General Fund revenues and expenditures California

Transcription

1 General Fund revenues and expenditures California US$ billions Expenditures Revenues * Sources: Legislative Analyst Office, California Department of Finance. * Projected (includes passage of proposition 30)

2 Percent change in revenues and expenditures General Fund, California Percent change from preceding year Expenditures Revenues * Sources: California Department of Finance, Milken Institute. * Projected (includes passage of proposition 30)

3 Revenue sources in FY * California, enacted budget, US$ millions Type of fund Categories General Special Total Change from Personal income tax 60,268 1,338 61,606 7,569 Sales and use tax 20,605 10,390 30,995 2,338 Corporation tax 8,488-8, Highway users taxes - 5,670 5, Motor vehicle fees 27 5,705 5, Insurance tax 2, , Estate tax Liquor tax Tobacco taxes Other 3,938 12,719 16,657 1,673 Total 95,887 37, ,902 11,875 Source: California Department of Finance. * Projected (includes passage of proposition 30)

4 Total spending in FY * California, enacted budget, US$ millions Type of funds Categories General Special Bond Total Legislative, judicial, executive 2,056 3, ,357 State and consumer services ,419 Business, transportation and housing 448 7,698 8,744 16,890 Natural resources 1,900 2, ,235 Environmental protection 46 1, ,302 Health and human services 26,695 18, ,493 Corrections and rehabilitation 8, ,919 K-12 education 37, ,885 Higher education 9, ,968 Labor and workforce development General government , ,213 Total 91,338 39,409 11, ,421 Source: California Department of Finance. * Projected (includes passage of proposition 30)

5 Primary expenditures in FY * California, enacted budget Source: California Department of Finance. * Projected (includes passage of proposition 30)

6 Revenue sources in FY * California, enacted budget Source: California Department of Finance. * Projected (includes passage of proposition 30)

7 Capital gains and stock options tax revenues California, FY to * US$ billions Sources: California Department of Finance, Legislative Analyst s Office, Milken Institute. * FY preliminary, FY 11-12, FY estimated. An assumed tax rate of 9% was used to calculate the tax revenue.

8 CalPERS total investment fund FY * US$ billions Source: CalPERS. * Year end is June 30.

9 CalSTRS total investment fund FY * US$ billions Source: CalSTRS. * Year end is June 30.

10 Education resources inadequate in California Elementary-secondary public school system, Rank State Spending per pupil (US$) 1 District of Columbia 18,667 2 New York 18,618 3 New Jersey 16,841 4 Alaska 15,783 5 Vermont 15,274 6 Wyoming 15,169 7 Connecticut 14,906 8 Massachusetts 14,350 9 Maryland 13, Rhode Island 13, California 9,375 Source: U.S. Census.

11 California prisons are overcrowded and costly Total number of inmates = 124,000* Prison design capacity = 155%* Average annual cost per inmate = $46,700 Sources: California Department of Corrections and Rehabilitation, Legislative Analyst s Office. * As of June, 2012 (accounts for realignment)

12 State-local tax burden As percent of state income, 2010 Rank State Percent 1 New York New Jersey Connecticut California Wisconsin Rhode Island Minnesota Massachusetts Maine Pennsylvania 10.2 U.S. average 9.9 Source: Tax Foundation.

13 Proposition 30 s impact on personal income tax rates Single filers Prop 30 Income bracket Before After $48,029-$250, % 9.3% $251,000-$300, % 10.3% $301,000-$500, % 11.3% $501,000-$1,000, % 12.3% > $1,000, % 13.3% Sources: Tax Foundation, California Department of Finance.

14 Proposition 30 s impact on personal income tax rates Married filers Prop 30 Income bracket Before After $96,058-$500, % 9.3% $501,000-$600, % 10.3% $601,000-$1,000, % 11.3% > $1,000, % 13.3% Sources: Tax Foundation, California Department of Finance.

15 Proposition 30 s impact on sales tax rates Prop 30 Before After 7.25% 7.5% Increase of 0.25% Sources: Tax Foundation, California Department of Finance.

16 2013 State Business Tax Climate Index California ranks 48 th overall Strengths Components Rank Unemployment insurance 16 Property tax 17 Weaknesses Components Rank Corporate tax 45 Individual income tax 49 Sales tax 40 Source: Tax Foundation.

17 California ranks 31 st in state competitiveness State rankings, 2011 Strengths Components Rank Openness 4 Technology 5 Security 18 Business incubation 27 Weaknesses Components Rank Human resources 37 Environmental policy 41 Infrastructure 46 Fiscal policy 47 Source: Beacon Hill Institute.

