LAO Report Shows January Revenues Don’t Live Up to Projections
February 19, 2016
The Legislative Analyst’s Office (LAO) released new estimates for January 2016 revenues showing that major sources of state revenue are not reaching the amounts included in the Governor’s estimates for the month. Both the LAO and the Department of Finance (DOF) make projections, setting the stage for a debate during the budget process about which set of numbers should be the basis for the state’s budget decisions and priorities. Last year’s budget included an almost $3 billion dollar discrepancy between LAO and DOF revenue estimates.
Actual revenues for personal income, corporation, and sales tax came in below January projections. The LAO notes that January is typically a big month for personal income tax revenues as California taxpayers receive year-end bonuses, and additionally the final quarter payments for capital gains and corporation taxes also tend to come in during January. While the numbers are trending above actuals from this same time period last year, they are not coming in quite as highly as estimated.
The LAO notes that economic growth is slowing, as several key months for examining tax revenue are on the horizon for the state’s current fiscal year. The analysis suggests that “the possibility now exists for some revenue deterioration between now and the May revision,” and that stock market weakness could result in lower than expected personal income tax revenues. Revenue estimates will be a key piece of the conversation as the Legislature and the Governor continue with two ongoing special sessions and budget hearings commence.