California revenue outpaces forecasts for 4th straight month

For the fourth straight month, California has collected more in taxes than expected, a sign that the state economy may be starting to recover.

But finance officials warned that any rebound is expected to be slow, and the revenue boon may prove less helpful at shrinking California’s deficit than many in Sacramento hope.

State revenue outpaced forecasts by $356 million in March, according to a report issued Thursday by the state controller. For the current fiscal year, California’s tax collections have topped budget projections by $2.3 billion, or 4.1%.

Controller John Chiang said in a written statement that lingering high unemployment in California means “the road to recovery will be long and arduous.”

Daniel J.B. Mitchell, professor emeritus of public policy at UCLA, said the spate of higher-than-expected receipts was another sign that California’s economy had “at least bottomed out.”

“Things aren’t getting worse,” Mitchell said. “On the other hand, things aren’t very good, either.”

Unemployment in the state remains stubbornly above 12% and the budget remains woefully out of balance, with an estimated $20-billion shortfall. Lawmakers have taken steps to pare back only a small portion of that deficit.

Having collected $2.3 billion more in taxes doesn’t mean the state deficit will shrink by that amount.

In a letter to top budget staffers in the Legislature last month, nonpartisan Legislative Analyst Mac Taylor said the new revenues “provide much less budgetary solution than on first blush.”

Much of the money will probably go to public schools, Taylor said, because the state’s education funding law, Proposition 98, dedicates a large portion of state tax revenue to primary and secondary schools.

That may be good news for public education, Taylor said in an interview, but it won’t necessarily do much to pay down the budget deficit.

“We just want to make sure people are going into this with their eyes open,” Taylor said. “You can’t attribute all of that new revenue to directly addressing the budget problem.”

Gov. Arnold Schwarzenegger plans to unveil his revised budget package in mid-May after the state tallies the taxes collected in April, when most residents file their tax returns.