Tax Receipts Down in October But That Doesn’t Necessarily Mean Bigger Budget Cuts
California’s cash collections for October were $608 million below the budget’s forecast of $5.8 billion leaving the state $1.3 billion below its revenue targets for the first four months of the current fiscal year.
As part of the budget signed by Gov. Jerry Brown June 30, a series of up to $2.5 billion in cuts – nearly $1.8 billion falling on public schools — will automatically be triggered if revenues for the entire fiscal year are more than $3 billion below budget estimates.
Brown’s Department of Finance stresses that any revenue shortfall is calculated over the entire fiscal year – the state gets most of its cash in the second six months – and not simply based on collections prior to December 15, the required announcement of whether the cuts will be imposed.
“The trigger determination is not going to be based on where we are on cash today. It will be based on a revised revenue forecast for the entire fiscal year,” said H.D. Palmer, a Department of Finance spokesman, for possibly the 500th time this year.
That forecast examines more than revenue collections. It also weighs a variety of economic factors, similar to the annual forecast created by the Legislative Analyst, which will be unveiled November 16.
Among those factors are housing permits issued, auto sales, the state’s unemployment rate – now 11.9 percent – and the stock market’s performance.
In its November Finance Bulletin, the Brown Administration says “recent employment and construction data indicate that California’s economy continues a slow recovery. The labor market report for September was a very welcome turnaround from the gloomy report for August.”
Home construction has also shown “modest improvement” over 2010.
Elsewhere, the bulletin says that if collections are to reach budget estimates, “the bulk of these revenues would be reflected in higher (income tax) and (corporate) estimated tax payments and final return payments which will be made in the months of December 2011 through June 2012.”
Prior to the December 15 announcement about the cuts, Palmer says the Brown administration will be privy to more up-to-date information on 2010 tax receipts, including revenue from taxpayers who opted for an extension in April until October 15.
State Controller John Chiang’s November cash report, released November 11, showed October revenues $811 million below budget projections.
Chaing said year-to-date revenues are now $1.5 billion below budget estimates and expenditures exceed projections by $1.7 billion.
Filed under: Budget and Economy
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