Bottom Line: What the Numbers Mean | Receipts | Disbursements

California saw about $300 million more in its bank account at the end of April than expected after tax collections were tabulated for the pivotal month. Total revenues reached $13.9 billion, beating estimates made in conjunction with the Governor’s Budget released in January by 2.2%.

With the April 15 tax deadline, $11.0 billion of personal income taxes (PIT) accounted for the majority of the month's revenue take. This was almost equal to the projection with a positive variance of $83 million, or less than 1.0%. Although refunds were larger than expected, so were the sum of final, estimated, and withheld taxes. Corporate taxes were the star performer, surpassing forecasts by $180 million, or 12%. Sales taxes were the only laggard, missing estimates by a relatively small $15 million, or 2.3%. The combination of various other revenue sources, led by the tax on insurance companies, surpassed the month’s projections by a total of $56 million, or 10%.

As expected, this April’s revenue tally was less than a year ago because of tax changes approved by voters (Proposition 30) in November 2012. The increase in personal income tax rates, which was retroactive to January 1, 2012, caused a bulge in tax payments in April 2013.

Total disbursements for April were almost identical to forecasts, with variance of a small $38 million, or 0.5%. Smaller-than-expected payments to local governments were offset by larger-than-projected outlays for state operations and other obligations.

With 10 months under its belt, how is the State positioned in the final stretch of its fiscal year? The answer is "promising." Total revenues for the period, July 1, 2013-April 30, 2014, are at 102.8% of projections. This represents a positive variance of $2.2 billion. (See Figure 1 and Figure 2.) PIT is in the lead in terms of dollars, with a favorable balance of $1.3 billion, or 2.5%. Corporate taxes follow with a cumulative tax take that is running approximately $600 million, or 12%, higher than estimates. Other revenue sources are also ahead of projections by about $300 million, or 10%. A small miss on retail sales tax receipts of $50 million, or just 0.3%, is the only negative.

Spending for the fiscal year to date is almost spot on estimates, with outlays only about $80 million, or 0.1%, less than projected. Both the cost of State operations and funding for local governments, encompassing health, education, and social services, are running slightly below forecasts.

With total General Fund receipts overshooting estimates and disbursements slightly undershooting them, the cumulative deficit so far this fiscal year of $7.6 billion is $2.4 billion less than projected in January. The end of April saw the State with borrowing needs of $10 billion to cover the $2.4 billion carried over from the prior fiscal year plus the $7.6 billion gap between total year-to-date revenues and disbursements. A combination of internal and external sources funded these obligations.

California Chrome won the Kentucky Derby and now faces two more legs of the Triple Crown. The State of California is in a similar position, as it faces two more months of its fiscal year. The economy has treated the State’s finances well so far. Increases in employment and capital gains from stocks and housing have bolstered personal income taxes, while strengthening company profits have finally kicked in on the corporate side. Consumers are just about keeping up with the pack.

California's economy appears to have enough momentum to help the state’s finances end the year in good shape, but nothing should be taken for granted.

Figure 1: Year-to-Date Revenues Beat Projections

Actual percent of forecast, July 1, 2013 – April 30, 2014

Figure 2: State Revenues $2.2 Billion Above Plan

Actual less budget forecast, FY 2013-2014, $ in Billions

* -$50 Million

Table 1: General Fund Receipts

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

Table 2: General Fund Disbursements

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

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