Are Lottery Bonds a Good Bet?

May 6, 2009

Lawmakers upped the ante on Proposition 1C today. February’s budget deal assumed $5 billion in proceeds from the sale of lottery bonds would help close the 2009-10 budget gap, but lawmakers are contemplating raising that figure to $10 billion.

The bet that voters are being asked to make on Proposition 1C is whether California can dramatically increase lottery sales. However, recent declines in California lottery revenues reflect trends in other states and may cause bond investors to hesitate. California lottery revenues fell by 7.4 percent in 2006-07, by 8.1 percent in 2007-08, and by 6.7 percent in the first six months of 2008-09. In 2008-09, per capita lottery sales fell in 17 of the 43 states with lotteries, and average per capita lottery sales in states with lotteries west of the Mississippi River decreased by 2.4 percent.

The decline in lottery sales mirrors a national trend of slower growth in gaming revenues: horse racing wagers in the US declined by 10.1 percent from $15.2 billion per year in 2003 to $13.6 billion in 2008 and gaming revenues in Nevada decreased by 1.9 percent in 2007-08 and by 14.0 percent in the first six months of 2008-09.

Declines in California lottery and national gaming revenues may cause investors to demand higher rates of interest to purchase lottery bonds. This increased cost of borrowing would mean a greater share of each lottery purchase would go to pay back investors. If this were to occur, the state budget would be less likely to benefit from lottery sales – a selling point for Proposition 1C proponents. Indeed, as the interest rate paid on lottery bonds increases, the chance that the state budget would receive dollars from the purchase of a lottery ticket becomes a much riskier bet.

For more information on Proposition 1C, see the CBP’s analysis here.

– Jonathan Kaplan

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Posted by cbporg

Resources on This Month’s Special Election

May 6, 2009

Want to learn more about the impact of ballot measures up for a vote in this month’s special election? The California Endowment has posted two resources featuring CBP Executive Director Jean Ross. Jean is interviewed in a nine-minute podcast on the budget, the special election, and health that’s part of the Endowment’s HealthSpeak podcast series. Listen to it here. If you missed Jean’s presentation last week at The California Endowment’s event, Breaking Down the Ballot: The May 19 Special Election and California’s Health, you can watch it here:

Over the next couple of days, be sure and check the Los Angeles Times’ Dust-up series.  Jean will be posting a series of columns about Proposition 1A and its impact on California.

– Lisa Gardiner

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Posted by cbporg

The Budget Pivot

May 5, 2009

Press reports suggest that proponents of the six measures appearing on the May 19 special election ballot have narrowed their focus and will target spending for the remainder of the campaign on Propositions 1A and 1B. This is interesting, and perhaps surprising, since neither Proposition 1A nor 1B would have an immediate impact on the budget; while the dollars associated with Propositions 1C, 1D, and 1E were scored toward closure of the 2009-10 budget gap.

– Jean Ross

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Posted by cbporg

A Step in the Right Direction

May 4, 2009

Earlier today, President Obama released a set of proposals that would crack down on offshore sheltering of corporate income. The Administration’s proposals include denying tax deductions for expenses used to support overseas expansion until firms pay U.S. taxes on the profits from those investments; eliminating loopholes for “disappearing” offshore subsidiaries through the so-called “check-the-box” rules; beefing up tax withholding, burden of proof, and penalties provisions targeting individuals who evade taxes through the use of offshore tax havens; and allocating additional resources to the Internal Revenue Service for efforts to stem offshore tax evasion.

To the extent these provisions limit offshore sheltering of corporate and personal income, California stands to realize a modest gain in state tax collections. Interestingly, the Wall Street Journal reports that several California-based companies – Google, Hewlett-Packard, and Cisco Systems – are among the firms that have benefitted from tax provisions that have allowed companies to legally avoid paying taxes on their earnings by parking them in offshore tax havens.

It is not clear what, if any action, California lawmakers must take to benefit from the new proposals, which are already garnering opposition from beneficiaries of the current treatment. But let’s hope that this is one bandwagon that state officials don’t let pass by.

– Jean Ross

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Can Workers Afford to Answer the Governor’s Call on Swine Flu?

May 1, 2009

Governor Schwarzenegger is asking all Californians who get the flu to stay home from work, to minimize the spread of the swine flu virus. Public health officials always recommend that people with the flu minimize contact with other people, but the rapidly evolving global flu outbreak gives this advice new urgency. However, it may be hard for the 5.4 million California workers who don’t have paid sick leave to follow this suggestion. When forced to choose between a paycheck and an unpaid day at home, many Californians may feel they cannot comply with the public health standard if it means sacrificing income they need.

Nationally, only one in five low-wage workers (21 percent) has paid sick leave. Restaurant staff, who work directly with the public (and the public’s food) all day, are the least likely to have paid sick leave – only 15 percent do.

San Franciscans should have an easier time complying with the Governor’s request. Under an ordinance adopted in 2006, all workers in San Francisco can take up to nine paid sick days – up to five days in firms with fewer than 10 employees – per year when they are sick, to get preventive health care, or to care for someone in their family who is sick.

This unfortunate situation is a good reminder that sick leave benefits are a public issue, not just a private one.

– Vicky Lovell

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Posted by cbporg

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