Bloomberg News

California April Taxes Falling Short as Brown Readies Budget

April 27, 2012

California personal-income-tax collections in April are falling short of Governor Jerry Brown’s projection by more than $2 billion, data from Controller John Chiang show. The state is already facing a $9.2 billion deficit through June 2013.

With two days to be counted, the state has taken in $6.74 billion since April 1, according to a daily tally on Chiang’s website. Brown’s projection for the month was $9.13 billion.

Brown, a 74-year-old Democrat, will unveil a revised budget in mid-May based on the newest figures. He’s already said that the deficit may widen by $1 billion or $2 billion because lawmakers resisted spending cuts he proposed and lawsuits blocked other reductions. California has fought deficits every year since 2007 as tax collections suffered from the longest recession since the 1930s.

“We’ve been in troubled times since July 2007 and we are going to continue to see tough times ahead,” Chiang, a Democrat, said in a telephone interview. “We have to be smart and prudent with our fiscal discipline.”

In January, Brown proposed a $92.6 billion budget that would cut $4 billion from health and welfare programs and that counts on voters approving higher taxes in November to prevent deep education cuts.

Hair Trigger

The budget, for the fiscal year that begins July 1, includes a mechanism that triggers $4.8 billion in reductions to public schools and colleges if voters reject higher taxes. The trigger will ensure that the state by year’s end can pay off short-term cash-flow loans. Absent that assurance, Wall Street might not lend to the state at affordable rates.

California’s nonpartisan Legislative Analyst’s Office said personal-income-tax collections as of April 25 lagged behind Brown’s projection by about $2 billion. Corporate taxes also were behind: The state began the month $304 million behind projections, and since has trailed Brown’s $1.53 billion April estimate by about 10 percent, the office said.

“These data and an updated economic forecast will be reflected in a revised revenue forecast,” said Brown’s budget spokesman, H.D. Palmer.

Last year, Brown and Democrats passed an $85.9 billion budget that assumed the nascent recovery would pour $4 billion of extra revenue into the treasury. It never happened, triggering $1 billion of cuts to school transport, universities, programs for the elderly and disabled, child care, libraries and prisons.

This year, to avoid such reductions, Brown will ask voters to raise the sales tax, already the nation’s highest, to 7.5 percent from 7.25 percent, and boost rates on income starting at $250,000. Those making $1 million or more, now taxed at 10.3 percent, would pay 13.3 percent, the most of any state.

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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