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State Budget Revenue Projection Update
On Monday, May 4, Jeff Frost provided this update:
At the end of March, the Department of Finance announced that their tracking of state revenues indicated that the state was approximately $1.3 billion above the projections made last year as a part of the 2014-15 budget. This was good news for public school advocates who believed that that figure would probably increase to as much as $2 billion in additional revenue once the April tax receipts are fully calculated.
However, last Friday the Legislative Analyst unveiled its analysis of the April tax receipts. Based on preliminary projections the personal income tax (PIT) collections for April alone was $1.8 billion and the corporate income tax gains for April was $90 million. These revenues will add to the current $1.3 billion in revenue that had exceeded the state's earlier budget projections. With more analysis to be done and May and June receipts still to come, the excess revenue could increase even further. In all, there could be between $3 and $4 billion in new revenue in the current fiscal year in excess of what had been forecast last June.
The LAO indicates that the vast majority of these new revenues will be required to go to Proposition 98 spending and possibly to a Proposition 2 Rainy Day Fund deposit. The administration is likely to consider these funds "one-time" and will not think of them as on-going revenue. This is reasonable given that this surge is driven in great part by capital gains taxes. Based on past history, the administration and DOF will want to keep revenue expectations as low as possible in order to keep programmatic spending by the legislature under control and because whatever revenue is considered a part of the 2014-15 budget will become a part of determining the base funding level for Proposition 98 in the 2015-16 Budget year.
These revenue levels will be the subject of scrutiny by the budget subcommittees in the next two weeks as the May Revise is finalized. We will monitor it closely and keep you informed. The report is available at the Legislative Analyst's Office website.