S&P sounds alarm over April tax revenue UPDATED
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Standard & Poor’s said on Tuesday that disappointing tax revenue in April could imperil California’s financial recovery.
In a new report, the ratings agency said it will be even more difficult for lawmakers -- who have so far resisted steep cuts to welfare and healthcare programs -- to balance the budget this year.
‘As the most important month of the year for [income tax] collections, April receipts are not only failing to solve part of the state’s projected problem, they are deepening the estimated budget gap,’ the report said. Standard & Poor’s also noted that Gov. Jerry Brown warned two weeks ago that the budget gap may have grown by $1 billion.
[Updated 3:05 p.m. H.D. Palmer, a spokesman for Brown’s Department of Finance, confirmed that the gap has grown.
‘The number is going to be larger,’ he said. ‘We’re going to have a plan to close that gap when we release the May revision,’ the updated budget proposal which is expected by May 14.]
Most of the discussion over April revenue has focused on income taxes, the largest chunk of the state budget. But corporate taxes have also continued to dip -- a problem neither Brown’s Department of Finance nor the legislative analyst’s office saw coming.
California pulled in $1.38 billion in corporate taxes in April, falling about $145 million short of expectations, according to numbers from the Franchise Tax Board.
The nonpartisan legislative analyst’s office, which provides budget advice to lawmakers, has been consistently pessimistic about the Brown administration’s predictions on income tax revenue. But the office agreed with the administration that corporate taxes would exceed $9.4 billion in the current fiscal year, which ends June 30.
But taxes on businesses have lagged almost every month, and the gap continues to widen. By the end of March, corporation taxes were 6% under estimates for the current fiscal year. Now they’re almost 7% short -- $6.13 billion instead of a projected $6.58 billion.
-- Chris Megerian in Sacramento