State’s Three Major Revenues Continue to Deliver Strong Returns
October 19, 2017
The California Department of Finance (DOF) published its report for September cash flows and for the second month in a row, California’s three major taxes have exceeded 2017-18 budget expectations. Overall revenues in the month of September totaled $10.8 billion, beating budget projections by $190 million (or 1.8 percent) and generating $454 million (or 4.4 percent) more in revenues than September 2016.
Specifically, sales tax revenues are performing well in comparison to budget expectations, bringing in $5 million of unanticipated revenue for September. With these gains, fiscal year-to-date sales tax revenues have reached an impressive $247 million (or 4.4 percent) above budget expectations. It is important to note that although sales tax revenues are outperforming 2017-18 Budget Act projections, they were $61 million, or 3 percent lower than the $2 billion collected in September 2016.
In addition, personal income tax experienced a $9 million (or 0.1 percent) bump above estimates. Although $9 million is relevantly small on the grander scheme, income tax revenues fiscal year-to-date are up $152 million (or 0.9 percent). DOF reports that the amount transferred to the Mental Health Services Fund (MHSF) for the month of September was right on target with the 2017-18 Budget Act, coming in at $137 million.
The DOF report provides numbers that vary slightly from what the State Controller reported last week. This is due to the timing of the two reports. The DOF report captures agency cash which represents the cash when it is received by revenue collection agencies. It is different from the Controller’s report to the extent that cash received by the aforementioned agencies has not been reported to and recorded by the Controller.
In the recent report, DOF also provided an update on other economic indicators aside from revenues, such as the unemployment rate, gross domestic product, and building activity. In all, the economy appears to remain on strong footing. Unemployment fell by 0.2 percent in September, personal income continues to grow as previously noted, and residential permits are up 2.2 percent from a year ago signaling increased building activity.
While September was a relatively strong month for the economy, there are still three unpredictable months between now and when the Governor unveils his January Budget. CSAC will be tracking revenues very closely and will keep counties informed along the way.