Brown Cites Unrest in Egypt to Make His Case for Budget Vote

More news from my home state of California, and the governors attempt to fix the budget. Now Governor Brown is exploiting the protests in Egypt to get his budget approved.

From the LA Times Blog:

Citing the pro-democracy unrest in Egypt and Tunisia, Gov. Jerry Brown called it “unconscionable” that GOP legislators are vowing to block his attempt to ask voters to extend tax hikes to balance the budget.

“When democratic ideals and calls for the right to vote are stirring the imagination of young people in Egypt and Tunisia and other parts of the world, we in California can’t say now is the time to block a vote of the people,” Brown said in his first State of the State address in nearly 30 years.

He said the budget has tough choices but that the people “have a right to vote” on the package.

He challenged both parties to take the difficult votes necessary to balance the budget.

“If you are a Democrat who doesn’t want to make budget reductions in programs you fought for and deeply believe in, I understand that,” he said. “If you are a Republican who has taken a stand against taxes, I understand where you are coming from. But this time things are different. In fact, the people are telling us -- in their own way -- they sense something is profoundly wrong. They see that their leaders are divided when they should be decisive and acting with clear purpose.”

Continue reading at LAtimes.com...

California Weighs Vote To Renew Tax Increase

Yesterday, the Governor of my home state launched a campaign asking voters to help reduce California's $25.4 billion budget deficit by increasing both income and sales tax rates. Let’s see how many people will say “yes” to higher taxes with some of the highest unemployment levels around…

The Wall Street Journal reports:

In a State of the State address, his first since becoming governor, Mr. Brown plans to underscore the seriousness of the fiscal crisis facing the nation's most populous state and press lawmakers for a prompt response to his proposal for a midsummer election asking voters to extend temporary tax hikes, according to people familiar with his plans.

Earlier this month, Mr. Brown proposed an $84.6 billion budget for the fiscal year ending June 30, 2012.

His budget calls for $12.5 billion in cuts, contingent on voter approval of a five-year tax extension that would generate $12 billion during the fiscal year.

Mr. Brown decided against simply asking the legislature for the tax extensions, which would have broken a campaign pledge. His ballot measure would specifically propose a five-year extension of a temporary increase enacted in 2009 on personal income tax, sales tax and vehicle license fees.

In a poll last week from the Public Policy Institute of California, 53% of respondents approved of that plan, while 41% disapproved. If the tax extension fails, California's legislature will have to restart budget talks from scratch.

Read more here

California Declares Fiscal Emergency

On Thursday Governor Jerry Brown declared a state of fiscal emergency for the government of the most populous US state. He is pressing lawmakers to finally tackle its $25.4 billion budget gap. What’s on the cut list?

CNBC reports:

Democrat Brown’s declaration follows a similar one made last month by his predecessor Arnold Schwarzenegger, the former Republican governor.

Democrats who control the legislature declined to act on Schwarzenegger’s declaration, saying they would instead wait to work on budget matters with Brown, who served two terms as California’s governor in the 1970s and 1980s.

Brown was sworn in to his third term early this month and has presented lawmakers with a plan to balance the state’s books with $12.5 billion in spending cuts and revenue from tax extensions that voters must first approve.

Brown has said he wants lawmakers to act on his plan by March.

His fiscal emergency declaration is meant to underscore that target, an official said.

Brown’s declaration, which is largely procedural, says it affirms Schwarzenegger’s December declaration, giving lawmakers 45 days to address the state’s fiscal troubles.

Read more here

Californians Braces for 59% Health Premium Hike

Bad news for residents in my home state. Wasn’t the health reform supposed to help keep rates lower? If other health insurance companies want to increase their market share, now would be a great time to advertise lower premiums. Who wouldn’t switch companies with a hike like this?

From CNN:

One of California's largest health insurers - Blue Shield - announced plans to hike its premiums by as much as 59%.

The jacked up premium rates are set to take effect on March 1, pending review from state insurance regulators. The move impacts 193,000 Blue Shield policy holders.

