California’s bounce-back economy generates unexpected half billion more in tax revenue
SACRAMENTO Calif. (Reuters) – California’s recovering economy has generated tax revenues that are more than a half-billion dollars above estimates in the past three months, but the state still needs to take care not to overspend, Controller John Chiang said Monday.
The additional income is welcome news in a state plagued until recently with chronic budget problems and facing what Democratic Governor Jerry Brown has dubbed a “wall of debt.”
“We are growing, but we have to keep close vigilance,” Chiang said in an interview. “Let’s not make the mistakes that were made during the last recession.”
From July to September, California took in $21.8 billion in taxes and other revenues for its general fund, $533 million above projections and $1.6 billion more than in the same period last year, Chiang said in a report released late last week.
Of that amount, about $1.6 billion came from corporate taxes, $14.1 billion from personal income taxes and $5.3 billion from sales and use taxes.
Democratic lawmakers have been hoping for such boosts in the state budget and trying to persuade Brown, a fiscal moderate, that the state can afford to spend more to shore up its tattered social safety net.
But Brown’s finance spokesman, H.D. Palmer, urged caution on Monday.
“You can’t build long-term projections on one or two months of data,” Palmer said.
For example, he said, the state appears to have spent less money than anticipated during the first quarter of the fiscal year. But he said that was mostly because anticipated expenditures for education haven’t been made yet.
The state has also spent more than anticipated fighting wildfires, Palmer said. On Sept. 29, Brown’s finance director wrote in a letter to the legislature that California had spent all of the $209 million budgeted for wildland firefighting, and would need to tap $70 million more in reserve funds.
Chiang, a Democrat who is running for state treasurer, praised California’s progress at paying down debt, but urged lawmakers to do more to reduce long-term obligations such as setting aside money to pay for retiree health care.
If an upcoming ballot measure authorizing the state to issue bonds to pay for projects aimed at shoring up water supplies in the drought-parched state is successful, California will take on additional debt and have to make more interest payments, he said.
(Editing by Eric Walsh)