July California Tax Revenues Plunge More Than 10% Below Expectations

Tyler Durden's picture

Even as the Fed continues to pretend that keeping interest rates at zero for what is now becoming apparent will be an infinite amount of time is an appropriate substitute for the absence for the elimination of actual cash flows, we once again get a reminder that life in the real economy, there were people can not just print their way out of trouble, practical issues such as reality still matter. One such example comes to us by way of California which just announced that state tax revenue plunged in July, falling more than 10% below expectations, and as the LA Times blog says, "making it more likely that deeper cuts to public schools built into the state budget in case of a stalled economic recovery will occur." It adds: "Gov. Jerry Brown and state lawmakers patched up the final $4 billion of California’s budget shortfall this year by hoping for a windfall economic recovery. Those hopes are now fading fast. Tax collections in July were $538.8 million below budget forecasts, according to state Controller John Chiang." And just like the proposed Deficit Reduction Plan will crash and burn courtesy of the completely unknown trillions in yet undisclosed savings, so California is now waking up to a bad hangover after realizing that the deus ex machina in unidentified billions of "revenues" forgot to make an appearance.

Income taxes were up slightly, but sales and corporate collections lagged by a combined nearly $210 million. But the biggest drag was from the unidentified $4 billion that budget writers had banked on.


“Every drop in revenues puts us closer to the drastic trigger cuts that could be imposed next year," Chiang said in a statement. Those automatic cuts include a reduction in schools spending that could shrink the academic year by as many as seven days in some districts.

And unless the Fed can continue to baffle them with bullshit, by declaring that the recession is here, but it is really good for your 401(k), California's troubles are only set to escalate.

Worse, the sagging tax collections were reported before the recent stock market turmoil. The Dow Jones industrial average plunged by more than 600 points on Monday. California relies very heavily on capital gains taxes from the stock taxes.

We are confident California will survive. After all it merely need to tell its taxpayers that courtesy of ZIRP to perpetuity, they all just got much wealthier, and if not, then they should bring their grievances to the Fed Chairman. In the meantime, tax hikes, and spending cuts for the state, which has to have a balanced budget, at least on paper, are imminent.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
CrashisOptimistic's picture

The revenue shortfall in the bill is not the number in the article.

The bill was looking for "better than expected" revenues.  That is, above the baseline.

This number in the article above is Below The Baseline.

So the amount running short is not just the $600 million (FOR ONE MONTH) in the article.  It is that, plus the amount over baseline "expected".  

It's a double whammy, and it's only one month.  August will come in short too after this downgrade, Euro trash and overall crash.

They are going to fire those cut triggers, and you just watch, they will have an emergency session to not let them do anything, because "if we cut and eliminate the programs, then we won't have anything to fund when things improve."


DeadFred's picture

There are already hefty layoffs from most local governments starting July1 which are likely responsible for much of this drop in taxes. When Thanksgiving rolls around and The Super Committee is proposing new cuts California is likely to be on the verge of default. I thought the yearly drama was going to be missing this year when they actually passed a budget on time. Sadly it was based on moonbeams and stardust. Take a look at the mandatory cuts posted above. A two billion dollar shortfall? They routinely have 10-20 billion dollar shortfalls because of the fluff assumptions put in to come up with the mandatory "balanced" budget. Start thinking about investment strategies to deal with the S&P at 1000 and California about to default. How about you Bruce K., you're the guy who could come up with the "Surviving the Thankless Thanksgiving Meltdown" playbook. Something other than silver and lead, most people here have that covered.

Calmyourself's picture

They will change the law the state is run by Democrats.  Change you can vomit too..  That is why on a Federal basis Balanced Budget Constitutional Amendment makes no sense, lots of way  to go around it. 

Steaming_Wookie_Doo's picture

Right, did you catch this: "patched up the final $4 billion of California’s budget shortfall this year by hoping for a windfall economic recovery."

So the budget consisted of hoping it would be better. If I didn't live here, I wouldn't have believed it. Well, I'm sure they'll just close 412 schools and "hope for an academic recovery" as well.

DeadFred's picture

Considering the schools it may be an improvement.

Doyle Hargraves's picture

Tough to deal with those hopium addicts in sacramento...permanent state of baked thanks to that particular drug.

papaswamp's picture

Wooo that's a big crack in the dam.

Zero Govt's picture

the Progressives destroy another part of America

T I M B E R !!

youngandhealthy's picture

California = Spain

When will they have to leave the US Dollar project?

SparkySC's picture

Why in hell would they cut anything that is for kids (i.e. School budgets ).

That's insane thinking and governing.

Cut the benefits to the Old.

