“Gov. Arnold Schwarzenegger said Monday that California faces a budget gap that could approach $20 billion through June 2009, a dizzying projection that adds further confusion to the depth of California’s financial crisis.”
“The estimated gap for the fiscal year that begins July 1 already has prompted talk in Sacramento of tax increases and spending cuts that could hit classrooms, law enforcement and health care.
The new figure essentially doubles the Republican governor’s deficit projection from just days ago. California’s economy has been hammered by the slumping housing market, while soaring gas prices have cut into consumer spending.”
Schwarzenegger says Calif. faces $20 billion budget deficit [SFGate]

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Comments from “Plugged-In” Readers

  1. Posted by badlydrawnbear

    could this be the fiscal crisis that ends Prop 13?

  2. Posted by ex SF-er

    rediculous.
    it’s always the teachers and firefighters and police people that go first.
    I’m sure there’s no room to cut from anywhere else, like the bloated govt itself.
    unfortunately, some of the cuts are going to have to come in the form of public workers pensions/compensation. people in the public sector simply make too much money when they are not working.
    Note: I am not arguing whether or not they “deserve” to make money, I am arguing that California cannot afford to PAY them that money.
    simply put: California simply cannot afford it’s lifestyle. That said: I’m sure they’ll just pass more bonds.

  3. Posted by San FronziScheme

    Nah. Prop 13 cannot be repealed that easily. Personal interest would be the only thing that would kill Prop 13, and it is not gonna happen.
    The only way the majority of homeowners would be against Prop 13 would be if they ever paid more than if the taxes were indexed on prices. Say the prices go down 40%, then plenty of homeowners would be angry at the taxes vs. current value.
    But this cannot happen, as you can have your property re-assessed on the down side and therefore lower your taxes. It’s a safety valve and it will be used more and more in this market.
    The re-assessment issue is gonna hit the state coffers in the next 2 years.
    Prop. 13 is just a plain bad idea.

  4. Posted by NoeValleyJim

    This budget problem would not even exist if California still had the VLF (car tax) that Schwarzenpoodle repealed as his first executive act. Can we start a petition to have him impeached already?

  5. Posted by dissent

    Prop 13 covers commercial property, which is absurd.
    Prop 13 could be repealed for commercial property, if people had to choose between cops, schools, and continuing their love for kissing rich b*tt.

  6. Posted by FSBO

    Schwarzenegger needs to take a Texas chainsaw to the state budget. It’s the most bloated state budget in the US – and we shouldn’t be burdened with higher taxes to maintain this inflated condition. Yes, some homeowners are unfairly benefiting from Prop 13 – but the rest of California’s taxes and fees are totally out of control. We already have the highest state income taxes rates and the highest sales tax rates in the country and among the highest business taxes. Same with our gas taxes and vehicles fees, etc.
    Spending needs to be slashed everywhere. And taxes need to be reduced eventually. And speaking of bloated budgets, it’s nice to see that our mayor is going on a 9-day international trip. It’s truly amazing how many city officials take these international junkets. I guess the costs can be covered with higher parking fines and the new fines for having visible garbage cans. I’m sure there are no other pressing matters that need attended to here at home.

  7. Posted by Mole Man

    Go ahead and pass bonds. That market is almost dead. The only sales are of smaller bundles of bonds at very high interest rates. This is the same wall that other states have already been hitting. The longstanding structural deficit is going to have to be dealt with. Even prison guards might be at risk of some cutbacks.

  8. Posted by dub dub

    There needs to be a Godwin’s law applied to real estate and prop 13 discussion.
    What evidence do we have that a repeal in prop 13 will fix any budget problem? I pay about 15% extra a year in “special assesments” on top of my property tax, and pay a hefty sales tax too. Will those magically go away? Will rent control? How do I know the county will spend my extra taxes wisely? Etc.
    Think about it: if the RE slump is causing revenues to suffer now (when “unsold” properties do not materially participate in marginal revenue generation because of prop 13), then this is a problem with taxes collected on homes sold within the “last few years”. If *all* homes were participating in marginal tax generation, the shortfall would be *worse* (more reassessments, etc).

  9. Posted by Spencer

    repealing prop 13 is a great idea to help the budget crises.

  10. Posted by "Dave"

    Oh no. Here comes a Prop 13 debate. Run.
    I don’t know a lot about budgeting but don’t voters dig their own holes in California? We seem to pass every spending bill via ballot propositions and bond measures. We can’t exactly take the budgeting process out of the hands of politicians and then blame them for screwing up the budget, can we?

  11. Posted by CR

    Is anyone surprised? Give your money to someone so they can give it to someone else but no one is happy with any of the results. No wonder why jobs are flying out of California. It’s amazing!

  12. Posted by Mike B

    IMHO, prop 13 could be repealed since I imagine a majority of voters in CA do not own homes. It would just be hard to get them to the voting booths since no one would pay for the anti-prop 13 ads.

