The State’s revenues continued to deteriorate in April. Total General Fund revenues were down $1.89 billion (-16%) from the latest estimates found in the 2009-10 Budget Act.
Personal income taxes were $1.06 billion below the estimate (-12.6%), corporate taxes were below the estimate by $831 million (-35.6%) and sales taxes lagged the estimate by $108 million (-19.9%).
Some of April’s sales tax receipts were pushed into early May, but declining taxable transactions still drove sales tax receipts well below the Budget Act projection. While California’s sales tax rate went up April 1, revenues from the new rate will not be seen until May.Compared to April 2008, General Fund revenue in April 2009 was down $6.3 billion (-39%). The total for the three largest taxes was below 2008 levels by $6.3 billion (-40.3%). Sales taxes were $452 million lower (-50.9%) than last April, and personal income taxes were down $5.7 billion (-43.6%). Corporate taxes were $142 million below (-8.6%) April of 2008
How can sales tax revenue cut in half? Granted, car sales are down by almost that much. But cars are an extreme case. Could be due to the fact that not all goods are taxed. People are still paying for untaxed food. But they aren't buying the taxed goods and services that are more optional.
For example, during the dot-com bubble, government spending grew 28% over two years. That growth was ultimately unsustainable, and we didn't have the foresight to save for the recession that followed. During recessions, revenues drop just as the needs for services grow.
How is California's state government managing to function? Simple enough: federal aid has become the biggest source of revenue for the states.
The sales tax had been the No. 1 source of state and local revenue since the mid-1970s, according to the Bureau of Economic Analysis. Before that, property taxes were the primary source. That changed in the first three months of 2009.
Federal grants — early stimulus money plus conventional federal aid — soared 15% in the first quarter to a seasonally adjusted annual rate of $437 billion, eclipsing sales taxes, which fell 2%.
Wages are declining for those who still have jobs. So that cuts spending and tax revenue as well.
If, since 1990, state spending increases had been held to the inflation rate plus population growth, the state would have a $15 billion surplus instead of a $42 billion budget deficit, which is larger than the budgets of all but 10 states. Since 1990, the number of state employees has increased by more than a third. In Schwarzenegger's less than six years as governor, per capita government spending, adjusted for inflation, has increased nearly 20 percent.
The needs and demands of California's expanding poor NAM (Non-Asian Minorities) population explain part of the increased expenditures. But I've yet to come across a good analysis of what has caused California's biggest spending increases.
Defeat of the measures on the May 19 ballot would chop nearly $6 billion in expected revenue from next year's budget, on top of a projected $8 billion deficit left by shrinking tax collections. Proposals by Gov. Arnold Schwarzenegger and others to close that gap are driving a wildfire of criticism across the state.
Those state ballot budget measures are polling very poorly. So another Cal state budget crisis is less than 2 weeks away. I hope the Obama Administration does not offer loan guarantees when the credit market locks the state out of borrowing more money. It is time for the state legislature to act responsibly and do huge restructurings to cut long term costs.
The Obama Administration is interceding in ways that make the situation in California even worse. Barack Obama is trying to block cuts in wages for unionized state workers
Guess what the Obama Administration is doing? It is telling Governor Arnold Schwarzenegger that it will revoke nearly $7 billion in federal stimulus money unless the state restores legislated wage cuts for unionized health-care workers.
Obama's loyalty is toward the public sector and the unions. He also wants an immigration amnesty that will legalize illegals and make them eligible for more social programs. Plus, the amnesty will only accelerate illegal migration and he'll probably push for more legal immigration. Obama makes California's long term problems worse.
|Share |||By Randall Parker at 2009 May 10 02:02 PM Economics Government Costs|