Taxable Talk

I'm leaving tomorrow for a ten-day vacation. Will California's legislature have a budget by the time I return?

Republicans in the State Senate want a balanced budget. State Senator Tom Harman (R-Huntington Beach) told the Flash Report, "Senate Republicans have placed on the table for consideration by the Democrats a plan that reduces the operating deficit to zero." That's what the Republicans want.

The GOP budget proposal has cuts—cuts in welfare spending, cuts in unfilled positions in state government, and cuts that do not impact education, public safety, and environmental programs.

However, the Democrats don't like these cuts. They hit Democratic constituencies, so they oppose them. However, for any budget to pass the legislature, it must have a 2/3 vote in each house. Though the Democrats have a majority in each house, they must get Republican votes to pass a budget.

The GOP is united, and part of this stems from a silly stunt that State Senate President Pro Tem, Don Perata, did. He locked the entire State Senate in the chamber for 30 hours, figuring that by doing so he would force two Republicans (the number needed to defect to pass the budget) to join with the Democrats.

It backfired.

Meanwhile, in coming days we will see more impacts in California. I don't know if we will see a state government shutdown (such as occurred earlier this year for a few days in Pennsylvania or last year in New Jersey). This will hurt government workers.

California does need to look at the budget and view it honestly. A balanced budget is required under the state constitution. It would be nice if our legislators in Sacramento actually obeyed the law.

As to the chance there's a budget on August 6th (when I return), I think the odds are still even money.

California is still without a budget, and the battle will not end until Wednesday at the earliest. The State Senate recessed Saturday with Republicans refusing to budge.

California requires a 2/3 vote in each house of its legislature to pass the budget. While Democrats have a sizable majority, they must get some Republican votes in each house. The Assembly approved the budget with a few Republicans crossing over. However, the State Senate has not.

To date, legislative aides and state contractors have felt the biggest sting from the battle in Sacramento. However, it will likely start impacting more as the days go on. A good source for the Republican viewpoint is the Flash Report Blog.

State Senator Bob Dutton (R-San Bernardino) told the Flash Report Blog, "This budget must have a zero-deficit." Given that the budget has a $5 Billion operational deficit, it looks like when I head on vacation next Saturday there won't be a budget.

I used to reside in Tulare County, located in California's Central Valley. It's prime agricultural land. It's also one of the poorest counties in California. And the county will need to find $327,000.

The Dinuba Redevelopment Agency is funded through property taxes paid by various businesses in Dinuba. Unfortunately, the Tulare County Assessor misclassified some businesses in 1998. The error was discovered in 2004, and corrected. The Dinuba Redevelopment Agency asked that the error be fixed retroactively (so that the agency would receive $327,000); the county refused.

Dinuba took the case to court, and lost in Tulare County Superior Court. They appealed, and won at the 5th District Court of Appeals. Tulare County then appealed to the California Supreme Court; that court upheld the appeals court decision.

So it is important to check your property tax bills...both for the counties sending them to taxpayers and for taxpayers receiving them.

News Story: Tulare Advance-Register

In nine days I go on vacation. I think it's even money as to whether or not California has a budget before I leave.

Of course, California is supposed to have a budget signed by June 30th, but that deadline is rarely met. However, it appears that progress is being made...lubricated by wine.

The Sacramento Bee reports that Assembly Speaker Fabian Nunez has used wine to help Democratic and Republican leaders to come to an agreement. Even though the Democrats control both houses of California's legislature, they must get Republican votes in order to pass a budget—the budget must pass by a 2/3 vote. Republican leaders want an end (or, at a minimum, a drastic cut) to California's $1.5 billion operating deficit.

Democrats don't want to forgo cost-of-living increases in social programs. Republicans want a balanced budget and cuts in spending. Something has got to give eventually. Already, staff workers in Sacramento have missed a paycheck.

There's one other factor that figures into the budget stalemate: California's revenues are $800 million under projections. The housing slump and the Central Valley freeze (which greatly impacts agriculture) are probably the two biggest culprits here. In any case, this also doesn't bode well for the future. California will likely face a $5 billion budget shortfall next year.

How did I miss this story from the Orange County Register?

"ANAHEIM - The former director of UCLA's Willed Body Program pleaded guilty to federal tax charges after admitting he never paid taxes on tens of thousands of dollars he made while overseeing the university's program."

Read more at Roth Tax Updates.

Spidell is reporting that California's Franchise Tax Board (FTB) has sent notices to 1,400 tax preparers who are not registered, and threatened each with a $2,500 fine. Only one problem: EAs, CPAs, and attorneys aren't required to be registered (all hold other professional licenses). The FTB has lists of CPAs & attorneys (they must register with other state agencies) but has no list of EAs, so many EAs likely got the notices.

Any EA "lucky" enough to get one of these notices should reply back to the FTB with their license information and the FTB shouldn't continue with the fine.

And let me end this with a plug for Spidell. Spidell has excellent continuing education offerings, and provides a lot of quality materials.

It's stuck in the legislature.

The California Constitution requires a 2/3 vote in each house of the legislature for the budget to be approved. While the Democrats have a majority in both houses, they do not have a "super-majority" and they must get Republican support in order for the budget to pass. So far, the G.O.P. is holding firm on, in their view, "a fiscally prudent budget."

Whether or not we see furloughs of state workers on August 1st is an open question. With the legislature back in session this week it's possible we will see some movement...but I expect this to drag on for some time.

A few years ago, the IRS introduced new Schedule K-1s. The Franchise Tax Board plans on introducing new K-1s for the 2007 filing season, so that "[t]ransferring amounts from federal K-1s to California Schedule K-1s will soon be easier."

You can see the draft K-1s here.