Though a recovery does seem to be under way for the overall economy of the nation, California's budget concerns will last well into the middle of the decade, according to a report from the state's chief budget analyst released last week. Tax collections have slowed, but revenue won't fully recover until at least 2015. The state's government is currently looking at a deficit of nearly $21 billion. Sacramento, in particular, will be unable to restore financing that has been cut to middle, elementary, and high schools, universities, healthcare, and social services.
One reason the recovery will be so low in coming is that California is at the heart of the real estate crisis and the vast wave of foreclosures. And, the economic troubles in Sacramento will have a major impact on the state's economy as a whole. Californians must accept that the state now has higher taxes, and offers less services, than before the real estate boom. It will be interesting to see just how much they will take.
Fourteen people were arrested last week for their part in a rowdy protest of a 30 percent hike in student fees at the University of California. One member of the California Teachers Association has called the cuts to the state's K-12 budget "amputation". And, experts say that the state is still unable to afford what is being spent, and that further budget cuts and tax hikes will be necessary. The new budget revelations come less than four months after lawmakers and the Governor agreed on a plan that mostly contained accounting tricks. The plan has failed miserably.
Governor Schwarzenegger said last week there will be across the board cuts in spending when he unveils a plan to address the $21 billion expected deficit in January. The deficit could grow even higher in the next few years, as temporary tax increases expire and the state is forced to repay money borrowed from local governments around the state. One expert estimated that the deficit will grow to $23 billion by fiscal year 2012 - 2013. And that estimate doesn't account for raises for state employees or cost of living adjustments in state programs. It also assumes that the state will win all the pending court cases challenging billions in service cuts. So, it's fair to say that the estimate could be a little on the conservative side.
Republicans are opposed to the new taxes which Democrats advocate to move toward a balanced budget, claiming that the hikes will only serve to drive businesses out of the state. They claim that if the state instead eases regulatory demand and lowers tax rates, businesses will be drawn to the state and improve the budget crisis in the long run. The crisis has also led lawmakers to look to Washington, DC for help. Most of the federal assistance that helped ease this year's state cuts is getting ready to expire.
One official from the California Budget Project, and advocacy group representing lower income Californians, said that a second round of federal assistance will be needed. That may be hard to come by, as Washington conservatives have serious questions about the success of the first round of aid. Many in Washington believe that California has severely mismanaged their finances, and it will be difficult to convince representatives of other state, who have managed their finances more soundly, to come to California's aid.
Ron Parks has been buying Marin real estate for 27 years. Year after year he is one of Marin's top real estate agents. Ron specializes in all areas of Marin County, including Belvedere and Mill Valley.
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