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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. 


Inflation Tracker February 28, 2024

Year-over-year core inflation declined slightly in January 2024, but inflation remains above pre-pandemic levels. California CPI saw an increase in its most recent data release for December 2023--mirroring the national data showing an increase in headline inflation in December.


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. 


Updated "Big Three" Revenue Outlook February 9, 2024

Our latest forecast continues to suggest there is significant downside risk to state revenues relative to the Governor’s Budget. Specifically, our forecast is about $24 billion below the Governor’s Budget across 2022-23 to 2024-25. 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 $10 billion higher or lower than our estimate for 2023-24 and $25 billion higher or lower for 2024-25.


Income Tax Withholding Tracker January 31, 2024

January PIT withholding came in $1 billion (11 percent) below projections included in the 2024-25 Governor's Budget. January 2024 withholding totals were 1 percent below January 2023 levels, normalized for the number of collection days.


California Housing Affordability Tracker (January 2024) January 24, 2024

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 over $220,000—roughly 2.5 times higher than median household income (about $85,000). Further, the annual income needed to qualify for a more affordable "bottom-tier" home is 60 percent higher than the median income. 


Monthly Jobs Report January 23, 2024

California businesses added 23,400 jobs in December. For the fourth month in a row, the state's unemployment rate climbed, surpassing 5 percent for the first time since 2017 (not including the pandemic period). The "Sahm rule," a real-time recession indicator that first triggered on in March, continues to signal the beginning of an economic downturn. 


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. 


Updated Unemployment Insurance Fund Forecast Shows Structural Deficit January 16, 2024

The administration's most recent Unemployment Insurance (UI) Trust Fund forecast shows that UI benefit payments will exceed state payroll tax receipts by $1.7 billion in 2024, after surpassing receipts by $1.3 billion in 2023. As a result, the state's outstanding UI loan from the federal government is set to increase over the next two years, despite automatic employer payroll tax increases to repay the loan. 


Holiday Hiring Sluggish January 3, 2024

October and November holiday season retail job growth remained relatively weak for the second year in a row. One plausible explanation for this weakness might be the continued transition to online holiday shopping, but transportation and warehousing jobs (where goods and packaged and delivered) has also been sluggish this holiday season.


U.S. Retail Sales Update: November 2023 December 14, 2023

U.S. retail sales have grown 0.9 percent over the last 3 months and 4.1 percent over the last 12 months. Both of these growth rates outpaced inflation.