  13. Posted by Rillion

    Yeah, lets repeal prop 13 because the main problem we are having right now is homeowners are sitting on their homes rather then selling them. There isn’t enough supply of unsold homes so we need to do everything we can to make it more expensive for homeowners to continue owning.
    Also repealing prop 13 and its limit on what the percentage the property taxes can be will really help new homeowners when the ~1% tax rate gets jacked up to 2% so governments can balance their budget.

  14. Posted by Dude

    Some misinformation here.
    First off, the majority of Californians do own their own homes. Outside of egregiously overpriced areas like SF and westside LA, California’s homeownership rate is probably close to the national average of ~60%.
    Second, the segment of Californians that most benefit from Prop 13 are long-term owners with limited incomes (i.e. seniors and retirees). And they all vote.
    Finally, with property values down significantly across most parts of the state (Sacramento/Central Valley down ~36%, San Diego down 20%+), the percentage of homeowners who are “in the money” on their Prop 13 option is down, and continuing to fall. So the amount of people displaced by repealing it would be low if the decision was timed correctly. And most of the displaced could probably sell their homes for a huge windfall if that happened anyway.
    If there’s ever a good time to push for a repeal of Prop 13, it’ll be at the bottom of the real estate cycle when it serves the least benefit to most Californians. Not to say that it will ever be repealed. Or that our government would spend the new money wisely. Those are separate discussions.

  15. Posted by David

    Oh please. How come Californians have the 11 highest tax burden, but are 4th from the bottom in infrastructure spending per capita? The state just wastes money like the farmers waste water.
    School spending is out of control, and there is no return on those dollars wasted.
    Want to balance the budget? You have to cut gov’t employees & their benefits. Period. Convert everyone to 401(k)’s like the rest of us. Cut retiree health benefits like the rest of us. Cut ridiculous overtime rules. Furlough 1/12 bureaucrats per month and see which ones you really miss. Fire the rest. Heck, give them 1 year’s severance, it’d still help the budget tremendously.

  16. Posted by view lover

    So why is it surprising that the state would be suffering a budget deficit. Are most people not given the economy? Individual adjust, so should the state. There isn’t anymore money to go around. Increasing taxes will only rob Paul (who is also broke) to pay Peter, and Paul goes without. Most of us are Paul.

  17. Posted by JR

    Add another vote for the repeal of Prop 13. It is absolutely rediculous.

  18. Posted by NoeValleyJim

    How come Californians have the 11 highest tax burden, but are 4th from the bottom in infrastructure spending per capita?
    Prisons.
    Three Strikes has led to California spending more in prisons than anywhere else in the country. You want to cut government spending, you have to go where the low hanging fruit is.

  19. Posted by FSBO

    David – you make some excellent points – I agree with all of them. Regarding California’s ranking as the 11th highest tax burden, as bad as that is, I believe that it is based on average income tax rates (and sales tax rates) throughout the state. If you are in the top 9.3% income tax bracket and live in counties like San Francisco with a 8.5% sales tax rate, then I believe that you have the #1 tax burden in the entire country. Vermont has a slightly higher top income tax rate (9.5%) but lower sales taxes for most products – and their gas tax is lower.
    No matter how you compute it, California’s tax load is oppressive and shameful.

  20. Posted by tipster

    Prop 13 should be repealed and replaced with the following system:
    Each year, your property taxes should be reassessed, but you can get an interest bearing loan from the state to cover any increase beyond the prop 13 2% limit that never has to be paid back until the home is sold, and only has to be paid back to the extent that the home is sold for more than its basis. Overall property taxes will not be assessed more than they would under prop 13, but they are assessed to all property owners equally.
    Such a law would likely benefit more people than it would hurt, so you could likely get it passed tomorrow.
    Grandma could keep her house, but she wouldn’t be paying an obscenely low amount in taxes, only to be selling her home for an obscenely high amount, and people wouldn’t keep homes merely because they have a good property tax basis they don’t want to lose.

  21. Posted by The Milkshake of Despair

    That makes too much sense tipster. It does eat into a retiree’s “reverse mortgage” income but certainly retains the spirit of prop 13 which was to runaway appreciation from taxing retirees out of their homes.

  22. Posted by zzzzzzz

    My only hope is that the state budget crisis will pound some sense into SF voters come November when Chris Daly’s huge budget set-aside for subsidized housing appears on the ballot. This set-aside will be coming out of a municipal budget that will already be severly strained from cutbacks at the state level. Just what does Daly propose to cut in order to pay for his slush-fund for subsidized housing developers? “Affordable housing” may sound like kittens and puppies, but it comes with a big price tag.

  23. Posted by NoeValleyJim

    Daly is going to get hammered this election cycle. Both of his initiatives are going to lose. How do I know? Because I am the quintessential San Francisco moderate: pretty much everything I vote for wins here. I was actually quite surprised to find this out, since I before I moved here, everything I voted for lost. Occasionally I vote for a loser: I voted for Gonzalez. But I knew that one was going to be close.

  24. Posted by Janet

    Prop 13 is single-handedly the WORST thing for California schools and residents. I’m sick of paying more to cover for people who should be paying their own tax bills, not mooching off of the rest of us. They already have an advantage by getting their real estate for cheap. Let’s stop subsidizing those who need it the least.

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