Tax receipts are down. Time to panic? + Who’s running? + Last call for legislation
Welcome back from a long, well-earned weekend. Who’s your favorite president? We hope you celebrated him accordingly. Speaking of “him,” there’s a record number of five women running for president.
$2 BILLION SHORT
State Controller Betty Yee reported last week that California’s total revenues equaled $18.79 billion in January, nearly $2 billion shy of what Gov. Gavin Newsom’s budget proposal estimated.
But let’s not hit the panic button.
H.D. Palmer, spokesman for the Finance Department, said that the cash shortage is most likely a reflection of a change in taxpayer behavior since the enactment of President Donald Trump’s tax plan last year.
Palmer’s office is scheduled to release its own report today that he said will reflect similar findings in both the controller’s and the Legislative Analyst’s Office report from Feb. 5, which also recorded a $2 billion shortfall.
“Normally it would be very logical to say if you’re down $2 billion relative to your forecast for one month, you should be running for the lifeboats,” Palmer said. “But that’s not the case here. Because the issue, we believe, is the month is not down because of underlying economic weakness. It’s because the change to federal tax law no longer gives [taxpayers] the benefit of paying in December. They can hold off paying until April.”
Trump’s tax plan placed a $10,000 cap for state and local tax claims and no longer made it advantageous for people to submit payments months before Tax Day. Palmer said that his office expects the numbers to rebound closer to April.
The controller’s update shows that January’s revenue is $1.2 billion higher than former Gov. Jerry Brown’s 2018-2019 budget estimated. The controller’s office noted that while personal income tax faltered last month, sales and corporation taxes generated greater revenue than anticipated.
All in all, it’s still too early in the season to hypothesize whether these shortfalls will trigger budget cuts or curb the agenda Newsom outlined his $209 billion budget proposal.
“At the end of the day, we anticipate that we will recoup a significant amount that we did not expect to receive in January,” Palmer said. “We will pick that up four months down the road.”
But, Palmer cautions, “This uncertainty underscores the importance of a budget that maintains fiscal balance and builds on budget resiliency.”
BIG MOVES
It’s worth mentioning some announcements from last week.
Soon-to-be termed-out state Sen. Holly Mitchell, D-Los Angeles, has no intention of leaving politics. The Los Angeles Times reported last week that the senator is seeking the 2nd District seat on the Los Angeles County Board of Supervisors.
“I believe in the best Los Angeles County has to offer and I am willing to fight for it,” Mitchell said. “This is why I am running for county supervisor.”
Newsom also appointed JP Petrucione as his Director of Digital Media. With his appointment, Petrucione is now the highest-ranking openly transgender appointee in state history, according to the governor’s office.
Former 2018 gubernatorial candidate and current chairman of the California Republican Party, John Cox, endorsed Jessica Patterson on Thursday in the race to fill his seat.
“We all recognize that the California Republican Party needs to improve to help candidates and our grassroots volunteers win,” Cox’s endorsement read. “Jessica Patterson has articulated a strong plan, which will help us close those narrow vote margins to beat the Democrats in 2020. I’m committing to do everything I can to work with her and the party as she leads this effort.”
Patterson is overwhelmingly the favored candidate. She’s earned endorsements from 17 of 19 Republican assembly members and seven of the 10 Republican state senators.
THE RAT RACE
California lawmakers have until Friday to file legislation for the 2019-2020 session. While members and their staff rush their packages to the finish line, there are already some hot-button items on the table.
Wildfires: Emergency funding, warning systems, public utility accountability. Given the devastation of 2017 and 2018’s wildfire season, mitigating future catastrophe is a top priority.
Affordable housing: The governor signaled that he wanted to take up affordable housing and rent-related legislation.
Health care: Sure to be a big one — covering undocumented individuals through Medi-Cal.
Criminal justice: California is keeping the conversation on bail reform going, and it’ll be interesting to see how Assemblywoman Shirley Weber’s use-of-force bill plays out alongside Sen. Anna Caballero’s, backed by the California Police Chiefs Association.
HAPPY BIRTHDAY
Feb. 17: Assemblywoman Melissa Melendez, R-Lake Elsinore
Feb. 18: Assemblyman Jim Patterson, R-Fresno
Feb. 18: Sen. Bob Wieckowski, D-Fremont
Today: Sen. Connie Leyva, D-Chino
MUST-READ: Gov. Gavin Newsom didn’t kill high speed rail. But what’s his Plan B?
This story was originally published February 19, 2019 at 5:45 AM with the headline "Tax receipts are down. Time to panic? + Who’s running? + Last call for legislation."