SACRAMENTO -- Gov. Jerry Brown said Wednesday it would be a mistake to count on the extra tax revenue that was projected by the legislative analyst last week.
The nonpartisan Legislative Analyst's Office says the state will receive $3.2 billion more than Brown's Department of Finance has estimated. The higher forecast is based on the expectation that stock market improvements will generate more tax money for state coffers.
Speaking during a California Chamber of Commerce breakfast, Brown downplayed the difference between the two forecasts as a "kerfuffle" and said it was better to use more conservative estimates.
"[The stock market is] up today, it may be up for six months, but at some point it’s coming down," he said. "And [if] we operate like this is a straight line, that’s when we get into trouble."
The budget is being negotiated between the governor and state lawmakers over the next several weeks, and revenue estimates are a key part of the process. Democrats have rallied around the higher number from the legislative analyst in hopes it will allow them to restore more money to safety-net programs.
One Wall Street ratings agency agrees with the governor.
Moody's said in a Wednesday report that counting on the extra tax revenue estimated by the analyst's office would add "more risk" to the state budget.
It chided the state for using "overly optimistic revenue projections" in the past, which resulted in midyear spending cuts when taxes fell short.
The report added, "Using the governor’s fairly conservative revenue forecast would increase the likelihood of meeting those forecasts and maintaining the $1-billion reserve factored into the budget proposal."
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