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Facebook stock value part of California budget house of cards

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POSTED August 4, 2012 12:52 a.m.

Facebook stock closed at $21.09 a share on Friday.

It’s down quite a bit from its initial price of $38.

That should worry you unless you are planning on moving out of state sometime in the next few months.

The house of cards that is the California budget depends on a lot more finger crossing than getting a rather irate and financially tapped-out populace to embrace sales and income tax increases on Nov. 6. It also assumes close to $2 billion in revenue from capital gains taxes when Facebook employees can legally sell their restricted stock starting in November.

No worries, mouthpieces for the state Department of Finance are saying, it’s a long way to November.

That’s like offering up words of encouragement to those on the Bataan Death March by saying, don’t worry, it’s a long way to Camp O’Donnell.

The budget therefore is based on the state hoping voters pass two tax increases in November and hoping that Facebook stock will bounce back somewhere close to $38 per share.

Ironically, the group of Californians that will probably be hit the hardest if the state’s cut of the pie from Facebook stock sales later this year fizzles are the biggest fans of Facebook - youth.

That’s because any cuts at this point are going to disproportionately target education.

It is why voting against the taxes would be a tough decision to make.

It doesn’t help that the state keeps tripping over itself losing track of money that’s been squirreled away for years, letting rogue mid-level bureaucrats bypass payroll safeguards to buyout vacation and sick time in violation of state policy, and awarding double digit pay increases to state university presidents making $300,000 a year and to legislative staff making six figures.

I do not relish the thought of the state government being brought to the point of collapse. Nor am I thrilled that for 20 years-plus state leaders ignored independent panels that recommended going away from a taxing system that relies heavily on capital gains to balance the budget. And certainly it is a major disappointment to anyone who has had to rethink how they spend money, run a business, or - in the case of local government - provide day-to-day services over the past five years while the state basically hasn’t moved one iota in the same direction. They keep going along as if the heavens will open up and start raining C-notes into the state treasury.

If there ever was a time for voters to hold their collective noses and be pragmatic it is this November.

But still, how can you keep giving money to addicts at the State Capitol who won’t even take the first step toward recovery? It doesn’t take a prophet to know that they are simply going to keep spending and running things the way they have for decades.

It wouldn’t take much to sway me to take a gamble and invest in California’s future on Nov. 6 and pay a half cent sales tax for four years and OK higher taxes on incomes of $250,000 or more.

I’m willing to take two crumbs that would be the easiest for the California Legislature to offer up. All they have to do is agree to two of Gov. Jerry Brown’s pension reforms before the election. One is reducing the benefits and retirement packages for future state hires. The other is stopping the practice of double dipping by hiring retired employees back to do what is essentially contract work. If the job is vital, make room for other people to help reduce the unemployment rolls. And if it isn’t vital, eliminate the position.

Two things and I’ll hold my nose and give Sacramento access to more money.

Brown’s pension reform plan - that has much more substance to it - has been shelved by the legislative leadership since it first was delivered last November.

If they can’t do that, then the legion of Facebook users out there in public schools and state institutions of higher learning had better light a candle for Mark Zuckerberg in his bid to pump up revenues in the next 100 days.

 

This column is the opinion of managing editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at dwyatt@mantecabulletin.com or 209-249-3519.

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