State revenues dip again following recent gains

State revenues dip again following recent gains

(Calif.) Lawmakers crafting a new state budget may have to dial back some of the administration’s proposed spending priorities, as January collections came in about $1.8 billion lower than estimated in Gov. Gavin Newsom’s 2019-20 budget.

State Controller Betty Yee reported California’s total revenues of nearly $18.8 billion in January were 8.8 percent lower than estimates in Newsom’s recently released budget proposal–which included an increase of $576 million more for special education, as well as a boost in Prop. 98. per-pupil funding, among other education spending increases.

That’s not to suggest that the state is on a drastic decline, however, as Yee noted: total revenues of more than $74.4 billion for the first seven months of the 2018-19 fiscal year were lower than expected in the proposed budget by nearly $2.9 billion.

Yet, in the fiscal year to date, state revenues are just 0.2 percent lower than the same time last year overall. 

That’s because the past few months have largely exceeded expectations.

California received nearly $9.7 billion in revenue in November–with collections for the month coming in close to $1.3 billion, or 15 percent, higher than estimates made last summer as part of the state budget process. That made up for a slight dip in October collections, which itself had followed months of surprisingly high collections.

September, for instance, also saw collections exceed expectations by slightly more than $1 billion.

And although January came in lower than projections overall, Yee’s office took care to highlight the more positive collections.

“Sales tax and corporation tax–two of the state’s ‘big three’ revenue sources–came in higher than assumed in last month’s proposed budget,” according to a statement released Monday.

Indeed, last month’s collection of more than $579 million in corporation taxes was actually 9 percent higher than estimates in the 2019-20 budget proposal.

And sales tax receipts of nearly $1.6 billion for January were close to $603 million higher than anticipated in Newsom’s proposed 2019-20 budget.

On the other hand, personal income tax receipts came in at just short of $16.4 billion. That was more than $2.5 billion, or 13.4 percent, less than the Department of Finance forecasted last month–though still 2.5 percent higher than what was estimated in the budget enacted last June.

A similar dip occurred in October, when personal income tax revenue came in 8.4 percent, or $472 million, lower than an expected $5.1 billion.

Yee’s office, suggested that there’s no reason to assume yet that this is the beginning of a downward trend. This last month’s revenues still came in higher than projections in the 2018-19 Budget Act by about $1.2 billion, or 6.9 percent, according to the finance department. more