Just a Reminder that We're in a Budget Lull

Where we're not

Sacramento Bee columnist Dan Walters provides a reminder that we have not solved the state's (and therefore UC's) budget crisis.  Rather we are in a lull created in part by Prop 30 temporary revenue and general economic recovery.  It wouldn't take much of a perturbation in the economy to cause a renewed crisis.  As we have noted in past posts, if you look at the reserve in the state's general fund (including the "rainy day" fund the governor has put on the ballot), it is slated to decline in the current fiscal year - something that in normal English parlance might be called a "deficit."  Whether that turns out to be the case will depend on actual revenue flows and spending.  But there won't be much in the rainy day fund for years, whatever happens.  It would disappear very fast in a downturn.

From Walters:
...(T)he (Prop 30) tax increase accounts for perhaps a third of the revenue gain.  The rest stems from the improving economy and particularly the substantial increases in incomes of the state’s highest-income taxpayers – the chief targets of the 2012 tax increase.  While criticizing the widening gap between “one-percenters” and the rest of us is popular, the fiscal reality is that California’s budget probably would still be drowning in red ink were it not for taxes on income gains by those atop the economic food chain.  State income tax data for 2012, the latest available and the first year of the temporary income tax increase, illustrate that fact. The state received 15.2 million personal income tax returns for 2012, of which 161,744 – 1.06 percent – came from those with adjusted gross incomes of $500,000 or more. Those one-percenters accounted for $275.3 billion or 28.5 percent of all taxable income, but paid $30.8 billion or 51.4 percent of all income taxes that year. It’s now at least $36 billion, more than twice the $17.3 billion they paid in 2010.  With income taxes now two-thirds of general state revenue, it means one-percenters are financing over a third of the budget’s spending on schools, colleges, prisons and health and welfare programs for the other 99 percent. Brown understands that and worries aloud about “volatility” in revenue due to ever-higher reliance on taxing incomes of the affluent – although, it should be noted, his tax hike increased that reliance...

Full story at http://www.sacbee.com/2014/09/13/6704364/dan-walters-taxes-on-rich-closed.html

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