California makes invalid assumptions to 'balance' its budget
California's budget is balanced ... or at least that is what Gov. Jerry Brown wants you to believe, now that he "temporarily" hiked taxes on all Californians by $6.8 billion last year.
This past November, after voters approved Brown's income and sales tax hike through a referendum, the state's Legislative Analyst's Office projected that California would still end fiscal year 2014 with a $1.9 billion deficit. In January, just two months later, Brown claimed in his State of the State address not only that "the budget is balanced," but that the Golden State was on track to end the fiscal year with a billion-dollar surplus.
So what exactly happened in the span of two months that added $2.9 billion to California's bottom line? Did the economy suddenly turn around? Was spending cut? Not at all. What happened is that Brown simply made up new numbers.
Brown's budget not only assumes $1.1 billion in higher income and sales tax revenues than the November projections, but it also takes advantage of an additional $1 billion in revenues that will supposedly be created by the state's new cap-and-trade program and the elimination of certain development tax breaks.
But Brown was hardly in a position to make such assumptions. Before his speech, the first round of cap-and-trade auctions had already taken place, producing only 14 percent of expected revenue. In addition, California's state controller had already released numbers in December showing that actual tax collections were 10.8 percent below projection.
Will any of Brown's magic new revenue actually materialize in state coffers? History suggests it won't. A recent California Common Sense study showed that, since the recession began, governors' budget projections have overestimated revenue by an average of 5.5 percent. Apply that average to Brown's 2013 projections, and California's budget would suddenly go from $1 billion in the black to $3.9 billion in the red.
And those are just the debts that Brown chooses to acknowledge.
...There are several items of debt that are apparently "off budget" including the unfunded pension liabilities and accumulated debts of around $28 billion. This is how liberalism works in California. If companies used this kind of accounting braud the people in control of the company would be looking at jail time.