Good News From State Cash Flow Report, With Caveats
March 25, 2016
The latest monthly report from the Department of Finance show positive news for state revenues, but the positive economic news is tempered with some continued uncertainty as well.
For the month of February, the “big three” revenue sources came in higher than anticipated: personal income tax receipts were $348 million (14.4 percent) above projections, sales and use tax revenues were $115 million (4.7 percent) above projections, and corporation taxes were $181 million (1073.6 percent) above projections. In total, monthly general fund revenues beat the forecast by $636 million, or 12.7 percent. Year to date general fund revenues are less extreme, but still tracking at $442 million (0.6 percent) above forecast.
The state’s economic health is under great scrutiny as the 2016 legislative session marches toward the May Revise and updated budget forecast for 2016-17. The large variance over forecasted projections is partly due to lower than anticipated refunds in personal and corporation taxes. The lower than expected refunds, in turn, may be due to delays in processing as well as other factors. In the world of sales and use tax receipts, a portion of the January receipts shifted to February as reported last month. February sales tax revenues therefore include part of the final quarter of 2015 payment, as well as the prepayment for first quarter of 2016.
In general economic news, California demonstrated job growth in some sectors but a small decrease in total jobs overall. The unemployment rate of 5.7 percent is higher than the U.S. unemployment rate of 4.9 percent. Home sales and prices dropped from January levels, but are still higher than the comparable period in 2015.