The state of California will probably collect $2 billion more in tax revenue than expected in the current fiscal year, all of which would be dedicated to schools and community colleges under the state's education funding formula, according to a new report.
The report, released on Wednesday by the nonpartisan Legislative Analyst's Office, said income and corporate taxes are generating the higher revenue, offsetting lax sales tax receipts.
Revenue for the current fiscal year was estimated at $105.48 billion in the budget that was signed by Gov. Jerry Brown. The new report estimates it at $107.44 billion.
Despite the higher revenue, state leaders should not expect there to be money left over, the report said. The education funding formula, part of the state Constitution, will direct the funds to schools and community colleges.
The report highlights how California's finances are improving after several budget crises. By July 2016, the state could have $4.2 billion in reserves, thanks in part to a ballot measure approved by voters earlier this month. That measure, known as Proposition 2, requires state leaders to set aside money in a rainy-day fund every year.
The reserves could help cushion the state from an economic downturn. The report said the United States is currently in its sixth consecutive year of economic expansion, which is longer than average since World War II.
"Based on the historical length of economic expansions, it is likely that a significant economic slowdown or recession will occur prior to 2020," the report said.