Gov. Jerry Brown is counting on $6.5 billion too much for his proposed budget, even with Facebook's stock sale on the horizon, according to a new economic review by the state's fiscal analyst.
The nonpartisan Legislative Analyst's Office has taken a more pessimistic view of capital gains in California through June 2013, though it acknowledges in its new report that predicting those totals is "notoriously difficult."
California's heavy reliance on volatile capital gains income has been a significant reason the state has found it so difficult to budget in recent years.
The analyst's latest revenue estimate is not far from its November forecast, when it pegged California's deficit at nearly $13 billion.
But the latest report is noteworthy because updated data has not changed its position that Brown is too optimistic in his budget.
Brown, using a rosier forecast, projected the deficit at only $9.2 billion through June 2013. He has proposed a $92.5 billion general fund budget for next year, including a hike in income taxes for wealthy earners and a half-cent sales tax increase on purchases.
Jason Sisney of the analyst's office said it is not ready to update the deficit total because doing so requires other calculations, such as how much schools are owed. But he said "in general, it's worse than the governor's January forecast. By how much, we don't know."
The analyst's office would have been even more pessimistic had Facebook not filed paperwork for an initial public stock offering this month. The office estimates that California will receive about $2 billion through June 2013 in Facebook IPO-related income tax payments than it would have otherwise.
Due to volatility, the analyst's office recommended that the Legislature wait until the governor revises his budget in May before writing the 2012-13 budget.
But the latest news is hardly reassuring for legislative Democrats who said they were counting on a more fruitful April than Brown predicted to avoid the deep health and welfare cuts the governor proposed.
The analyst's office said in the report that its forecasts for housing and capital gains are similar to those used by Brown's Department of Finance.
Given that, the office noted, "we can identify no strong rationale for the administration's assumption that capital gains will grow very rapidly in 2012 and later years."