State Revenues Coming in Stronger Than Projected
April 20, 2017
Tax day has officially passed and all eyes are on the State Controller’s Daily Revenue Tracker. So far, tax returns are up eight percent ($595 million) from the same point in time last year. For now, this puts the State on target to meet the $14 million Governor Brown projected to collect in personal income taxes for the month of April. As we near the end of the month, the next 10 days will be crucial in anticipating the direction of the Governor’s budget revisions (due to the Legislature no later than May 15).
Big collection days must continue in order to stay on track with the Governor’s budget forecast. Although last months’ revenues do not necessarily indicate what cash flow will be over the next 10 days, the Department of Finance’s most recent report shows overall revenues for March exceeding the Governor’s 2017-18 Budget projections by $1.39 billion. Year-to-date that puts us at $1.151 billion above forecast. This is especially significant given the Governor’s budget plan, which he unveiled this past January, anticipates a $1.6 billion deficit come next summer if reductions aren’t made.
While personal income taxes take center stage this month, the Legislative Analyst reminds us that April is also a big month for corporation taxes. The Franchise Tax Board has reported $1.68 billion of gross corporation tax collections in April thus far. This is coming on the heels of a significant spike in March – 33% ($338 million) above budget projections.
It is also important to remember that, while personal income taxes make up the largest piece of the state’s pie, the Administration looks at the bigger picture, taking into account a combination of other factors when crafting the state’s budget. Tax streams play a significant role, but so too do other economic indicators such as labor market conditions, building activity, real estate, and national trends.
Expect to see more news from CSAC on the budget front as the constitutional deadline for the May Revision draws closer.