By Mike Luery, KCRA, May 12, 2016
A recent slump in the stock market is causing a major cash crunch for California.
“We projected that we were going to take in about $14.9 billion from personal income taxes in the month of April — the most important revenue month for the state,” said H.D. Palmer, a spokesperson for Gov. Jerry Brown’s Department of Finance. “We took in about a billion dollars less than that.”
The billion dollar hit comes primarily from capital gains — the taxes that people pay after selling a stock at a profit.
“Capital gains is one of the most important sources of revenue for personal income tax,” Palmer explained. “(Capital gains taxes are) two-thirds of the state budget. So when the markets sneeze, the budget can catch a cold.”
That “cold” could affect kids, especially those needing child care while their parents work.
Nancy Gray is a child care provider in Citrus Heights. She takes care of 14 children with an assistant.
She said that many of her clients are working families that are struggling to make ends meet.
“One of them for a while there was paying me her entire paycheck just to get child care started for her child,” Gray said.
Child care is a high priority for the Legislative Women’s Caucus.
“We have put in (the request) to the governor. We’ve asked for $800 million dollars,” said Sen. Hannah-Beth Jackson, D-Santa Barbara.
She added that the extra money would “provide an increase in rates,” for child care providers.
But child care is not the only demand at the Capitol. There’s also pressure to spend more money to improve California’s crumbling roads.
There are also demands for more dollars for Denti-Cal, where Republicans are asking for an additional $200 million in extra funding for the program that assists low-income Californians.
But Sen. John Moorlach, R-Costa Mesa, a former certified public accountant, said that higher taxes are not the answer.
He added, ” We cannot be the band on the deck of the Titanic. We’ve got to start addressing tomorrow today.”
And the message from Gov. Brown on Friday is likely to be about belt tightening.
“The worst thing we could do now is commit the state to higher ongoing levels of spending, only to have to cut back when, not if, but when we get to the next economic downturn,” Palmer said.
The latest figures from the Franchise Tax Board show that California’s top earners, the 1 percent, pay 48 percent, or nearly half of all the personal income taxes in California .
So when they have a bad day on Wall Street — the Golden State suffers.
Brown is scheduled to provide details of his revised May budget plan on Friday at 10 a.m. at the State Capitol.