California State Controller John Chiang has announced that total state revenue for the month of November 2012 fell $806.8 million, or 10.8%, below budget.
Democrats thought they could hammer “the rich” by convincing voters to pass Proposition 30 to create the highest state income tax in the nation. But it now appears that high income earners have already “voted with their feet” by moving themselves and their businesses out of state, resulting in over $1 billion shortfall in corporate and income taxes last month and the beginning of a new financial crisis.
Passage of Proposition 30 set off euphoria and expectations of higher spending for public employees. The California Teachers’ Association (CTA) trumpeted: “California students and working families won a clear victory today as voters clearly demonstrated their willingness to invest in our public schools and colleges and also rejected a deceptive ballot measure aimed at silencing educators, other workers and their unions.”
State bureaucrats immediately ramped up deficit spending far beyond the state’s $6 billion annual tax increase, with the Departments of Health Services and Developmental Services increasing this month’s spending by over $1 billion versus last year. The lower tax collection and higher spending drove the State’s deficit after the tax increase to $2.7 billion for the first 5 months of this fiscal year. State Controller John Chiang reported:
November’s disappointing revenues stand in stark contrast to recent news that California is leading the nation in job growth, has significantly improved its cash liquidity to pay bills, and even long-distressed home values are starting to inch upward… This serves as a sobering reminder that, while the economy is expanding, it is doing so at a slow and uneven pace that will require the State to exercise care and discipline in how its fiscal affairs are managed in the coming year.
The improved “cash liquidity” Chiang referred to turns out to be $24.9 billion of debt.
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