The company, a member of the Blue Cross Blue Shield Association with 3.3 million members, which announced the move late Thursday, stressed that its decision has "almost nothing to do with the federal health reform law" and that ultimately the law will help slow down health care costs.

But responding to this most recent increase the company said, "our individual market medical costs are rising rapidly due to higher provider prices, increased utilization, and the fact that healthier people are dropping coverage during a bad economy," the company said.

Despite the steep double-digit hike, the insurer maintained it still expects to lose tens of millions of dollars on its individual healthcare business in both 2010 and 2011.

Continue reading at CNN.com...

Troubled California to Restructure Debt Sales

In another desperate attempt to reign in an out of control budget, my home state of California announced yesterday that the state government would restructure upcoming bond issues to raise $14 billion.

CNBC reports:

The decision to shift more of the sale to a government-subsidized market for municipal bonds would lower the cost of the new debt. This follows other local borrowers who have delayed or downsized bond deals in a market downturn that has produced some of the largest one-day rises in yields on “munis” since the height of the financial crisis.

At the heart of the gloom is both the recent rise in US Treasury bond yields and the looming expiry of the Build America Bonds (BAB) program, which has buttressed the $2,800 billion market where states and municipalities have raised money since the financial crisis.

Most munis offer tax breaks that make the bonds attractive largely to wealthy US individuals. In an effort to ease credit to muni borrowers after the crisis, the federal government introduced the BAB program to subsidize taxable debt to attract a wide range of institutional investors.

The BAB program expires at the end of the year. This has resulted in wave of issuance and concerns about how the traditional market will fare under the renewed weight of the full borrowing needs of states and municipalities at a time when local governments are still under pressure from the recession.

Read more here

California's Unemployment Fund has Deficit of $10.3 Billion

California businesses already pay some of the highest unemployment taxes in the country – and the tab is likely to increase.

The recession and the Legislature's decision years ago to raise benefits have drained the state unemployment insurance fund, which now has a estimated $10.3 billion deficit.

The nonpartisan Legislative Analyst's Office, in a recent report titled "California's Other Budget Deficit," said the state will probably need to raise unemployment taxes on employers as well as reduce benefits to bring the fund back in balance.

Raising the tax would require a two-thirds vote in both houses of the Legislature and might be politically impossible. Gov.-elect Jerry Brown has promised not to raise taxes without voter approval.

But pressure is growing on Sacramento to fix the system soon – whether it wants to or not. California has borrowed about $8.5 billion from the federal government to keep benefits flowing, and the repayment obligations are coming due.

"The longer we go without a fix, the bigger the hole becomes," said Loree Levy, a spokeswoman for the Employment Development Department, which doles out the benefits.

Lambda Legal Releases Tax Guide Following IRS Acknowledgment of California's Same-Sex Couples

Last week Lambda Legal published a helpful guide to help taxpayers and tax preparers in California with a recent IRS tax law change that applies to thousands of legally married same-sex couples, as well as registered domestic partners in California. Check out the following snippet from their press release, or click here for the full text.

The change, announced earlier this year by the Internal Revenue Service, applies to California's registered domestic partners (RDPs) and also may apply to the state's estimated 18,000 legally married same-sex couples, as well as registered domestic partners in Nevada and Washington. In a change from the approach taken by the Bush Administration, the IRS will now recognize the jointly owned community property income earned by California RDPs, the same way it long has done for different-sex married couples who file separate federal income tax returns. Recognition of "community income" means couples each will report half of their combined income on their separate returns -- called "income-splitting" -- which can mean big savings for couples with wide disparities in income.

"This change represents one more good step in the direction of treating same-sex couples who have formalized their relationship under state law the same as married different-sex couples are treated," said Jennifer C. Pizer, National Marriage Project Director for Lambda Legal. "The problem addressed by this new policy highlights what marriage discrimination means – an endless stream of sometimes small inequalities that often end up costing same-sex couples real dollars as well as their dignity. But let's be clear – while this is welcome progress towards our community's goal of full legal equality for same-sex couples, the IRS still won't allow us to file a joint tax return or otherwise respect our family relationships, and federal law as a whole still discriminates against us in countless serious ways. This is a small step, but it's a good one."

