Bottom Line: What the Numbers Mean | Receipts | Disbursements

March came in like a lion for California revenues and went out with a significant roar, with all three of the State’s major revenue sources beating expectations. California’s General Fund Receipts reached $6.4 billion, which was about $0.5 billion above projections made by the Department of Finance as part of the Governor’s 2014-15 Budget submitted in January.

Personal income tax receipts clocked in at $2.9 billion, which was about $232 million, or 8.6%, above expectations.  Refunds were much less than expected, which may reflect the fact that an improving economy is generating more income and capital gains than anticipated. As discussed in the Job Tracker in this month’s Chiang Report, California is close to its pre-recession employment peak, while stock prices and home values have rebounded strongly.

Corporate tax payments, which had been lagging forecasts for many months, have recently brightened substantially.  In March, they passed estimates by $131 million, or 9.5%. Reflecting the improvement in both California's and the nation's economies, operating earnings have increased while write-offs have diminished. Not to be left out, consumers have stayed in the game, pushing sales tax receipts a slight $22 million, or 1.4%, above projections.

The year-over-year rebound in tax receipts is also impressive. The sum of California’s “Big Three” revenue generators -- personal income taxes, corporate taxes, and sales taxes -- scored a 10.5% gain over March of 2013.

While revenue gains surpassed estimates for March, so did actual disbursements or spending. Spending exceeded projections by about $0.5 billion, essentially cancelling the month’s positive variance on the revenue side.

Month-to-month fluctuations can be substantial. What is California’s financial standing as the State enters the final quarter of its fiscal year? “Good” is the answer. Total General Fund Receipts have exceeded forecasts by $2.1 billion, while overall spending is a slight $0.1 billion less than estimates. While the cost of local government assistance is above projections, the cost of State operations has been less than expected.

Lower-than-expected payments to service California’s outstanding debt have been a major source holding down the State’s cost of operations during the past nine months. At the local level, higher-than-expected spending on Medi-Cal has accounted for the primary overage.

Compared with the first nine months of the prior fiscal year, total General Fund Receipts are up by 1.6%. Outlays are up by 13.4%, with spending on K-12 education and other areas receiving critical funding after severe cutbacks during the Recession.

With California’s year-to-date difference between outlays and spending running $2.2 billion better than projections, its outstanding loan balance of $16.7 billion at the end of March was also $2.2 billion below forecasts. That $16.7 billion comprised the $2.4 billion carried over from the prior fiscal year plus the year-to-date cash needs and was financed both through external and internal borrowing.

California’s strong revenue performance so far this year is giving the State an opportunity to markedly improve its financial standing. It is now imperative that the dividends of an economic upswing be wisely reinvested by paying down the State’s debt and building up its reserve fund.

Figure 1: Total Revenues Compared to March Forecasts

Percent of total projected March 2014 revenues*

*Governor's 2014-2015 Budget

Table 1: General Fund Receipts

July 1, 2013 – March 31, 2014 (in Millions)

Table 2: General Fund Disbursements

July 1, 2013 – March 31, 2014 (in Millions)

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