Governor’s Budget Plan Highlights California’s Economic Hurt

Signs of California’s tattered economy are sprinkled throughout Gov. Schwarzenegger’s proposed budget for the fiscal year that begins July 1.

The most obvious is the steep decline in tax revenues, coupled with years of over-spending, that led to budget shortfalls totaling $60 billion over the past two years and an additional $20 billion in the budget the GOP governor proposed January 8.

There are more subtle indicators.

The state’s share of funding for public schools was increased during the current fiscal year by $234 million to offset lower-than-expected local property tax collections. For the fiscal year that begins July 1, the amount the state will shoulder is estimated at $1.5 billion.

“Property taxes received by school districts and reflected in the Department of Education and Community Colleges budgets are significantly below projections used for the (current) fiscal year,” the summary of the governor’s proposed budget dryly says.

Assessed value is estimated to decrease 2.9 percent from the last to the current fiscal year and another 2.2 percent in the fiscal year beginning July 1.

In discussing revenues, the spending plan notes that “based on preliminary data, it is estimated that taxable sales will decrease…by 12.8 percent for the fiscal year that ended June 30, 2009. During the current fiscal year another 7.5 percent decrease is predicted. A modest increase of 6.3 percent is expected for the next budget year, however.

Sales taxes, which represent about 29 percent of the state’s general fund, are estimated to be $26 billion during the current fiscal year but fall to $25.8 billion next year.

Capital gains, a major contributor to the state’s personal income tax collections, reported by taxpayers increased 10.5 percent in 2007. Then plunged 61.5 percent in 2008. A further decline of 15 percent is expected this year but the governor predicts a 40 percent increase in gains cashed out in 2010.

A real sign of just how bad the economy is – taxes collected on alcoholic beverages, particularly distilled spirits, are heading up.

Last fiscal year they were $324 million. This year, $332 million. And in the next fiscal year, the estimate is $354 million, $185 million from the hard stuff and $169 million from beer and wine.

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