1. T HE W EEKLY B RIEFING
Of note:
 Point of Emphasis – Retirement savings drop
 Global – ‘Human development’ rises worldwide
 National – SEC slows enforcement activity
 California – Clean tech sees venture capital slide
 Public Finance – CA’s new tax rankings
3/25/2013
The Weekly Briefing is prepared by staff of the State Treasurer’s Office (STO). It provides information and analysis
about the economy, fiscal affairs and public finance for the State Treasurer and senior STO staff. It also is shared
with interested persons outside the STO. The Weekly Briefing should not be used for making investment decisions about
State of California bonds or notes. Potential investors should always obtain and read the Official Statement published by
the State for each issue of bonds or notes.

2. 3/25/2013
THE WEEKLY BRIEFING
K EY I NDICATORS
T HIS WEEK ’ S DATA
POINT OF EMPHASIS
CA Nonfarm Jobs – Jan. Retirement security: slow-motion train wreck
14,526,700 2 reports – by the Employee Benefit Research
Institute (ERBI) and Society of Actuaries – combine
1,700 from Dec.
to document America’s worsening retirement
254,900 from Jan. 2012 (1.8 percent) security problem. They show how U.S. workers are
CA Unemployment Rate – Jan. failing to save adequately for retirement, even
9.8 percent though the need is greater than ever because people
are going to longer. Highlights:12
 From Dec.
From 11.0 percent in Jan. 2012 Insufficient savings (2013 ERBI survey)
U.S. Housing Starts – Feb.  Last year, 57 percent of workers reported
0.8 from Jan. and 27.7 percent from they had saved $25,000 or less for
Feb. 2012 to annual rate of 917,000 retirement.
 In 2012, 66 percent of workers reported they
U.S. Leading Economic Indicators – Feb.
have some retirement savings, compared
0.5 percent from Jan.
with 75 percent in 2009.
R ECENT DATA  41 percent of workers said they either do not
CA Median Home Price – Feb. save for retirement or do not save enough
0.3 percent from Jan to $289,000 because they have so much trouble meeting
day-to-day expenses.
20.9 percent from Feb. 2012
 Only 50 percent believe they could come up
CA Home Sales – Feb. with $2,000 in a month to meet an
0.5 percent from Jan. to 28,719 unexpected expense.
3.1 percent from Feb. 2012  49 percent of workers are not at all confident
U.S. Consumer Price Index – Feb. or not very confident they can live
comfortably in retirement – virtually
0.7 percent from Jan. (beat forecast)
unchanged from record-low levels in 2011.
U.S. Real Average Hourly Earnings – Feb.
0.6 percent from Jan.
Longer life spans (Society of Actuaries, 09/12)
U.S. Retail Sales – Feb.  A male who reaches 65 this year is likely to
1.1 percent from Jan. (beat forecast) live 20.5 more years, one year more than
estimates from last year.
U.S. Business Inventories – Jan.
 A woman turning 65 can expect to live 22.7
1.0 percent from Dec. to $1.64 trillion more years, up from 21.3 last year.
(beat forecast)  Longer life spans could increase corporate
U.S. Factory Production – Feb. pension liabilities by $97 billion in the near
0.8 percent from Jan. and 2.0 percent future. Since 2008, those liabilities have
from Feb. 2012 risen from $1.6 trillion to $1.93 trillion.
1

3. 3/25/2013
GLOBAL PERSPECTIVE
‘Human development index’ rises across world – Nations throughout the world have
improved the life expectancy, educational attainment and financial resources of their
people since 1990, according to a new United Nations report. The report rates countries’
performance on the 3 metrics with a composite “human development index,” or HDI.
Almost every country has raised its HDI, the report said. From 1990 to 2012, the number of
countries with an HDI at least as high as the 75th percentile score in 1990 increased from 33
to 59. Over the same period, the number of countries with HDIs below the 25 th percentile
HDI in 1990 fell from 33 to 15.
Meanwhile, the share
of people living in
extreme poverty (less
than $1.25 per day)
declined from 43.1
percent in 1990 to
22.4 percent in 2008.
From 1990 to 2012,
inflation-adjusted per
capita income
increased in all
countries, even those
with the lowest HDIs.
On education,
developing countries
have significantly
increased enrollment
in schools. If they
continue to pursue
aggressive policies,
the report projects
the share of the
world’s population older than 15 who have no formal education will dwindle from 12
percent 2010 to 3 percent in 2050.
The report gave special attention to progress in what it called the South, which includes
such developing countries as China, India, Brazil, Indonesia and Turkey. From 1990 to 2010,
the South’s share of the world’s middle class (earned or spent $10 to $100 per day) grew
from 26 percent to 58 percent. By 2030, that number will be 80 percent. And at $30
trillion, the South’s consumption spending will account for 70 percent of the world’s total.
2