The document is entitled "The IRS Applies 'Income-Splitting' Community Property Treatment to California's Registered Domestic Partners: Preliminary Answers to Some Frequently Asked Questions." It was prepared by Pizer, Lambda Legal Staff Attorney Peter C. Renn and tax attorneys at the prestigious Irell & Manella law firm in Los Angeles, with consultation by Wendy E. Hartmann of the Bennett & Erdman law firm, also in Los Angeles, who specializes in estate planning for same-sex couples.

To download Lambda Legal's FAQ explaining the new IRS position about registered domestic partners' community property rights, please go to: www.lambdalegal.org/ttp-community-property.

California's Business Tax Burden No Heavier than Average

Although my home state of California is often scrutinized for it's heavy corporate tax rate, according to this article from LA Times.com, the burden is no heavier than the national average. In fact, California takes an estimated 4.7% of what businesses produce in taxes, which is the exact same as the national average.

The government take is higher in Alaska (13.8%), New York (5.5%) and Florida (5.3%). Even Texas, known for rolling out the red carpet for business, pocketed more than California — 4.9%.

That's according to an annual study of the tax burdens in all 50 states by the Council on State Taxation, a business-friendly group led by senior executives of Chevron Corp., General Electric Co. and other major corporations.

"California is pretty middle-of-the-pack when it comes to business taxes," said Joseph R. Crosby, the organization's senior director of policy.

Although the state's corporate income tax rate — 8.84% — is among the higher in the nation, its bite is diminished by various tax credits and other measures that have been adopted over the years, including:

• One of the most generous research-and-development tax credits in the nation, allowing businesses to deduct 15% of the amount they increase their R&D funding over a base level. The national median is 6.5%, according to Yonghong Wu of the University of Illinois at Chicago.

• Proposition 13, the 1978 initiative that limits property tax increases to 1% a year until properties are sold, when they are reassessed at the market value. This has slowly shifted the property tax burden from businesses to homeowners, since commercial real estate changes hands less often than residential.

Continue reading at LA Times.com...

Tax Dreams of Drug Decriminalization

My home state of California is on the verge of making history. Proposition 19, which currently has a narrow lead in the polls, would repeal marijuana prohibition. Supporters of the legislation have suggested that the law could generate over a billion dollars in revenue for the state. However, according to this article on Politico, these estimates are misleading.

Supporters of legalization claim that treating marijuana like other legal vices – for example, tobacco and alcohol — could generate $1.4 billion in badly needed new tax revenue for California. This is more than alcohol and tobacco cigarette taxes, combined, now generate.

Such claims could easily push Prop 19 over the top on Nov. 2. Unfortunately, the tantalizing revenue projections are high—“Up in Smoke” high.

California is unlikely to collect $1.4 billion in marijuana taxes. Not yet, anyway. But it’s not because forecasters have grossly over-estimated Californians’ appetite for the drug. Commentators quibble about consumption data, but no one seriously doubts marijuana is a multibillion-dollar industry in the Golden State.

Rather, the real problem with the revenue estimates is that forecasters have ignored how hard it would be to collect a marijuana tax.

The state’s Board of Equalization, for example, has just assumed marijuana growers would pay any tax—100 percent of the time. That’s an audacious assumption. No tax has a 100 percent compliance rate. And the incentive to evade a marijuana tax would be particularly strong: the tax rate forecasters use is around 37 percent.

Continue reading at Politico.com...

California Senate Approves a Budget Plan

100 days after the constitutional deadline to pass a budget, the California Senate finally came to an agreement and sent a budget to Governor Arnold Schwarzenegger. According to News10.com, the vote came after a long night of floor votes and party caucuses. However, not everyone is happy about the new changes and spending cuts it includes.

"This budget has too much spending, which could make next year's deficit even worse. I'm voting no, "said Sen. Jeff Denham, (R) Merced.

Democrats say the spending plan is fair.

