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What stock market swings can mean for California's budget


Sohn said if stock market losses continue, sectors of California's economy that rely on spending by the wealthy could take a hit. In good years for the stock market, "they spend on real estate, they are more generous with charitable giving and they buy ...


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Listen to story 00:55 Download this story 0.0MB The stock market just had one of its worst weeks in yearsThat volatility should be concerning to Californians — even those with no money in the market — because it can have an outsized impact on the state's budget. "Our revenues can fluctuate pretty dramatically with changes in the stock market," said Chris Hoene, executive director of the California Budget and Policy Center. California's Legislative Analyst's Office estimates that about 8 percent of the state's General Fund revenues comes from taxes associated with capital gains, such as growth in the stock marketIf the stock market has a bad year, so does California's budget. Hoene said Californians can be somewhat reassured by the state's rainy day fundIt has been growing in recent years, thanks in part to a booming stock market. "If this is just some short-term correction, the fact that we're still in overall good economic conditions will likely still mean that the state's revenues are pretty healthy," Hoene said.  It's not yet clear whether this recent volatility could turn out to be a footnote in another otherwise strong year for the stock market, or if it could be the precursor to a significant downturn. Cal State University Channel Islands economist Sung Won Sohn said after years of sustained growth, a dip in the stock market is not surprising — but last week's swings were unusual. "The direction doesn't bother meIt's overvaluedOf course we should have some correction," he said"But the speed and the volatility, that's what's bothering me."  Sohn said if stock market losses continue, sectors of California's economy that rely on spending by the wealthy could take a hit. In good years for the stock market, "they spend on real estate, they are more generous with charitable giving and they buy more luxury goods," he saidAnd in bad years, when the stock portfolios of wealthy Californians take a hit, we can expect to see the state's sales tax revenue go down too.  // Load In-Article Membership Appeal from AdHost scpr.VisualCampaign.enqueue('article-appeal', $('#article-membership-appeal')); // Load Embeditor embeditor = new Embeditor.Base({ Embedly: { query: { key : '0cb3651dde4740db8fcb147850c6b555' } } }) embeditor.swap() The best SoCal news in your inbox, daily. Sign up to get KPCC's Short List newsletter. Sign up Related links Stock market swings may rock more minds than wallets US stocks swing back to gains, Dow up 330 on turbulent day Dow industrials drop another 1,000 points as selling spreads The wild swings in the stock market and what it means for your retirement savings /* * * CONFIGURATION VARIABLES: EDIT BEFORE PASTING INTO YOUR WEBPAGE * * */ var disqus_shortname = 'kpcc'; // required: replace example with your forum shortname // The following are highly recommended additional parametersRemove the slashes in front to use. var disqus_identifier = 'news/story:80740'; var disqus_url = 'https://www.scpr.org/news/2018/02/13/80740/what-stock-market-swings-can-mean-for-california-s/'; var disqus_title = "What stock market swings can mean for California's budget "; /* * * DON'T EDIT BELOW THIS LINE * * */ (function() { var dsq = document.createElement('script'); dsq.type = 'text/javascript'; dsq.async = true; dsq.src = 'https://' + disqus_shortname + '.disqus.com/embed.js'; (document.getElementsByTagName('head')[0] || document.getElementsByTagName('body')[0]).appendChild(dsq); })(); Please enable JavaScript to view the comments powered by Disqus. blog comments powered by Disqus KPCC's Business & Economy coverage is a Southern California resource provided by member-supported public radioWe can't do it without you. Your contributions power KPCC Give today. The Voice of Southern California Support the voices you trustDonate now. Local US & World Arts & Entertainment Crime & Justice Science Politics Health Business Education Take Two AirTalk Off-Ramp The Frame Program Schedule Programs A-Z KPCC In Person About KPCC Contact Us Staff Directory Careers News Programs Events Support About Our Partners Terms & Conditions Privacy Feedback

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