SACRAMENTO, Calif. (AP) — California Gov. Jerry Brown’s administration and state lawmakers are hailing Facebook’s much-anticipated plans for a public stock offering as a potential windfall for California’s cash-strapped treasury, while some already say the extra revenue should go to preventing cutbacks to public schools.
“If it is as big as it is being billed, then on behalf of a grateful state, I will go to Mark Zuckerberg’s house and either wash his windows or mow his lawn,” said Mr. Brown’s finance spokesman, H.D. Palmer, of the California-based social-media giant’s Wednesday announcement.
Facebook’s filing with regulators indicated it hopes to raise $5 billion in its IPO, the most for an Internet IPO since Google Inc. and its early backers raised $1.9 billion in 2004.
California’s nonpartisan legislative analyst’s office estimates the state stands to reap hundreds of millions of dollars - perhaps more than $1 billion - in the near term from newly wealthy Facebook investors and employees profiting from stock transactions.
That could bring a much-needed windfall to a state government facing a $9.2 billion deficit.
Republican state legislative minority leaders Bob Huff and Connie Conway issued a statement Wednesday saying the state should use tax revenues related to Facebook’s IPO to pay for classroom needs. Under Mr. Brown’s budget proposal, the state will cut nearly $5 billion to public education if voters reject the governor’s plan to raise taxes in the fall.
“We should use this added revenue to protect our public school students from the governor’s trigger cuts and pay down the state’s debt service,” according to a joint statement by Mr. Huff and Ms. Conway.
Senate President Pro Tem Darrell Steinberg, Sacramento Democrat, cautioned that it’s unclear when tax revenue from those reaping the benefits of Facebook shares will reach state coffers. Democrats are, however, using the so-called “Facebook effect” to delay the governor’s proposed cuts to social programs.
California’s general fund relies heavily on income taxes and capital-gains taxes, which are sure to see a bump with the wealth to be made off Facebook stock sales.
The wealthy are essential to funding California state government: The top 1 percent of income earners pay about 40 percent of all income tax, the dominant source for the state’s general fund.
“Facebook is good news for the state budget, but it will not solve the state’s near-term budget problem,” Jason Sisney, an analyst with the legislative analyst’s office, wrote in an email.
While Facebook isn’t the state’s first IPO windfall, it could be its biggest.
Taxes from Google executives began flowing into state coffers in 2006, two years after the company went public. After cashing in more than 9 million shares valued at $3.7 billion that year, 16 Google insiders owed the state as much as $380 million in taxes. At the time, that was enough to cover the salaries of more than 3,000 state employees.
Facebook’s offering could be four times as large as Google’s IPO.
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