Economic Watch
5/8/2012
Standard & Poor’s (S&P), the world’s foremost provider of credit ratings, recently expressed doubt about California’s future debt rating because of two April events. First, the announcement by the State Controller that California’s personal income tax collections came in about $2 billion below budget estimate. According to an S&P analysis, “April receipts are not only failing to solve part of the state’s projected problem [as the Legislature suggested], they are deepening the estimated budget gap.” Additionally, S&P is concerned about the California Superior Court’s decision in Steinberg, Perez v. Chiang which ruled that the State Controller may not withhold pay from legislators so long as they pass an on time budget they deem to be balanced, whether true or not. “This decision, in our view, may open the door for the Legislature to potentially rely on budget maneuvers that may be politically expedient but fiscally unreliable when devising deficit solutions…We believe that the Steinberg decision, coupled with what we see as reluctance among legislators to make additional difficult spending cuts, increases the risk of a less structurally balanced budget for fiscal 2013,” stated S&P in their review of California’s financial situation.
To read Standard & Poor’s review, click here.
5/3/2012
Last week, the nonpartisan Legislative Analyst’s Office (LAO) estimated that the total personal income tax collections for April will be over $2 billion below Governor Jerry Brown’s $9.4 billion projections. The Governor’s Office estimated that the Franchise Tax Board would collect some $6.35 billion in April, but as of April 25 the FTB had collected approximately $4 billion, according to the LAO. Income tax revenues have been consistently falling behind the Governor’s projections each month, the current year deficit has increased to $3 billion. In addition, the report found that corporate tax revenues are also trailing Brown’s forecast by about $450 million for the fiscal year. In total, the LAO estimates that the state is about $3.5 billion behind projections for this fiscal year, and potentially a “few billion dollars” further behind in the upcoming 2012-13 fiscal year. Unless the state’s sales tax revenues skyrocket, the Governor’s proposed budget will become a greater fiscal disaster, which will force politicians to once again attempt to raise California taxes.
To read the LAO report, click here.
4/24/2012
Although the national unemployment rate decreased to 8.2 percent in March, California’s unemployment is again on the rise. New data from the California Employment Development Department (EDD) released on April 20th reveals that California’s unemployment rate increased to 11% in the month of March. This updated unemployment rate is derived from a federal survey of 5,500 California households. Although seven labor categories have added jobs, four categories (construction; manufacturing; information; and other services) reported job declines over the month, totaling 19,600 jobs lost. All told, the number of people unemployed in California in March was 2,031,000, which means over 19,000 more Californians are out of a job.
To read EDD’s data, click here.
To compare California’s unemployment rate with other states, click here.
4/21/2012
According to the Tax Foundation, today, April 20, 2012, is California’s Tax Freedom. Tax Freedom Day is a calculation that dates back to 1948, when a Florida businessman figured out how long Americans must work to pay their taxes, if all of their wages were to first go to paying taxes. The total tax burden borne by residents of different states varies considerably, not only due to differing state tax policies, but also because of the steep progressivity of the federal tax system. This means higher-income states celebrate Tax Freedom Day later: Connecticut (May 5), New Jersey (May 1), and New York (May 1) residents face a significantly higher total federal tax burden than lower-income states. This year, California’s Tax Freedom day is four days later than the national Tax Freedom Day of April 16th-three days later than in 2010. In comparison to other states, California’s tax burden ranks 5th among the 50 states and Washington D.C.
To read the Tax Foundation’s Data Report, Click Here.
4/17/2012
California’s labor market will not return to a healthy state until sometime between 2018 and 2023, according to a new report from the University of California, Berkeley’s Center on Wage and Employment Dynamics. The report, A Depressive State: Assessing California’s Labor Market Four Years after the Onset of the Great Recession shows there remains a huge jobs deficit compared with pre-recession levels. California is down one million jobs-a decline of 6.6%-leaving the number of jobs in the state the same today as it had in 1999. The report also projects that unemployment in California will remain higher than 10 percent through 2013, wages for most workers were the same in 2011 as they were in 2000 and typical household incomes in California in 2010 were the same as they were in 1998, adjusting for inflation. California’s current path is not sustainable and it will keep the majority of Californians in this economic rut for the foreseeable future.
To read the report, click here
