|Budget Issue:||2012-13 revenues on track to end above both Governor and LAO projections (Updated July 1)|
|Finding or Recommendation:||This provides an update on June 2013 California personal income tax and corporation tax revenue collections. (Updated July 1, 5 p.m.)|
Updated: Monday, July 1, 5 p.m., Pacific time.
Agency cash revenue collection data indicates that the state ended May and June 2013 well above the Governor's revenue projections for the personal income tax (PIT) and corporation tax (CT). For these two income taxes alone, June revenues were around $1 billion above the Governor's projections--adding to the stronger-than-forecast results from the prior month of May. (Agency cash data for the sales and use tax and other revenues will become available in the coming weeks and be posted in the Department of Finance Finance Bulletin in mid-July.)
State Began June Significantly Ahead of Governor’s Revenue Projections. As of the end of May, state revenues were running significantly ahead of the Governor’s May Revision revenue projections, which were incorporated into the 2013-14 state budget package recently passed by the Legislature. Specifically, for the state’s “Big Three” General Fund taxes, revenues for the 2012-13 fiscal year to date ended May $695 million above the Governor’s May Revision projections. The bulk of this $695 million total results from PIT revenues, which were $561 million ahead of the Governor’s May Revision projection as of the end of May. (In addition to the positive trends for the Big Three taxes, the state's insurance tax collections were $215 million above year-to-date projections as of the end of May. Much of this gain is likely due to a timing issue mentioned in the most recent Finance Bulletin. Accordingly, the temporary gain in insurance taxes may be offset by lower June collections of that particular tax.)
June PIT Collection Trends Ahead of Governor’s Projections. June is a major month for PIT estimated payments—quarterly payments made principally by higher-income Californians to the Franchise Tax Board (FTB) related to capital gains and business income. Preliminary agency cash reports concerning June 2013 PIT collections show that the state ended June around $570 million above the Governor’s May Revision projections.
June CT Collection Trends Ahead of Governor’s Projections. June is also a major month for quarterly CT estimated payments. CT collections exceeded the Governor's projections in June, and preliminary agency cash data received to date indicates that a significant volume of projected CT refunds did not materialize during the month. The preliminary FTB reports indicate that CT revenues for the month of June were around $395 million above the Governor’s May Revision projections.
Figures Subject to Change. Particularly before publication of the Finance Bulletin in mid-July, routine reconciliations of FTB and other tax agency reports could alter the totals listed above to some extent.
Likely That 2012-13 Revenues Will End Above Both Governor and LAO May Projections. Our office’s May revenue forecast projected that the state’s 2012-13 revenues would be $690 million higher than those in the Governor’s May Revision forecast. Given that Big Three revenues ended May nearly $700 million above the Governor’s May Revision projections and that PIT and CT combined appear to have ended June nearly $1 billion above the Governor’s projections for the month of June alone, 2012-13 General Fund revenues will in all likelihood end above both the Governor’s May Revision projection and our own, assuming that year-end accruals materialize as projected.
Final results will depend in part on June totals for the sales and use tax and other revenue sources, which will be announced in the mid-July Finance Bulletin. Moreover, we caution that final determinations of 2012-13 revenues—which affect calculations of the General Fund reserve and the Proposition 98 minimum funding guarantee for schools—will not be made until many months from now under the state’s complex, opaque, and difficult-to-predict revenue accrual policies.
Agency cash data cited in this post differs from "Controller's cash" data. Agency cash data is used for budgetary revenue forecasting and tracking purposes--that is, for purposes related to the revenues listed in the annual state budget act.