California watches windfall shrink as Facebook stock slides
Facebook's stock has been in a steady slide ever since the company debuted on Wall Street in May.
The stock fell under $21 on Wednesday, far below its $38 starting price.
Every drop is another problem for California's budget, which had expected shares to hold steady at $35. That's the price used by Gov. Jerry Brown's administration when it predicted the state would reap $1.9 billion in tax revenue related to Facebook's initial public offering by next July. (That's assuming voters approve Brown's plan for tax hikes in November.)
The nonpartisan Legislative Analyst's Office, which provides budget advice to lawmakers, released a new report on Wednesday saying that if "lower share prices persist through November and December, hundreds of millions of dollars of income tax revenue assumed in the state budget plan are at risk."
The report doesn't necessarily mean it's time to panic. Taxes connected to Facebook's IPO were pegged at less than 2% of the state's overall revenue in the current fiscal year.
Besides, there's many other things to worry about too. California's budget is also at the mercy of "volatile trends in the overall stock market, trends in consumer confidence, and the economic situation in parts of Europe and Asia," according to the analyst's office.
-- Chris Megerian in Sacramento
Photo: Facebook is listed on the Nasdaq stock exchange. Credit: Carolyn Cole / Los Angeles Times