You're selling out the future of the Country for a bunch of old people who have already taken enough out of the USA benefit wise.

Why short KIDS??????

Give them all they need.

Cut elsewhere.


Old are NOT a Priority.

Young people are.

The Future lies with them.




LFMayor's picture

Because kids don't vote
Kids don't decide to pack up their shit and move out of state

and Charlie DON"T SURF

AcidRastaHead's picture

Our future just got more stupid by 7 days.

Navigator's picture


Why would California cut education for kids Sparky?  

Because that's the way Republicans insist it happen and they hold everything in a state hostage in order to get it.  If you haven't seen it yet, it's coming to your state soon.  

Why?  Because Republicans and their corporate owners desperately need votes....and educated adults don't vote against their own best economic interests in order to enrich corporations.

divide_by_zero's picture

Pretty funny, you should take a look at opensecrets to see where the Democrat money comes from also(note I said also).  Brown still got an 8% INCREASE in the budget this year. There's billions in phony commissions in this state that are used as political favor payoffs that could be cut but Democrats and RINOS in this state would rather make it painful, as is the usual path.

BayAreaAlan's picture

I don't know what California you have been looking at, but republicans have little input, much less, hostage-taking ability, in California. Yes, they delayed a budget, but caved in the end.

dwdollar's picture

LOL..  you need a '/sarcasm' after that because I know you're just kidding.

SparkySC's picture

Anyone who has cast a vote for a Republican or Democrat in the last 20 years is a complete and utter FOOL.

They're ALL the SCUM-SCOURGE of Society today in the USA.

The 2-Party system is a Fossil.

The worst of the worst are the Wil E. Coyote 'geniuses' that vote strictly down party lines.



The Old Raisins in Congress are what is EXACTLY what is wrong with Society. 

They don't give a crap about what they do, because they're not long for this world anyways.

They pull the old knob Repub/Democrat network B.S. and don't even try to use their ill-firing brainstems.


When there was enough going around, sure you can keep them around so they can go to the casinos in every State and supply these companies with Slot revenue, but now when there isn't enough for everything....




You have to make difficult decisions in times like these, and people should be cognizant that the Old Crones in power will attempt to Take it All with them.  




Bicycle Repairman's picture

Sparky, the current "education" system is gold-plated compared to 40 years ago and everyone knows it.  The results delivered are not commensurate.  Time to rationalize the system.  Bend over.

Things that go bump's picture

I have a relative who is a middle school teacher.  She tells me they don't have time to actually teach much these days as most of their time must be spent teaching those poor children how to pass the standardized tests. They no longer teach cursive writing, as there isn't time.  They don't teach how to tell time on a regular clock or how to make change or how to do math without a calculator.  I shudder to think what else they aren't teaching, and what exactly are they teaching in place of the things that were once considered the basic necessities for any child.  

Doyle Hargraves's picture

Depending on where your relative teaches middle school did she mention how much extra time she has to spend teaching the non native english speaking kids how to speak/read/write english?! Did she also happen to say about how much she gets paid in comparison to other teachers across the 50 states? I think that would probably put the correct spin on that top...

Things that go bump's picture

She has an advanced degree and teaches reading in Florida.  When she told me she taught reading to middle schoolers, I said surely she taught English or literature, but no, she teaches reading.  Apparently, there are middle school-aged children who are not functionally literate to any useful degree and such children are in sufficient numbers that full-time teachers must be employed in middle school to rectify the deficiency.  She said it had something to do with the students not having grasped the way vowels function. I don't really understand how a child can make it as far as middle school without first mastering that one absolutely essential skill.  

Doyle Hargraves's picture

Well I guess if you have to employ remedial action to get kids up to speed it kind of explains how adequate the system below that is.

The Hawk's picture

You need to read Atlas Shrugged... I can't even respond to a Californian... The US was not created on the principles of giving money to poor people who didn't take care of themselves.  People who sit on their asses and collect their entitlement checks every month, paid for by the working class.  Those entitlement checks need to be cut by more than half... We live in a freaking nanny state... 

dolly madison's picture

I have read Atlas Shrugged and pure selfishness is not the answer.  You need to watch the Shock Doctrine on youtube. 

We are all fighting over scraps because a few are making it this way.  Quit fighting over scraps, and fight to fix the system.

AssFire's picture

Whatever you say Mrs. Rearden..ah, Dolly. You could not have read the novel and still have your attitude. You are talking about fixing CAPITALISM.

The answer is limiting GOVERNMENT, especially it's illegal seizure of half our efforts EVERY YEAR.

