July revenue bounce brings an optimistic start to 2017-18
(Calif.) It may not be the billion dollar surge some are still expecting, but July’s revenue report scored a surprising spike of more than 3 percent above projections, or $188 million overall.
The jump in collections may not have been dramatic, but it could be telling given that estimates for revenue in the first month of the fiscal year were made only a few weeks before, in early June, as legislative leaders and Gov. Jerry Brown finalized budget negotiations for 2017-18.
According to the state Controller’s Office, all three major sources of income to the state exceeded expectations, led by a 10 percent jump in sales tax revenue that resulted in almost $85 million additional dollars.
Corporate taxes, which closed 2016-17 by under-performing estimates by almost $900 million, came in 5.5 percent higher in July at $19 million.
Even personal incomes taxes, which had frustrated fiscal analysts much of last year with see-saw performances, swung upward in July and beat estimates by $77 million.
Given the continued advance of Wall Street and a booming economy in many parts of California, there were many who believed a flood of additional money would pour into state coffers sometime during the 2016-17 fiscal year.
Since the economy has shown no signs of letting up–in either California or nationally—some analysts continue to believe a spike in revenue is still coming and, if so, the numbers will eventually look much more dramatic.
Consider that when Brown signed the 2016-17 budget act last July, the Standard & Poor 500 stock index stood close to 2,170. After setting records practically every day through the spring and summer, the S&P today is close to 2,470.
While few would have guessed that the market would drive as high as it has, many believed last year that the U.S. economy could continue moderate growth—which would have delivered billions more to the state than were actually realized. In fact, based on the projections in the 2016-17 budget, revenues were down $2.7 billion last year.
The suspicion is that those tax dollars didn’t show up because big investors are holding off on profit taking in hopes that the Republican Congress and President Donald Trump will come to an agreement on tax reform. Such an agreement may well come, but probably not anytime soon and thus, stock profits will be eventually cashed-in and the taxes will eventually will be paid.
Of course, that’s what many forecasters thought would happen last year. Collections failed to meet projections in seven of the twelve months of the year including in April and June, considered traditionally the two highest generating months.
The revenue surprise last month could be a sign that the important months for collections—September, December, January, April and June—will mean a much better fiscal 2017-18.