State Tax Receipts Fall for 5th Month in Row

Budget negotiators hoping for a turnaround in the economy--and with it improved tax collections--were told Wednesday by Controller Gray Davis that tax receipts fell again in May compared to the previous year, marking the fifth straight monthly decline.

After releasing the May revenue report, Davis urged Gov. Pete Wilson and legislators to be conservative in the kind of revenue estimates they adopt in the budget for the new fiscal year that will begin July 1.

The controller said net collections for personal income tax, bank and corporation taxes, and sales and use taxes in May were $146 million, or 6.2%, below the amount collected during the same month last year. For the year to date, tax collections are running $286 million, or 1%, behind last year’s level.

“Unfortunately, there was no May miracle,” Davis said. “Every month the situation just seems to worsen.”

A tug of war is under way between Republican Wilson and Democratic budget writers over revenue estimates, which are key to the $14.3-billion deficit figure the governor has adopted. Democrats are pressing Wilson to accept the estimates of the nonpartisan Commission on State Finance, which are $800 million more than estimates by the state Department of Finance.

If Wilson goes along with the higher number, the potential deficit could be reduced by that amount, eliminating the need for an additional $800 million in higher taxes or budget cuts.

The commission’s estimates are higher because its forecasters believe the state will begin to pull out of the recession this summer.

But Davis, a member of the commission, said the May tax collections underscore the state’s financial difficulties. He urged Wilson and lawmakers to take the more conservative approach.

Davis said he does not believe the economy will turn around until fall at the earliest.

Stepping into the budget debate, Davis, a Democrat, said: “Clearly the governor is taking the more prudent path. Last year the Legislature went along with then-Gov. George Deukmejian’s inflated revenue expectations and we are currently paying the price. I would urge a very conservative approach.”

Meanwhile, the state Senate, on a 33-0 vote, approved a rough-cut $55.8-billion version of the new budget with no debate. The action was necessary procedurally to allow an Assembly vote on the spending plan and set the stage for a final round of legislative negotiations on the budget.

The budget, as approved, would require about $7 billion to $8 billion in tax increases. The budget also would require $5 billion to $6 billion in budget cuts, the biggest of which have yet to be decided.

Sen. Alfred E. Alquist (D-San Jose), carrying the budget bill, told the senators before the vote: “There is something in it for each of you to find fault with or to hate. . . . The sooner we get it out of our house and into the conference committee the better off we will be.”

Wilson and legislative leaders are setting the stage for what they hope will be a final round of budget votes this weekend.