(CALMATTERS) – The latest numbers confirm what many, including the Legislative Analyst’s Office, predicted: California’s revenues will be lower than expected.
February’s personal and corporate income taxes fell $1.2 billion below the administration’s January budget projection.
- Large corporate tax refunds cost $796 million more than projected
- There was a $412 million shortfall in personal income tax withholdings.
The shortfall was driven largely by layoffs in the tech and finance sectors — despite an otherwise strong labor market — and the collapse of the IPO market last year.
Scott Graves, director of research at the California Budget Center, said the latest numbers mean policymakers may end up having to look at solutions that the governor didn’t propose in January:
- Graves: “We may see a situation in May or June that they decide, we actually need to dip into the reserves to help bring the budget into balance without making deep cuts to public services.”
Another option is to raise revenues, including by trimming corporate tax breaks.
A special challenge during the budgeting process will be working off of numbers that remain uncertain due to the federal and state extensions of the tax filing deadline to October 16.
“They’ll be making some assumptions with really incomplete info about how revenue comes in later in the year,” Graves said. “So we may see some corrections down the road.”