Mephisto, did this get posted already?
Stock drop hits tech-rich states
By Matt Krantz, USA TODAY
10/21/2001 - Updated 10:50 PM ET
usatoday.com
With tech employees' options underwater or shrunken in value, states that have relied on taxes from these once-lucrative sources are considering cuts to programs.
"We're getting hit straight in the head," says Ted Gibson, chief economist of California, a tech-rich state that got 25% of its revenue last year from income tax on gains from stock and stock options.
Consider the effects on states with the most tech workers:
California. The state braced for a $5.6 billion decline in revenue this year because of weak stock option and capital gains income, says Gibson. But revenue was even $1 billion weaker than that.
Employees' take-home pay including stock options fell 6% during the third quarter, stunning planners, who normally would have expected a 6% gain because employment rose 1.6% in the quarter.
For instance, stock options exercised by employees of Cisco Systems, the California-based networking gear maker, fell 44% during its fiscal year ended July 31 to just $4 billion, says Bill Parish, financial analyst at Parish & Co.
That's a dramatic loss to the state. Cisco employees cashed in $7.1 billion worth of stock options during the previous fiscal year, an amount larger than the state's $6.3 billion budget surplus.
To digest the shortfall, departments across the state are being asked to trim budgets by 15% for the 2002 fiscal year, Gibson says.
Washington. The state that Microsoft and Amazon call home can't measure the hit yet, because it has no state income tax but relies on sales taxes. Still, the pain is severe, says Changmook Sohn, executive director for the state's office of forecasting. Rising stock options gave consumers money to spend.
Personal income this year is expected to grow by only 4%, depressed by stock options, he says. It's a tough change. In 1999, for instance, personal income grew by 8% — 3 percentage points of which were due to just the stock options of Microsoft.
Stock options "had been a phenomenal contributor" to the state's income, Sohn says. Their "role has reversed now."
During Microsoft's last fiscal year ended June 30, the value of stock options cashed in by employees dropped 63% to just $5.9 billion, Parish says.
Oregon. The home of more Intel employees than any other state won't know how much tax it'll lose out on until the forecast is released later this month, says state economist Tom Potiowsky. But a decrease is likely, he says. And state agencies are already being asked to trim 2002 budgets by 10%, he says.
The value of stock options exercised by Intel employees dropped 73% during the 6 months ended June 30 to $485.7 million, Parish says.
"The impact will be even more significant in the coming quarters," he says |
