State revenues up again in August
(Calif.) August revenue collections continued a solid, steady upward trend and raised expectations that the promise of a surging stock market would finally deliver its reward to state coffers.
The news comes after July provided an unexpected 3 percent increase over estimates made just a few weeks earlier as part of the 2017-18 budget negotiations.
The state controller’s office reported Tuesday that in August all three of the state’s big revenue sources ran ahead of projections by a combined 4 percent. To date, revenues during the first two months of the fiscal year totaled almost $15 billion, about $530 million more than budget analysts had expected.
While that remains far below the billions of additional dollars that had been expected by some over the past year, the August numbers could be a promising sign ahead of September’s end of the state’s first quarter, which is traditionally a big collection month.
The controller reported that personal income taxes produced $5.2 billion in August, which was almost $136 million more than estimates. For the first two months, income taxes exceeded projections by $213 million.
Corporate taxes, which have consistently under-achieved much of the past year, came in almost 278 percent above expectations—generating $95 million last month.
The state sales tax also came in strong last month, posting a 2.2 percent increase over projections for a total of $3.1 billion.
While Gov. Jerry Brown has maintained a cautious outlook for most of this time in office, the booming economy in many parts of California combined with Wall Street’s record pace has raised expectations for more than a year of a big surge in revenues to the state.
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 2,500.
At some point, observers say, the big market investors are going to take more of their profits off the table and trigger significant capital gains taxes. There were many who believed a lot of taxes would have been paid in the 2016-17 fiscal year and indeed, the forecast for revenues last year fell about $2.7 billion short.
The assumption has been 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 would negotiate an agreement on tax reform—something that hasn’t happened and probably won’t until after the November elections.