Newsletter: The search for California’s missing $2 billion in tax revenues

Essential Politics

That headline probably got your attention, right?

It may not be full-on nervousness, but there’s definitely anxiety in Sacramento on this tax day about income tax receipts that help pay for a variety of vital government services — from K-12 schools to prisons, parks and beyond.

Here’s the thing: Even if tax receipts meet projections by Gov. Gavin Newsom, it still will force some tough choices when lawmakers craft a new state budget. That’s because the state began April far behind where things were expected.

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Simply put, Newsom’s projections for tax revenues back in January missed the mark by almost $2.7 billion. I first wrote about this in mid-February, pointing out that state budget writers believed they could pin the problem on President Trump and congressional Republicans. The federal tax overhaul of 2017 shrunk the amount of state taxes that Californians could write off on their federal returns.

The theory since this winter is that some California taxpayers who used to pay their state taxes early just to get that benefit would hold on to their dollars until the last possible moment — the final hours of April 15.

Through the end of last week, though, most of the money hadn’t shown up. Tax receipts were about $600 million above projections, reported the independent Legislative Analyst’s Office. And it’s certainly possible this week will close the gap.


But what if it doesn’t? As I wrote in my Sunday column, it could force Newsom and the Legislature’s mega-majority of Democrats to rethink some of their more ambitious budget proposals. The governor will use April’s final tally to revise his budget plan next month; legislators must send him a final spending plan by June 15 — or forfeit their paychecks for every day that it’s late.


Newsom also faces a few intense weeks on a topic that has bedeviled lawmakers for the past year: a comprehensive plan to ensure the costs of utility-involved wildfires are paid to victims and communities without putting any more utilities into bankruptcy.

On Friday, the governor unveiled a 52-page report from the task force he commissioned to find a road map for California’s wildfire future. The group made recommendations on wildfire prevention and enforcement but declined to pick a path forward on whether long-standing liability laws should be loosened so that utility companies only pay when they’re at fault for a blaze’s origin. The chance that such a change means someone else pays the difference — ratepayers or taxpayers — is why the issue has been so contentious at the state Capitol.


Nor is the governor likely to find an easy way to move the needle on the economic plight in Central America that has led so many people to make their way to the U.S.-Mexico border.

Newsom’s trip last week to El Salvador left him convinced that California could do more to boost the economy of the country, the kind of assistance that was once solely the province of the U.S. government.

The president, meantime, ratcheted up the rhetoric over the weekend on the idea of sending migrants to cities with “sanctuary laws” — many of them in California.


“We hereby demand that they be taken care of at the highest level, especially by the State of California, which is well known [f]or its poor management & high taxes!” Trump tweeted on Saturday.

Newsom — who found tensions running high on the immigration debate while in El Salvador — called the idea “sophomoric” and “petulant.”


-- Pete Buttigieg, the Indiana mayor who hopes to be the voice of a new generation, officially entered the 2020 presidential race on Sunday. (Can it last?)

-- Sen. Kamala Harris used the looming tax day deadline on Sunday to release 15 years worth of her personal returns. Last year, she and her husband paid almost $700,000 in taxes on more than $2 million in income.

-- Speaking of California’s junior senator and money: Harris is the early presidential favorite of Hollywood donors, a Times analysis finds.

-- Trump’s reelection campaign is set to report that it raised more than $30 million in the first quarter of 2019, edging out his top two Democratic rivals combined, according to figures it provided to the Associated Press. The haul brings the campaign’s cash on hand to $40.8 million, an unprecedented war chest for an incumbent president this early in a campaign.

-- Roger Stone asked a federal judge to compel the Justice Department to turn over a full copy of special counsel Robert S. Mueller III’s report on the Russia investigation as part of discovery in his criminal case.


-- Top Democrats rushed to defend Rep. Ilhan Omar after Trump retweeted video that was edited to suggest she was being dismissive of the significance of the 9/11 terror attacks. And on Sunday, House Speaker Nancy Pelosi announced that she has taken steps to ensure Omar’s safety.

-- A bipartisan group of congressional leaders is questioning the Trump administration’s new system for detecting anthrax or other airborne biological weapons, warning it could be “even less reliable’’ than the nation’s existing, problem-plagued program.

-- Joe Biden, preparing to enter the 2020 presidential race, has spent years trying to make amends for his handling of the Anita Hill sexual harassment allegations. A careful review of the record shows problems that could hurt his candidacy.

-- A top House Democrat on Saturday ratcheted up his demand for access to President Trump’s tax returns, telling the IRS that the law clearly gives Congress a right to them.


-- Our Times investigation: California’s automated “motor voter” system was launched at DMV offices even after engineers reported an alleged hacking attempt. State lawmakers said last week they want to know why the project wasn’t delayed so the problems could be fully investigated.

-- Newsom announced Thursday he was pursuing a plan for at least three new low-income housing projects to be built on state land.

-- Nurse practitioners won an early round at the state Capitol in their bid to expand their care for patients without doctor supervision.

-- A bill to ban cosmetic surgeries on young children born with atypical genitalia was shelved for the year amid opposition from doctors who said medical decisions should be left up to parents.

-- California lawmakers are considering a bill that would clarify how county boards of supervisors can oversee sheriffs, including controversial departments in Los Angeles and Sacramento.

-- A contentious bill that would tighten rules around police use of force moved forward last week after California legislators voted it through a key legislative committee.

-- Soda news: California’s proposed ban on “Big Gulp”-style sodas is shelved for 2019 in Sacramento.


Essential Politics is written by Sacramento bureau chief John Myers on Mondays and Washington bureau chief David Lauter on Fridays.

You can keep up with breaking news on our politics page throughout the day. And are you following us on Twitter at @latimespolitics?

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