The State of California is a dire situation when it comes to money. California is like that college freshman who got his parents’ credit card for “emergencies” and then maxed it out. I mean, it’s bad. So now, after state lawmakers and Governor Arnold Schwarzenegger agreed to serious cuts to several programs to reach a budget deal, the governor is mandating that most state employees take three days off without pay each month.
The furloughs are aimed at cutting the state’s expenses, obviously. Most state employees can probably get by without the three days’ wages, and California can definitely use the money. Seems like a good way to help things along in this tough economy. Unless the furloughs are for the Franchise Tax Board.
The Franchise Tax Board estimates that the state treasury will lose at least $550 million in revenue over the next three years because of the furloughs for the workers who audit and collect taxes. Wait–the state is going to lose money because of the furloughs? Shouldn’t we let these people keep working?
Rachel Carmen, the Governor’s spokeswoman, says no. She says that the Franchise Tax Board has been given special flexibility in order to remain open five days a week, and that despite the furloughs, they have no excuse not to get all their work done.
The furloughs will have the effect of cutting the Board’s workforce by 15%. In addition to that, several employees have been given notice that they could be laid off come fall. The Board collects both corporate and personal income taxes, which are responsible for about 70% of the state’s $85 billion general fund.
Ok. So we know that the state will lose some revenue due to these furloughs. But let’s do a little cost benefit analysis, here. If the money saved by enacting the furloughs outweighs the revenue that’s lost, then it’s worth it. So how much money would the state save due to the furloughs?
Revenue losses would be as much as nine times that amount.
Now, I’m pretty sure that the Governor doesn’t have an economics degree, but he should be able to figure out that $550 million in revenue is a lot more than the $60 million that would be spent collecting that revenue. So why the furloughs? I don’t know. I’m sure that the Franchise Tax Board won’t be able to get all their work done with a 15% workforce reduction, and it will get worse if employees are laid off in the coming months. No matter what the Governor’s spokeswoman says, the state will lose revenue. I think it’s time to reconsider these furloughs…maybe I should run for governor.