California budget to benefit from Facebook IPO
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California budget to benefit from Facebook IPO
Jeremy Hobson: Facebook’s IPO on Friday is going to make a lot of people rich — and many of them live here in California.
That could be some welcome good news for the state’s budget, as Ben Adler reports now from Capital Public Radio in Sacramento.
Ben Adler: It’s budget season in California, which means there’s a different rally practically every day outside the State Capitol.
This one was on Monday, the day Democratic Gov. Jerry Brown released his updated budget proposal. And informed Californians that the state was $16 billion in the hole, instead of the mere $9 billion everyone expected. Several dozen people, including Jennifer Greppi, vented their frustrations over Brown’s proposed cuts to welfare and childcare grants.
Jennifer Greppi: These programs are how these families live and survive. It’s just – it’s really unfair to cut these programs.
With its huge deficit and years of cuts already on the books, California desperately needs some good news, as in money. That’s where Facebook’s stock offering comes in.
Jason Sisney: It’s a really big deal.
Jason Sisney runs the budget numbers for California’s non-partisan Legislative Analyst’s Office.
Sisney: Because with the IPO, there will be a series of financial transactions — beginning Friday — that will generate a lot of taxable income for a few thousand Californians.
Particularly founder and CEO Mark Zuckerberg. He could end up paying the state hundreds of millions of dollars. Facebook’s investors and current and former employees will face big tax bills, too. California’s income tax on millionaires is 10 percent, second only to Hawaii.
Sisney: It will not be a panacea — the state’s budget problems are much bigger than this amount of money. But it’s a real help and it is a bright spot in the state’s economy.
Sisney is projecting a one-time windfall of about $2 billion — roughly two percent of the state budget — with smaller amounts trickling in down the road. But he says the state could net a a billion or two more, depending on where the price of the stock ends up.
In Sacramento, I’m Ben Adler for Marketplace.
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