Many believe the current tax system does not serve California as well as it might, and that a review of the entire structure is long overdue. Post – Proposition 13 revenues from the sales and use tax, the corporation tax, and the property tax have diminished. This has increased California’s dependence on the personal income tax. The increasing volatility of the state’s economy (and the stock market) has translated into greater unpredictability of state tax revenue, presenting challenges for budget forecasts.
May state revenues fell short of projections in Gov. Jerry Brown’s revised budget proposal by $154.3 million, weighed down by corporation tax refunds far higher than expected, State Controller Betty T. Yee reported today.
California State Controller Betty T. Yee today issued the state’s Comprehensive Annual Financial Report (CAFR) for the fiscal year that ended June 30, 2015, showing that a resurgent economy led to a $29.6 billion increase in revenues in the 2014-15 fiscal year. While spending and transfers also went up, the increases were not enough to offset the additional revenue, resulting in a $13.1 billion improvement in governmental activities’ net position. . . This CAFR incorporates major changes to reflect the state’s net pension liability. Based on guidance from the Governmental Accounting Standards Board (GASB), the new figure more accurately reflects a government’s unfunded pension obligation, helping policymakers decide on future funding strategies. Using these standards, the CAFR reports a net pension liability of $63.7 billion as of June 30, 2015.
The total liability grew $2.38 billion compared to the prior fiscal year, but the size of the increase was $1.50 billion less than estimated in last year’s report. Health care claims did not grow as rapidly as expected, and changes in health care delivery and assumptions about long-term trends helped to lower costs by $1.76 billion. Conversely, demographic shifts added more than a quarter billion dollars to the liability.
These costs have increased dramatically over the past 15 years. In 2001, retiree health care costs accounted for 0.6 percent of the state General Fund budget. This year, they will total $1.90 billion, or about 1.6 percent of the budget. If no changes are made to the state’s method of funding retiree health care costs, the current $74.10 billion unfunded liability will grow to more than $100 billion by the 2020-21 fiscal year, and $300 billion by 2047-48.
Total revenues in September reached $9.8 billion and beat forecasts contained in the 2014-15 Budget Act by $671 million, or 7.4%. All of the “Big 3” revenue generators — personal income, corporate income, and retail sales taxes — surpassed expectations.
California entered the new calendar year with generally good financial news. Total revenues topped estimates for January even though projections were recently revised upward as part of the Governor’s 2014-15 Budget submitted early this year. Overall spending was less than expected.
California ended the 2013 calendar year with a burst of tax receipts as the economic recovery continued to boost jobs, incomes, profits, and spending. Revenues flowing into the State’s General Fund coffers totaled $10.6 billion, beating estimates contained in the 2013-14 Budget Act by a hefty $2.3 billion, or 27.7%.
November’s tax receipts could look somewhat disappointing at face value, but delays in collections and recording appear to have accounted for much of the shortfall. Relative to projections contained in the 2013-14 Budget Act, total November revenues fell $376 million, or 5.9%, shy of estimates. Those figures do not include approximately $440 million in late November sales tax deposits which, because of the late Thanksgiving holiday, were recorded to the State’s books in December.