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A view of the California State Capitol. The budget outlook is improving for the Golden State, but that doesn't mean there will soon be a lot of money on the bank.
California may declare a surplus for its fiscal year 2014 budget. Unfortunately, the state won’t be able to put money in the bank for a rainy day.
That doesn't mean its outlook isn't looking up. The credit rating agency Moody’s likes what it sees in the Golden State's improved fiscal situation. In particular, the passage of Prop 30 last November — raising incomes taxes on wealthy Californians and sales taxes on everybody — bodes well for future revenues.
But getting the budget out of deficit and into surplus doesn’t mean the state will be prepared for the next inevitable economic bust.
Moody’s analyst Emily Raimes blames a history of underfunding education.
“As revenues increase in the state in the next few years, additional revenues will have to be dedicated to bringing that education funding back to the baseline where it would have been if the state had not been doing that underfunding," she said.
Photo by guyprentice via Flickr Creative Commons
Gorgeous. You can visit, but if you want to live with this view, you'll need a million bucks.
This week, real estate tracking firm DataQuick released its annual report on the condition of the million-dollar (and up...waaayyy up) home market in California.
There was the usual drive-by-and-gawk stuff. The Woodside manse that went for $117.5 million in 2012. A 13-bathroom (is that unlucky?) palace in Bel Air. The seemingly impressive 26,993 homes that sold for a million or more in 2012 in California, a 27 percent rise from 2011.
Why seemingly impressive?
Because in 2007, the total was 45,502.
How far we have fallen.
The report also contained this astounding factoid: "Virtually all home sales in some communities were in the $1 million-plus category."
One of those communities was Santa Monica. Specifically, what DataQuick analyst John Karevoll identified as the "enclavish" zip code of 90402, where 91.2 percent of the homes sold in 2012 changed hands for at least a million bucks.
Daniel Vera, assistant manager at the Altadena Walmart Neighborhood Market, greets job seekers at the "Hiring Altadena" event.
The Labor Department released its January jobs report Friday. The country added 157,000 jobs for the month and the unemployment rate went to 7.9 percent from December's 7.8 percent.
In the words of the Bureau of Labor Statistics' economists, the situation was "essentially unchanged" from last month.
The 157,000 number was lower than what payrolls processor ADP reported earlier as well as what economists surveyed by Bloomberg were expecting. However, it was in line with the pace of job growth in the U.S. over the past 12 months.
The economy can tread water with sub-200,000-per-month job growth. To really drive the unemployment rate down to what economists call "full employment" — an unemployment rate of around 5 percent — the economy would need to add 300,000-to-400,000 new jobs each month.
California Gov. Jerry Brown speaks in support of Prop. 30 at a rally of UCLA students on campus, Oct. 16, 2012. The passage of the ballor measure in combination with fiscal discipline has led ratings agencies to re-examine California's debt.
Hot on the heels of lowering Illinois' general obligation (GO) bond debt one notch, from "A" to "A-", Standard & Poor's raised California's GO debt to "A" from "A-".
So California is now the second lowest rating U.S. state, among those whose debt S&P rates.
It was S&P's first upgrade for the state since before the financial crisis.
I talked to California Treasurer Bill Lockyer after the announcement, and he credited the combination of Prop 30 — the ballot measure passed last November that raised sales taxes and income taxes on wealthy Californians — along with improved fiscal discipline for prompting the upgrade.
Another agency, Fitch Ratings, is also keeping an eye on California's improving finances. Doug Offerman, an analyst I spoke with last year, wouldn't put a timetable on a possible upgrade, but he did indicate that Fitch likes the math Prop 30 delivers:
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Phil Mickelson speaks to reporters following play during the Pro-Am at the Farmers Insurance Open at Torrey Pines South Golf Course on January 23 in La Jolla, California. Will higher taxes drive him and other rich Californians to tax-free states?
Millionaire professional golfer and San Diegan Phil Mickelson got himself into a spot of bogeyish bother during the weekend when he said that in response to rising income taxes on the wealthy in the U.S. and California, he would have to take "drastic action."
Observers interpreted the pronouncement as a pledge to leave the Golden State for the tax-free embrace of Florida to which Mickelson's fellow native Californian, Tiger Woods, skedaddled in the mid-1990s. It also shed some light on why, after being part of an investor group that won the bidding for the Padres last year and bought the team for $800 million, he pulled up his ownership stake.
Florida is pretty much the epicenter of pro golf. Numerous touring professionals, American and otherwise, have pitched their tents there. Mickelson is something of an outlier for choosing tax-addled California and having to add to his private jet flying time when he visits the links of Europe.