The California Department of Finance is expected to release its monthly revenue report this week. It comes on the heels of last week’s report from State Controller John Chiang on January revenues he called “disappointing.”
Chiang reported that state sales tax revenue came in $4 million higher than the Brown administration expected, but revenue from personal income tax and corporate tax fell short of January estimates by a combined $700 million.
If the trend continues, lawmakers will have a larger deficit to plug next year.
Finance Department spokesman H.D. Palmer says, “We don’t know exactly what that’s going to mean for April receipts or for the rest of the fiscal year, but it’s something that obviously bears watching.”
Palmer says it’s possible that personal income tax revenue was lower than expected because self-employed taxpayers underestimated what they owed the state in January — and will pay more in April. He says capital gains tax may be lower because Californians delayed stock sales due to market conditions.
Palmers say that, if that's the case, those stockholders could realize capital this year, and the state would make up the loss. But, Palmer says, there’s no way to look at these numbers and figure out for sure why personal income tax revenue is lagging behind estimates.
“One quarterly payment, even if there’s a big swing, is only one piece of the puzzle," says Palmer. "You can’t build a long-term trend off of one or two months’ worth of data."
California lawmakers won’t have a clear picture of revenues until the end of April when they’ve counted all the state tax returns.
Jason Sisney with the Legislative Analyst’s Office says it could turn out that Gov. Brown overestimated revenues, that “capital gains and similar revenue sources were weaker in 2011 than the administration expected. That’s one possible interpretation; there are others.”
But he say no one will know if that’s the case until May.
The Legislative Analyst’s Office will release its revised revenue forecast later this month.
Sisney says, given the uncertainty about where tax revenue stands, state lawmakers probably won’t make any major budget decisions until May, when they have solid revenue numbers in hand.