CA Governor Freezes Hiring, Drops Minimum Wage Suit

Jerry Brown, the governor of my home state of California ordered a hiring freeze earlier this week to help with the state government's $26.6 billion financial crisis. He also dropped a lawsuit filed by former governor Arnold Schwarzenegger regarding the governor’s authority to pay workers minimum wage.

From AP News:

Brown announced what he said was a comprehensive hiring freeze that applies to vacant, seasonal, full-time and part-time positions. The administration estimates the freeze, along with other cost-cutting efforts like reducing the number of state-issued cell phones, will save $363 million in the fiscal year that begins July 1, about $200 million of which will be in general fund savings.

"We must do everything possible to save money and make government leaner and more efficient," the Democratic governor said in a statement.

Brown is allowing for certain exemptions that are critical to public safety, revenue collection and other core functions. An example includes positions that respond to disasters or life-threatening situations. He also will continue to make senior-level appointments to form his new administration.

According to the state controller's office, California had about 234,000 employees as of Jan. 31.

Hiring freezes aren't new in California. Schwarzenegger ordered a state hiring freeze and payroll cuts to conserve cash as California struggled with a $42 billion budget deficit back in 2008. He also imposed days off without pay, which became known as "furlough Fridays."

More here

Latest Good Reads

BP, Oil Spills, and Giving Up Tax Breaks

No Progress in California Budget; May Soon Impact Tax Refunds

Mickey Mouse, the Estate Tax and Me

It’s National Coupon Month!

Cash-Strapped Calif. County Approves Hospital Tax

From the WashingtonPost.com:

Voters in a rural California county are in such a dire financial condition that it's seeking a state bailout.

The vote gives Modoc County, in the state's northeastern corner, a much-needed infusion of cash and likely means it will avoid bankruptcy.

Voters approved two measures - one to impose a $195-a-year parcel tax to keep their struggling hospital, and another to create a hospital district to oversee its operations. The tax required two-thirds voter approval.

Local officials said they needed the tax because the hospital's operating costs have overwhelmed county finances. They had hired a bankruptcy attorney and have requested a $12.5 million loan from the state.

State finance officials are considering the request and said they want to be assured the county could repay the loan. The vote results make that more likely.

California Exhausts $100 Million in Film Tax Credits for Year

Less than three months into the new fiscal year, my home state of California has reportedly already exhausted its entire $100 million film and television tax credit budget. They have provided credits to over 30 different projects already.

BusinessWeek.com reports:

Additional subsidies, designed to keep movie jobs in the state, won’t be available until July 2011, Amy Lemisch, executive director of the California Film Commission, said in an interview. About 45 productions are on a waiting list.

California is competing with states including New York, New Mexico and Louisiana that also offer incentives to attract movie and television production. California offered tax breaks for the first time in fiscal 2010. Demand increased with awareness of the program, Lemisch said.

New York offers $420 million a year in incentives, according to the website for the state’s Office for Motion Picture & Television Development.

The California incentives can cover 20 percent to 25 percent of a movie’s production budget, according to the California Film Commission website.

Read more here

Schwarzenegger budget: No new taxes, deeper cuts

Let’s face it, the California budget is a mess. With the unemployment rate so high and the tax revenue low, California faces a 19.1 billion budget deficit, according to the Associated Press. So, Arnold Schwarzenegger is rolling up his sleeves—not to show off his large muscles this time, but to propose some pretty big cuts across most state agencies and eliminating many health and social programs.

The fight is what it has always been: Republican lawmakers vote against raising taxes and Democratic leaders oppose more cuts to social programs, nothing new there. The good news is that Schwarzenegger vows to protect public education. Earlier today, I read he might propose to end state worker furloughs. Some people suggest the Governor cut corporate tax credits instead of low-income assistance programs that will hurt California’s poorest citizens and children. Finding the answer to our budget problem is not easy. There’s no doubt that we need a creative solution to the budget problem, and quickly. Tweet me your thoughts on this at www.twitter.com/ronideutch.

Read more of the article here.

California Jobless Rate Swells to 12.6 Percent

It is no secret that my home state of California has had a rising unemployment rate. Therefore, it should come as no surprise that the number of Californians without jobs increased last month to 12.6%. The state Employment Development Department made the announcement last Friday.

