Can tech IPOs save California’s budget?

Adriene Hill Mar 1, 2012

Adriene Hill: Online rating’s site Yelp is going to start selling stock to the public tomorrow. Facebook is gearing up to do the same thing later this year. And we wondered how much the sales could bring in, in taxes for the state government.

So we called up Barbara O’Connor. She is emeritus director of the Institute for the Study of Politics and Media at Cal State University, Sacramento. Good morning.

Barbara O’Connor: Good morning.

Hill: So how big of a windfall are these IPOs for states where the companies are based?

O’Connor: Well, they can be quite large. Google in 2004 was a real boon for the state — capital gains revenues increased $54 billion. And it went on for several years after that. So they can be quite large.

Hill: Here in California, we do have the Yelp IPO, and soon the Facebook IPO. How significant will they be for California’s budget?

O’Connor: Well Mac Taylor, a ledge analyst, estimated that it could be as much as $2.5 billion over a two-year period, and of course that’s significant in a state where we just got estimates that the revenues were slower than expected and we had a much larger gap than the governor’s assuming over the next two years.

Hill: So have we solved the state’s budget problem then?

O’Connor: I don’t think you do it with a one-shot, sort of windfall. It needs to be viewed as a windfall that occurs over a couple of years, and it’s certainly sizable. But the California Budget Project says, ‘don’t count your chickens until they hatch.’ And unfortunately, you know, we’re looking for any way to shore up the California budget, including raising taxes.

Hill: Barbara O’Connor, thanks.

O’Connor: You’re welcome.

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