4. 3/25/2013
The report identified 4 policy priorities that developing countries should adopt to sustain
their HDI progress: enhancing equality, expanding public discourse and political
participation; meeting environmental challenges; and managing demographic changes.
Education emerged in the report as probably the most important determinant of successful
human development. To show education’s effect on HDI metrics, the report offered base
case and fast track scenarios. The base case assumes continuation of current education
attainment policies, and the fast track scenario assumes more aggressive goals. One of the
report’s more striking data sets showed how much child death rates would fall under the
fast track education scenario (see chart below from STO staff).3
Projected Deaths Children Under 5 with Aggressive Education Attainment Policies
(in thousands)
16,552
Source: United Nations
18,000
15,029
16,000
2010-15
14,000
2045-50
12,000
7,872
10,000
7,495
8,000
5,681
6,000
3,064
1,927
4,000
1,716
773
526
2,000
0
Africa Asia India Pakistan China
Oil resurgence in Iraq – Iraq is now producing 3.15 million barrels of oil per day (bpd), an
increase of more than 1 million barrels from the production level prior to Operation Iraqi
Freedom.
An October forecast by the International Energy Agency predicts Iraq’s oil production will
double by 2020. Iraq’s oil minister, Adbelkarim Luabi, has more ambitious designs. Earlier
this month, he announced plans to boost production to 9 million bpd over the next 5 years
through a $173 billion infrastructure investment plan.
Iraq is home to more than 137 billion barrels of proven oil reserves, approximately 9
percent of the world’s total. And its oil is some of the world’s easiest and most affordable
to extract. On average, the cost of producing a barrel of Iraqi field oil is only about $5
compared to about $65 for American shale oil.
Despite its current performance and inherent advantages, some analysts say Iraq’s oil
recovery has been too slow. They note, contrary to popular belief, Iraq’s oil fields and
physical infrastructure were largely undamaged by the 2003 U.S. invasion.
3

5. 3/25/2013
However, the
country’s De-
Ba’athification
policy, combined
with unchecked
Islamist militia
violence, led to the
exodus of Iraqi oil
engineers, many of
whom were Sunnis.
The resulting brain
drain became the
primary obstacle to
recovery.
Today, security has improved enough that Iraqi engineers are slowly returning, along with
international oil companies competing for contracts to develop fields and open refineries.
Still, some observers say, bureaucratic red tape that hinders such international investment,
along with delays on a national seawater treatment plant (needed to maintain sufficient
pressure to extract oil) continue to delay production from growing as quickly as it could.4 5
(chart from U.S. Energy Information Administration)
NATIONAL VIEW
Corporate watchdog slowing down – The U.S. Securities and Exchange Commission (SEC)
has opened fewer investigations in the past 2 years and filed fewer civil fraud cases so far in
2013, a trend analysts say reflects today’s calmer economic times.
The number of investigations opened by the SEC dropped 15 percent between 2011 and
2012, declining from 952 to 806. In January and February of this year, the SEC filed 24 civil
and administrative fraud actions, compared to 30 during the same period in 2012.
The slowdown at the SEC comes at a time when a new leader is about to take over. Mary Jo
White, a former federal prosecutor, has vowed to aggressively pursue all wrongdoers.
Analysts say the downward trend in enforcement is not surprising. They note that in more
normal financial environments, such as the current one, less fraud and wrongdoing is
uncovered.
In cases arising from the not-so-normal times of the financial crisis, the SEC says it has taken
action against 150 firms and individuals and imposed penalties of $2.7 billion.
What’s looming on the SEC’s near-term enforcement horizon? In the year ending October
2012, the SEC got more tips about wrongdoing in financial reporting than any other
category. That makes accounting fraud a likely focus of future investigations and
enforcement actions.6 (graphic below from Wall Street Journal)
4

