California Tax Revenues Fall Below Estimates As Budget Talks Get Under Way

California’s economy is still growing – but at a slower pace than it has been. And that’s having a similar effect on state budget revenues, leaving Gov. Jerry Brown with less money to work with when he releases his updated spending proposal Friday.

Income taxes for the crucial month of April came in $1 billion below projections. That puts the state nearly $900 million short of Brown’s estimates this past January – just as the governor puts the finishing touches on his updated budget plan due out later this week.

But Jason Sisney with the non-partisan Legislative Analyst’s Office says that doesn’t mean California’s budget is back in deficit-land.

“Fundamentally, the state enters this new budget much healthier than it has been,“ Sisney says, pointing to billions of dollars stashed away in reserve thanks to recent state budgets and the “rainy day fund” voters approved two years ago.

“So revenues would have to drop a lot in order to put the state in a situation where its fiscal condition was dire, and where you would expect to have broad-based cuts,” he adds.

Nevertheless, Brown and state lawmakers may need to curtail their plans this year to prepare for the next recession.

“The trick is, you can’t predict when that will occur,“ Sisney says, “so you have to plan ahead.”

The governor has called for placing extra money in reserve and for one-time spending on infrastructure projects. Democratic legislative leaders are expected to seek new funding for programs such as early care and affordable housing.

Brown will release his updated spending proposal (known as the “May Revise“) on Friday morning, marking the traditional start of state budget negotations ahead of the Legislature's June 15th constitutional deadline.

Brown has called for placing more money in reserve and for one-time spending on infrastructure projects. Democratic legislative leaders are expected to seek new funding for programs such as early care and affordable housing.