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Other Budget Issues

Last Updated: 2/11/2013
Budget Issue: "Big Three" state taxes finish January $4.95 billion above administration projections
Program: Revenues
Finding or Recommendation: Provides update concerning January personal income, corporate income, and sales and use tax collections.
Further Detail

This brief note provides an update on January revenue collections for the State of California, following release of preliminary agency cash reports concerning sales and use tax (SUT) collections. Collectively, personal income taxes (PIT), SUT, and corporation taxes (CT) are known as California's "Big Three" taxes and account for about 95 percent of state General Fund revenues (including Education Protection Account revenues).

"Big Three" Taxes Finish January $4.95 Billion Above Administration Projections. Preliminary agency cash data shows $2.13 billion of General Fund SUT collections for January, or $58 million below the administration's January Governor's Budget projection for the month. As described in our earlier note, General Fund PIT collections finished January at $12.56 billion, or $4.952 billion above the administration's January 10 Governor's Budget projection for the month. CT collections finished January at $78 million, or $53 million above the administration's modest projection for the month. Combined, therefore, the Big Three taxes finished January about $4.95 billion above the administration's projections.

By custom, the administration's January 10 projections essentially "true up" prior months' collections. After accounting for minor prior month adjustments, Big Three collections for the 2012-13 fiscal year to date now total $52.56 billion, or about $4.96 billion above the administration's January 10 forecast.

As described in our earlier note, there are a variety of possible reasons for the greater-than-projected influx of tax revenues in January, and it is possible that this influx will result in little or no improvement in the state's financial bottom line.

Methodology. The totals listed above are based on agency cash reports, which are the most timely and authoritative means of tracking budgetary revenues for the state. "Controller's cash" data, by contrast, is not used to track and forecast budgetary revenues for various reasons, including the fact that Controller's cash does not give a timely reading of some tax collections, such as SUT collections due at the end of some months. Agency cash data in the monthly Department of Finance Finance Bulletin is based on real-time data from the state's tax agencies. The Finance Bulletin lists Big Three collections as well as other revenue collections.

Controller's monthly cash reports are used to track the state's end-of-month "cash cushion"--cash resources available for state operations--as the only source of information available for that data point. At the end of January, the Controller's office report shows that the cash cushion equaled $17.6 billion, which was $6.65 billion above the administration's cash forecast in the Governor's Budget Schedule 5C, as released on January 10.  (During the current fiscal year, the state has borrowed $10 billion from investors for cash flow purposes through the issuance of revenue anticipation notes. The General Fund also relies on non-General Fund "borrowable" cash balances when needed.)