|Budget Issue:||April income tax collections on track to be $300 million above projections|
|Finding or Recommendation:||Provides update on preliminary daily agency cash reports of April 2011 personal and corporate income tax collections, net of refunds.|
(The analysis below was posted on April 28, 2011. An updated analysis was posted on April 29 to reflect one additional day of April revenue collections.)
California appears poised to collect about $300 million more in personal and corporate income taxes (collectively, "income taxes") than projected during the month of April 2011. (This does not reflect results for sales and use taxes or other revenues during the month.)
Through the end of March 2011, General Fund agency cash tax revenues were running approximately $2 billion above year-to-date projections for 2010-11. In the next few weeks, the state's budget forecasters will have to consider how to incorporate these higher year-to-date tax collections into final state revenue projections for 2010-11, as well as 2011-12. Among issues to be considered will be the level of projected tax collections for June 2011, which is expected to be the single largest revenue collection month of the current fiscal year.
Background. April traditionally has been California's most significant revenue collection month, particularly for personal income tax (PIT) revenues. April PIT collections have been prone in some prior years to be wildly above or below projections due to the state's reliance on highly volatile tax revenues related to capital gains, bonuses, and similar income. Every month--especially during April--the Legislative Analyst's Office (LAO) tracks daily PIT and corporate tax (CT) agency cash collections based on our communications with the Franchise Tax Board (FTB), the Employment Development Department (EDD, which administers PIT withholding for the state), and the administration.
The tax agencies now have reported to us PIT and CT collections through today, April 28. Refund reports lag by one day. Accordingly, with the month's PIT and CT collections now essentially completed, we provide below a preliminary LAO tally of income tax results to date based on the agencies' daily reports. These totals will change to some extent as tax agency officials update and reconcile tallies in the coming days and weeks. A more refined estimate will be available in about one week when FTB releases its first preliminary monthly tally of all income tax collections for the month. This preliminary FTB tally is incorporated into the month's Finance Bulletin, which is released by the Department of Finance and is the authoritative monthly tracking report for state revenues.
Personal Income Tax. For the month to date, FTB (non-withholding) PIT collections have totaled $7.007 billion, and FTB PIT refunds have totaled $2.605 billion, for a net amount of non-withholding PIT collections of $4.402 billion. For the entire month of April, the administration forecasted that this amount would equal $4.359 billion. One collection day and two refund days have yet to be added to this total. Accordingly, it appears likely that FTB (non-withholding) PIT collections will end up very close to the administration's forecast for the month--likely tens of millions of dollars above the forecast.
Based on LAO's tally of daily EDD reports, PIT withholding appears to be poised to end the month at around $3.1 billion--about $250 million above the administration estimate of $2.824 billion.
Accordingly, overall net PIT collections for April appear on track to end the month at around $7.5 billion--about $300 million above the administration's estimate. (This estimate includes PIT collections for both the General Fund and the Mental Health Fund.)
Corporation Tax. For the month to date, net FTB CT collections have totaled $1.482 billion. For the entire month of April, the administration forecasted that this amount would equal $1.532 billion. Collections have been surprisingly strong this week. With one collection day remaining, it now appears likely the state will meet the administration's CT forecast for the month of April.
Methodology. The daily tax agency collection reports upon which this update is based are "agency cash" reports. Agency cash—not "Controller's cash"—is used for state budgetary forecasting and reporting purposes. Agency cash differs from Controller's cash (which is reported in monthly state cash flow statements and the State Controller's Office personal income tax daily revenue tracker) based principally on the timing of receipts.