Updated "Big Three" Revenue Outlook May 2, 2024
Revenues Likely to Fall Below Governor’s Budget Assumptions. Our forecast continues to suggest there is significant downside risk to state revenues relative to the Governor’s Budget. Specifically, our forecast is $19 billion below the Governor’s Budget across the 2022-23 to 2024-25 budget window. That being said, there is still significant uncertainty about how much revenue the state ultimately will collect. It is entirely possible that revenues could end up $8 billion higher or lower than our estimate for 2023-24 and $20 billion higher or lower for 2024-25.
Income Tax Withholding Tracker May 2, 2024
April PIT withholding came in $54 million (1 percent) above projections included in the 2024-25 Governor's Budget. Overall, withholding is running 1 percent above the Governor's Budget projections and about 5 percent higher than last year.
Monthly Jobs Report May 2, 2024
Preliminary reporting from California businesses suggest the state added 28,300 jobs in March, while the February figure was revised downward to reflect larger job losses. Although businesses continue to report modest hiring, an alternative measure of the state's labor market has shown monthly job losses since last summer. The state's unemployment rate remained at 5.3 percent. The "Sahm rule," a real-time recession indicator that first triggered a year ago, continues to signal an economic downturn.
California Housing Affordability Tracker (April 2024) April 30, 2024
Our post provides an updated snapshot of housing affordability in California. Over the last few years, we have seen a rapid increase in California housing costs, led by the dramatic increase in the costs of purchasing a home. Monthly costs for a newly purchased home are about $2,500 higher than they were just a few years ago. Annual income needed to qualify for a typical home is about $235,000—over 2 times higher than median household income (about $85,000). Further, the annual income needed to qualify for a more affordable "bottom-tier" home is over 50 percent higher than the median income.
U.S. Retail Sales Update: March 2024 April 15, 2024
U.S. retail sales have grown 0.8 percent over the last 3 months and 4 percent over the last 12 months. Retail sales growth has outpaced inflation over the last 12 months, but not over the last 3 months.
Inflation Tracker April 12, 2024
Inflation has started to trend back up in recent months and remains above the pre-pandemic norm. Prices in California largely have tracked with this national trend.
U.S. Retail Sales Update: February 2024 March 14, 2024
U.S. retail sales have dropped 0.4 percent over the last 3 months and grown 1.5 percent over the last 12 months. The 12-month growth rate was below the rate of inflation.
Annual Revision Shows State Added Few Jobs Last Year March 13, 2024
Each year, the U.S. Bureau of Labor Statistics revises the state's jobs number to match actual payroll records from businesses. The latest revision lowered its count of California jobs by 1.5 percent. The corrected data show that the state added just 50,000 jobs between September 2022 and September 2023, while preliminary monthly reports had showed the labor market growing by more than 300,000 jobs.
The 2024-25 Budget: Property Tax Postponement Program February 29, 2024
The Governor proposes to use $7.5 million General Fund on a one-time basis to support the Property Tax Postponement (PTP) program. The PTP program has a structural deficit, very low participation, and relatively high administrative costs. We recommend the Legislature (1) direct the State Controller's Office to report at budget hearings to provide an update on the PTP program and (2) consider eliminating the program.
Overview of State Bond Debt Service February 27, 2024
We summarize state bonds, the state's current debt levels, and its annual debt service payments. In inflation-adjusted terms, total bond debt and annual debt service payments have declined over the last couple of decades. The share of the overall state General Fund budget going to debt service payments is less than 3 percent--also the lowest level in over 20 years. We project that the share of the General Fund budget going to debt service payments will remain relatively steady over the next few years.
Cannabis Tax Revenue Update: February 2024 February 27, 2024
Our new forecast for 2023-24 cannabis retail excise tax revenue is $675 million, very close to the January Governor’s Budget forecast of $660 million.
Evaluating Tax Policy Changes in the Governor's Budget February 22, 2024
The Governor’s budget includes several proposed tax policy changes. We recommend approving proposals to eliminate certain tax expenditures for fossil fuel companies and conform to federal law on tax deductions for open space and historical preservation. We also suggest, in light of the state’s fiscal situation, seriously considering the proposal to eliminate lenders’ ability to claim tax deductions or refunds for sales tax payments made with bad debt. Finally, we recommend rejecting the proposal to limit the use of net operating loss deductions.
U.S. Retail Sales Update: January 2024 February 15, 2024
U.S. retail sales have dropped 0.5 percent over the last 3 months and grown 0.6 percent over the last 12 months. The 12-month growth rate was well below the rate of inflation.
Recent Revenues Coming in Below Governor's Budget Projections January 22, 2024
In the first few weeks of January, real-time personal income tax (PIT) revenue collections are running $3 billion to $4 billion short of the January target for current year revenue projections included in the 2024-25 Governor's Budget.
U.S. Retail Sales Update: December 2023 January 17, 2024
U.S. retail sales have grown 0.7 percent over the last 3 months and 5.6 percent over the last 12 months. Both of these growth rates outpaced inflation.