Bottom Line: What the Numbers Mean | Receipts | Disbursements

California ended the 2013 calendar year with a burst of tax receipts as the economic recovery continued to boost jobs, incomes, profits, and spending. Revenues flowing into the State's General Fund coffers totaled $10.6 billion, beating estimates contained in the 2013-14 Budget Act by a hefty $2.3 billion, or 27.7%.

As portrayed in the accompanying chart, all revenue sources in December showed green arrows both with respect to estimates and to the prior year's actual figures.

As we noted in our analysis of November’s revenues which, at first glance, appeared to fall short of projections, approximately $400 million of December’s $2.3 billion of unanticipated revenues were actually generated in the month of November but were not deposited into the General Fund and booked into the State’s official ledger until the first week of December.  We attribute this timing anomaly to "Black Friday" weekend falling at the end of November, which impacted the timing of retail sales collections and when they were recorded in the state ledger.

Even when this anomaly is factored-out, December's revenue numbers alone are still impressive. Retail sales tax receipts surged past estimates by over $700 million, a jump assisted by an improvement in the job market, last year's 30% swell in stock prices, and strong rebound in housing-related holiday shopping. The growing popularity of online shopping and the agreement of online retailers to now collect California sales taxes also helped boost results.

Personal income taxes exceeded expectations by a large margin of $987 million in December. Estimated taxes were very high, bolstered by capital gains and the desire by taxpayers to make payments by year-end to add to their 2013 federal income tax deduction. Rounding out California’s three major tax sources, corporate tax receipts were better than expected by $189 million during December.

Looking over the entire first six months of fiscal 2013-14, California's  revenues outstripped estimates by 6.4%, illustrating the strength of the state’s economic recovery. (See Figure 1.) Corporate tax receipts were ahead of projections by 2.8%, while personal income tax receipts topped forecasts by 6.1%. Retail sales tax receipts surged the most, with a positive variance of 9.2%. Online retail activity is no longer siphoning off tax receipts from the state, but is adding to them. At the same time, online retailers are generating new economic growth for California as they expand warehouse and distribution operations in the state.

Meanwhile, spending remains in check, particularly in terms of the cost of state government operations.  For the first half of fiscal 2013-14, disbursements for state operations were 0.3% below forecasts.  Disbursements for local assistance were modestly above expectations, but the divergence appears to have been more than accounted for by a delay in health care reimbursements that will now not take place until February.

Putting the revenue and spending sides of the ledger together, California’s liquidity position at the half-way point of FY 2013-14 is healthy, with no foreseeable problems on the immediate horizon. Although the perennial timing differences between when the State receives its revenues and when it makes its expenditures generally causes the State to see a cash deficit during the July-December period, the $15.9 billion difference this year was $1.9 billion less than what had been projected. That $15.9 billion plus the $2.4 billion balance carried over from the prior fiscal year was financed by a combination of borrowing from internal and external sources.

As we enter 2014, the state's economy appears to have significant momentum. A boom in technology, further gains in housing, a firming in commercial real estate, rising exports, and improving consumer and business confidence bode well for the new year.

Related Reading:

• Controller's State Finances 101

Figure 1: California Ends 2013 In High Spirits

July 1-December 31, 2013, Variance From Estimates, (Percent)

Table 1: General Fund Receipts

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

Table 2: General Fund Disbursements

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

Back to Top