AssFire's picture

Hawk, I read it and now I'm on the Fountainhead.. I believe it should be required reading. One cannot help but notice this commie shit coming true..blue ribbon panels from government institutes and central planners blaiming all ills on the greedy money makers.

With all the money on the sidelines (or in gold) there is no other way to put it: Atlas has shrugged. We may not have a Gualt's Gulch to move to but we certainly have no desire to make more than necessary (especially is it means having 50+ employees) or risking our assets for the sake of the looters.

divide_by_zero's picture

Why not? Hasn't been much educating going on here for quite some time, just babysitting and indoctrination.

Mashuri's picture

+1T w/ ZIRP


I can't wait for the day Big Brother's child-indoctrination prison system collapses.  I'll be blasting some Pink floyd when it happens!

CrashisOptimistic's picture

There is no future.

The kids will be dead soon, along with many older folks.

Why spend money on kids about to die?

Pay Day Today's picture

Maybe an Apple Tax is in order. You know, a .8% tax on their cash reserves would cover it.

Cathartes Aura's picture

most likely Jobs & Co. will just set up "foundations" like BillG, where they can do their "global influencing" under the "philanthropy" banner. . .

*cough* useless eaters *cough*

'sides, all these "social networking" devices make the sheep so easy to "tag" now.  god's work, ayup.

sun tzu's picture

Maybe a tax on the government is in order

i love cholas's picture

You are pissing on your future self.

chubbar's picture

In case you weren't being sarcastic let me give you an idea of what my local high school is all about.

First, it's brand new, floated on bonds backed by the state gov't which is now backing down from the deal. It is built on land that was owned by one of the local "families" which was bought at the peak of the market at an exorbinate price and built with a budget that would be more likely found in a big city (town of 10K). You can be SURE that no one was paid off and everything was at arms length with THAT transaction!

Besides being "plush" it houses a machine shop that is the envy of any major manufacturer in the state (NH), a greenhouse because kids just HAVE to know how to grow veggies, a day care center so the teenagers know how to raise their illegitimate offspring, an auto shop with no less than 10 lifts and tools that would make ford auto co drool, several fields for the athletics with stands/score boards to boot, a massive auditorium for plays, etc, a computer room that is probably as sophisticated as something at DELL along with all the other incidentals that you can only dream of as a 14yo attending high school. Of course the kids are no better at reading/writing or math, score low on the state acheivement exams and are semi literate as a group but who wants to quibble over that unimportant nonsense?

The teachers just negotiated a 3% pay raise along with the rest of the frauds working there but hey, at least the rest of the folks who are the ones stuck paying their salary just had their property taxes jacked 15% to pay for this shit!

Yeah, by all means protect the kids!   The fucking country can't crash fast enough IMO!!!

I want to see all these fuckers (the adults responsible for this crap) blowing bums down by the wharf for their rent money before this is over!

Bicycle Repairman's picture

"I want to see all these fuckers (the adults responsible for this crap) blowing bums down by the wharf for their rent money before this is over!"

I feel your pain.  Post a video on YouTube when you get one.

Matte_Black's picture

I want to see all these fuckers (the adults responsible for this crap) blowing bums down by the wharf for their rent money before this is over!

Bums down by the wharf can afford to pay for blowjobs? Where does one apply for the position of 'Bum' on this wharf, sir?


macholatte's picture

Damn near eloquent, Chubbar.


StychoKiller's picture

So, I gather you're NOT in favor of Public Education being run by the Govt!

Check out: "Some Lessons from the Underground History of American Education"  by John Taylor Gatto, found in "Everything You Know is Wrong",  ISBN 978-1-56731-637-7, pgs 274-287

coded language's picture

Educated, critical thinkers are dangerous. They might catch on to the deep deception at hand.

Bicycle Repairman's picture

"Education" and critical thinking are not strongly correlated.

Calmyourself's picture

What the kids need to be educated and what the unions need to be satiated are two very different things.   It is simply back to basics, we did fine with no 30K smartboards in our classrooms, so will todays children.

DeadFred's picture

Old people vote

Kids ride skateboards

Doyle Hargraves's picture

Cutting 7 days off the school year is just 7 days less of indoctrination coupled with 'diversity' and 'sensitivity' training. Actually made it better so the kids can learn about real life things they will actually use those 7 days they are out of the camps. Of course if they were really serious about stopping the cuts and the 'educators' were serious about educating they would ask their union to take a large enough cut from their salary or even union dues to facilitate those 7 days of 'learning' since they are the highest paid 'educators' in the nation on average, and the hardest to terminate if they are lousy at their job.

kito's picture

how is that CALPERS prediction of 7.75% returns looking these days???? ouchhhhhhh......