The state’s general fund tax revenue for the first 11 months of the 2022-23 fiscal year was $195 million below the $147.5 billion forecasted earlier this year, according to a Department of Finance report released June 22.
The projected shortfall for the current fiscal year, which ends June 30, does not directly impact the 2023-24 budget sent to the governor by the Legislature earlier this month, as the legislative budget included adjustments for current-year revenue declines.
“However, it is worth noting these numbers exclude $173 million in May personal income withholding that will be reflected in June cash receipts due to a processing delay,” the report stated. “Adjusting for the $173-million shift in withholding, General Fund agency cash receipts would have been $22 million below forecast fiscal year-to-date, and $173 million above forecast for May.”
The department stated that personal income tax withholding, adjusting for the $173-million shift, increased 3 percent year over year, its highest growth since May 2022.
“Personal income and corporate income tax refunds were cumulatively $813 million higher than projected fiscal year-to-date, offsetting gains in payments and revenues from personal income tax, corporate income tax, pooled money interest, insurance, and other revenues,” the report stated. “While high refunds potentially indicate weakness related to tax year 2022 liability, it is an incomplete picture until payments in October related to tax year 2022 are received. The May Revision monthly cashflow reflects the expected impact of delayed payment and filing deadlines for Californians in most counties to October 16.”
The state’s “big three” sources of revenue all are below the amounts projected by the Newsom administration in the revised budget:
- Personal income tax revenue for the first 11 months of the fiscal year was $371 million below the forecast of $85.62 billion and $177 million below forecast in May.
- Corporation tax revenue for the first 11 months of the fiscal year was $153 million below the forecast of $23.67 billion and $153 million below forecast in May. “May refunds were $231 million higher than projected,” the report stated. “Pass-Through Entity (PTE) Elective Tax payments were $100 million above projections in May. Excluding PTE payments, net corporation tax revenues were cumulatively down $252 million relative to forecast for the fiscal year-to-date.”
- Sales and use tax revenue for the first 11 months of the fiscal year was $56 million below the forecast of $31.32 billion and $56 million below forecast in May.
There was no public action this week on the $311.7 billion budget bill that the Legislature sent to the governor’s desk June 15 (SB 101, Skinner). Newsom has not given any public indication about whether he intends to sign or veto the bill – or use his line-item veto authority to delete specific spending items while approving others. The Legislature’s budget is higher than the $306.5 billion proposed by Newsom in May, and higher than last year’s $307.9 billion budget.