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State tax collectors denied exemption from furloughs

Governor's office says Franchise Tax Board workers must also take three days off a month. Agency says the state will lose $550 million in revenue over the next three years because of the furloughs.

July 29, 2009|Marc Lifsher

SACRAMENTO — The state treasury is expected to lose at least $550 million in revenue over the next three years due to furloughs of the state workers who collect and audit tax collections.

As part of budget-cutting measures, Gov. Arnold Schwarzenegger has ordered most state employees to take off three days each month without pay, including the staff of the Franchise Tax Board.

Despite objections from the board, the governor ordered employees to take two days off each month starting in February and a third beginning this month. The board estimated that the loss of work time already had cut income tax revenue by $177.4 million for the spending year that ended June 30.

If the furloughs continue, the board said the backlog of dealing with tax disputes and late collections would contribute to a net loss of another $372 million over the two years after that.

Critics lambasted the governor.

"It's a terrible mistake," said Assemblyman Charles Calderon (D-Montebello), the chairman of the Revenue and Taxation Committee. "How can you require across-the-board cuts at the Franchise Tax Board and think it's not going to impact tax collections?"

Furloughs for the more than 200,000 state workers need to be "applied across the board" to save the state an estimated $3 billion, said Schwarzenegger spokeswoman Rachel Cameron.

The Franchise Tax Board has been given special flexibility to juggle its staffing so it can remain open five days a week, and it has no excuse for not meeting work targets, she said.

"State agencies and departments have a responsibility to fulfill their functions despite furloughs," Cameron said.

Though Franchise Tax Board workers and most other government workers are going without pay three days a month, a few "mission-critical" agencies, such as the California Highway Patrol and the Department of Forestry and Fire Prevention, are exempt.

Also free from furloughs are thousands of employees working for elected officers, including the attorney general, treasurer, controller, superintendent of public instruction, and members of the Board of Equalization, another tax collection agency.

The elected officeholders contend that their workers are exempt from the governor's order, although Schwarzenegger is challenging that in court.

The Franchise Tax Board asked for an exemption from furloughs, but "we were told no," spokeswoman Denise Azimi said.

The board collects both the personal and corporate income tax, which bankrolls about 70% of the state's $85-billion general fund. The estimated tax collections lost through furloughs represent about 1% of all state income taxes paid in the state.

Forcing about 5,000 people at the board to take furloughs essentially reduces an already streamlined workforce by about 15%. But the productivity losses don't stop there. An additional 289 staffers have received notices that they could be laid off in the fall.

The reductions in personnel immediately translate into lost revenue for a state that's trying to dig itself out of a $24-billion hole with an austerity budget that the governor signed into law Tuesday.

"As a department, whose only product is revenue -- voluntary and involuntary -- cuts in our operations do impact our final revenue output," Franchise Tax Board Executive Officer Selvi Stanislaus wrote on June 30 to Schwarzenegger's finance director, Mike Genest.

The state would save about $60 million in salaries by furloughing all board workers for three days per month, the board said. But cumulative revenue losses would be as much as nine times that amount.


Times staff writer Evan Halper contributed to this report.

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