The state of California already sitting on a record surplus would benefit from an additional revenue windfall thanks to two decisions handed down by the United States Supreme Court. The question is what would the state do with that new money?

Initial estimates following the Supreme Court’s decision allowing taxing of Internet sales is that California will reap up to $2 billion in new revenue. Couple that with an unknown benefit from the proceeds from in-state sports betting and the overflowing state treasury will see another gusher of money.

This will not happen overnight and certainly obstacles remain but I’ll bet somewhere in Sacramento legislators and special interests are already calculating how to spend the new money.

A number of businesses are complaining that they cannot handle the many different tax districts—about 10,000–they would have to comply with in determining correct sales tax amounts to send back to jurisdictions. This may result in Congress stepping in to create a uniform system, which would alter the take California could expect.

The sports betting issue is bound to run into competition of who can run this business. Betting is allowed in this state on Indian reservations, racetracks and card club parlors. California tribal governments already have insisted on their rights to conduct sports betting. In addition, an initiative has been filed aimed at the 2020 ballot to open up sports betting in the state.

An indicator of the kind of revenue the state and local governments might expect from this new activity is a 2014 report from the California Nations Indian Gaming Assn., which reported the state’s tribal casinos generated more than $400 million in state and local taxes. Sports betting will dramatically increase that figure.

California spending has increased over 50% since Governor Brown took office in 2011. Yet, he has resisted demands for even more spending. However, a new administration may not be so tight-fisted. Those urging more money for health and welfare programs will be in line for the new funds. Schools, of course, will demand more money. Schools already have reaped revenue from gambling since the lottery was established in 1984. If the gas tax repeal is successful, or even if it is not, transportation and infrastructure could gain from the new dollars.

Would the legislature take the opportunity offered by the unexpected revenue to help confront the growing pension problem?

I expect the new revenues resulting from the court action would be ignored as some legislators seek even new taxes. And the idea about cutting taxes and returning something to the taxpayers—forgetaboutit!

The Supreme Court declared a windfall of tax dollars for the state and in the halls of the legislature it will be treated like manna from heaven.


(Update: A Senate Staffer states that experts believe the take from sports betting would be about $75 million a year.)