Monday, October 15, 2012

SUPPORT SLIPS FOR TAX MEASURES; SEPTEMBER REVENUES MIXED: State PTA president suggests that the governor and Munger sit down this week to look for ways to “de-escalate the recent situation”

By Tom Chorneau, SI&A Cabinet Report |

Monday, October 15, 2012  ::  Thanks to a vigorous rivalry campaign, both tax measures on the November ballot are losing support among voters with the likelihood for passage quickly fading even as some stakeholders try to arbitrate a cease fire.

And while there has been some good economic news of late – especially the national unemployment rate falling and housing prices in parts of California rising – new revenue numbers out last week from the state controller suggest no end yet to the state’s fiscal struggle.

Total revenues came in at $7.2 billion for September, which ran 2.2 percent or $162.5 million below estimates.

Personal income taxes, the largest of California’s big three revenue sources, came in at $112 million above expectations. But sales taxes fell short by 5.6 percent or $87 million along with corporate taxes, which were 8.8 percent or $74.8 million below estimates.

With the books closed on September, analysts can look back at the first quarter of the state’s fiscal year with some sense of satisfaction since revenues came in at a total of $18 billion or just 1.1 percent under estimates.

Growth in income taxes – somewhat tied to the upward trend of the stock market – has largely offset the disappointment of taxes on corporate profits, retail sales and other smaller revenue sources, including insurance company earnings, alcoholic beverage sales and cigarette purchases.

Because the first quarter typically only accounts for about one-fifth of the year’s revenue, fiscal officers are keeping a close eye on the horizon, especially the coming holiday season and the potential for improved retail sales.

The mixed economic news came as Gov. Jerry Brown’s Proposition 30 – which would generate about $8.5 billion by temporally raising income taxes on the wealthy and the sales tax by a quarter percent – was subjected to a new barrage of attack ads, much of it coming from the architect of the rival tax measure on the ballot, Los Angeles attorney and philanthropist Molly Munger.

Munger’s measure, Proposition 38, would provide close to $10 billion annually – most of it going directly to schools – by increasing personal income taxes over the next 12 years on a sliding scale for virtually all Californians.

Munger and her brother Charles Jr., scions of investor Warren Buffet’s long-time partner, have puts tens of millions of dollars into TV and radio ads attacking Brown’s tax measure. That criticism, along with GOP opposition, is slowly dragging the proposal down in the polls.

Now with less than a month to go before the Nov. 6 election, education leaders are trying to negotiate a settlement between the two sides – fearing that both measures are in jeopardy.

President of the California PTA, Carol Kocivar, has suggested that the governor and Munger sit down this week to look for ways to “de-escalate the recent situation.”

The California School Boards Association – which is backing both measures – also sent a letter to Munger asking her to suspend the ads attacking Brown’s Prop. 30.

“It is not in the best interest of public schools and the children we serve to urge voters to choose one proposition over the other,” CSBA said. “In essence, ‘If you choose, we lose.'" 

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