Bottom Line: What the Numbers Mean | Receipts | Disbursements

California ended the fiscal year in the black for the first time in seven years.

Revenues as of June 30 exceeded spending by approximately $4.3 billion, which was enough to pay off the $2.4 billion in outstanding loans carried over from the previous fiscal year and leave the state with a positive cash balance of $1.9 billion. (See Figure 1.)

The cash balance was less than 2.0 percent of General Fund disbursements for the year and could easily be erased by a dip in economic activity and revenues or a spike in spending. It is, however, a sign of California’s improving financial health.

June closed out the fiscal year with a solid performance in total revenues. At $14.8 billion, total revenues exceeded the monthly number estimated by the Department of Finance (DOF), in conjunction with the Governor's 2014-15 Budget, by $304 million, or 2.1 percent.  Advances in jobs and total payrolls, along with capital gains from stocks and housing, put personal income taxes at $635 million, or about 7 percent, above DOF projections.

June also saw corporate taxes surpass expectations by close to $290 million, or 13 percent. This reflected an improving economy and its positive impact on profits. Retail sales taxes were the only major category to disappoint. Those revenues were nearly $270 million, or about 12 percent, shy of estimates.

The spending side helped the State end the fiscal year on a positive note. Although disbursements can be volatile on a month-to-month basis, June’s General Fund spending equaled $4.6 billion and was $1.1 billion less than projected.

For the total fiscal year, spanning July 1, 2013, through June 30, 2014, overall revenues were about $101.6 billion and exceeded Budget projections by $2.1 billion. (See Table 1.) Personal income taxes were the principal driver of that overshoot, followed by corporate taxes.

Disbursements for the total fiscal year equaled approximately $99.6 billion and were close to DOF projections issued in January. (See Table 2.) The cost of state operations and capital outlays was less than expected but was offset by higher-than-anticipated payments to local governments and other spending. Greater outlays for health care represented the primary area where actual spending exceeded DOF estimates. This was largely due to increased state spending for Medi-Cal patients as the Affordable Care Act has increased awareness of the program. Spending to fund the regional centers serving the disabled also exceeded expectations.

California's positive cash balance going into the new fiscal year represents the impact of a solid rebound in economic activity and the success of efforts to rein in government spending. It is still premature to declare victory. State revenues are subject to volatility and swings in economic activity. Maintaining curbs on spending is difficult at a time when spending demands for schools, health care, social services, the environment, and infrastructure continue to advance.

California still has much work to do to pay down its debt in various areas and to build up its reserve fund. Nevertheless, beginning the fiscal 2014-15 year with $1.9 billion in the bank is a good first step.

Figure 1: State's Cash Balance Turns Positive

Billions of Dollars, Fiscal Years Ending June 30

Table 1: General Fund Receipts

July 1, 2013 – June 30, 2014 (in Millions)

Table 2: General Fund Disbursements

July 1, 2013 – June 30, 2014 (in Millions)

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