6. 3/25/2013
More workers raiding their 401(k) plans – Even with the economy recovering , the number
of workers who borrowed from their 401(k) plans to pay current expenses rose in 2012, to 1
out of 3 from 1 out of 4 in 2011, according to a study by Financial Finesse, a financial
education firm.
Analysts say the increasing use of 401(k) plans to pay for living expenses reflects the uneven
distribution of the economic recovery’s benefits. Women, younger workers and lower-
income employees drew most on 401(k) funds.
Taking a loan or a distribution from a 401(k) plan indicates financial stress because doing so
often requires paying penalties or taxes. Further, a smaller 401(k) makes it more difficult
for a worker to live comfortably in retirement.
The Financial Finesse study offered the following data points: 7
 37 percent of young workers between 30 and 44 took hardship loans or distributions
from their retirement accounts in 2012, compared to 27 percent in 2011.
 34 percent of women took 401(k) loans or distributions, compared to 23 percent of
men.
 45 percent of employees earning between $35,000 and $60,000 reported having to dip
into their 401(k) funds to pay current bills.
5

7. 3/25/2013
CALIFORNIA FOCUS
Venture capital’s clean tech role shrinks – Traditional venture capital (no corporate
partners) saw its share of total public and private clean tech financing in California fall by
47.1 percent from 2008-2012, according to a report released March 18 by Next 10. Over
the period, traditional VC’s share dropped from 64.8 percent to 34.3 percent, the report
said.
Over a more recent period, CA Clean Tech Financing: 2011 to 2012
(billions of dollars)
from 2011-2012, total Source: Next 10
clean tech VC funding 7.00
6.50
(including corporate 6.00
partnerships) decreased at
5.00
a faster clip than the 4.30 Total
decline in overall VC 4.00
3.75
Public/Private
Funding
financing across all sectors. 3.00
Clean tech VC went down 2.60 VC Funding
2.00
by 39 percent, to $2.6
billion, while overall VC 1.00
investment dropped by 17
0.00
percent, to $15.5 billion, 2011 2012
the report said.
Despite the recent setbacks, California clean tech VC investment comprised more than half
of the national total of $4.4 billion in 2012.
The VC drop from 2011-2012 was part of a broader decline in clean tech financing. Total
public and private financing of California clean tech declined by about 42 percent, to $3.75
billion from about $6.5 billion, according to the report. The $3.75 billion roughly equaled
the 2008 funding level. More report highlights:8
 Patents – After a period of relatively stagnant growth since 1990, California’s clean tech
patent registrations took off between 2010 and 2011, increasing by 26 percent. That
pace far outstripped the U.S. rate of 10 percent, and the global rate of 5 percent. In the
2-year period 2010-11, Californians registered 913 clean tech patents. That led the
nation and topped No. 2 New York by 114 percent. California’s share of U.S. solar
patents jumped from just over 35 percent in 2008-09 to more than 45 percent in 2010-
11.
 Jobs – The number of jobs in California’s “core clean economy” (15 fields, including
energy generation, energy efficiency, transportation, recycling and green building) grew
by 8 percent in the 5-year period ending 2011, compared to a 1.0 percent decrease for
the overall economy. In the 10-year period ending 2011, core clean jobs increased by
17 percent, compared to just 4 percent for the overall economy. In 2010-11, however,
core clean job growth lagged behind the overall economy – 1.2 percent compared to 2.2
percent. (chart from STO staff)
6

