General fund revenue was $243 million (1.6 percent) below the governor’s budget forecast for March and $5.8 billion (4 percent) below the fiscal year-to-date forecast of $146 billion, the Department of Finance reported April 22.
On the plus side, the state’s personal income tax revenue for the month of April has nearly met Governor Gavin Newsom’s projection, with several days of collection still remaining. In his January budget proposal, Newsom projected that $16.3 billion in net PIT revenue would be collected in April. Through April 25, the state had collected approximately $16.25 billion, according to State Controller Malia Cohen’s daily PIT revenue tracker.
The Department of Finance’s March revenue report detailed the status of the state’s three main sources of revenue:
- PIT revenue was $683 million above the forecast in March due to payments exceeding the forecast by $448 million and refunds coming in $249 million lower than projected. The report continued: “This brings the fiscal year-to-date shortfall in personal income tax receipts to $3.4 billion, or 3.9 percent. Withholding receipts were $887 million above forecast cumulatively through March. While withholding reflects more of a real-time indicator of economic activity than estimated payments, single-month readings can be misleading: calendar changes can affect when payments are recorded, and the timing of stock-based compensation can also affect payments, therefore, withholding should be evaluated over multiple months for longer-term trends. Personal income tax withholding receipts were 2.1 percent above forecast for November through March and increased by 6.9 percent year-over-year over that same period. Personal income tax estimated payments exceeded the forecast by $28 million in March but remained $4.7 billion below forecast fiscal year-to-date, indicating weakness in tax receipts related to tax year 2023.”
- Corporation tax revenue was $247 million below the forecast in March and $1.4 billion (5.3 percent) below the fiscal year-to-date forecast. “The March shortfall was due to Pass-Through Entity Elective Tax payments ($292 million below forecast) and corporation estimated payments ($59 million below forecast) falling below projections, partly offset by lower refunds ($43 million below forecast),” the report stated.
- Sales and use tax revenue was $653 million below the forecast in March and $1 billion (3.8 percent) below the fiscal year-to-date forecast. “While the March shortfall was partially due to timing issues that shifted some receipts from March to February, the fiscal year-to-date shortfall and longer-term sales tax receipts trends reflect ongoing weakness in taxable sales,” the Department of Finance explained.
With the state’s revenue picture coming into clearer focus, Newsom’s staff is preparing a revised budget for the 2024-25 fiscal year, which begins July 1. The “May revise” is due by May 14.