Despite UC Budget Increase, Expect Even Worse Calif. Financial Woes


Alexander Yu
Staff Writer

The good news: Governor Jerry Brown’s proposal for the University of California provides it with about $6.4 billion in funding for the 2012-2013 fiscal year, roughly a 5 percent increase from last year. This means (generally) that the University system would be admitting more students, providing more financial aid, expanding class sizes and options and hiring more skilled faculty.

The bad news: Despite this general increase in funding for public education, in the wake of the governor’s abysmal financial woes, many are still doubtful that his arithmetic skills will again fall short in the future. For now, California has fallen quite a bit short of its expected receipts. This past week, the governor released a statement that California’s budget deficit for this year has nearly doubled to the princely sum of almost $16 billion, 17 percent of its current budget of $92.6 billion.

What does this mean for California? Since states cannot print their own money, the individual state is responsible for managing its own receipts and balancing its budget. And with some estimates of our total debt coming in above $90 billion, lots of government programs will be cut in the future. A small business that is in deep debt will cause pain and suffering to those who constitute the organization. Governments that are in deep debt will undoubtedly do the same for the citizens who constitute their populations.

Most notable in California’s current financial shortfall are corporation taxes and personal income taxes, both falling short of estimates by 7 percent and 6.2 percent, respectively, constituting a total of $3.3 billion lost from California’s income receipts. And in the wake of a “Greece or Spain”-like financial crisis, the last thing the people of California need are higher taxes on the small businesses that spur the job creation within the state.

In addition, our state isn’t winning any businesses partnerships any time soon. This past September, the online retail giant Amazon agreed to a one-year sales tax exemption for purchases made in the state of California, threatening to move business affiliates and jobs away if taxed.

Should Governor Brown’s tax increase on the wealthy pass, it would only serve to further drive away those who contribute the most to California. Many people who make more than $250,000 own small businesses and consequently, provide much of job creation efforts within the state, offering employment and distribution of wealth to those who work. Cutting their budgets through increased taxes means that they will be forced to relocate to other states with more prosperous business atmospheres and leaner regulation, such as Texas. As a result, this will cause the tax base to shrink, resulting in lower incomes to the state than previously expected, and beginning a snowball effect of further increasing taxes, driving away more and more people who seek wealth in the state.

The prosperity of Texas is a fantastic example of how California’s economy is headed in the wrong direction today. The Lone Star State’s highest income tax rate is 7.9 percent, while California’s is pending to reach a national high of 13.3 percent. According to the U.S. Census, Texas has added roughly 1.2 million jobs to its labor pool since 2000, boasting a better-than-average unemployment rate of 7 percent in March. California, on the other hand, currently has 300,000 fewer jobs today than in 2000 and has 11 percent unemployment- the third worst rate out of all 50 states. The only difference is that California has some of the best weather in the U.S., but without a strong economy, potential permanent residents become only temporary guests, taking their money elsewhere.

Chuck DeVore from Fox News has explained that the financial mismanagement of Jerry Brown has forced him to relocate to a different state, and many individuals including myself are considering following suit. Without immediate government deregulation and spending cuts, I fear the gleam of the Golden State will quickly become tarnished and fade away. We as citizens of the state need to hold the Governor responsible for his inefficient and self-destructive economic policies.