January 25, 2007

On state revenues

Here’s a little more detail on the topic of Clea Benson’s story in the Bee today about a potential shortfall in state revenue.

According to Brad Williams, the chief economist for the LAO, the state collected about $6.1 billion in estimated and miscellaneous personal income tax payments last December and January. For this December and January, the Department of Finance forecast a big jump, to $7.1 billion for the same two-month period. But the latest figures with just a few days left in January suggest that the total will actually go down, to right around $6 billion. And that, of course, would leave the governor with about a $1 billion hole in his budget estimate only weeks after it came off the press.

These are year-end payments that come from investors and small business owners, mostly. They reflect not only the final quarter of the calendar year, October through December, but also the year as a whole. If these taxpayers realize late that they had a great year, they usually pay up in their estimated payments so they don’t get dinged at tax time for underpaying. The payments usually, but not always, are a harbinger of what’s to come in April, the state’s biggest revenue collection month.

A couple of points might work in the other direction, however. One is that bank and corporation tax payments were stronger than expected in December, by about $350 million. The other is that the administration’s estimate for April is not as bullish relative to a year ago as it was for December and January. So it’s possible that even if these bad numbers are borne out in April, the effect won’t be as magnified as it otherwise would have been.

Posted by dweintraub on January 25, 2007 12:39 PM