Monday, January 19, 2009

California’s Budget Update, State Delays Tax Refunds

The San Jose Mercury News reports How big is California's budget hole? Try these numbers on for size

SACRAMENTO — If Gov. Arnold Schwarzenegger were to fire every employee in state government tomorrow, it would easily patch California's enormous deficit, right? Not even close.

But surely shutting down all state prisons would do the trick? That, too, would only get him about a quarter of the way there.

Now what if he were to close every prison and cut off funding for health care and other services for the poor? Now we're in the ballpark.

Schwarzenegger on Thursday delivered his annual State of the State address, and there was only one topic on his mind: A budget deficit that's ballooned to $40 billion through mid-2010.

How does the average taxpayer begin to make sense of that sum? Not easily.

"It's like a number that's out there, but it's so big that it almost becomes meaningless," said Adrienne Gates, a 50-year-old San Jose resident who keeps fairly close tabs on news out of Sacramento. "It's like hearing stories about how fast the universe is expanding."

…Still, even a governor and Legislature in perfect ideological harmony would struggle to close a deficit this big. Consider that $40 billion is the amount the state shells out of its general fund each year for the public school system.

Payroll for California's roughly 230,000 civil servants tallies a mere $18 billion — not including legislative aides or people who work for the state's courts or university systems. (Those 149,000 additional folks aren't under the governor's control, but even if Schwarzenegger could fire them, their salaries wouldn't be enough to patch the $40 billion deficit.)

Reuters reports California delaying tax refunds amid cash crisis

SAN FRANCISCO (Reuters) - California will not pay state tax refunds for individuals and business that overpaid 2008 taxes, in order to conserve dwindling cash for priority payments including school spending and debt repayment required by state law, the state's controller office said on Friday.

Other state checks to be postponed for 30 days include payments for vendors who provide services and products to the state government and state checks to a million aged, blind and disabled Californians to cover rent and utilities bills, State Controller John Chiang's office said in a statement.

…"I take this action with great reluctance," Chiang said in the statement. "I know it will put many California families who rightfully expect their state tax refunds in a desperate position."

"Individuals who already are vulnerable will be hit hard," Chiang added. "Small businesses that don't get paid may have to lay off more workers. Rather than helping stimulate the economy, withholding money from Californians will prolong our pain and delay our economic recovery."