April Tax Collections Make Budget Woes Slightly Less Bad
The sigh of relief by the Schwarzenegger administration over the past weekend’s record $2.8 billion in April tax collections could easily have been heard upstairs in the Legislature.
While the state’s deteriorating economy will likely drive the existing $7.4 billion budget shortfall to more than $10 billion when the GOP governor unveils his revised spending plan in May, less-than-predicted tax receipts in April – the state’s biggest revenue month – would have significantly worsened the problem.
Last week, it looked like that’s what was going to happen. As of Friday April 25 when the Franchise Tax Board had only counted personal income taxes of $8.4 billion for the month. That total was far less than the $12.1 billion Schwarzenegger’s budget expects would be collected in April.
But Board of Equalization employees processed $2.8 billion in returns over the weekend moving the state’s monthly income tax receipts to $11.2 billion – less than $1 billion from the governor’s estimated collection level.
“Looks like there’ll be one more good deposit day,” said Denise Azimi, a spokeswoman or the board. Azimi said a “good” deposit day could be close to $1 billion.
The $2.8 billion counted over the weekend is the biggest amount of personal income tax receipts the state has logged. On April 24 2006, after a weekend of counting, $2.7 billion was posted.
Besides $12.1 billion in personal income tax revenue, Schwarzenegger’s budget is contingent on collecting $1.5 billion in bank and corporations taxes and $2.5 billion in sales taxes this month.
While final sales tax figures won’t be known until the month ends, the Franchise Tax Board has already collected $1.7 billion in bank and corporation taxes this month, $200 million more than anticipated.
While April tax collections are good news, the bad news is those collections are unlikely to erase the $1.2 billion the state has already fallen short of revenue expectations for the current fiscal year, which began last July 1.
For example, even with the higher than expected corporate taxes collected in April the state collected $846 million less than it thought it would during the previous nine months. So April’s gains merely reduce the net loss.
Speaking to the Senate Budget Committee last week, Legislative Analyst Elizabeth Hill said lawmakers should plan on having to fill a deeper fiscal hole.
“Based on what we had seen in revenues through March as well as recent economic developments I said they should assume – for planning purposes – that we would be several billion dollars below our February revenue estimates in May,” Hill said in an interview.
The annual budget dance — in which Democrats call for tax increases in concert with spending reductions and Republicans refuse to go along — doesn’t get into full swing until Schwarzenegger issues what’s known as the May Revision, a reassessment of his initial January budget plan based on actual cash collections than predictions.
Then, if history is any guide, lawmakers will try – and fail – to meet a June 30 deadline to send a spending plan to Schwarzenegger.
Filed under: Budget and Economy
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