The state Assembly passed the main bill Thursday afternoon in a legislative package aimed at ending California's record budget impasse and closing a $19 billion deficit. Trailer bill list

Lawmakers voted 54-1 Thursday in favor of the measure, SB970, getting just enough support in the 80-member house to reach the required two-thirds vote threshold.

The budget package contains no new taxes or fees, and just 40 percent of the gaping deficit would be closed by additional spending cuts. The rest would be addressed through rosy revenue assumptions and creative accounting.

California State Budget Crunch Brings Back Furlough Fridays

The California Supreme Court agreed to allow furloughs to resume on Friday, until they have enough time to thoroughly review the case. The judges must decide whether or not Governor Arnold Schwarzenegger has the right to order unpaid days off for state workers.

News10.net reports:

150,000 state workers will take an unpaid day off Friday in an effort to curb the state's budget crisis. Furloughing state employees three days a month will save $150 million a month.

The California Supreme Court cleared the way for furloughs to resume Wednesday, saying furloughs can resume while it reviews whether the governor has the authority to mandate unpaid days off for state employees.

Gov. Arnold Schwarzenegger recently ordered workers to be furloughed three days a month, following a previous round that ended in June.

It's a move that has an impact on the private sector as well as state employees.

Read more here

Schools Pack In More Kids to Cope With Cuts

Many California students returning to school this week are being squeezed into over-crowded classrooms. According to the Sacramento Bee, the state is seeing the largest average class sizes in over a decade. The change is part of a new trend where schools are requesting class-size increases, without having to pay stiff penalties, in order to save money.

Large numbers of school districts are bombarding the state with requests to expand classes beyond the legal limits.

The California Board of Education, which reviews class-size waiver requests, gave out 16 exemptions in an 11-month period ending in July. Since then, the board heard 16 more waiver requests at its board meeting Aug. 2 and expects another 16 in September, said Judy Pinegar, manager of the waiver office at the California Department of Education.

The state had no requests for class size increases between 1999 and 2009.

"It's the hot item right now," Pinegar said. "I'm expecting almost every district in the state to request one."

The state allows an average of 31 students in kindergarten, 30 in first through third grade and 29.9 in fourth through eighth grade.

Continue reading at SacBee.com…

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CA Seeks IRS Tax Equity for Same-Sex Spouses

Yesterday, legislators in my home state passed a resolution asking that same-sex spouses and domestic partners receive the same tax equality as married taxpayers.

According to the Associate Press, the resolution asks the Internal Revenue Service to issue a ruling requiring individuals in a same-sex marriage or domestic partnership to each report half of their community income on federal tax returns.

Currently, California law requires same-sex couples and domestic partners to do so, but the IRS does not.

The Senate-endorsed resolution passed the Assembly on a 52-9 vote Monday.

Democratic Assemblyman Mike Feuer says his resolution supports equality. Republican Assemblyman Chuck DeVore says it supports state sovereignty and allows states to set rules on family law.

Anti-Tax Initiative Qualifies on California Ballot

California taxpayers will be voting on a new anti-tax initiative in November that would make it illegal for lawmakers to approve taxes disguised as fees without a proper vote. According to Mercury News, both the California Taxpayers Association and the California Chamber of Commerce are supporting the initiative.

California's secretary of state certified the initiative Thursday, the ninth to go before voters in November.

The proposition would stop state lawmakers from approving taxes disguised as fees without the constitutionally required two-thirds vote for a tax increase. Passing a fee right now only requires a majority vote of the Legislature.

Supporters say lawmakers try to skirt the high vote threshold required to approve taxes by labeling charges as fees on everyday items such as food and fuel.

The initiative also would require local officials to bring similar fee increases to voters.

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California Heading to the Abyss

California unemployment falls to 12.4 percent

Here in California the unemployment rate is falling, but not making much of a difference. It fell to 12.4 percent in California last month and the state had its fifth straight month of job growth, but the numbers are still very weak, according to the California Employment Development Department. The statewide unemployment rate fell only a tenth of a point, from 12.5 percent in May, while 28,300 jobs were added. However, most of the jobs were temporary government jobs, probably those from the Census.

