By Francis Wilkinson
In the next few years, Facebook's biggest cheerleaders may be found not on Wall Street but in Sacramento.
California's Legislative Analyst Office just issued an updated report on the California economy, including projections for the next few years of state revenues. For the most part, it offers the kind of sober analysis one expects from a government bureaucracy, citing a host of problems holding back economic growth, including "persistent joblessness" and a "very troubled" housing market.
But the LAO report is hardly all gloom. "Wage and salary employment has increased at a healthy clip in recent months," it says, and profits at many California-based companies have been booming; for its most recent quarter, Apple Inc. reported earnings of "about $1 billion per week."
As a source of giddiness for the green-eye-shade crowd, however, Apple could yet be eclipsed by Facebook Inc. The company's highly anticipated initial public offering is expected to produce a market capitalization of around $100 billion and generate "substantial capital gains and other income for a small number of Californians and, in so doing, generate additional tax revenues over the next few years."
How substantial? The LAO acknowledges "a very large range of error" in its forecast. But presuming Facebook goes public this spring, LAO projects $500 million in Facebook-related revenue in 2011-2012 and another $1.5 billion in 2012-2013. All told, the LAO envisions $2.4 billion for the state through 2014-2015. "Should the IPO proceed," the report states, "it appears virtually certain that the state revenue impact will be at least in the hundreds of millions of dollars, spread across a few fiscal years."
If the stock soars, the report states, "the state revenue benefit could be $1 billion or more over the level we assume, spread across a few fiscal years."
If only Washington had a magic revenue pony of its own.
(Francis Wilkinson is a member of the Bloomberg View editorial board. Follow him on Twitter.)
-0- Feb/28/2012 14:26 GMT