California's jobless rate grew from 12.5 percent in February after holding steady for a month. The rate was 10.6 percent in March 2009.

Howard Roth, Chief Economist for the State Department of Finance, said the unemployment rate appears to be at or near its peak.

It was the first time since mid-2007 that the state saw job gains for three consecutive months. The department previously had reported a job loss in February, but revised those numbers Friday based on new data.

"I think this is for real," Roth said of the economic rebound. "We're seeing it in other statistics as well, personal income, taxable sales and housing prices."

Schwarzenegger Wants More Federal Money for California

In an attempt to close the budget gap during his last year in office, or at least make a worthy attempt, California governor Arnold Schwarzenegger swore earlier today that he would request more money from the Federal government to help the indebted State government. According to Reuters.com, Schwarzenegger went on to say that the State is owed more funding, and that a national healthcare policy would make things drastically worth for his California’s economy.

In a state of the state speech, the governor said creating jobs was the top priority for his last year in office and proposed spending $500 million in worker training funded by part of the budget which is in surplus.

He also laid out ambitious reforms for the final year of his term -- almost certain to include months of budget battle.

Schwarzenegger on Friday will present his plan to close a budget hole that reflects the problems of the boom and bust California economy. The U.S. economic engine faces deteriorating finances as it tries to balance its budget and preserve social safety nets in tough times.

The outgoing Republican governor, stopped by term limits from seeking reelection in November, called for tax reform, protection for higher education spending -- and more money from the federal government.

"We no longer can ignore what is owed to us, or what we are forced to spend on federal mandates," Schwarzenegger told the combined state Assembly and Senate, which must support any budget plan by a two-thirds majority -- a bar that has forced months of acrimonious debate in previous years.

Continue reading at Reuters.com…

California Taxes Fall Short of November Target by $439 Million

My home state of California seems to find itself in one financial mess after another. Reports emerged yesterday that the state’s estimated tax revenue for November was $439 million less then the government had expected. With the fiscal year only have over, the state’s revenue is already short by an astonishing $1 billion. Some financial experts assert the decline is only a preview of what is to come, and that the upcoming year will be even more difficult on California’s budget.

Schwarzenegger is due to release his budget for the coming fiscal year in January. California Legislative Analyst Mac Taylor said in November the state will face a deficit of $14.4 billion beginning in July. That’s in addition to a $6.3 billion gap opening up in the current year as several projections within the budget falter or miss revenue projections.

“In many respects, the steps to close next year’s budget gap will be even more difficult and more challenging than what we’ve just had to do this year,” Department of Finance spokesman H.D. Palmer said yesterday.

California has been among the most affected by the recession as a wave of home foreclosures, rising unemployment and the 2008 stock market tumble dissipated expected tax receipts. From February through July, lawmakers worked to close a record $60 billion deficit with spending cuts, temporary tax increases and other one-time fixes. The unemployment rate rose to 12.5 percent in October from 8 percent the year before and 4.8 percent in July 2006.

Continue reading at Bloomberg.com…

Latest Good Reads

On the Tax Travails of the famous and would-be famous

GOP Introduces Geithner Penalty Waiver Act

Guidance For Taxpayers With Rental Property

A Lesson for California from South Dakota

The Obey War Tax Proposal: Sensible?

Schwarzenegger's Office Blames $79,000 Tax Lien on 'Paperwork'

From MercuryNews.com:

Gov. Arnold Schwarzenegger was having a feel-good Thanksgiving week, passing out turkeys in East Los Angeles and giving thanks for "the blessings of freedom and democracy."

But then came the heartburn.

A gossip Web site Friday morning revealed that the IRS filed a federal tax lien against the governor last spring seeking $79,000 — a discovery Schwarzenegger's office blames on "a minor paperwork tracking discrepancy."

A copy of the tax lien, submitted in Los Angeles County, was first posted by TMZ.com. A search of public records databases shows the lien was filed May 11 and that it lists the governor's home address.

The governor's office at first questioned the authenticity of the document and insisted that Schwarzenegger had paid his taxes "in full and on time." Later, after officials spoke with the IRS, they explained there had been a snafu.

"The issue is completely unrelated to the payment of taxes," Schwarzenegger spokesman Aaron McLear said in a statement. "The matter will be resolved and the lien expunged without any penalty assessed upon the governor."

