A couple suggestions - none that will sort out the immediate problem, but they will help with long term.
Lower taxes. California citizens are over taxed. Cut our taxes. This would persuade some of the thousands of upper middle class taxpayers to stay rather than leave the state. The wealthy and upper middle class LEAVE, the poor and illegals COME. It should be apparent, but apparently not.
Cut assistance.
Colleges can stop giving out waivers for economically disadvantaged. Reduce their costs, but no free ride.
Raise state tuition costs 10-20%. We still have lower tuition than many states.
Cut business taxes - give businesses an incentive to come to California instead of leaving California.
Do the following and within two tax cycles, California will again be solvent.
In the meantime - cut costs by 10% across the board - every department, agency, and refinance the loans currently held providing for a six month window where the state will not have to make payments.
Finally, all those homeowners still living in property grandfathered in to Proposition 13 should pay a more reasonable fee - 12% increase each year until their taxes are equal to, but not higher than those of any other homeowner. This will not solve any problem, but combined with the cuts and the lowered tax base - the state would recover.
Or we will meltdown.
California nears financial "meltdown" as revs tumble
Wed Jun 10, 2009
By Jim Christie
SAN FRANCISCO (Reuters) - California's government risks a financial "meltdown" within 50 days in light of its weakening May revenues unless Governor Arnold Schwarzenegger and lawmakers quickly plug a $24.3 billion budget gap, the state's controller said on Wednesday.
Underscoring the severity of California's cash crisis, Controller John Chiang, who has previously warned the state's government risks running out of cash without a budget deal, said revenues in May fell by $1.14 billon, or 17.7 percent, from a year earlier.
Additionally, the revenues of the government of the most populous U.S. state fell short of estimates in Schwarzenegger's budget plan by $827 million, Chiang said.
He warned California's state government is speeding toward a financial disaster unless officials act urgently to balance its books.
"Without immediate solutions from the governor and legislature, we are less than 50 days away from a meltdown of state government," Chiang said in a statement.
California's revenues have been on a dramatic slide as a result of recession, rising unemployment and its lengthy housing downturn.
The state's revenues from personal income taxes tumbled by 39.3 percent in May from a year earlier while revenues from corporate taxes fell by 52.1 percent and revenues from sales taxes sagged by 7.6 percent, according to a report released by Chiang's office.
"A truly balanced budget is the only responsible way out of the worst cash crisis since the Great Depression," Chiang, a Democrat, said.
DUELING BUDGET CONCEPTS
Schwarzenegger, a Republican, has proposed filling the state's budget gap with deep spending cuts, borrowing from local governments and by scrapping some state programs, including its welfare program.
Democrats who control the legislature are crafting a rival budget plan that includes spending cuts and saves programs Schwarzenegger has proposed eliminating. They instead would use reserves estimated in his budget to narrow the budget gap.
State Senate President Pro Tem Darrell Steinberg said on Tuesday he wants a budget agreement by the end of this month.
California's new fiscal year begins on July 1. The sooner the state has a budget the better poised it will be to raise short-term cash to fund its operations by selling revenue anticipation notes, or RANs, on the municipal debt market.
If pressed, California could sell revenue anticipation warrants, or RAWs, an idea floated by Schwarzenegger when he unveiled his budget plan last month. But he quickly shelved it amid opposition from lawmakers.
"No one wants to issue RAWs for our cash-flow borrowing," said Tom Dresslar, a spokesman for State Treasurer Bill Lockyer. "Everyone would prefer to issue RANs for the obvious reason: It costs less."
Lockyer, a Democrat, supports a budget with the reserve Schwarzenegger has proposed. That would increase confidence among investors that California has cash to pay the $7 billion to $9 billion in short-term debt notes that Lockyer's office assumes the state will need to sell, Dresslar said.
California debt
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