Citi California Pulse™ 2nd Qtr. Survey 2010 shows that to address the state’s
budget, Californians prefer state spending cuts over tax increases

To solve California’s gaping budget deficit, a majority of the state’s residents
would choose state spending cuts over increased taxes, according to the latest
Citi California Pulse™. Yet when pressed on what to cut, survey respondents could
only muster majority support (51 percent) for cuts to “parks and recreation.” All
other choices saw strong majorities against reduced spending, with respondents
opposed to cuts to funding for public schools (86 percent), state colleges and
universities (75 percent), health care (73 percent), fire fighters (85 percent)
and police (78 percent).  When asked what they would choose if they “had to raise
taxes,” respondents overwhelmingly preferred to tax lifestyle choices, such as
tobacco (77 percent) and soft drinks with sugar (70 percent), over all other
options, including income (21 percent), sales (33 percent), gasoline (25 percent)
and property (20 percent) taxes.

Summer Vacation Plans Cool
Despite the arrival of the traditional summer travel season, few Californians say
they plan to take a vacation during the warmer months this year. Only 36 percent of
those surveyed said they plan to take or have already taken a summer vacation; 63
percent said they have no plans to take a vacation. Among those going on a holiday
this summer, most will stay in California – only 28 percent plan to visit another
state and only 10 percent plan to leave the country. In addition, Californians expect
to keep expenses for their trip low, with 61 percent planning to spend less than $1,000.
“We may be feeling the heat of summer, but Californians remain cool about the economic
recovery,” said Rebecca Macieira-Kaufmann, President of Citibank California. “Until
consumers see more evidence in their everyday lives that conditions are improving,
such as more jobs and rising home prices, they will likely spend less and save more.
One of our survey’s most telling findings was that most Californians are choosing to
stay close to home this summer and, if they do travel, planning to stick to a tight
budget.”

Among the survey’s key findings:
• 92 percent said the California economy is only fair or poor
• 59 percent said California is a good or great place to live, down from 64
  percent in the first quarter
• Younger Californians are more optimistic than older residents – 68 percent
  of those aged 18-34 believe the economic conditions in California will be
  better in the next 12 months, compared to 44 percent of those aged 44-55
• 31 percent say it is an excellent or good time to buy big-ticket items –
  down from 34 percent in the first quarter and 40 percent in the fourth
  quarter of 2009
• 33 percent see signs the California economy is improving, compared to 29
  percent in the first quarter
• 54 percent would cut state spending to solve California’s budget issues
• 11 percent would raise taxes to solve California’s budget issues

Optimism Index
Overall, the Citi California Pulse index of optimism remained at -3 in the second
quarter of 2010, identical to the first quarter. For the first time since the survey
began, almost no respondents rated the California economy as excellent; only 8 percent
called the economy good. Californians’ thoughts on the direction of the state remained
steady, with 21 percent saying California is on the right track and 65 percent
disagreeing, saying it is on the wrong track – this compares to 21 percent and 64
percent in the first quarter, respectively.

Job Growth and Opportunities
While Californians continue to call the current job market fair or poor, they remain
optimistic about job opportunities in the future. Nearly 60 percent said job opportunities
would be better in 12 months, while 30 percent said they would be worse. When asked
about the greatest source of jobs as the economy recovers, 12 percent said big business,
22 percent said small business and 32 percent said green business.

Regional Results: Northern Californians More Optimistic
The survey found continuing differences between residents of Southern California and
Northern California. To reduce the state’s budget deficit, Los Angeles-area residents
are less likely to raise taxes (11 percent) than San Francisco residents (19 percent),
while only 46 percent in the Bay Area would cut spending, compared to 54 percent in
Los Angeles.

Similarly:
• 43 percent in San Francisco plan to take a vacation this summer, compared
  to 34 percent in Los Angeles
• 66 percent of Bay Area residents believe job opportunities will be better
  in the next 12 months, compared to 55 percent of Los Angeles-area residents
• 21 percent of Bay Area residents believe their personal financial condition
  is better than a year ago, compared to 16 percent of Los Angeles-area residents

About the Survey
The Citi California Pulse™ is a quarterly survey focused on California consumer and
small business sentiment regarding the current and future economic environment. This
poll was conducted by telephone June 17 - 24, 2010, among a random sample of 1,200
California residents, age 18 and older throughout the state. Interviews were conducted
in both English and Spanish. The design includes interviews with cell phone respondents,
324 interviews in the San Francisco MSA, and 329 interviews in the Los Angeles MSA.
The cell phone and MSA samples are weighted to the correct proportions. The margin
of error for the entire sample is approximately +/- 3 percentage points. The margin
of error is higher for subgroups. Abt SRBI Public Affairs, a major national polling
firm conducted all interviewing. For additional information, visit: www.srbi.com.

Index Methodology
The California Pulse™ Index is calculated by subtracting negative responses to each
item from the positive responses for all 12 index items. The Index scale can range f
rom +100 (if every respondent gave positive response to each of the 12 questions)
to -100 (if all respondents expressed consistently negative views).