California Controller John Chiang said Monday revenues in July came in $475 million below estimates in the state budget.
“Revenue collections were disappointing for the month of July,” Chiang said in a statement. “However, because spending appears to be tracking and the funds that the state depends on for liquidity are performing well, California’s cash outlook remains stable.”
The fall-off in revenue was fueled by a $295 million drop in sales tax collections in July compared to projections in the fiscal 2013 budget adopted at the end of June.
In contrast, personal income taxes in July rose 0.4%, or $12 million, above estimates and corporate taxes gained 27.4%, or $57.1 million.
California currently has a cash deficit of $18 billion after entering the fiscal year on July 1 with a cash deficit of $9.6 billion.
The state is covering the gap with internal borrowing and with this week’s offering of revenue anticipation notes.
The $10 billion Ran deal is one of the state’s largest such cash-flow management deals.
It is almost twice as large as California’s 2011 note sale, as the state’s normally uneven cash-flow schedule has an additional layer of uncertainty because of a November tax ballot measure.
Cash-flow problems in recent years have led California to create more tools to shore up its cash position until revenue comes in later in the year during income tax season.
For these and other reasons, rating agencies have given this year’s Ran deal top marks.
Moody’s Investors Service gave the notes a short-term MIG-1. Standard & Poor’s assigned the Rans an SP-1 plus. Fitch Ratings rated them F-1.
In a two-day retail order period for the Rans on Tuesday and Wednesday, investors ordered $3.235 billion of notes.
In the retail period, notes in the first series of $2.5 billion yielded 0.30% to 0.40% with a 2.5% coupon in 2013.
Notes in the second series of $7.5 billion yielded 0.40% to 0.55% with a 2.5% coupon in 2013.