McLear — who said the governor learned of the matter only Friday — wouldn't comment further on the nature of the mix-up or on what kind of taxes the lien involved.

But an IRS primer on the collection process explains that the agency sends out several warnings to anyone who's been billed for overdue

California Finances Plummet Less than Three Months after Budget Passage

From WSWS.org:

California finance officials have announced that the state has a current budget deficit of $1.1 billion. News of the shortfall comes less than 10 weeks after a balanced budget deal was reached by Republican Governor Arnold Schwarzenegger and the State Legislature.

An October report released by State Controller John Chiang announced that the latest budget deficit was mainly due to a large drop in third quarter income tax collection; revenues were 11 percent lower than initially projected.

The California Department of Finance is also expecting a deficit of $7.4 billion at the start of fiscal year 2010-2011, which begins next July. This could climb to as high as $20 billion by the start of fiscal year 2011-2012.

Loss of tax revenue due to the economic crisis and widespread unemployment and wage reductions is not the only component of the budget deficit. The state’s fiscal health is also largely dependent upon the willingness of outside investors to purchase its municipal bonds and other securities.

As recently as last summer, the state’s credit rating was lowered by all three of the largest agencies, Fitch, Moody’s and Standard & Poor’s, to the lowest in the nation. The state effectively became insolvent at that time and was reduced to handing out IOU’s instead of actual cash payments to vendors, tax refund recipients and others.

Schwarzenegger's Budget Boss to Step Down

From the LA Times:

Gov. Arnold Schwarzenegger's budget director is departing after nearly four years in one of the most influential posts in Sacramento.

Budget czar Mike Genest announced his departure Monday, as a financial crisis continued to grip the state. His Department of Finance has predicted a $7.4-billion deficit for the fiscal year that begins next summer.

The figure is expected to balloon -- perhaps tripling -- as a result of sagging revenues, court rulings blocking recent budget cuts and overly optimistic savings projections by the Legislature and governor.

Genest said in an interview that he would leave by year's end, or sooner if a replacement is found earlier.

"It feels like a good time for me to step back from the day-to-day fray of things," he said.

Red ink has plagued Sacramento during much of Genest's tenure, the second-longest for a budget director since Ronald Reagan was governor.

There have been deep cuts to education, and social services for the needy have been slashed.

Continue reading at LA Times.com…

California to Withhold a Bigger Chunk of Paychecks

From LA Times.com:

Reporting from Los Angeles and Sacramento - Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners -- holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.

Technically, it's not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers' annual tax bills won't change.

Think of it as a forced, interest-free loan: You'll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.

But with rising gas costs, depressed home prices and double-digit unemployment, the state's added reach into residents' regular paycheck isn't sitting well with many.

"The state's suddenly slapping people upside the head," said Mack Reed, 50, of Silver Lake. "It's appalling how brash that is."

California’s Budget Suffers ‘Major Blow’ as Debt Sales Loom

From Bloomberg.com:

California’s revenue collections trailed its forecasts by $1.1 billion during the first three months of the fiscal year, showing new deficits are emerging in the budget Governor Arnold Schwarzenegger signed July 28.

Revenue was 5.3 percent less than was assumed in the $85 billion annual budget during the three months ended Sept. 30. Income tax receipts led the shortfall, as unemployment reached as high as 12.2 percent in August.

“Revenues more than $1 billion under estimates and recent adverse court rulings are dealing a major blow to a budget that is barely 10-weeks old,” Controller John Chiang said in a statement. “While there are encouraging signs that California’s economy is preparing for a comeback, the recession continues to drag state revenues down.”

The latest figures show that California is facing resurgent fiscal strains brought on by the U.S. recession. Since February, Schwarzenegger and lawmakers have cut $32 billion from spending, raised taxes by $12.5 billion and covered $6 billion more with accounting gimmicks and borrowing.

The budget news comes as the most populous U.S. state prepares to sell as much as $15 billion of bonds in the next nine months to refinance debt and fund public-works projects.

California, already the largest borrower in the municipal market, may offer as much as $4 billion of debt during the week of Oct. 26 to refinance the bonds used by Schwarzenegger to cover previous budget deficits. The budget enacted in July would allow the sale of as much as $11 billion more of general obligation bonds through the June 30 end of the fiscal year if financial markets allow, state Treasurer Bill Lockyer said. The exact sale amount hasn’t been decided.

