After a decade marred by ballooning budget deficits, rising unemployment and swingeing cuts in public services, Californiaâs economy may have finally turned a corner.
The state was hit hard by the financial crisis, with the rate of mortgage foreclosures and unemployment much higher than the national average. Regular budget deficits forced the state to slash public services and two years ago it even had to offer IOUs to its creditors in lieu of cash.
But jobs growth in the Golden State, an economy larger than those of India or Russia, has outpaced the national trend in the US in recent months. Californiaâs Legislative Analystâs Office is projecting a $1bn budget surplus by the 2014-2015 fiscal year, as $6bn of new tax revenue is due to flood into state coffers after voters passed a staggered tax increase on individuals and families earning more than $250,000 and $500,000 a year.
The LAO said years of spending cuts, the new taxes and an economic recovery had âcombined to bring California to a promising moment: the possible end of a decade of acute state budget challengesâ.
The passage of Proposition 30, which increases the top rates of tax with new money ringfenced for the stateâs ailing education system, was a big victory for Jerry Brown, Californiaâs governor. Mr Brown has urged Barack Obama, president, to consider the stateâs election result â and the willingness of California voters to sanction new taxes on the wealthy â in his negotiations with Republican congressional leaders over the so-called fiscal cliff.
But critics of Proposition 30 say it could prove harmful to California and should not be replicated at the national level.
âDramatically increasing taxes on entrepreneurs and small business owners, as Prop 30 does, is going to hasten the exodus of employers from California to other states, and the jobs and tax revenue will go with them,â said Darrell Issa, a Republican congressman in the state, in an emailed statement.
âRepeating that mistake on a national scale will force those jobs overseas to countries where the business climate is more favourable.â
A spokesman for Mr Brown responded that Republicans liked to âdrone onâ with complaints about California. âWeâre leading the nation in job growth and Mitt Romney just spent Thanksgiving at his home near San Diego,â he said. âThere is only one Golden State, and it will continue to be a magnet for people all over the world â including former Republican presidential candidates.â
http://www.ft.com/intl/cms/s/0/bd7eeb8c-3d66-11e2-b8b2-00144feabdc0.html
The state was hit hard by the financial crisis, with the rate of mortgage foreclosures and unemployment much higher than the national average. Regular budget deficits forced the state to slash public services and two years ago it even had to offer IOUs to its creditors in lieu of cash.
But jobs growth in the Golden State, an economy larger than those of India or Russia, has outpaced the national trend in the US in recent months. Californiaâs Legislative Analystâs Office is projecting a $1bn budget surplus by the 2014-2015 fiscal year, as $6bn of new tax revenue is due to flood into state coffers after voters passed a staggered tax increase on individuals and families earning more than $250,000 and $500,000 a year.
The LAO said years of spending cuts, the new taxes and an economic recovery had âcombined to bring California to a promising moment: the possible end of a decade of acute state budget challengesâ.
The passage of Proposition 30, which increases the top rates of tax with new money ringfenced for the stateâs ailing education system, was a big victory for Jerry Brown, Californiaâs governor. Mr Brown has urged Barack Obama, president, to consider the stateâs election result â and the willingness of California voters to sanction new taxes on the wealthy â in his negotiations with Republican congressional leaders over the so-called fiscal cliff.
But critics of Proposition 30 say it could prove harmful to California and should not be replicated at the national level.
âDramatically increasing taxes on entrepreneurs and small business owners, as Prop 30 does, is going to hasten the exodus of employers from California to other states, and the jobs and tax revenue will go with them,â said Darrell Issa, a Republican congressman in the state, in an emailed statement.
âRepeating that mistake on a national scale will force those jobs overseas to countries where the business climate is more favourable.â
A spokesman for Mr Brown responded that Republicans liked to âdrone onâ with complaints about California. âWeâre leading the nation in job growth and Mitt Romney just spent Thanksgiving at his home near San Diego,â he said. âThere is only one Golden State, and it will continue to be a magnet for people all over the world â including former Republican presidential candidates.â
http://www.ft.com/intl/cms/s/0/bd7eeb8c-3d66-11e2-b8b2-00144feabdc0.html
