Business and debt leading to the escalation of taxes
After the recent financial upheaval, almost all individuals and families are drowning under the sea of outstanding debt. The latest statistics from the Federal Reserve indicate that the total amount of consumer debt in the U.S. stands at nearly $2.4 trillion. These large number of debt ridden individuals are thus increasingly turning to a non profit debt consolidation program in order to come out of the over-burden debt.
On this economic situation, the California Department of Finance confirmed this week that the state’s financial year revenues will come in $2.2 billion in the month of June. However, according to Gov. Jerry Brown, out of the amount of revenue, $1 billion will be implemented in budget cuts. These cuts will include $528 million busing subsidy, $320 million from public universities, $200 million in programs from the elderly and disabled, and $79.6 from public schools.
While all the cuts will go into effect from January 1, cuts to schools will begin from February 1. These drastic reductions are the outcome of a last-minute June budget deal and now serves as political cover. This poor state affair reflects the despondent condition of business in California and provides a clear picture of state’s irresponsible budget practices as a whole.
Now California’s current budget process depends largely on the method of budget trick, especially number shifting and projection altering. In June, State Budget Solutions figured out that the governor was expecting $4 billion or more in such rosy economic forecast than the already projected $6.6 billion forecasted increase. Observers were established to be right when their prediction was $541 million off the mark by the end of the budget’s first month.
Budget tricks are employed in part because of their ability to transfer the blame from politicians to some unanticipated situations, for instance California’s miserable low-year-end revenues.
Brown has now prepared to have a general sales tax increase, along with higher income taxes on those earning more than $250,000. This new project has been placed on the ballot of November 2012. In this new change, Brown has elucidated a point that his 2012-13 budget proposal’s revenue forecast will going to include $7 billion from these extra taxes, despite the fact that their fate will not be decided till November.
The Governor has introduced a bill this year with the intention to reform the entire budget process. The legislature collectively passed SB14 that would put performance-based budgeting into operation.
Performance-based budgeting requires state agencies and departments to evaluate the overall spending measures. Measurements are then used to assess the effectiveness and efficiency of the department in achieving its goal.
When each allotment is considered as one part of a revenue pie, prioritization occurs based on the successes or failures of individual programs. However, Brown has denied believing that a state’s budget is one whole entity. According to him, effective allocation of one sum of money requires a big over-view of the entire budget along with a clear understanding of how each expenditure piles up against the rest in terms of actual outcomes and state priorities.
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