(The Center Square) – California’s state tax revenue came in billions short of forecasts in the first three months of the fiscal year, but officials say budgetary caution will help the state remain stable in the coming months.
Revenue is nearly $7 billion below forecasts through the end of September, according to a new bulletin from the Department of Finance. General fund agency cash receipts for September came in nearly 15% below the 2022-2023 Budget Act forecast, and cash receipts for the first three months of the fiscal year came in nearly $4.8 billion below forecast.
When accounting for the nearly $2.2 billion shortfall relative to the 2021-2022 budget forecast, “the cumulative deficit was $6.967 billion through September,” the bulletin states.
The shortfalls last month “continued to be driven by lower proceeds from personal income tax,” despite months of job gains, the bulletin said. This is the third month in a row the Department of Finance has reported cash receipts coming in under forecast.
Finance Department spokesman H.D. Palmer told The Center Square that at this point there are no changes in current-year spending relative to the budget approved over the summer. He noted that “any proposed changes to the current year would be reflected/proposed in the governor’s budget proposal in January.”
Looking ahead to future spending, Palmer said the state’s budget “recognized the importance of not building higher ongoing levels of spending that may not be sustainable.” He noted that 93% of the discretionary budget surplus was one-time spending, and the handful of ongoing programs approved in the budget are under a condition that there will be sufficient revenue to fund them in early 2024.
“If not, then they don’t go into effect,” Palmer said.
Despite concerns about a future economic downturn, an analysis released last month by Moody’s Analytics found that California ranked fourth among 50 states for recession preparedness. California is among the 39 states that “have overall cash balances large enough to weather at least a moderate recession without having to raise taxes or cut government spending.”
Jason Sisney, budget advisor to Assembly Speaker Anthony Rendon, noted that in addition to “technical forecasting issues,” lower stock prices and tech layoffs are “weighing” on the budget’s income tax revenues.
“Reserves and past caution on ongoing spending will help with stability in the months ahead,” Sisney tweeted.