SAN FRANCISCO – California’s tax collections jumped nearly $500 million in November above projections in the state budget, but revenue still remains well below budget estimates, according to the state controller.
Controller John Chiang said in a statement Thursday that monthly revenues came in during the month $497 million above projections made by lawmakers to close a budget gap. If revenues fall too short, tiered cuts will be triggered during the year to account for the shortfall.
“While November’s totals came in 9% above projections, they did not erase the fact that we are still running $1 billion behind in revenues and $2 billion ahead in expenditures,” Chiang said. “Regardless of whether midyear cuts are enacted next week, the Legislature faces a tremendous fiscal challenge when it returns to session next month.”
The controller said his office is working with the Department of Finance to prepare for any possible impact on the state’s cash flow. California’s combined current-year cash deficit is $21.5 billion, which is being covered by $16 billion of internal borrowing and a $5.4 billion revenue anticipation note sale this fall.
Gov. Jerry Brown signed a balanced budget in June by assuming revenue would come in $4 billion higher than previously forecast. Since revenues have fallen too far below budget assumptions, spending cuts will likely be triggered to education and other services, if lawmakers let them stand.
The nonpartisan Legislative Analyst’s Office said in a report last month that revenuesin the current fiscal year that began July 1 is likely to come in $3.7 billion below projections used by lawmakers to craft the budget, potentially resulting in $2 billion of mid-year budget cuts.
The LAO said the combined cuts would likely total $2 billion with $1.4 billion, mainly hitting K-12 schools. It added that state may face an almost $13 billion deficit next fiscal year.
The LAO’s estimates for the rest of the year along with one slated to come out next week from the Department of Finance will determine the potential size of the reductions. The highest of the two will be used to determine the level of cuts.
