Capitol Alert

Watching and waiting as California’s April revenue rolls in

For the past four weeks, workers at the California Franchise Tax Board’s sprawling Butterfield Way processing center have been busy sorting income tax returns and reporting daily collection tallies during what typically is the most lucrative month for the state treasury.

April’s returns will produce about a fifth of California’s general fund revenue for the current fiscal year. The vast majority of this filing season’s 15.3 million returns, about 91 percent, arrive electronically and went straight into the tax board’s servers. The rest, about 1.4 million returns, continue to be opened, sorted and scanned by hand.

Billions of dollars in refunds, meanwhile, continue to go out the door. What’s left over goes into the state treasury. Compared to what the Brown administration forecast in January, those receipts seem likely to come up short for the first time since 2012.

Through Wednesday, the state had collected $12.7 billion in April (after calculating refunds), about $2.2 billion less than the $14.9 billion in net personal income tax that Gov. Jerry Brown estimated in his January budget proposal. The daily receipts are running slightly less than last April, with preliminary totals for the month due to be released Monday.

“April is clearly a critical month for revenue and we’re closely monitoring it,” Department of Finance spokesman H.D. Palmer said of the lower-than-forecast receipts.

Palmer, though, cautioned that April revenue continues to be counted, and that this month’s receipts, while an important bellwether of the state’s fiscal health, are only one of several things officials take into account as they craft the revised spending plan for the budget year beginning July 1 that Brown will release in a couple of weeks.

Everything from local building permit applications (an indicator of the housing industry’s health) to updated health and welfare caseloads (which determine what the state spends on those programs) go into the calculation.

In addition, state revenue also includes money from sales and use taxes and the corporation tax. And through March – the nine-month point of the fiscal year – corporation tax revenue was running $359 million above estimates, with sales and income tax revenue slightly lower.

Yet income taxes are by far the biggest piece of the state’s revenue pie, comprising two-thirds of state revenue. They also are the most volatile, contributing to rating agency Moody’s recently ranking California last in a nationwide survey of states’ fiscal vulnerabilities.

Also, some economists have nervously noted the length of time since the last recession. The current economic expansion has lasted more than 80 months, making it one of the longest in U.S. history.

Jason Sisney and Justin Garosi of the nonpartisan Legislative Analyst’s Office, who are tracking daily income tax collections, wrote this week that it seems unlikely that the state will meet its April tax goal. A possible reason, they said, could be the stock market’s decline earlier this year.

But the analyst’s office notes that lower-than-expected April receipts have happened before and also are unlikely to throw the state budget into deficit. Various budget formulas adjust spending and reserve requirements based on how much money is coming in, for example.

In addition, Brown’s January budget proposal includes $1.5 billion for new or renovated state office buildings in Sacramento. It also directed $1.1 billion for extra reserves. Lawmakers could scale back either or both proposals to compensate for any dip in revenue, the LAO said.

The Sacramento Bee’s Data Tracker is a weekly feature that offers a deeper look at the numbers behind today’s news. Jim Miller: 916-326-5521, @jimmiller2

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