Tax receipts falter in April; ugly budget season coming

April 27, 2010

Three months of higher-than-expected tax receipts, which many in the Capitol had hoped would wipe out a big chunk of the state’s budget deficit, appear to be coming to an end. April revenues so far have been several billion dollars below projections, with only five more days of envelopes to open at the Franchise Tax Board and the Employment Development Department. Unless the state sees a big end-of-the-month rally, the coming budget season is going to be a bleak one for people who depend on public services, and, potentially, an ugly one for the politicians in Sacramento.

As of Monday the state remained about $4.5 billion shy of the $10.5 billion projected for April in withholding from paychecks, estimated payments from taxpayers and end-of-the year tax payments for 2009 that were due on April 15. Even if the state collected $500 million a day for the rest of this week, a shortfall for this month alone would wipe out a $2.7 billion “surplus” for the current calendar year built in January, February and March, when revenues came in above projections.

All of this means that legislators and Gov. Arnold Schwarzenegger will indeed be grappling with a budget shortfall in the neighborhood of $20 billion on a general fund budget of about $90 billion. Funding for schools, higher education, health and public assistance will all be at risk. Democrats will be pushing for tax increases, but Republicans have said they will not support them. Some Republican votes are needed to pass a tax hike because doing so requires two-thirds super-majorities in each house of the Legislature.

The governor is due to release his revised budget proposal on May 14.

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