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In the spirit of the holiday, here is some good budget news, for once. State Controller John Chiang reported this past Thursday that California beat its November revenue projections by $497.7 million, or 8.9 percent. The announcement comes just days before the Department of Finance is slated to announce how much money it believes California will receive for the 2011-12 fiscal year, which will ultimately decide how much the state has to cut starting in January.
Through the first five months of the fiscal year, California is $1 billion short of its revenue forecast, or 3.4 percent, better than the $1.5 billion revenue gap Chiang reported last month.
Personal income taxes drove the November boost. The state took in $531.4 million, or 19.6 percent, more in income tax revenues than expected. Sales taxes were on target, while corporate taxes were $57.9 million, or 53.6 percent, higher than expected. But the state has also spent $1.95 billion more than projected through November, Chiang reported.
"While November's totals came in 9 percent above projections, they did not erase the fact that we are still running $1 billion behind in revenues and $2 billion ahead in expenditures," Chiang said in a release. "Regardless of whether midyear cuts are enacted next week, the Legislature faces a tremendous fiscal challenge when it returns to session next month."
As we discussed in last week’s edition, Governor Brown and Democratic lawmakers balanced the budget in June with an optimistic assumption that revenues would come in $4 billion higher than previously forecast. The Legislative Analyst's Office said last month that California would fall $3.7 billion short of that $4 billion based on the fact that state coffers had already fallen behind in the first third of the year and that economic indicators for the spring weren't exactly rosy.
If the analyst's forecast holds true, the state would have to cut about $2 billion starting in January. But the Department of Finance will weigh in next week with its own projection, with the benefit of having these improved November totals. The $4 billion bump was predicated almost entirely on personal income tax revenues. So any positive swing in the income tax figures, such as the $531.4 million, could give Finance Department officials justification to believe the state will see more of the $4 billion bump than the analyst predicted.