A press release by the State Controller’s office this week revealed an unsurprising drop in state revenues, 10.8 percent below projections contained in the 2012-13 State budget, a total of $806.8 million.
“November’s disappointing revenues stand in stark contrast to recent news that California is leading the nation in job growth, has significantly improved its cash liquidity to pay bills, and even long-distressed home values are starting to inch upward,” said Chiang. “This serves as a sobering reminder that, while the economy is expanding, it is doing so at a slow and uneven pace that will require the State to exercise care and discipline in how its fiscal affairs are managed in the coming year.”
According to the release, tax revenues from both personal income taxes and corporate taxes fell during the month of November. Revenue generated by personal income came in 19 percent below projections, a total of $842.5 million. Corporate tax revenue was down by $187.8 million, or a whopping 213.4 percent. The only revenue that exceeded projections was sales taxes, at $99 million, and was not nearly enough to offset the missed budget estimates.
The State Controller’s office claims that a portion of the drop in corporate tax revenues was due to “higher than expected corporate tax refunds,” but it looks like Californians are simply escaping this strangling economic environment by packing up and moving their businesses out of state. Spectrum Location Solutions reported that 254 companies left California in 2011, possibly the biggest reason for any decline in corporate tax revenue. Earlier in January, corporate tax revenues had fallen by 48.8 percent. Corporate tax receipts were down in October as well, missing projections by 47 percent. Now, that number has fallen by 213.4 percent, and will only continue to drop as more people migrate out of the state.
California has successfully reached a $24.9 billion cash deficit, up from $9.6 billion from the last fiscal year. That deficit is being covered by $14.9 billion of internal borrowing via “temporary loans from special funds,” and $10 billion of external borrowing. The state has nearly $25 billion in outstanding loans, with only $7 billion left in unused internal borrowable resources. After that $7 billion is used up, California will have to turn to external resources to borrow even more money.
The fiscal cliff for the country is rapidly approaching, but it appears that bankruptcy for California looms ahead as well. Cities are filing for bankruptcy one by one, from Stockton to San Bernardino. The state’s spending binge on subpar public services and government employee compensation has grown out of control, and it’s only a matter of time before we reach rock bottom.
(Josephine Djuhana is Assistant Editor for the California Political Review.)