California expects windfall in billions
Published 5:00 am Tuesday, May 17, 2011
SACRAMENTO, Calif. — State revenue has rocketed to a projected $6.6 billion beyond expectations, a windfall that Gov. Jerry Brown wants to use to stabilize education spending and help repair California’s battered finances.
In the revised budget that Brown released Monday, schools would receive about $3 billion that otherwise would have been deferred, helping school districts plan for the upcoming academic year. The proposal also would devote some of the unanticipated money to business tax credits and to delaying some of the tax increases Brown sought earlier this year.
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But although the revenue surge erases much of what had been a $15 billion deficit, Brown says it is not enough to put the state in the black. His budget still relies partly on renewing tax increases that are due to expire this year or have already expired.
“The wall of debt must be brought down,” Brown said, alluding to the borrowing, accounting shifts and other maneuvers that have left California’s books perpetually unbalanced. “I don’t want to continue the games and gimmicks of the past.”
The governor’s continued push for more revenue, however, is complicated by the unexpected receipts. Republican lawmakers are already pointing to the increased revenue as one reason to block his plans.
“With $6.6 billion in new revenues, Republicans are right — we don’t need, and it’s ridiculous to ask voters for, five years of new taxes,” said a statement issued by Republican leaders in the state Senate.
Brown is using some of that revenue to modify his tax plan, which he now hopes to achieve by persuading lawmakers to enact the income, sales and vehicle taxes and then asking for voters’ blessing. The income-tax rate increase he proposed for this year would not be enacted until 2012 under his revised budget. The change would save $2 billion.
“We modified it to give taxpayers a break,” the governor said.
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The extra revenue would also be used to preserve a scaled-down “enterprise zone” program, which gives tax credits to businesses that hire workers from blighted neighborhoods.
Also in the governor’s plan are some reductions. He calls for the elimination of 43 boards and commissions, some of which pay six-figure salaries to their members and have been labeled patronage posts by their critics. And the administration announced last week that it plans to close 70 state parks to save money.
State finance officials attribute the revenue windfall — achieved despite the state’s high unemployment and stagnant wages — to a sharp increase in earnings of the wealthy, whose tax rates are much higher than those of average earners. California’s financial health has long been tied to the fortunes of high earners.
“It looks like the upper-income taxpayers are having a greater gain in their income than previously anticipated,” said Brown’s budget director, Ana Matosantos. Soaring investment profits played a role; capital gains tax collections are on track to rise 60 percent for 2010 and 45 percent for this year, according to the governor’s budget.