8. 3/25/2013
LAO offers familiar critique of tax breaks – Echoing past complaints, the Legislative
Analyst’s Office in a March 18 report said policymakers and the public have little means to
assess the effectiveness of myriad tax breaks now on the books.
Citing the latest Department of Finance data, the report estimated the tax breaks will
deprive the State of approximately $50 billion in FY 2012-13.
Despite that hefty price tag, the report said data and other information needed to evaluate
whether tax breaks achieve their objectives “is often limited.” (In fact, the annual DOF
reports have shown
that in the majority of Tax Breaks and the State General Fund: FY 2012-13
(billions of dollars)
cases, the laws Source: Governor's Budget, Department of Finance Tax Expenditure Report
establishing tax
breaks have no 95.3
provisions stating the 100
Legislature’s intent.)
80
As a result, the 49.1
“effectiveness of (tax 60
breaks) often is very
40
hard to evaluate,” the
LAO said. Highlights 20
from the report, 0
which focused on tax General Fund Revenues Tax Break Cost to General Fund
breaks related to
housing:9
 Mortgage interest deduction – Lost revenue to the State in 2010 totaled about $4.6
billion. In that year, 30 percent of California tax filers (4.5 million of 15 million) claimed
deductions totaling roughly $71 billion. The deductions have been falling since 2007,
when the total approached $100 billion. 3 main criticisms of this break: it causes
consumers who already planned to buy a house to purchase a more expensive one; it
benefits mainly higher-income people; and it doesn’t make homes more affordable.
 Real property tax deduction – This one cost the State about $1.5 billion in 2010. 4.8
million filers claimed deductions totaling $23 billion. Criticism of this break is similar to
concerns expressed about the mortgage interest deduction.
 Capital gains exclusion on sale of primary residence – The exclusion is $250,000 for
single filers and $500,000 for joint filers. The cost in 2009 was about $1.1 billion. The
current exclusions amount to a “windfall,” according to critics, and top-earner
households would realize a substantial gain even if the exclusions were lowered.
(chart from STO staff)
Job growth slows since late 2012 – In the heady days of 2012, California led the nation in
year-over-year growth in number of jobs. Ignited by a 74,200 increase in January, the state
economy added 297,900 jobs in the first 10 months of 2012. That equaled a 2.1 percent
increase, significantly better than the U.S. rate of 1.2 percent.
7

9. 3/25/2013
Since last October, however, California’s job growth has slowed substantially to 0.2 percent,
as the state added just 31,200 jobs in the 3-month period ending January 2013. California’s
relatively anemic growth somewhat tracked the nation’s performance. U.S. jobs increased
a little better, by 0.4 percent, in the same 3-month period. Meanwhile, Texas added jobs at
a faster pace than both California and the nation, increasing by 0.6 percent.
Still, State officials were heartened by the January California jobs report, released March 19.
It showed that in 2012, the state added 101,500 more jobs than previously estimated. The
revised total was 327,400.
Meanwhile, a March 18 report from the U.S. Bureau of Labor Statistics showed California in
January 2013 had 254,900 more jobs than it had the prior January. That was the 2nd-highest
increase in the nation, trailing Texas’ by 56,000 jobs.10 11 12 (chart below from STO staff)
CA Nonfarm Job Growth: Slowdown Since Fall 2012
(in thousands)
Source: U.S. Bureau of Labor Statistics
15500.0
15213.5 (pre-
recession peak)
15000.0
14500.0
14526.7
14525.0
14516.8
14495.5
14452.9
14447.9
14416.6
14394.8
14360.4
14329.1
14306.2
14276.6
14271.8
14000.0
14197.6
14055.9
14011.2
13965.3
(trough)
13845.3
13500.0
13000.0
PUBLIC FINANCE
Tax Foundation releases new state rankings – California had the nation’s 6th-highest
combined State-local per capita tax burden in FY 2009-10, according to the Tax
Foundation’s latest annual report that compares states. California’s number was $4,934,
about 20 percent higher than the U.S. average of $4,112, said the report released last week.
When looking at total State-local revenues – including taxes, fees, license revenues and
other sources – California’s per capita figure in FY 2009-10 was 13th-highest among states,
at $8,785. That was 8.2 percent higher than the national average of $8,122. More
highlights:13
 Personal income taxes – California’s combined State-local per capita rate in FY 2009-10
was $1,229. That was 7th-highest in the country, and 45.4 percent above the U.S.
average of $845.
 Corporate income taxes – California’s State-local per capita total in FY 2009-10 was
$245, 5th-highest in the U.S. and 76.2 percent above the national average of $139.
8