Can Budget-Strapped California Afford More Wildfires?

My struggling home state of California took another hit the past week, as rampant wildfires consumed trees, houses, buildings, etc. As such, the State has been forced to spend millions of dollars on supplies and labor fighting the fires, and assisting evacuees. However, as this article on Time.com pointed out, many are wondering how the budget problem riddled state can afford these expenses?

For more than a week, much of the Angeles National Forest has been an inferno as a ferocious fire, spurred by abnormally high temperatures and single-digit humidity, ripped through steep canyons, dense brush and forest untouched by flames for 60 years. The advancing fire has cut a moonscape swath through the middle of the mountain range that forms a barrier between the greater Los Angeles area and the Mojave Desert.

In addition to the lost lives of two firefighters, 76 destroyed homes and thousands of evacuees, the fire's financial toll has climbed to nearly $45 million. That has been the cost so far of a ground and air assault on the nearly 160,000-acre Station Fire, as it has been called, with more than 4,000 firefighters working the fire lines and an air fleet of 12 helitankers, seven helicopters and 11 airplanes — including a Boeing 747 and a DC-10 — pouring thousands of gallons of fire retardant on blazing hillsides. Only heroic work by firefighters saved the historic Mt. Wilson Observatory located 5,700 feet above Pasadena. (See pictures of this year's wildfires in California.)

But this season's firefighting in California comes just as the state has made vast and deep cuts in nearly all services to balance its books. Can California afford to fight fires given its budget woes? And when does the federal government step in? (What things should you save if your home is threatened by fire?)

Furloughs to Hurt Tax Collection, Officials Say

No matter how hard they try, it seems California legislators cannot get the state’s budget under control. After their choice to put State workers on two furlough days a month, a new study has come out reporting that the missed work will drastically reduce the amount of revenue the state collections in income taxes. The estimated loss over the next fiscal year could be as much as $1 billion. Below I’ve included a story about the new revelation courtesy of SFGate.com.

The setback could further strain California's budget, contributing to shortfalls in the current and next fiscal years.

Officials from Gov. Arnold Schwarzenegger's administration - from the Department of Finance, the Franchise Tax Board and the Board of Equalization - presented the state Senate Budget Committee on Tuesday with the estimated revenue losses due to the furloughs and budget cuts.

At the hearing, Sen. Denise Moreno Ducheny, D-San Diego, told the officials they should rethink the wisdom of the work stoppages at the tax and equalization boards.

"I just don't see where we're getting savings," a visibly frustrated Ducheny, who chairs the Senate Budget Committee, told a panel of administration officials.

Latest Good Reads

Health Care Reform--Is Congress Listening?

The Checks are in The Mail!

CRS: Tax Options for Financing Health Care Reform

Welcome to the Hotel California

Regulation of Executive Compensation Through the Tax Code

Tax Revenues Lowest Since Depression

Sacramento County Facing Budget Deficit of $38 million

The State of California has been dealing with enough of their own budget problems, and now the state’s capitol – and my hometown – is beginning to have their own problems. New reports suggest that the Sacramento County is facing a budget deficit of nearly $38 million, and it could get worse soon. An article from the Sacramento Bee explains how this new revelation could affect all Californians.

Less than a month into the fiscal year and Sacramento County officials are already saying there's a near $38 million budget shortfall that could get even worse.

In addition to the $9.8 million in projected welfare costs the county chose not to fund in June, sales tax, property tax and other revenue projections made just months ago are already proving to be overly optimistic. Then there's the matter of the $10 million the supervisors have said they want to restore to the Sheriff's Department.

All of that means the county -- which laid off 243 employees and eliminated numerous contracts earlier this month in order to pass a "balanced" $2 billion general fund spending plan -- could be making more big cuts in a couple months.

The board will discuss the worsening budget situation at its meeting this afternoon. Originally the supervisors were going to talk about where they would cut $10 million from the budget in order to restore some funding to the Sheriff's Department and save 70 deputy jobs.

County Executive Terry Schutten's office, however, is recommending that "instead of a piecemeal approach...all these issues be dealt (with) at final budget hearings."

The Sheriff's Department has enough money in its budget to cover the cost of those 70 deputies until the fall when the board amends the spending plan it passed last month, according to Schutten's office.

