Bottom Line: What the Numbers Mean | Receipts | Disbursements

Revenues began the new fiscal year with a bumpy start. For the year beginning July 1, total revenues were about $300 million, or 6.0%, shy of estimates contained in the 2013-14 Budget Act. Personal income taxes were the primary culprit, as the revenue take was close to $275 million, or 7.0%, below Department of Finance projections. (See Figure 1 and Table 1.)

Projections have assumed that total personal income taxes would be lower in Fiscal Year 2013-14 than in Fiscal Year 2012-13 as many individuals may have accelerated their capital gains in December of last year to avoid the impact of higher capital gains taxes that went into effect on January 1. July withholdings, however, were below estimates and refunds were slightly more than anticipated.

The other two primary revenue drivers beat forecasts, but by smaller amounts. Corporate taxes were $10 million, or 4.9%, ahead of estimates, while sales taxes topped projections by $7 million, or 0.9%.

One should not be too alarmed by the overall shortfall in revenues as July is typically a comparatively low month for tax receipts.Total July revenues typically are equal to about 5% of the total expected for the full year, compared with what would be about an 8% share if tax receipts were spread evenly across the 12 months of the year. As a result, there is ample time for revenues to catch up, but healthy job and income gains will need to continue.

While revenues fell short of expectations by about $300 million, expenditures came in under predictions by twice as much, or close to $600 million. (See Table 2.) The cost of state operations was in line with forecasts, but local assistance in the form of disbursements to K-12 schools and Social Services was less than expected. This difference is likely to be reversed in August.

While July disbursements had been expected to exceed total receipts, July's deficit was $8.5 billion, or about $300 million, below the $8.8 billion contained in the Budget. The State's loan balance at the end of the first month of the fiscal year stood at a total of $10.9 billion. This represented the sum of the spending/tax gap of $8.5 billion plus the $2.4 billion balance carried over from the last fiscal year. All of the balance was funded through internal borrowing.

July's revenue numbers were somewhat disappointing, particularly since Budget Act projections for the 2013-14 fiscal year appear to be relatively conservative. Although spending also came in on the low side, that shortfall is unlikely to be sustained.

California's economy remains on the upswing and should be strong enough to support sizable revenue flows in the year ahead. However, higher interest rates, weaker export growth, further federal budget cuts, and company concerns about health insurance costs pose possible risks. Maintaining the balance between revenue outcomes and demands for higher state outlays will remain California's chief fiscal priority.

Related Reading:

• Department of Finance's 2013-14 State Budget Summary
• Controller's State Finances 101

Figure 1: Total July Revenues Fall Short

Percent variance from budget estimates

Table 1: General Fund Receipts

July 1, 2013 – July 31, 2013 (in Millions)

Table 2: General Fund Disbursements

July 1, 2013 – July 31 2013 (in Millions)

Back to Top