. That's why Cali hasn't seen a new oil refinery in years even though fuel consumption goes up and Cali has great port facilities as well as it's own oil supplies. What the existing refiners have to do is modernize within their existing permitted facilities. However, there is a limit to what can be done and Cali is there. Thus, they end up importing refined petroleum products from the rest of the nation and indeed Mexico when they have plenty of unemployed workers who could build and operate new refineries.

    Z

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    Default Re: California has projected budget surplus

    update with actual financial facts ... from


    (snip)"California state tax collection beat Governor Brown’s 2013-14 Budget by $4.3 billion, or 39.1%, last month over. The out-performance was due to two expected one-time events that took place by December: $1 billion in delayed sales tax deposits and $3.3 billion of taxes on capital gains, dividends and bonuses collected in January for a prior period.

    But in what should be very disturbing to giddy state politicians and lobbyists who are cranking up for a new spending spree, January sales taxes plunged by $582.7 million, or 27%
    . It seems that “Taxafornia” finally raised taxes so high that affluent residents are moving their investment and spending elsewhere.

    Many financial analysts declared the California debt crisis over two weeks ago, after the Legislative Analyst’s Office said the state was on track to collect $5 billion more in tax revenue in January than estimated in the Governor’s budget. The revenue was expected to come from high-income earners cashing-out of investments early to beat the rise from 15% to 20% in federal capital gains tax rates as part of the Congressional fiscal cliff deal. But according Budget Director, H.D. Palmer: “As we always caution, you can’t assume or build a long-term trend -- good or bad -- off of one month’s worth of data, because any number of factors can swing one month either way.”

    California clearly enjoyed a windfall in January, with affluent residents paying $3.3 billion more in retroactive estimated tax payments under November’s voter approved Proposition 30 tax increase initiative and booking of capital gains, business income, and other income not subject to withholding prior to the January 1st federal tax increase. But collections fell far short of the anticipated $5 billion bonanza and sales taxes tanked."(snip)

    (snip)Governor Brown, who led the pro-Prop 30 campaign, pooh-poohed concerns of competition from low cost states, like Texas. California has highest income tax at 13.3%, the highest sales tax at 7.5%, and the second highest gasoline tax at $.67 per gallon. Brown promised that, if voters approved new taxes and if he cut spending, the 2013-14 Budget would achieve the first surplus in a decade. At the news conference celebrating the passage Prop 30, Brown stated:


    “I think the real lesson here is that voters have trusted the elected representatives, maybe even trusted me to some extent, and now we've got to meet that trust. But we've got to make sure over the next few years that we pay our bills, we invest in the right programs, but we don't go on any spending binges like we did in the days when we had the dot-com boom."

    When asked how he would maintain discipline, Brown cited a mantra he performed every night before bed while studying at a Zen monastery in Japan in the 1980s:


    "Desires are endless, I vow to cut them down."

    Buddhism may provide Brown an inner-peace, but the 27% plunge in January’s sales tax revenue seems to indicate that California’s egregious taxation has driven many affluent residents to seek their inner peace by moving to states with lower tax rates.(snip)

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