18 California vs. Texas 2013 State Business Tax Climate Index California ranks 48 th overall Texas ranks 9 th overall Components Rank Corporate tax 45 Individual income tax 49 Sales tax 40 Unemployment insurance 16 Property tax 17 Components Rank Corporate tax 38 Individual income tax 7 Sales tax 36 Unemployment insurance 14 Property tax 32 Source: Tax Foundation.

19 California vs. Texas 2011 State competitiveness rankings California ranks 31 st overall Texas ranks 15 th overall Components Rank Fiscal policy 47 Security 18 Infrastructure 46 Human resources 37 Technology 5 Business incubation 27 Openness 4 Environmental policy 41 Components Rank Fiscal policy 24 Security 27 Infrastructure 16 Human resources 42 Technology 32 Business incubation 17 Openness 2 Environmental policy 27 Source: Beacon Hill Institute.

20 13 of Top 50 U.S. companies are in California By market cap Company Headquarters Rank in the U.S. Market cap* (US$ billions) Apple Inc Cupertino Google Inc Mountain View Chevron Corp San Ramon Wells Fargo & Co San Francisco Oracle Corp Redwood Shores Intel Corp Santa Clara Qualcomm Inc San Diego Visa Inc San Francisco Cisco Systems San Jose Walt Disney Co Burbank Amgen Inc Thousand Oaks Occidental Pete Los Angeles ebay Inc San Jose Source: Bloomberg. *As of November 6, 2012.

21 Kauffman Index of Entrepreneurial Activity 15 largest metros, 2011 Source: Ewing Marion Kauffman Foundation. Entrepreneurs per 100,000 Rank Metropolitan Statistical Area people 1 Los Angeles-Long Beach-Santa Ana, CA Atlanta-Sandy Springs-Marietta, GA Phoenix-Mesa-Scottsdale, AZ Miami-Fort Lauderdale-Miami Beach, FL Riverside-San Bernardino, CA New York-Northern New Jersey-Long Island, NY-NJ-PA Houston-Baytown-Sugar Land, TX Dallas-Fort Worth-Arlington, TX San Francisco-Oakland-Fremont, CA Seattle-Tacoma-Bellevue, WA Boston-Cambridge-Quincy, MA-NH Washington-Arlington-Alexandria, DC-VA-MD-WV Philadelphia-Camden-Wilmington, PA-NJ-DE Chicago-Naperville-Joliet, IL-IN-WI Detroit-Warren-Livonia, MI 180

22 Percent gains in non-farm jobs Major metros v. California and United States, 9/2011-9/2012 Percent change from preceding year San Francisco 2.9 San Jose 2.5 San Diego 2.1 California 1.9 Los Angeles 1.8 United States Sources: U.S. Bureau of Labor Statistics, Moody s Analytics, Milken Institute.

23 High unemployment rate in California cities September 2012 Percent Fresno Sacramento California Los Angeles San Diego San Jose San Francisco United States Sources: U.S. Bureau of Labor Statistics, Moody s Analytics.

24 Retirement benefits paid to California service retirees average annual benefits for safety members, by selected counties US$ thousands San Jose* Los Angeles San Francisco Sacramento San Diego Fresno Sources: Stanford University, Systems Actuarial Valuation Reports. * City

25 Retirement contribution rates for California safety members , by selected counties Percent San Diego Fresno San Francisco San Jose* Sacramento Los Angeles Sources: Stanford University, Systems Actuarial Valuation Reports. * City

26 Fiscal pressures affecting the City of San Jose

27 The City of San Jose s skyrocketing retirement costs

28 Tech companies served by San Jose s expedited permitting in 2012

29 Some basic data on California California (2011): Personal Income $1.65 Trillion Consumption $1.37 Trillion Currently: National unemployment rate = 7.9% California unemployment rate = 10.2% (third highest of 50 states) Increases (mid-1980s 2005): Population: Medicaid recipients: Tax filers paying income taxes: Prison population: 10 million 7 million 150K 115K With roughly 12% of U.S. population, California has 31% of TANF recipients 22% of Medicaid spending Spends more per incarcerated inmate than average take home pay per family Leader in: technology; agriculture, entertainment

30 California spending 1. K-12 education largest cost, health and prisons next 2. Complex interaction with local government, e.g. on K-12 education 3. Spending projected to be at an all time high in three years, despite cuts 4. Fiscal debacle: a) Large deficit: Governor Brown s budget: : some cuts, large tax hikes b) Large structural deficit beyond next year c) Public employee pension plus heath cost massive unfunded liability d) 2 nd lowest bond rating of any state (recently passed by Illinois) 5. Brown s budget plan 5/2012: Cuts in higher ed, social services and courts But spending increases 6% from FY12 to FY13 K-12 increases 13% Pay cut of 5%? really 4.6% after 3% COLA, so 1.6% for 5% fewer hours Good ideas: Bringing CA welfare to work program in line with federal rules Small Medicaid copay, so far blocked by Obama administration