10. 3/25/2013
 Sales taxes – California in FY 2009-10 collected $1,073 in State-local sales tax revenues
per capita, 10th-highest in the country and 16.0 percent above the U.S. average of $925.
 Property taxes – In 2011, California’s average property tax on owner-occupied homes,
as a percentage of the average home value, was 0.80 percent. That ranked as the
nation’s 33rd-highest ratio, and was 28.6 percent below the U.S. average.
 Excise taxes – California’s combined per capita State-local excise collections in FY 2009-
10 ranked as the 45th-highest in the country, at $325. That was 31.6 percent below the
national average.
(chart below from STO staff)
State-Local Taxes and Total Revenues FY 2009-10
Per Capita Burden: CA v. U.S. Average (in dollars)
Source: Tax Foundation
10,000
8,785
9,000
Total revenues include 8,122
8,000 taxes, fees, license revenue,
other sources.
7,000
6,000
4,934 U.S. Average
5,000
4,122 CA
4,000
3,000
2,000
1,000
0
Taxes Total Revenue
Illinois court upholds reduction of retiree health care benefits – A state trial court judge on
March 19 upheld a 2012 Illinois law that requires retired government workers to pay more
for their health care benefits.
The plaintiffs, including unions, alleged health care benefits are a contractual right akin to
pension benefits and that the 2012 statute unlawfully infringed on that right.
The judge disagreed, saying, “Plaintiffs do not have a vested contractual interest in free
health insurance.” The ruling rested in part on the judge’s reasoning that “medical
technology and contracts offered by insurance companies change, as opposed to the
actuarial certainty of a pension payment …”
The Illinois legal development comes as California confronts a $63.8 billion unfunded
liability for future health care benefits earned by employees and retirees in the California
Public Employees’ Retirement System (CalPERS). If the State switched from the current
pay-as-you-go method of funding the costs to an approach that uses investment income to
help cover the benefits (the system used for pensions), the unfunded liability would drop to
$42.1 billion, according to an actuarial analysis provided to the State Controller’s Office.14
9

11. 3/25/2013
NOTES
1
Workers Saving Too Little to Retire, Wall Street Journal, March 19,2013
http://online.wsj.com/article/SB10001424127887323639604578368823406398606.html?mod=WSJ_hp_mostpop_rea
d
2
EBRI’s 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many, March 2013
http://ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=5175
3
Human Development Report 2013- The Rise of the South: Human Progress in a Diverse World
http://hdr.undp.org/en/media/HDR_2013_EN_complete.pdf
4
The Real Reason Iraq’s Oil Boom Has Stalled, Businessweek March 19, 2013
http://www.businessweek.com/articles/2013-03-19/the-real-reason-iraqs-oil-boom-has-stalled#r=nav-fst
5
Iraq exports rebound after two-month lull, 2013 Global Post, March 21
http://www.globalpost.com/dispatch/news/afp/130321/iraq-oil-exports-rebound-after-two-month-lull
6
Number of Cases Filed by SEC Slows, Wall Street Journal, March 17, 2013
http://online.wsj.com/article/SB10001424127887324392804578360521650790966.html?mod=WSJ_qtoverview_wsjla
test
7
In Spite of the Recovery, More Workers Are Borrowing From 401 (k)s, Bloomberg BusinessWeek, March 15, 2013
http://www.businessweek.com/articles/2013-03-15/in-spite-of-the-recovery-more-workers-are-borrowing-from-401-k-
s#r=mar-s
8
2013 California Green Innovation Index, Next 10, March 18, 2013
http://next10.org/sites/next10.huang.radicaldesigns.org/files/2013%20California%20Green%20Innovation%20Index%
20031913.pdf
9
Housing-Related Tax Expenditure Programs, Legislative Analyst’s Office, March 18, 2013
http://www.lao.ca.gov/handouts/Econ/2013/Housing-Tax-Expenditure-031813.pdf
10
California’s unemployment rate unchanged at 9.8 percent: California gained 327,400 payroll jobs in 2012,
Employment Development Department, March 19, 2013
http://www.edd.ca.gov/About_Edd/pdf/nwsrel13-11.pdf
11
Regional and state employment and Unemployment – January 2013, U.S. Bureau of Labor Statistics, March 18,
2013
http://www.bls.gov/news.release/pdf/laus.pdf
12
Economy at a Glance: U.S. California and Texas, U.S. Bureau of Labor Statistics
http://www.bls.gov/eag/eag.ca.htm
13
Facts & Figures: How Does Your State Compare, Tax Foundation, March 2013
http://taxfoundation.org/sites/taxfoundation.org/files/docs/ff2013.pdf
14
Court Upholds Illinois OPEB Overhaul, The Bond Buyer, March 20, 2013
10