SAN FRANCISCO — California Gov. Jerry Brown’s rosy revenue projections are likely to be reworked back to reality later this month.
All eyes will be on the governor’s May Revise budget set to be released later this month after the nonpartisan Legislative Analyst’s Office Tuesday projected state revenues are now $3 billion short of projections in Brown’s original budget proposal after the crucial month of April.
Department of Finance spokesman H.D. Palmer said it’s important to keep in mind that other economic factors contribute to the state’s revenues, including Facebook Inc.’s upcoming initial public offering.
But Palmer said the projected budget deficit in the May Revise will still likely be more than the current estimate.
“The number will be bigger than $9.2 [billion],” Palmer said.
The governor in January proposed a $92.5 billion spending plan for the fiscal year ending June 30, 2013, that attempts to close a $9.2 billion deficit.
Weaker-than-projected state revenues and a recent court decision stripping Controller John Chiang of the power to dock lawmakers pay if they don’t pass an on-time balanced budget led Standard & Poor’s to temper the high marks it gave Brown’s budget earlier in the year when it raised the outlook on California’s A-minus to positive.
The agency said in a report released Tuesday that the two developments could keep it from raising California’s credit rating.
It noted that its outlook is based on structural changes to the state’s budget rather than near-term revenue trends.
Standard & Poor’s analyst Gabriel Petek said if the governor is unable to pass his tax initiative in November, a cornerstone of his budget proposals, the state’s credit could take a hit.
“We have to look at the enacted budget with an eye toward how it may perform if the voters reject the tax initiative, and if it cannot withstand that scenario and remain realistically balanced, then it could undermine the basis for the positive outlook,” Petek said.
The tax referendum, which Brown has said could raise nearly $9 billion, asks voters to raise sales taxes and income taxes on the wealthy.
The money would mainly be used to prevent further cuts to education that would be triggered if the ballot initiative fails.
If the initiative fails, the rating agency said the window of solutions left to lawmakers has been narrowed this year to either spending cuts or a “patchwork approach” that would include one-time fixes and gimmicks used before fiscal 2012.
Petek noted that the structural budget improvements and the ability to pass a budget with a majority vote, which led to the positive outlook, remain intact.
Both Standard & Poor’s and Fitch Ratings assign California their lowest rating for a state at A-minus.
Moody’s Investors Service has the state two notches higher at A1, just above Illinois.
In a report released Tuesday, the LAO said that year-to-date general fund revenues, which includes April, are now likely around $3 billion below the administration’s target.
A shortfall of more than $2 billion in personal income taxes compared to the governor’s January projections was the main contributor.
Chiang also estimates personal income tax revenue came in about $2 billion short of the state’s budget projections in April, which is on top of a $898 million revenue shortfall through March.
