Late filings will boost state revenue by $1 billion
(Calif.) When the 2016-17 fiscal year closes on June 30, state coffers are likely to be boosted by about $1 billion more than Gov. Jerry Brown estimated just last week, according to a new report from the nonpartisan Legislative Analyst.
The additional money would come in the form of personal income taxes–likely the very same dollars that failed to show up in April.
The timing of the collection, however, will be too late for lawmakers and school administrators to take advantage of, at least for now. The Legislature is required to pass the state budget by June 15, and local educational agencies must also have a new spending plan in place before the end of June.
Ryan Miller, who helps coordinate the LAO’s revenue outlook, said that the difference between what his office is projecting and those from the governor’s office are relatively small compared to prior years where the swings were in multiple billion dollars.
“To a large extent, whether the tax trends in June end up closer to what we’ve said or to that of the administration will depend on estimated payments that principally high-income tax payers will be making on their capital gains,” he said.
The late-arriving tax income would be consistent with the frustratingly inconsistent manner that revenue collections have performed this year. A string of bad months in summer and fall, prompted Brown in January to release an extremely cautious budget plan that imposed immediate cuts in funding to schools and also called for an $860 payment deferral.
Last week, the governor’s revised plan acknowledged–in part—that the revenue outlook had improved. That is, the money wasn’t lost, it was simply paid later than expected.
April, for instance, is the state’s most important tax collection month and personal income taxes fell about $700 million short of projections.
Although last week Brown improved his revenue projections by about $2.5 billion from January, he concluded he still needed to impose adjustments to the school budget next year. Officials from his Department of Finance said K-12 schools and community colleges will end the year with an over-appropriation of almost $480 million.
As a result, Brown has called for the elimination of a supplemental payment through 2020-21 and has made conditional another $1 billion in the education budget.
It should be noted that if the additional income tax money arrives in June, as the LAO suspects it will, schools could expect to get a significant share–perhaps enough to cause Brown to tear up his cost-saving measures.
Even if Brown’s conservative May plan is eventually adopted, the LAO pointed out that schools are getting significantly more that the Proposition 98 funding guarantee requires: $433 million more than the 2015-16 guarantee, $580 million above the 2016-17 guarantee, and $601 million above the 2017-18 guarantee.