LAO Fiscal Outlook: Updated Proposition 30 Estimates

In conjunction with the release of the November 2015 edition of our office's Fiscal Outlook, we display below our office's updated estimates for the revenues of Proposition 30 (2012) under our publication's "main scenario."

Main Scenario Assumes Economic Growth...Other Scenarios Possible. As we describe in our report, the main scenario assumes continuing economic growth and steady growth in stock prices. Many other scenarios are possible, including ones that would lead to much larger or much smaller Proposition 30 income tax revenues. For example, if a recession or stock market downturn were to occur (like the hypothetical recession in the Fiscal Outlook "recession scenario"), Proposition 30 revenues could be considerably less than shown above.

Accruals. The figures above reflect the state's complex policies for accruing, or attributing, Proposition 30 revenues by fiscal year. Those policies cause 2018-19 to have somewhat less than half a year of Proposition 30 income tax revenue, since a portion of that year's revenues will have been accrued to previous years. (This assumes that the state maintains its current revenue accrual policies.)

Proposals to Extend Proposition 30 Income Taxes. State law requires our office to produce analyses of the fiscal effects of proposed ballot initiatives. Recently, proposals have been advanced to extend the Proposition 30 income taxes or adopt similar taxes on a permanent basis. Our analyses of those proposals are here and here. Our Fiscal Outlook methodology assumes that current tax policies remain in place and, therefore, also assumes that Proposition 30 expires as scheduled in current law. Accordingly, if voters were to approve a tax measure like those mentioned above, revenues available for education or other budget commitments would increase, relative to our Fiscal Outlook assumptions.

Proposition 30 Sales Tax Expiration Slows Our Projected Sales Tax Growth in 2016-17. As described in a separate blog post here, the expiration of the Proposition 30 sales taxes in 2016-17 has a significant effect on our overall sales tax projections.

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