The board will begin discussing the so-called "final budget" at a hearing Sept. 10.

CA Gives Nearly $68M in Hollywood Tax Credits

From Mercury News:

California on Monday announced the first batch of movie and TV productions to qualify for tax credits under a film incentive program that former "Terminator" actor Gov. Arnold Schwarzenegger pushed through the Legislature and signed into law in February.

So far, 25 productions have qualified for $67.5 million in state tax credits, most of which would have relocated elsewhere if the state money hadn't been in place, said California Film Commission Director Amy Lemisch.

"On most of these productions, they were indeed location-scouting and budgeting in other areas outside of California," she said.

The Walt Disney Co.'s "Beverly Hills Chihuahua 2," was slated for filming in Vancouver had the funding not come through, and "Christmas in Beverly Hills" by Fast Lane Productions LLC might have become "Christmas in Arizona" if it had not qualified for state credits, she said.

One TV series, Comedy Central's "Important Things with Dmitri Martin," will likely hire 100 staffers based in California, she said.

Lemisch said the projects are budgeted to spend $347 million on basic production in California, and are expected to spend 30 percent to 40 percent more on actors, directors, producers and other creative talent and rights.

California Budget Deal Closes $26 Billion Gap

California Governor Arnold Schwarzenegger and the California legislature announced yesterday that they had finally put together a budget deal that settles the states whopping $26 billion deficit. Reactions to the budget are mixed, but at least the state is finally taking responsibility for their budget. According to the LA Times, the following changes will be made to the stat budget. However, as the author points out the reductions do not add up to $26 billion, and are pretty general to say the least.

Cuts

• K-12 and community college education -- $4.3 billion
• Higher education -- $3 billion
• Medi-Cal -- $1.3 billion
• State worker pay -- $1.3 billion
• Corrections -- $1.2 billion
• CalWorks/welfare -- $528 million
• Home health aides -- $226 million
• Healthy Families children’s insurance -- $124 million
• Local transportation -- $1 billion
• Redevelopment agencies -- $1.7 billion

Additional Revenues

• Accelerate income tax withholding -- $1.7 billion
• Increase estimated tax payments for businesses and the self-employed -- $610 million

New Funds

• Sale of State Compensation Insurance Fund -- $1 billion
• Assumed federal funds for Medi-Cal program -- $1 billion

Accounts Shift / Borrowing

• Local government borrowing -- $2 billion
• Education deferrals -- $1.7 billion
• June 2010 state worker paycheck deferral -- $1.2 billion

The Wall Street Journal also published a piece with strong opinions on some of the cuts. Check out a clip of their article below, or find the entire full here.

Under the budget plan, state lawmakers would cut $15 billion in spending. The rest of the gap would be filled by taking funds from local governments and through one-time fixes and accounting maneuvers. The deal must still be approved by rank-and-file legislators, who are expected to vote on it Thursday.

"We have accomplished a lot in this budget," Mr. Schwarzenegger told reporters after lawmakers struck the deal Monday evening. "We dealt with the entire $26 billion deficit," he said.

The nation's most populous state faces a $26 billion gap in a $92 billion general-fund budget through June 2010. Mr. Schwarzenegger and legislators have been wrestling over the budget for weeks, forcing the state's chief accountant to issue IOUs to many creditors, including some welfare recipients.

As of Friday, the state had issued 153,711 IOUs, worth a total of $682 million. The office of Controller John Chiang said it would need to evaluate the budget proposal before determining when it could stop issuing the warrants.

Economists said the spending cuts would bruise a California economy already slammed by rising unemployment and foreclosure rates. "It will certainly offset a fraction of the federal-stimulus effect this fall," said Roger Noll, a professor emeritus of economics at Stanford University. "That will mean the depth and duration of the recession [in California] will both be bigger than otherwise would've been the case," he said.

The leaders of the Democratic-controlled state legislature said that of the $15 billion in cuts, $9 billion would come from education, $1.3 billion from state-worker furloughs and $1.2 billion from the prison system.

"For Democrats, I have to tell you that many of cuts we had to make, at another time, we would've thought unthinkable," said Assembly Speaker Karen Bass.

Ms. Bass also said that local governments "will have to share the pain." The state will take away $4.3 billion from local governments by borrowing from them or redirecting funds that had been earmarked for them.