State Revenue Update
Behind February Estimates, Ahead for Fiscal Year
March 15, 2018
The latest California Department of Finance (DOF) cash flow report shows February receipts falling short of 2018-19 proposed budget projections by $297 million, or 5.7 percent. The underperformance was driven by personal income tax receipts which were $357 million, or 11.5 percent below forecast – a dip that DOF attributes to federal tax reform. Despite this setback, state revenues are still surpassing estimates for the fiscal year overall.
The revenue picture for the fiscal year thus far is $2.6 billion, or 3.3 percent higher than anticipated in the 2018-19 proposed budget. Additionally, compared to the same point last year, revenues are up $7.7 billion. The unemployment rate has also reached a new historic low of 4.4 percent, demonstrating a strong labor market.
As previously stated, personal income taxes (PIT) are down for the month of February. This is largely driven by an unexpectedly high amount of refunds ($293 higher than forecasted). As a result, the amount transferred to the Mental Health Services Fund (MHSF) was $6 million below estimates. While February brings disappointing news for PIT collection, for the fiscal year, PIT is up $2 billion, or 3.6 percent.
Sales tax revenues beat February estimates by $26 million, or 1.4 percent. For the fiscal year, the state has collected $16.9 billion in sales tax, almost exactly in line with 2018-19 Governor’s Budget forecast.
Corporation taxes are also doing well, surpassing estimates for February by $24 million, or 18 percent. For the fiscal year, the state has collected nearly $5 billion in corporation taxes, $431 million (or 9.4 percent) above forecast.
CSAC will continue to closely monitor all that will factor into the Governor’s final budget decisions as DOF makes preparations for the Governor’s May Revision and keep counties apprised of any new updates.