Wednesday, February 11, 2009

Budget, Maybe

We knew it would come to this. The LA Times has the rundown:

A copy of the fiscal blueprint obtained by The Times shows that the deficit would be wiped out with $15 billion in cuts; $14.4 billion in new and increased taxes on sales, vehicles, gasoline and personal income; $12 billion in borrowing against future profits from the lottery; short-term loans; and various accounting maneuvers. Some of the cuts and borrowing could ultimately be offset by billions of dollars in federal aid that California would receive in the economic stimulus package that passed the U.S. Senate this week and is awaiting final approval in Congress.

Even so, the cuts to state services would be deep and long-lasting.

Schools and community colleges, which account for nearly half of all state spending, would lose nearly $8 billion. Part of that would probably be backfilled by Washington, though not necessarily enough for some districts to avoid cutting programs and laying off employees before the school year is over.

State colleges and universities, where tuition has been steadily rising for years, would lose $890 million.

Scheduled cost-of-living increases for welfare recipients would be canceled, and mental health and early childhood education programs created by voter-approved ballot initiatives would be cut by more than $830 million. The state would cut spending on local public transit by $459 million.

Vehicle license fees would nearly double, going from the current rate of 0.65% to 1.15% of the value of a car or truck. The sales tax would increase by 1 cent, raising the rate in Los Angeles County to 9.75%. Gasoline taxes would increase by 12 cents a gallon. And Californians would pay a new surcharge on their personal income taxes, amounting to 2.5% of their total tax bills.
The new taxes amount to about $500 for each man, woman, and child in the state, and will more than cancel out the effects of any tax relief included in the federal stimulus bill. In addition, the Governator has threatened to fire 20,000 state workers if the budget isn't passed by Friday. (This is an idle threat, since the Republicans are likely to oppose new taxes and applaud a reduction in the state workforce.)

The next couple of days should be an interesting!

Edit: He forgot to say the magic word:

8 comments :

Rob Dawg said...

State colleges and universities, where tuition has been steadily rising for years, would lose $890 million.

For the record the California Constitution forbids the charging of tuition to in-state residents.

Just goes to show you how truly twisted the government of this state has become.

Max said...

Just goes to show you how truly twisted the government of this state has become.

Yeah, they should have said "fees have been rising for years."

The regressive nature of these taxes will force further consumer retrenchment and will never collect the projected revenue amounts. "We'll be back" here in six months with a worse crisis.

patient renter said...

And Californians would pay a new surcharge on their personal income taxes, amounting to 2.5% of their total tax bills.

Man, I was holding up all the way until that last one, but that's just a slap in the face. The VLF is pretty brutal too - gotta love paying for the privelege of using my own property.

This "budget" will have a lot of people asking, "why am I here again?"

Marginal Utility said...

It's funny how the government is forcing every productive person from the state. I'm glad I will be out of here within the next year. Pretty soon, the population will be entirely made up of illegals, welfare recipients and state employees.

My personal favorite is the 9+% sales tax. All it's going to do is force purchases online. Even now, I only buy gas and food locally. Everything else is cheaper online already.

Max said...

It's funny how the government is forcing every productive person from the state

The problem is impossible to solve without cutting services. Raise taxes, people stop consuming and/or leave the state.

The US is hitting the wall in almost every way. Raise taxes, people stop consuming. Issue more federal debt, divert capitol from private use. Print money, devalue money.

There's only one answer to these problems, but it's the one nobody wants to hear.

Marginal Utility said...

Well, there is only one way the feds are going to solve it. Print as much money as possible. During all this stimulus talk, all the criticism is about the cost and how we will borrow it from China. There's no mention of how we have increased M2 by 20% in the last 6 months. We're already seeing prices start to rebound in the commodity space. This hasn't hit most radar screens yet, but within the next year, it will take center stage.
Watch out Argentina, here we come.

Marginal Utility said...

very timely video

http://www.ritholtz.com/blog/2009/02/100-bills-as-toilet-tissue/

Anonymous said...

Just when I thought about moving back home I read this kind of garbage. Sales tax at 9%, a 2.5% surcharge on income taxes and an increase in VLF. Umm, no thanks. I think I'll stay in Indiana for a while.