California revenues miss the mark for third month running

California's revenues for February were off by billions of dollars compared to the forecasts in the enacted and proposed state budgets, according to Controller Betty Yee's monthly cash report.

Revenues of $5.51 billion in February were 19.5% lower than forecast in the governor’s proposed 2019-20 fiscal year budget, off by $1.34 billion, and 26.7% lower than assumptions in the fiscal year 2018-19 budget, off by $2.01 billion, Yee reported Monday.

Total revenues of $80 billion for the first eight months of the fiscal year were $4.2 billion less than expected in the proposed budget and $3.3 billion less than anticipated in the enacted budget.

State revenues are 1.4% lower than for the first eight months of fiscal 2018, according to the controller’s office.

In December, one-month cash receipts were $5.6 billion, or 34.4% below those in December 2017, led by a 41.2% decline in personal income tax.

State finance officials had attributed the decline in December to taxpayers accelerating tax payments into calendar 2017 to beat federal tax reform’s $10,000 limitation on state and local tax deductions beginning in 2018. They are expecting a boost in April’s number since the elimination of SALT deductions took away the motivation to pre-pay income taxes.

S&P Global Ratings analyst David Hitchcock threw a caution flag in a report last week on the California budget. He noted that through January, cumulative sales tax revenue, which should not necessarily be affected by federal tax reform, was 1.5% below forecast through the first seven months of the year in the controller’s report.

S&P analysts wrote that they don't believe a one-month variation should "form the basis of a change in long-term credit outlook," but that it bears watching to see if the revenues show up in April as expected.

For February, sales and corporation taxes beat the forecasts, coming in higher than assumed in the governor’s proposed budget released in January, according to the controller’s report.

For the month, personal income tax receipts of $1.39 billion were $1.82 billion, or 56.6%, less than forecast in the proposed budget; and they were $2.05 billion, or 59.5%, lower than assumed in the budget enacted last June. In the current fiscal year, personal income taxes are 6% below the fiscal year 2018-19 budget forecast.

Sales tax receipts of $3.76 billion for February were $407.7 million higher than anticipated in the governor’s proposed budget, but $58.3 million less than expected in the fiscal year 2018-19 Budget Act.

Corporation taxes of $258.4 million in February were 59.8% higher than estimates in the FY 2019-20 proposed budget and 78.5% higher than in the enacted FY 2018-19 budget.