The May Revision anticipates a funding shortfall for programs supported by cannabis tax revenues. Our new revenue estimates are slightly higher, yielding a slightly smaller funding shortfall. Specifically, our estimate for 2022-23 cannabis retail excise tax revenue is $509 million. This is $24 million above the administration’s May Revision estimate but $133 million below the January Governor’s Budget estimate.
California businesses added 67,000 jobs in April, an above average pace after a sluggish start to the year. Despite employment gains, the state's unemployment rate rose slightly to 4.5 percent because more workers re-entered the labor force.
U.S. retail sales have dropped 0.9 percent over the last 3 months and grown 1.6 percent over the last 12 months.
We discuss our May revenue outlook.
Annual inflation is below the 2022 peak, but core measures have leveled off in recent months.
April PIT withholding came in $705 million (7 percent) below projections included in the recently released Governor's Budget. Since the Governor's Budget projections were released in January, withholding is $2.9 billion (8 percent) below the administration's projections. For the fiscal year so far, withholding is running 4.5 percent lower than last year, with most of the weakness coming in November and December of last year.
U.S. retail sales have grown 1.9 percent over the last 3 months and 2.9 percent over the last 12 months. Sales have grown faster than inflation over the last 3 months but slower than inflation over the last 12.
Based on the most recent revenue and economic data, we currently estimate that collections from the state’s “big three” taxes—personal income, sales, and corporation taxes—are likely to fall below the Governor's Budget assumption of $200 billion in 2022-23.
U.S. retail sales have grown 2 percent over the last 3 months and 5.4 percent over the last 12 months.
We look at recent program statistics and research on California Competes.
Revenue from the cannabis retail excise tax has declined for six straight quarters.
U.S. retail sales have grown 6.4 percent over the last 12 months, but have been flat after accounting for inflation.
Based on the most recent economic data, we now estimate that annual inflation will drop to about 4 percent by the second quarter of 2023.
U.S. retail sales (seasonally adjusted) declined 1.1 percent from November to December. The two-month decline was 2.1 percent. In the last 30 years, two-month drops of at least 2 percent have happened around recessions.
U.S. retail sales (seasonally adjusted) declined 0.6 percent from October to November.