ARTICLE
It is early December and the revenue wheels are churning as California, Santa Cruz County, and the City of Santa Cruz grapple with substantial budget deficits, prompting ongoing efforts to tackle these shortfalls. Various strategies are being considered, including the possibility of tax hikes, which are set to be included in measures on the March 2024 ballot. Let’s uncover what we are learning as these economic analyses begin to come public. As noted by Cal Matters reporter, Levi Sumagaysay, following the release of the Legislative Analyst’s Office (LAO) updated economic forecast, California faces a $26 billion revenue shortfall in 2023-2024 and a $58 billion shortfall for 2024-2025. (Some economists are likening it to the Great Recession of 2008.) The decline was anticipated but to what degree was not clear until this report. The LAO attributed the drop to a slowdown in investment in California companies because of higher borrowing costs due to the Federal Reserve’s repeated interest hikes. One of the big effects of that is the number of California companies that went public in 2022 and 2023 declined more than 80% from 2021. The office also pointed to stock market woes in 2022 as a factor. Those factors, combined with home sales that the analysts said have fallen by half in the past couple of years — also due to higher interest rates — have cooled the state’s economy. The decline also includes a rise in the state’s unemployment rate up to 4.8% with the number of unemployed workers climbing to 200,000 since the summer of 2022. So the various strikes and layoffs in various sectors are having an impact. (Santa Cruz County’s unemployment rate is also 4.8%. (These are October 2023 numbers; the November rates will come out later this month). All of this news comes before the Governor releases California’s 2024-2025 budget. Will there be sharp cuts in programs? Will there be an appetite to increase taxes on higher income earners and businesses? Will the governor and state legislature cut a deal to borrow dollars from the rainy day reserve funds? That debate and back and forth will begin in earnest in January when the Governor releases California’s budget. At the local level, our County and City leaders are scratching at the surface in preparing for their own budget shortfalls. Last week, as reported in our weekly eNews we noted the Santa Cruz City Council moved to place a 1/2 cent sale tax increase on the March ballot raising the rate from 9.25% to 9.75% which according to their analysis would garner $8 million/year to help assist at addressing the city's budget and services. The City continues to deliver baseline essential services to the community but also faces many situations where the services must be provided to more and more users, where new services are needed, or where resource intensive changes are necessary for an existing service. At the Santa Cruz County Board of Supervisors (BOS) meeting on Tuesday morning Dec. 5, the Board voted unanimously to place their tax measure on the March 5 primary ballot. Every voter in the county has an opportunity to say Yes or No to a sales tax increase raising the rate from 9.0% to 9.5%. According to county staff analysis, the new tax increase will bring in $10 million/year to assist the county in meeting public service needs for road repairs, county parks, and natural disaster assistance while the county awaits reimbursement from FEMA and other county responsibilities. Here is the nuance between the City measure and the County measure: The city tax vote will be only for registered voters in the City of Santa Cruz. The County measure is a vote by all registered voters in Santa Cruz County — including registered voters in all four cities. Essentially, the voter will have two votes to raise the sales tax in the City and County. If approved the tax collected would only stay within each jurisdiction. Throughout the next couple of months heading up to the March 5th Primary, the Chamber will offer information on council and board of supervisor candidates, candidates for state offices and a barrage of information about local and state ballot measures — the intent is to inform our members about the importance of voting. A reminder: the Chamber does not endorse individual candidates for office at all levels of government. However, on occasion, the Chamber will take a position on a ballot measure or local initiative that can impact the business community. One of the pillars of the Chamber is Advocacy in connection with resources and in service to the community. Stay tuned to learn more in the weeks ahead.
It is early December and the revenue wheels are churning as California, Santa Cruz County, and the City of Santa Cruz grapple with substantial budget deficits, prompting ongoing efforts to tackle these shortfalls. Various strategies are being considered, including the possibility of tax hikes, which are set to be included in measures on the March 2024 ballot.
Let’s uncover what we are learning as these economic analyses begin to come public. As noted by Cal Matters reporter, Levi Sumagaysay, following the release of the Legislative Analyst’s Office (LAO) updated economic forecast, California faces a $26 billion revenue shortfall in 2023-2024 and a $58 billion shortfall for 2024-2025. (Some economists are likening it to the Great Recession of 2008.) The decline was anticipated but to what degree was not clear until this report.
The LAO attributed the drop to a slowdown in investment in California companies because of higher borrowing costs due to the Federal Reserve’s repeated interest hikes. One of the big effects of that is the number of California companies that went public in 2022 and 2023 declined more than 80% from 2021. The office also pointed to stock market woes in 2022 as a factor. Those factors, combined with home sales that the analysts said have fallen by half in the past couple of years — also due to higher interest rates — have cooled the state’s economy.
The decline also includes a rise in the state’s unemployment rate up to 4.8% with the number of unemployed workers climbing to 200,000 since the summer of 2022. So the various strikes and layoffs in various sectors are having an impact. (Santa Cruz County’s unemployment rate is also 4.8%. (These are October 2023 numbers; the November rates will come out later this month). All of this news comes before the Governor releases California’s 2024-2025 budget. Will there be sharp cuts in programs? Will there be an appetite to increase taxes on higher income earners and businesses? Will the governor and state legislature cut a deal to borrow dollars from the rainy day reserve funds? That debate and back and forth will begin in earnest in January when the Governor releases California’s budget.
At the local level, our County and City leaders are scratching at the surface in preparing for their own budget shortfalls. Last week, as reported in our weekly eNews we noted the Santa Cruz City Council moved to place a 1/2 cent sale tax increase on the March ballot raising the rate from 9.25% to 9.75% which according to their analysis would garner $8 million/year to help assist at addressing the city's budget and services. The City continues to deliver baseline essential services to the community but also faces many situations where the services must be provided to more and more users, where new services are needed, or where resource intensive changes are necessary for an existing service.
At the Santa Cruz County Board of Supervisors (BOS) meeting on Tuesday morning Dec. 5, the Board voted unanimously to place their tax measure on the March 5 primary ballot. Every voter in the county has an opportunity to say Yes or No to a sales tax increase raising the rate from 9.0% to 9.5%. According to county staff analysis, the new tax increase will bring in $10 million/year to assist the county in meeting public service needs for road repairs, county parks, and natural disaster assistance while the county awaits reimbursement from FEMA and other county responsibilities.
Here is the nuance between the City measure and the County measure: The city tax vote will be only for registered voters in the City of Santa Cruz. The County measure is a vote by all registered voters in Santa Cruz County — including registered voters in all four cities. Essentially, the voter will have two votes to raise the sales tax in the City and County. If approved the tax collected would only stay within each jurisdiction.
Throughout the next couple of months heading up to the March 5th Primary, the Chamber will offer information on council and board of supervisor candidates, candidates for state offices and a barrage of information about local and state ballot measures — the intent is to inform our members about the importance of voting. A reminder: the Chamber does not endorse individual candidates for office at all levels of government. However, on occasion, the Chamber will take a position on a ballot measure or local initiative that can impact the business community. One of the pillars of the Chamber is Advocacy in connection with resources and in service to the community. Stay tuned to learn more in the weeks ahead.