Scrambling for pennies

President Trump wants to discontinue the penny. But Newsom & Co. are looking for any pennies they can find in the latest budget proposal. In particular, the governor is proposing a change in the way the state's corporate tax is calculated for certain financial institutions. The change would produce an estimated extra $300+ million in revenue. That may not seem like pennies to you. But given the magnitude of the state budget, he is fishing for coins in the cracks between the couch cushions.

From an email by Jason Sisney of the Legislative Analyst's Office (LAO):

“Apportionment” is how multistate and multinational businesses allocate corporate income to specific states for state tax purposes. The Governor’s January 10 budget plan proposes to switch specified financial institutions to the “single sales factor” method of corporate tax apportionment.

This proposal (on the administration’s trailer bill website here) is keyed a two-thirds vote by Legislative Counsel, as it would result in some taxpayers paying a higher tax. (This means that it would need to be passed in bills receiving 54 aye votes in the Assembly and 27 aye votes in the Senate.) As the Legislative Analyst’s Office (LAO) noted in its analysis, “some firms would pay and more and some pay less, but [a] net revenue increase [is] expected” from the proposal.

LAO notes administration estimates that the proposal would increase annual state General Fund revenues: by a net $330 million in 2025-26, declining slightly to $270 million by 2028-29. Net increases in General Fund revenues also generally increase annual school funding requirements under Proposition 98...

What does all of this mean for UC? Well, UC wouldn't mind getting some of the $300 million. On the other hand, the fact that the governor is poking around looking for pennies is a sign of budget distress.