STATE BUDGET:
State Revenue in March Was 6 Percent Ahead of Governor’s January Projection

California’s total state revenue of $8.02 billion for March was higher than estimated in the governor’s 2018-19 proposed budget by 6 percent, and above 2017-18 budget’s projections by 10.8 percent, State Controller Betty Yee reported April 10.

For the current fiscal year, which ends June 30, the three largest sources of general fund revenue –personal income tax, retail sales and use tax, and corporation tax – are beating estimates in the enacted budget. For the first nine months of the 2017-18 fiscal year, total revenue of $89.10 billion is 3.4 percent higher than expected in the January budget proposal and 6.4 percent above the enacted budget’s assumptions.

The total revenue of $89.10 billion for the first nine months of the fiscal year is $8.2 billion higher than at the same point in the prior fiscal year.

For March, personal income tax receipts of $4.22 billion were 6.2 percent higher than the current budget’s projections, but 4.2 percent lower than anticipated in the January budget proposal. For the fiscal year to date, PIT receipts are $3.17 billion higher than expected in the 2017-18 budget.

Corporation taxes for March totaled $1.31 billion, or $549.2 million (72.4 percent) higher than forecasted in the governor’s proposed budget. For the fiscal year to date, total corporation tax receipts are 32.5 percent above assumptions in the 2017-18 budget.

Sales tax receipts of $2.06 billion for March were $10.4 million lower than anticipated in the governor’s January budget proposal. For the fiscal year, sales tax receipts are $410.1 million higher than the enacted budget’s expectations.

In other budget-related news:

Tax Revenue Coming in Strong in April. The controller’s daily tracker of revenue coming in this month shows that as of April 12, the state had collected $2.86 billion in April, bringing the fiscal year’s collections to $64.8 billion. This is up significantly from the $57.3 billion collected at the same point last year.

Illustrating how much state tax revenue has grown in recent years, the figure on April 12, 2010, was $30.5 billion.

The controller said that during the last fiscal year, personal income taxes accounted for 67.9 percent of all state general fund revenue, and 15.4 percent of the PIT revenue arrived during the month of April.

Governor Jerry Brown’s Department of Finance will update the governor’s January budget proposal with the April revenue numbers for the budget revision that must be presented to the Legislature by May 15. The release of the “May revise” typically kicks the budget process into a higher gear, with the Legislature facing a June 15 deadline to send a budget bill to the governor.

Legislative Analyst and Governor Disagree on State’s Spending Limit. In his January budget proposal, Governor Jerry Brown estimated that the spending room left under the state appropriations limit – known as the Gann Limit after sponsor Paul Gann – is approximately $12 billion in the current year and budget year. This is about double the room estimated by the administration in the 2017-18 budget, the Legislative Analyst’s Office noted.

The analyst reported this month that the governor does not account for certain school appropriations, “violating a core principle of the Gann Limit.” The analyst found that counting the spending at the state level would reduce spending room by $1.3 billion in 2016-17, $877 million in 2017-18, and $1.8 billion in 2018-19.

The analyst also found that incorporating recently released data on school district finances will reduce state spending room under the cap by $2.5 billion in 2016-17, $1.7 billion in 2017-18 and $610 million in in 2018-19, relative to the governor’s January estimates.

The analyst recommended that the Legislature make four changes to the governor’s plan that, in total, would reduce state room under the spending limit by $6.8 billion in 2016-17, $5.8 billion in 2017-18, and $6.5 billion in 2018-19.

 

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