31 A snapshot of California s taxes California is a high tax state 4 th highest (after NY, New Jersey, Connecticut) per household in taxes on residents Well above national average as percentage of income Ranks 48 th on Tax Foundation s State Business Tax Climate Index Personal Income Tax: top rate of 9.3%, highest in nation at 40k; extra 1% (top rate 10.3%) above $1 million Capital gains taxed as ordinary income Highest percentage of zero filers of any state Prop 30: raises top marginal income tax rate to 13.3% (highest in the nation); retroactive to January 1, 2012; "temporarily," for 7 years Top 1% pay close to 50% in booms, collapses in busts; Prop 30 will increase dependency on this volatile income Corporate Income Tax: 8.84% flat rate; only a few states higher Sales Tax: 7.25% + local options Prop 30: an increase of 0.25% in sales tax for 4 years State statutory rate is highest in the U.S. Business to business sales are taxed Property Tax: California 34th share of personal income, 15th per capita and 25th percentage of S&L revenue Impact of Proposition 13 limitations But property taxes DOUBLED from Gasoline tax: 2 nd in nation CA a big donor state Only 78 cents in federal spending per $1 of federal taxes paid 1992: 93 cents, because of defense spending in CA

32 General Fund and Special Fund revenues Share of total state tax collections

33 General Fund revenue sources

34 California state revenue by source

35

36 Revenues are more volatile than the economy Annual percentage change

37 Property tax levies US$ millions

38 Sources of California state and local tax revenue FY 2009

39 How do the debacles (fiscal crises) happen? Rapid spending growth in bubble years, exceeding income growth, as highly progressive tax structure causes revenues to pour in; usually spending is built into baseline, rarely one time capital or debt reduction Then revenues dry up Revenue from stock options and capital gains collapse with stock market declines amid recessions Highly progressive income tax revenues fall more than income Roller Coaster revenues plus expansive and expensive spending plus short-sighted budgeting + episodic fiscal calamities rendering state incapable of supporting even basic services, such as courts or safety net

40 General and Special Fund revenues and expenditures Fiscal year * Growth (US$ billions) (US$ billions) ( ) Revenues and transfers % Expenditures % Source: California Department of Finance. * Enacted budget

41 California state employee positions* By agency, thousands Actual ( ) Estimated ( ) Proposed ( ) Executive State and consumer services Business and Housing Transportation Natural resources California Environment Protection Health and Human Services Corrections and Rehabilitation K thru 12 education Community colleges/other Labor and workforce development General government Subtotal, Executive University of California Hastings College of Law California State University Subtotal, Higher education Legislative Judicial Grand totals * The numbers of positions include 120 legislators and staff at the Legislative Counsel Bureau. They do not include the Legislature s staff and Legislative Analyst s Office.

42 California state employee salaries* By agency, US$ millions Actual ( ) Estimated ( ) Proposed ( ) Executive 1, , ,101.1 State and consumer services , ,034.1 Business and Housing Transportation 2, , ,156.8 Natural resources 1, , ,296.7 California Environment Protection Health and Human Services 2, , ,306.7 Corrections and Rehabilitation 4, , ,517.6 K thru 12 education Community colleges/other Labor and workforce development General government Subtotal, Executive** 15, , ,696.6 University of California 6, , ,772.9 Hastings College of Law California State University 2, , ,476.8 Subtotal, Higher education 9, , ,274.2 Legislative Judicial Grand totals 24, , ,486.8 * Legislative members staff benefits are included. ** 55.5% allocated to Special Fund.

43 Special Fund expenditures California, US$ millions Actual ( ) Estimated ( ) Proposed ( ) State operations 12,738 13,879 13,874 Local assistance 18,872 19,725 22,616 Capital outlay Unclassified 1,180 1,257 2,382 Grand total 33,432 35,588 39,824 Source: California Department of Finance.

44 Annual OPEB cost summary Pay-as-you-go funding, billions Fiscal Year (ending June 30) Annual cost Net employer contribution Percentage of annual OPEB cost contributed Net obligation 2008 $3.59 $ % $ $3.73 $ % $ $3.93 $ % $ $4.21 $ % $9.88 * 2012 $4.74 $ % $12.91 * Net employer contribution and net OPEB obligation estimated for fiscal year ending June 30, 2012.

45 CalSTRS funding shortfall At the December conference committee hearing, CalSTRS staff emphasized that there was no specific proposal made to address the most significant issue that the CalSTRS benefit program faces the unfunded liability in the Defined Benefit (DB) Program. - Ed Derman, CalSTRS The new funding gap, $4.5 billion (per year), moves closer to equaling the total $5.3 billion (per year) currently being paid into the CalSTRS pension fund. - Ed Mendel, Calpensions.com