California dreaming; school budget woes

This summer, we moved our venture fund to Texas and my wife and I moved back to Washington. Apparently I’m not the only one that left California this year. With high combined personal and business tax rates and an incapable Assembly, California has become a terrible place to do business.

Look around LA, there are few Fortune 500 companies left. While LAUSD is engaged in the biggest public building project in history, the overcrowding problem is beginning to be solved by the steady exodus to more business friendly climates.

In an effort to deal with a disastrous budget deficit and improve the business climate, Gov. Schwarzenegger’s tax commission issued recommendations yesterday that will be considered in a special session. Let’s hope the Assembly gets this right but I’m not optimistic.

On a related note, the WSJ reported a 17% drop in state revenues in the second quarter—the biggest drop in more than 40 years. The massive decline affected nearly every state. This is bad news for schools. Property taxes are likely to ratchet down for another year or two as foreclosures are factored into the tax rolls and income taxes will lag employment gains that may not pick up substantially for another year. This spells two or even three years of tough education budgets. Stimulus funds will help but will likely cause some states and school districts to cope with the dilemma of deficits in some accounts and surpluses in others.