In May, California still had the third highest unemployment rate in the U.S., trailing Nevada (14 percent) and Michigan (13.6 percent). May marked the first time since April 2006 that a state other than Michigan had the worst unemployment in the nation.

People Are Talking About California’s Proposition 16

Proposition 16 is in the news recently because many people are feeling very adamant about a NO vote on the initiative that seems to benefit the utility company giant, PG and E. Santa Barbara’s www.independent.com states that Proposition 16 gives PG and E a monopoly on electricity.

• “Prop 16 would change the California Constitution to require two-thirds supermajority vote before any municipality (city, county, district, etc.) could form its own nonprofit public utility, expand an existing publicly owned utility, or buy clean, renewable energy for the community at wholesale prices.”

The California initiative process was created in the early 1900s to empower citizens to enact legislation. Is big business using the initiative process for their gain? I took the liberty of looking up Proposition 16 in the California voter guide to get a more accurate look at both sides of the issue.

PG and E is said to have written the initiative and is the only one funding the campaign. PG and E is trying to keep its market share by force. Many people feel there are better ways to stay ahead: competitive prices and fulfilling its commitment to clean, renewable energy.

Some are worried that this change would prevent community choice in electricity. With community choice, a little-known option, a municipality could choose whether they wanted to power their homes with wind, solar, biomass, or even wave energy. So if your town wanted to use wind power, for instance, and take control over their impact on pollution, greenhouse gas emissions and prices, they could opt-out of the investor-owned utility company. Also, customers in your town could opt-out of the community choice and stay with the utility company, it’s their choice. If Prop. 16 passes, it means local governments would be required to receive two-thirds voter approval before they could start up electricity services or expand electricity service into a new territory. Some believe this puts local government spending in the hands of the taxpayer.

Coal is still being used as the primary electricity generator in California. See: http://www.sourcewatch.org/index.php?title=California_and_coal. Power companies aren’t meeting their goals for renewable energy statewide. And now some taxpayers feel that PG and E is trying to taking away their choice.

As with any proposition, voters need to be fully informed and the three sources below are a good place to start:

http://www.voterguide.sos.ca.gov/propositions/16/
http://www.independent.com/news/2010/jun/03/no-prop-16/
http://earth2tech.com/2010/06/03/opinion-it-leaders-need-to-speak-out-against-prop-16/

Calif. Moves to Ban Plastic Bags at Grocery Stores

Did you ever think that there would come a day when we would pay for the plastic grocery bag that holds our groceries? Well, in California it is happening. You will soon have to pay for plastic grocery bags.

Yesterday, the California Assembly passed legislation prohibiting pharmacies, grocery, liquor and convenience stores from giving out plastic bags. The bill also includes that customers will have to pay for using store-issued paper bags.

The ban is to help with plastic bag “pollution” since they often wind up in rivers and the ocean. They are also trying to reduce the number of plastic bags that wind up in landfills. A plastic bag ban first gained popularity in countries other than the U.S., such as South Africa, Ireland, China, and Bangladesh.

If signed into law, California would be the first state to adopt such a ban.

What do you think? Does a plastic bag ban and paying to use paper bags make sense in order to protect our environment? Or do you disagree with the ban and think California taxpayers just cannot afford this? Contact me on FaceBook at www.Facebook.com/ronideutch or
on Twitter at www.twitter.com/ronideutch.

Read the full article here.

Unemployment stuck at 12.6% in California

Even though the state of California added 14,200 jobs in April, the unemployment rate didn’t budge much – It continues to be 12.6 percent. According to the U.S. Bureau of Labor Statistics, California’s rate is the third highest in the nation, right behind Michigan coming in at 14 percent and Nevada’s 13.7 percent. We’ve heard whispers of the economy improving, however, with unemployment numbers like these, as the saying goes, proof is in the pudding!

But, I am all about hope, and the good news is that California payrolls did grow by a total of 56,000 this year and hopefully the new HIRE ACT tax breaks will get employers more hiring again. I want to know what you think; do you believe California’s unemployment rate is going to fall by the end of summer? Tell me your thoughts on Facebook or on my Twitter at www.twitter.com/ronideutch.